UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended JuneSeptember 30, 2012

OR

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

Commission File No:09081

CYBRDI, INC.

(Exact name of registrant as specified in its charter)

CALIFORNIA

(State or other jurisdiction of incorporation or organization)

95-2461404
(I.R.S. Employer ID No)

No 29 Chang'An South Road Xi'an Shaanxi P.R. China 71006 1

(Address of principal executive office) (Zip Code)

Registrant's telephone number:(011) 86-29-8237-3068

N/A
Former name, former address and former fiscal year, (if changed since last report)

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 [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

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 definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

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

Yes [   ]     No [X]

The number of shares of common stock, no par value per share, outstanding as of AugustNovember 14, 2012 was 120,225,323.

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FORM 10-Q
QUARTERLY PERIOD ENDED SEPTEMBER 30, 2012
INDEX

TABLE OF CONTENTS

3

PART I. FINANCIAL INFORMATION

Item 1 Financial Statements

4

CYBRDI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

See notes to consolidated financial statements.

F-1

CYBRDI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

See notes to consolidated financial statements.

F-2

CYBRDI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

See notes to consolidated financial statements.

F-3

CYBRDI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE A - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. Interim Financial Statements

The unaudited consolidated financial statements of Cybrdi Inc. and subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting on Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. However, the information included in these interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year. The consolidated balance sheet information as of December 31, 2011 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K. These interim financial statements should be read in conjunction with that report. Certain comparative amounts have been reclassified to conform to the current period's presentation.

The consolidated financial statements include the accounts of Cybrdi, Inc. and its wholly-owned subsidiaries and joint ventures. All material intercompany balances and transactions have been eliminated.

2. Description of Business

Cybrdi, Inc. (f/k/a Certron Corporation) (the “Company” or “Cybrdi”) was incorporated on August 1, 1966, under the laws of the State of California. Until around June 2004, the Company’s business consisted of the distribution of magnetic media products, primarily blank audio and video cassettes. Due to continuing intense price competition and technological changes in the marketplace for its products, the Company lost its remaining significant customers and disposed of or wrote off its remaining inventory. As a result of these occurrences, the Company concluded that its audio and videotape businesses were no longer viable and some of its product lines were obsolete.

On February 10, 2005, the Company, through a wholly-owned subsidiary, acquired all the ownership interest in Cybrdi, Inc., a privately held company incorporated in the State of Maryland ("Cybrdi Maryland"). As a result of the ownership interests of the former shareholders of Cybrdi Maryland, for financial statement reporting purposes, the transaction was treated as a reverse acquisition, with Cybrdi Maryland deemed the accounting acquirer and Certron Corporation deemed the accounting acquiree. Historical information of the surviving company is that of Cybrdi Maryland.

Cybrdi Maryland was established in 2001 to acquire an interest in biogenetic products commercialization and related services entities in Asia. On March 5, 2003, Cybrdi Maryland acquired an 80% interest in Shaanxi Chao Ying Biotechnology Co., Ltd. (“Chaoying Biotech”), a sino-foreign equity joint venture established in July 2000 in the People's Republic of China (“PRC”), through the exchange of 99% of the Company’s shares to the existing shareholders of Chaoying Biotech. For financial statement reporting purposes, the merger was treated as a reverse acquisition, with Chaoying Biotech deemed the accounting acquirer and Cybrdi Maryland deemed the accounting acquiree.

F-4

Chaoying Biotech is a sino-foreign equity joint venture between Shaanxi Chaoying Beauty & Cosmetics Group Co., Ltd. (the “Chinese Partner”, a PRC corporation) and Immuno-Onco Genomics Inc. (the “Foreign Partner”, a USA corporation). The joint venture agreement has a 15 year operating period starting from its formation in July 2000 and it may be extended upon mutual consent. The principal activities of Chaoying Biotech are research, manufacture and sale of various high-quality tissue arrays and the related services in the PRC.

Most of the Company’s activities are conducted through Chaoying Biotech. Chaoying Biotech, with its principal operations located in China, aims to take advantage of China's abundant scientific talent, low wage rates, less stringent biogenetic regulation, and the huge genetic population as it introduces its growing list of tissue micro array products.

On February 10, 2005, the Company completed the merger with Cybrdi Maryland and changed its name to Cybrdi, Inc.

On July 26 , 2007, Chaoying Biotech entered into an acquisition agreement with its Chinese partner, which is a principal shareholder of the company, Mr. Bai, the Company’s chief executive officer and a director is also a principal of its Chinese partner.

On July 28,2007, Chaoying Biotech invested RMB15 millions (equivalent to US$1,983,078) to acquire an 83.33% equity ownership of Shandong Chaoying Culture and Entertainment Co., Ltd. (“SD Chaoying”) from its Chinese partner,partner. SD Chaoying is a corporation organized in Shandong Province P.R.China. On September 5, 2007, Shandong Commercial government had approved this acquisition and the ownership title of SD Chaoying had been transferred to Chaoying Biotech from its Chinese partner. The future business of SD Chaoying will primarily focus on culture and entertainment, including spa activities, cosmetic and personal care, body building, gambling, catering, and lodging, etc. SD Chaoying will have a specific emphasis on casino gambling, which has been approved by Shandong Administration for Civil Affairs. As of December 31, 2009, SD Chaoying had substantially completed the construction of two residential buildings and had recognized revenue from sales of housing for 2009. The main structure of the commercial entertainment center has also been completed, except for the exterior, rooftop, the surrounding supporting projects and the community landscaping, which are expected to be completed in 20122013 prior to the commencement of operations by merchant tenants if we can obtain an estimated $2.8 million to complete construction.

On March 10, 2007 the Company entered into a Sales Agency Agreement with BioMax, Ltd., a reseller located in the United States.

On April 29, 2011, Chaoying Biotech invested $154,732 (equivalent to RMB 1 million) to restore the operation of the Institute of Shaanxi Chaoying Clinical Pathology (“IOSCCP”), a wholly-owned subsidiary established on July 31, 2003, whose main business includes pathology research and consulting, consulting and diagnostic clinical pathology and pathology-related research and development of new technologies, and basic training in pathology. Its sole shareholder has been Chaoying Biotech. However, Chaoying Biotech withdrew the original investment from IOSCCP in September 2007 as we believed that both internal and external conditions of IOSCCP were not mature at that time. In light of foreseeable benefits and new business opportunities for this entity, we resumed its business and re-invested $154,732 (equivalent to RMB 1 million) in it in April 2011.

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3. Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred significant losses and has not demonstrated the ability to generate sufficient cash flows from operations to satisfy its liabilities and sustain operations. The Company had an accumulated deficit of $2,740,390$2,854,278 and $2,447,643 as of JuneSeptember 30, 2012 and December 31, 2011, including net losses of $292,747$495,915 and $273,526$582,400 for the sixnine months ended JuneSeptember 30, 2012 and 2011, respectively. In addition, current liabilities exceeded current assets by $3,211,515$3,315, 503 and $2,931,175 at Juneas of September 30, 2012 and December 31, 2011, respectively. These matters raise substantial doubt about the Company’s ability to continue as a going concern.

The Company finances its operations primarily through short-term bank borrowings and advances from related parties and/or officers/shareholders. In order to complete the construction of SD Chaoying cultural and entertainment center, approximately $3.0 million (equivalent to RMB 19 million) of capital is expected to be needed. The Company, taking into account the available banking facilities, internal financial resource, and supports from related companies, believes it has sufficient working capital to meet its present obligation for at least the next twelve months. Management is taking actions to address the company's financial condition and deteriorating liquidity position. The following sets forth management’s plans for dealing with the adverse effects of the conditions:

(a) Sale of housing inventories: Proceeds to be received from the sale of the remaining housing of the two completed residential buildings are expected to amount to approximately $693,000.$0.5 million.

(b) Rental and management fee revenue from the cultural and entertainment center: Annual rental revenue is estimated to be approximately $650,000$0.68 million per year. Management fee revenue will be charged to commercial tenants at 3% of annual gross revenue. As of JuneSeptember 30, 2012, the Company has not commenced collecting rental and management fee revenue for the culture and entertainment center.

(c) Additional advances from related companies and affiliates: Mr. Bai, our Chief Executive Officer, advanced $55,974$83,081 to the Company in the current period to finance operations and the costs to maintain the Company’s public status in the U.S. In addition, Shaanxi Chaoying Beauty & Cosmetics Group, which is also an affiliate, is anticipated to provide up to approximately $791,000$790,000 (equivalent to RMB 5 million) of capital to support operations. Shaanxi Chaoying Beauty & Cosmetics Group advanced $12,660$12,640 for the current quarternine-month period ended September 30, 2012 to the Company to finance its operations.

The Company may require additional funds and may seek to raise such funds though public and private financings or from other sources. There is no assurance that management’s plans will be realized or the additional financing will be available at all or that, if available, such financing will be obtainable on terms favorable to the Company or that any additional financing will not be dilutive. The consolidated financial statements do not include any adjustments that might result from the outcome of those uncertainties.

F-6

4. Use of Estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Actual results could differ materially from those estimates.

5. Revenue Recognition

Revenue represents the invoiced value of goods sold recognized upon the delivery of goods to customers and service income is recognized when services are provided. Deferred revenue represents the undelivered portion of invoiced value of goods sold to customers. Sales transactions not meeting all the conditions of the full accrual method are accounted for using the deposit method of accounting. Under the deposit method, all costs are capitalized as incurred, and payments received from the buyer are recorded as customer deposits.

6. Reverse Merger

On February 10, 2005, (the "Closing Date") the Company closed on an Agreement and Plan of Merger (the "Agreement") among Certron Corporation (“Certron”), a California corporation, Certron Acquisition Corp., a Maryland corporation and a wholly-owned subsidiary of Certron ("Acquisition Sub"), and Cybrdi, Inc., a Maryland corporation (“Cybrdi – Maryland”) relating to the acquisition by Certron of all of the issued and outstanding capital stock of Cybrdi -Maryland in exchange for shares of common stock of Certron that will aggregate approximately 93.8% of the issued and outstanding common stock of Certron. Pursuant to the terms of the Agreement, at the Closing Date (a) Acquisition Sub has been merged with and into Cybrdi - Maryland, with Cybrdi - Maryland being the surviving corporation, (b) the common stock of Cybrdi-Maryland has been cancelled and converted into the right to receive shares of the common stock of Certron at an exchange ratio of 1.566641609 per share. This resulted in the issuance of 47,328,263 shares of the Certron’s common stock, and (c) each share of the common stock of Acquisition Sub has been converted in to and become one share of the common stock of Cybrdi-Maryland. The share exchange has been accounted for as a reverse merger under the purchase method of accounting. Accordingly, Cybrdi, Inc. will be treated as the continuing entity for accounting purposes and the historical financial statements presented will be those of Cybrdi, Inc.

In connection with the Agreement, on February 10, 2005, the Company amended its articles of incorporation to authorize the issuance of 150 million shares of common stock no par value and 500,000 shares of preferred stock, $1.00 par value per share, none of which are issued or outstanding.

Concurrent with the filing of the Articles of Merger, all of the Company then existing officers and directors tendered their resignation and Yanbiao Bai was appointed as its Chairman of the Board of Directors. Mr. Bai then nominated the balance of the Board of Directors.

F-7

7. Income Taxes

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to the differences between the basis of assets and liabilities for financial and income tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future income taxes.

8. Contingencies

Currently we are involved in disputes, litigation and other legal proceedings. We prosecute and defend these matters aggressively. However, there are many uncertainties associated with any litigation, and we cannot assure you that these actions or other third party claims against us will be resolved without costly litigation and/or substantial settlement charges. We record a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and (ii) the range of loss can be reasonably estimated. However, the actual liability in any such disputes or litigation may be materially different from our estimates, which could result in the need to record additional costs.

9. Recent Accounting Pronouncements

The Company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.

NOTE B – ASSETS

The JuneSeptember 30, 2012 consolidated balance sheet included total current assets of $1,583,640$1,613,882 and non-current assets of $8,730,312.$8,770,917. Of these amounts, $495,492$488,243 in cash and equivalents is planned for funding current operations and for future business expansion.

Other current assets also included accounts receivable, inventories, due from related companies, other receivables and prepaid expenses, and advance to suppliers. Inventories are mainly finished goods. Other components of inventories include raw materials, finished goods, and housing inventories. Inventories are stated at the lower of cost or market. Cost of raw materials is determined on the basis of first in first out method (“FIFO”). Finished goods are determined on the weighted average basis and are comprised of direct materials, direct labor, and an appropriate proportion of overhead.

F-8

The other primary assets included in current assets are loans to an unaffiliated company, QuanYe Security Co., Ltd (“QuanYe”), an unrelated People’s Republic of China (“PRC”) registered company located in Xian PRC. QuanYe is engaged in the pawnshop business and their primary business is offering alternative financing to small, local companies. According to the loan agreement, QuanYe had received loans from Chaoying Biotech for a total amount of RMB 29.3Million (equivalent to $4,652,640) since January 2006. A remaining balance of RMB 7.3 million (equivalent to $1,159,190) was extended to and expired on March 24, 2008. As of JuneSeptember 30, 2012 and December 31, 2011, the principal balance and interest receivable for this loan had been reduced to $0, net of allowance of $94,444$95,468 and $180,258$182,214 for doubtful principal balance and interest receivable, respectively. The interest rate for these loans initially was initially 8% per year, and subsequently reduced to 5% since October 9, 2006.

Included in non-current assets are property, plant and equipment, construction-in-progress and intangible assets. Property, plant and equipment mainly consist of building, office equipments, motor vehicles, leasehold improvement, software-website, and machinery used for product manufacturing located in the People’s Republic of China (“PRC”). Depreciation on property, plant and equipment is computed using the straight-line method over the estimated useful life of the assets. The majority of the assets have estimated useful lives of 10 years. Building and office equipment have estimated useful lives of 20 and 5 years, respectively. The “construction in progress” in the amount of $6,781,274$6,854,861 mainly consisted of land under development and construction of the entertainment, culture, and casino facility in Shandong Province, which will be transferred to fixed assets in SD Chaoying when construction is completed. As of JuneSeptember 30, 2012, construction-in-progress of $4.32$4.33 million and land use rights of $3.15$3.19 million of SD Chaoying were collateralized under a short-term loan from Changle Rural Credit Union. For the $3.15$3.19 million land use rights, $2.49 million$2.52million was classified under construction-in-progress for the commercial property and the remaining $0.66$0.67 million was classified under intangible assets subject to amortization. Intangible assets included a tissue chip patent at Chaoying Biotech and $0.66$0.67 million of land use rights being put in operation for the partial completed commercial property at SD Chaoying. Effective January 1, 2002, with the adoption of the accounting guidance for Goodwill and Other Intangible Assets, intangible assets with a definite life are amortized on a straight-line basis. The patent is being amortized over its estimated life of 10 years. The land use rights classified in intangible asset is being amortized over its estimated life of 36.9 years through the maturity of the land use rights for commercial use on November 6, 2047.

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NOTE C - LIABILITIES

As of JuneSeptember 30, 2012, the balance sheet included total liabilities of $5,635,305,$5,778,652, which consisted of current liabilities of $4,795,155$4,929,385 and construction payable of $840,150.$849,267. Included in the current liabilities was a short-term loan of $1,495,357 (equivalent$1,511,584(equivalent to RMB 9.5 million) from Changle Rural Credit Union, which is a bank located in Shandong Province of the PRC. The original term of the loan was from August 25, 2009 to August 24, 2010 with an interest rate of 7.965% per annum. In August 2011, the Company renewed this short-term loan with the same amount of $1,495,357 (equivalent to RMB 9.5 million) with Changle Rural Credit Union. The term of the renewal loan started from August 31, 2011 with a maturity date of August 20, 2012. The adjustable interest rate is a rate per annum equal to the Prime Rate plus 50% of prime rate. The prime rate is based on six-month-to-one-year loan interest rate released by The People's Bank of China. On September 4, 2012, the Company renewed this short-term loan with the same amount of $1,511,584 (equivalent to RMB 9.5 million) with Changle Rural Credit Union. The term of the renewal loan started from September 4, 2012 with a maturity date of September 2, 2013. The interest rate for the short-term loan was 9.465%12% per annum as of JuneSeptember 30, 2012. This short-term loan had been secured by the Company’s land use right and construction-in-progress of SD Chaoying with a book value of $3.15$3.19 million (equivalent to RMB 20.03 million) and $4.32$4.33 million (equivalent to RMB 27.4527.21 million) as of JuneSeptember 30, 2012, respectively. For the $3.15$3.19 million land use rights, $2.49$2.52 million was classified under construction-in-progress for the commercial property and the remaining $0.66$0.67 million was classified under intangible assets subject to amortization. The Company currently is in process of negotiating with Changle Rural Credit Union to renew the bank loan upon the maturity date on August 20, 2012. Additionally, there is another short-term loan of $157,406$159,114 (equivalent to RMB 1.0 million) from Mr. Fengguo Liu, an unrelated party. The short-term loan is due January 12, 2013 with an interest rate at 2% per month. Also included in the current liabilities was $1,745,801$1,839,454 of loans from related companies, including Xi’an Yanfeng Biotechnology Co., Ltd., Shaanxi Yanfeng Real Estate Co. Ltd, Shaanxi Chaoying Beauty & Cosmetics Group Co., LtdLtd., and the stockholders who are also the Company’s officers. These entities were related to the Company through common ownership and principal officers. These loans are non-interest bearing and have no set repayment terms.

NOTE D – STOCKHOLDERS’ EQUITY

As a result of the reverse merger (see Note A item 6), the common stock of Cybrdi-Maryland has been cancelled and converted into shares of common stock of Certron at an exchange ratio of 1.566641609 per share. This resulted in the issuance of 47,328,263 shares of Certron’s common stock to the Cybrdi shareholders. As of JuneSeptember 30, 2012 and December 31, 2011, the Company had 120,225,323 and 120,225,323 shares issued and outstanding, respectively.

As of JuneSeptember 30, 2012, the balance sheet included total equity of $4,678,647,$4,606,147, of which $1,112,330$1,091,375 was for non-controlling interest, representing 20% minority interest in Chaoying Biotech and 16.67% minority interest in SD Chaoying.

On January 15, 2010, the Board of Directors adopted resolutions that authorized incentive compensation to key management of the Company for services it has provided to the Company. As set forth in the Board of Directors’ resolution dated January 15, 2010, the incentive compensation shall be paid by the issuance of 12,000,000 shares of common stock of the Company to Mr. Yanbiao Bai, Chief Executive Officer and President of the Company, and 3,300,000 shares of common stock of the Company to Ms. Xue Bu, the former Chief Financial and Operating Officer of the Company. Compensation cost of $306,000 was recorded during the first quarter of 2010 at $0.02 per share, the market price of the Company’s common stock on January 15, 2010, the grant date.

F-10

On June 30, 2011, the Company entered into a written Debt Conversion Agreement with Shaanxi Chaoying Beauty & Cosmetics Group Co., Ltd. (a related party), Shaanxi NuoQi Healthfood Co., Ltd. (a related party), and Mr. Yanbiao Bai, Chairman and CEO of the Company. In the Agreement, the Company agreed to repay a total of $605,723 (RMB 3,920,000) debt due to Shaanxi Chaoying Beauty & Cosmetics Group Co., Ltd. by issuing the Company’s common stock. Simultaneously upon the execution of the repayment, Shaanxi Chaoying Beauty & Cosmetics Group Co., Ltd. agreed to transfer to Mr. Yanbiao Bai the number of shares to be issued through the debt repayment. The number of shares transferred to Mr. Yanbiao Bai was further offset by a number of shares equivalent to $169,973 (RMB 1,100,000) due by Shaanxi NuoQi Health Food Co., Ltd., a company wholly-controlled by Ms. Xue Bu, the spouse of Mr. Yanbiao Bai and former COO and Director of the Company, to offset its debt due to the Company. The Agreement was approved by the Company’s Board of Directors on June 30, 2011. As a result of the debt conversion and offset, the number of shares of common stock issued to Mr. Yanbiao Bai was 54,468,756 shares, which was determined based on the closing price of $0.008 per share on June 30, 2011. The share issuance for repayment of debt as agreed upon and approved was executed on August 17, 2011.

NOTE E – INCOME TAXES

Under the Enterprise Income Tax (“EIT”) of the PRC, prior to 2007, Chinese enterprises are generally subject to an income tax at an effective rate of 33% (30% statutory income taxes plus 3% local income taxes) on income reported in the statutory financial statements after appropriate tax adjustments, unless the enterprise is located in a specially designated region for which more favorable effective tax rates are applicable. Beginning on January 1, 2008, the new EIT law has replaced the existing laws for Domestic Enterprises (“DEs”) and Foreign Invested Enterprises (“FIEs”). The new standard EIT rate of 25% will replace the 33% rate previously applicable to both DES and FIEs. The two year tax exemption, six year 50% tax reduction and tax holiday for production-oriented FIEs will be eliminated. According to the Western Developing Plan implemented by the PRC Government, Chaoying Biotech is entitled to a 50% reduction in EIT of preferential policy, but not less than 15%. As a result, Chaoying Biotech’s effective EIT tax rate has been 15% since 2008.

The Company’s income tax expense includes U.S. and PRC income taxes. There were no U.S. current taxes for the sixnine months ended JuneSeptember 30, 2012 according to net loss incurred in the U.S. entity, which will not be anticipated to have any tax benefit in the future since no revenue is expected to be generated in the U.S as a result of discontinuing the U.S. operating company in Maryland in October 2007. There was $162$152 and $314 of PRC current income taxes accrued for the six monthsthree-month and nine- month period ended JuneSeptember 30, 2012 in SD Chaoying.Chaoying, respectively.

NOTE F – CONTINGENCIES AND LITIGATION LIABILITIES

On June 7, 2011, Weifang Shili Hesin Engineering Equipment Co., Ltd. (the “Plaintiff”) filed a complaint against SD Chaoying at the Basic People's Court of Changle County in Shandong Province, China, for alleged damages caused by SD Chaoying for not performing appropriately and completely the obligations in accordance with the agreement signed by both parties on April 28, 2011. Pursuant to the agreement, SD Chaoying agreed to transfer: (1) the rights of development, construction, and land of the #1 and #2 residential buildings for RMB 7.6 million, or $1,207,518, and (2) the 12 unsold residential units in the #3 and #4 residential buildings at a price as agreed upon. As of JuneSeptember 30, 2012, the Plaintiff paid $94,444$95,468 (equivalent to RMB 600,000) deposit as agreed upon, and prepaid $184,183$186,182 (equivalent to RMB 1,170,114), both of which were recorded as Other Payables under current liabilities. Plaintiff was seeking for the discharge of the original agreement signed, the return of prepayment of $184,183$186,182 (equivalent to RMB 1,170,114), repayment of the deposit plus 100% penalty, totaling $188,888$190,936 (equivalent to RMB 1,200,000), and for attorneys’ fees and costs. The Company disputed Plaintiff’s claim for a land use right certificate of underlying construction base of the #1 and #2 residential buildings, which certificate was inseparable from other part of the land and was not specifically stated in the agreement. The Company also disputed Plaintiff’s entitlement to the amounts claimed and instructed the Company’s legal counsel to contest the action, while concurrently pursuing opportunities for reasonable settlement. The case went to trial on July 7, 2011. On November 15, 2011, the Basic People's Court of Changle County pronounced its judgment against Plaintiff and that SD Chaoying had no liability. However, the plaintiff still has a right to appeal the judgment to the Intermediate Court in Weifang City, Shandong Province, China within 15 days after receiving verdict from the court. The verdict was released by the court on March 23, 2012. An appeal was filed on April 6, 2012 by the Plaintiff after the verdict was released.Plaintiff. The court sessionhearing for the appeal was held on May 16, 2012 at the Intermediate Court in Weifang City, Shandong Province, China. AsOn July 16, 2012, the Intermediate Court in Weifang City issued a decision and held that SD Chaoying should not be found liable. The decision is a final adjudication by the courts in China. Hence, the estimated contingent liabilities of approximately $36,942 (or RMB 240,000) recorded in other payable as of December 31, 2011 have been reversed in current quarter this year.

F-11

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation

The following discussion and analysis should be read in conjunction with the company’s Financial Statements and Notes thereto appearing elsewhere in this Report on Form 10-Q as well as the company’s other SEC filings, including our annual report on Form 10-K for the year ended December 31, 2011.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this quarterly report on Form 10-Q contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause its actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond its control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this quarterly report in its entirety, including but not limited to its financial statements and the notes thereto. Except for its ongoing obligations to disclose material information under the Federal securities laws, the Company undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. For any forward-looking statements contained in any document, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. This report on Form 10-Q contains forward-looking statements within the verdictmeaning of the appealfederal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "Cybrdi believes," "management believes" and similar language. The forward-looking statements are based on the current expectations of Cybrdi and are subject to certain risks, uncertainties and assumptions, including those set forth in the discussion under "Description of Business" and "Management's Discussion and Analysis." The actual results may differ materially from results anticipated in these forward-looking statements. We base the forward-looking statements on information currently available to us, and we assume no obligation to update them.

5

PLAN OF OPERATIONS

The Company focuses on biogenetics commercialization and healthcare product applications. The Company’s primary business includes sales of tissue microarray products and provision of related services. Tissue chips, also called micro tissue arrays, provide high-throughput molecular profiling and parallel analysis of biological and molecular characteristics for hundreds of pathologically controlled tissue specimens. Tissue arrays can provide rapid and cost-effective localization and evaluation of proteins, RNA, or DNA molecules, which is particularly useful for functioning genomic studies. Cybrdi manufactures both human and animal tissue microarray for a wide variety of scientific uses, including drug discovery and development.

The Company’s business strategies and focus in the near future include:

• Enhancing R&D in Tissue Microarrays (TMA)s and technical service;

• Expanding its product portfolio and virtual tissue array data bank (vTMAB);

• Launching the health diagnosis kit for obesity and skin disease;

• Participating in the culture and entertainment field.

With its sophisticated research in genes, the Company can provide a professional health diagnostic service for its customers. The Company provides genetic tests for the mechanism of obesity and skin diseases. By its genetic analysis, the Company can diagnose the reasons for obesity and other skin diseases such as freckles, which offers more accurate and specialized diagnosis than other similar services in the market. Such information can be utilized to guide customers to set up a proper health or fitness program.

The Company will also explore other business development opportunities that can leverage its sales platform and relationship with affiliated companies. Once the Company identifies attractive marketing opportunities, the Company may loan its available cash on a short term unsecured basis to non-affiliated third parties in order to generate interest income.

Commencing in the third quarter of 2007, the Company developed a new gene detective tissue array, called New Kits, and began to offer them to its customers.

On July 28, 2007, the Company acquired an 83.33% equity ownership of SD Chaoying from its Chinese partner, which will be primarily engaged in developing and operating culture and entertainment business. The culture and entertainment business will consist primarily of a spa activities, cosmetic personal care, hotel and casino. The Chinese partner is a principal shareholder of the Company and Mr. Bai, the Company chief executive officer and a director is also a principal of the Chinese partner. SD Chaoying began constructing the facility in September 2007. The total useable land and net building area for the project consists of approximately 50,000 and 33,000 square meters, respectively of which 52% will constitute property for business use and 48% for residential use. The project includes four multi-family residential buildings (about 14,188 square meters). As of September 30, 2012, SD Chaoying had substantially completed the construction of two residential buildings and had recognized revenue from sales of housing units of these buildings. Approximately 20.88% of the cultural and entertainment part of the facility opened in January 2011 and the balance remains under construction, which is expected to be completed in 2013 prior to the commencement of operations by merchant tenants. SD Chaoying intends to focus on spa activities, cosmetic personal care, hotel and casino gambling, which has not yet releasedbeen approved by the intermediate courtShandong Administration for Civil Affairs. In January 2011, SD Chaoying entered into a verbal agreement with Dongshan Victoria Spring Hotel (“Victoria”) allowing Victoria to manage and operate the SPA business at the completed section of the cultural and entertainment facility. SD Chaoying agreed to charge no fee from Victoria during the first year of operation as the trial period. SD Chaoiying and Weifang Shili Hesin Engineering Equipment Co., Ltd. executed an agreement on April 28, 2011, pursuant to which agreement, SD Chaoying agreed to transfer: (1) the rights of development, construction, and land use of the #1 and #2 residential buildings for RMB 7.6 million, or approximately $1,206,800, and (2) 12 unsold residential units in Weifang City.the #3 and #4 residential buildings at a price as agreed upon. As of JuneSeptember 30, 2012, the land use right and construction-in-progress with a total book value of $7.52 million (equivalent to RMB 47.5 million) of SD Chaoying were collateralized under the short-term loan of $1,511,584 (equivalent to RMB 9.5 million) from Changle Rural Credit Union.

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RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2011

Net Sales

Cybrdi now mainly generates two categories of revenues, including sales of tissue chip & kits products and residential housing. The net sales decreased $17,677 to $129,032 for the three months ended September 30, 2012 from $146,709 for the three months ended September 30, 2011, a decrease of 12%.

Tissue Chip & Kit Products: The net sales decreased $24,196 to $129,032 for the three months ended September 30, 2012 as compared to $153,228 for the three months ended September 30, 2011, a decrease of 15.8% . The decrease in net sales of tissue chip & kit product was primarily due to the decrease in the export sales revenues which accounted for approximately 84.1% of total tissue product sales revenues for the current period. Export sales revenues decreased $30,910 to $108,511 for the three months ended September 30, 2012 compared to $139,421 for the three months ended September 30, 2011, a decrease of 22.2% . The sales revenues generated from export sales now are subject to value added tax (VAT) according to PRC tax regulation, whereas the VAT imposed by PRC tax bureau was absorbed by the Company without charging to the customers before May 2012. The current selling price for export sales has been adjusted accordingly to maintain a reasonable range of gross margin since May 2012. Currently, our sole domestic sales representative in China is Xi’an AiLiNa Biotechnology Co., Ltd., and the only overseas sales representative is Biomax. We mainly distribute our products through these two sales representatives.

Housing: SD Chaoying completed the construction of the two six-story multi-family residential buildings with a total of 72 housing units in 2009, 9 and 37 of which units qualified as being recognized as sales revenue aggregating $296,521 and $1,010,632 for the years ended December 31, 2010 and 2009. An additional two residential units were sold in 2011. Another five residential units were qualified as being recognized as sales revenues during the first quarter of 2012. There was no sales from housing division in the quarter ended September 30, 2012. Since SD Chaoying is required to continue its involvement with the property after the sale, including installations of utility systems, improvements and amenities, and community landscaping, profit from the sale was recognized using the percentage of completion method as required by ASC Topic 360-20, “Property, Plant, and Equipment – Real Estate Sales”.

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Gross Margin

Gross margin as a percentage of sales increased to 27.1% for the three months ended September 30, 2012 from (22.5%) for the three months ended September 30, 2011

Tissue Chip & Kit Products: The gross margin of Tissue Chip & Kit Products division increased to 39.6% for the third quarter of 2012 compared to 31.6% for the same period in 2011. The increase in gross margin for the three months ended September 30, 2012 was mainly because more technical services were rendered to customers in domestic market and the service incomes were charged to the selling price of products.

Housing: There is no gross profit of the Housing division for the three months ended September 30, 2012. The negative gross profit for the three months ended September 30, 2011 was mainly due to weak sales in the residential housing division. As profits from the sale was recognized using the percentage of completion method as required by ASC Topic 360-20, “Property, Plant, and Equipment – Real Estate Sales”, only 93.20% of revenues can be recognized based on the current percentage of completion as of September 30, 2011 and 2012.

In addition, the commencement of the business in the commercial property segment has not generated revenue but has incurred costs directly associated with the business.

Operating Expenses

The Company's operating expenses decreased by $89,867, or 41.3%, to $127,837 for the three months ended September 30, 2012 from $217,704 for the three months ended September 30, 2011. The decrease was primarily due to the decrease of bad debt expense and selling and distribution expenses and a gain on  reversal of contingent liabilities accrued in the same period last year, partially offset by the increase in professional fees and salaries and wages for the three months ended September 30, 2012.

There was no bad debt expense assessed for the three months ended September 30, 2012, whereas the bad debt expense was $23,526 for the same period last year. The Company recorded an estimate of loss contingencies of $37,700$36,942 in the third quarter last year, which was estimated by the Company's legal counsel to be reasonable. The Company recorded the estimated liability and loss contingencies according to FASB ASC 450-20-25-2 under Topic 450, “Contingencies Loss Contingencies Recognition”. On July 16, 2012, the Intermediate Court in Weifang City pronounced its judgment against Plaintiff and that SD Chaoying had no liability. The litigation is a final adjudication. Hence, the estimated contingent liabilities recorded in last year have been reversed in current quarter this year.

The decrease of operating expense for the three-month period this year was partially offset by an increase of $14,261 in professional fees from $14,268 for the three months ended September 30, 2011 to $28,529 for the three months ended September 30, 2012 and an increase in salaries and wages of $5,698 to $51,279 for the three months ended September 30, 2012 from $45,581 for the same period last year.

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Other Income (Expense)

Other income decreased by $36,809 to $(41,851) for the three months ended September 30, 2012 as compared to $(5,042) for the three months ended September 30, 2011, a decrease of 730%. The decrease was primarily due to the interest expense of $40,617 for the three months ended September 30, 2012 that was not subject to capitalization due to temporary suspension of the construction of the entertainment center, whereas interest expense was capitalized and recorded as construction-in-progress in the third quarter of 2011.

Income Taxes

The Company did not record U.S. current income tax for the three months ended September 30, 2012, and 2011, since there was no taxable income during these periods. There was $152 of PRC current income taxes accrued for the three months ended September 30, 2012 in SD Chaoying.

Net Loss

As a result of the above factors, our net loss before minority interests decreased $120,862, or 47.3%, from $255,705 for the three months ended September 30, 2011 to $134,843 for the three months ended September 30, 2012.

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2011

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Net Sales

Cybrdi now mainly generates two categories of revenues, including sales of tissue chip & kits products and residential housing. The net sales increased $99,610 to $483,549 for the nine months ended September 30, 2012 from $383,939 for the nine months ended September 30, 2011, an increase of 25.9% .

Tissue Chip & Kit Products: The net sales decreased $48,862 to $341,596 for the nine months ended September 30, 2012 as compared to $390,458 for the nine months ended September 30, 2011, a decrease of 12.5% . The decrease in net sales of tissue chip & kit product was primarily due to the decrease in the export sales revenues which accounted for approximately 85.0% of total tissue product sales revenues for the current period. Export sales revenues decreased $65,612 to $290,222 for the nine months ended September 30, 2012 as compared to $355,834 for the nine months ended September 30, 2011, a decrease of 18.4% . The sales revenues generated from export sales now are subject to value added tax (VAT) according to PRC tax regulation, whereas the VAT imposed by PRC tax bureau was absorbed by the Company without charging to the customers before May 2012. The current selling price for export sales has been adjusted accordingly to maintain a reasonable range of gross margin since May 2012. Currently, our sole domestic sales representative in China is Xi'an AiLiNa Biotechnology Co., Ltd., and the only overseas sales representative is Biomax. We mainly distribute our products through these two sales representatives.

Housing: SD Chaoying completed the construction of the two six-story multi-family residential buildings with a total of 72 housing units in 2009, 9 and 37 of which units qualified as being recognized as sales revenue aggregating $296,521 and $1,010,632 for the years ended December 31, 2010 and 2009. An additional two residential units were sold in 2011. Another five residential units were qualified as being recognized as sales revenues during the first quarter of 2012. Since SD Chaoying is required to continue its involvement with the property after the sale, including installations of utility systems, improvements and amenities, and community landscaping, profit from the sale was recognized using the percentage of completion method as required by ASC Topic 360-20, “Property, Plant, and Equipment – Real Estate Sales”.

Gross Margin

Gross margin as a percentage of sales increased to 18.4% for the nine months ended September 30, 2012 from (4.4%) for the nine months ended September 30, 2011.

Tissue Chip & Kit Products: The gross margin of Tissue Chip & Kit Products division increased to 34.9% for the nine months ended September 30, 2012 compared to 24.7% for the same period in 2011. The increase in gross margin for the nine months ended September 30, 2012 was mainly because more technical services were rendered to customers in domestic market and the service incomes were charged to the selling price of products.

Housing: The gross margin of housing division increased to 13.3% for the nine months ended September 30, 2012 compared to 0% for the same period in 2011. The negative gross profit for the nine months ended September 30, 2011 was mainly due to weak sales in the residential housing division. As profits from the sale was recognized using the percentage of completion method as required by ASC Topic 360-20, “Property, Plant, and Equipment – Real Estate Sales”, only 93.20% of revenues can be recognized based on the current percentage of completion as of September 30, 2011 and 2012.

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In addition, the commencement of the business in the commercial property segment has not generated revenue but has incurred costs directly associated with the business.

Operating Expenses

The Company’s operating expenses decreased by $132,223 to $427,961 for the nine months ended September 30, 2012 from $560,184 for the nine months ended September 30, 2011, a decrease of 23.6% . The decrease in operating expenses was primarily because there was no bad debt expense assessed for the nine months ended September 30, 2012. Also Selling and distribution expenses decreased from $16,422 for the nine months ended September 30, 2011 to $4,123 for the same period in 2012. The Company recorded an estimate of loss contingencies of $36,942 in the third quarter last year, which was estimated by the Company’s legal counsel to be reasonable. The Company recorded the estimated liability and loss contingencies according to FASB ASC 450-20-25-2 under Topic 450, “Contingencies Loss Contingencies Recognition”. On July 16, 2012, the Intermediate Court in Weifang City pronounced its judgment against Plaintiff and that SD Chaoying had no liability. The litigation is a final adjudication. Hence, the estimated contingent liabilities recorded in last year have been reversed in current quarter this year, resulting in a decrease in operating expense for the nine months ended September 30, 2012.

F-11
The decrease of operating expense for the nine-month period this year was partially offset by an increase of $30,353 in operating tax expenses from $235 for the nine months ended September 30, 2011 to $30,588 for the nine months ended September 30, 2012 and an increase of salaries and wages of $26,682 to $153,839 for the nine months ended September 30, 2012 from $127,157 for the same period last year.

Other Income (Expense)

Other income decreased by $151,123 to $(156,534) for the nine months ended September 30, 2012 as compared to $(5,411) for the nine months ended September 30, 2011, a decrease of 2792.9% . The increase was primarily due to the interest expense of $134,637 for the nine months ended September 30, 2012 that was not subject to capitalization due to suspension of the construction of the entertainment center, whereas interest expense was capitalized and recorded as construction-in-progress for the same period in 2011.

Income Taxes

The Company did not record U.S. current income tax for the nine months ended September 30, 2012, and 2011, since there was no taxable income during these periods. There was $314 of PRC current income taxes accrued for the nine months ended September 30, 2012 in SD Chaoying.

Net Loss

As a result of the above factors, our net loss before minority interests decreased $86,485, or 14.8%, from $582,400 for the nine months ended September 30, 2011 to $495,915 for the nine months ended September 30, 2012.

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LIQUIDITY AND CAPITAL RESOURCES

Operating working capital deficit (total current asset deduct total current liabilities) increased by $384,328 from $(2,931,175) as of December 31, 2011 to $(3,315,503) as of September 30, 2012. The decrease was primarily due to a decrease of $100,643 in inventories from $1,053,038 as of December 31, 2011 to $952,395 as of September 30, 2012 , an increase of $43,924 in accrued expense from $693,436 as of December 31, 2011 to $737,360 as of September 30, 2012, and an increase of $95,156 in other payables from $366,020 as of December 31, 2011 to $461,176 as of September 30, 2012.

For investing activities, the Company incurred net cash outflow during the nine months ended September 30, 2012. The primary reason was due to $61,970 used in the construction in progress of the SD Chaoying project during the nine months ended September 30, 2012.

For financing activities, the Company obtained net proceeds of $69,502 and $168,060 from related parties and shareholders/officers of the Company, respectively for the nine months ended September 30, 2012, partially offset by the repayments of loan from the Company’s shareholders/officers of $252,734 for the nine months ended September 30, 2012.

The Company had a short-term loan in the principal amount of $1,511,584 (equivalent to RMB 9.5 million) with Changle Rural Credit Union. The loan had a maturity date of August 20, 2012. The adjustable interest rate was a rate per annum equal to the Prime Rate plus 50% of prime rate. The prime rate is based on six-month-to-one-year loan interest rate released by The People's Bank of China. On September 4, 2012, the Company renewed this short-term loan with the same amount of $1,511,584 (equivalent to RMB 9.5 million) with Changle Rural Credit Union. The term of the renewal loan started from September 4, 2012 with a maturity date of September 2, 2013. The interest rate for the short-term loan was 12% per annum as of September 30, 2012. This short-term loan had been secured by the Company’s land use right and construction-in-progress of SD Chaoying with a book value of $3.19 million (equivalent to RMB 20.03 million) and $4.33 million (equivalent to RMB 27.21 million) as of September 30, 2012, respectively. For the $3.19 million land use rights, $2.52 million was classified under construction-in-progress for the commercial property and the remaining $0.67 million was classified under intangible assets subject to amortization.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred significant losses and has not demonstrated the ability to generate sufficient cash flows from operations to satisfy its liabilities and sustain operations. The Company had an accumulated deficit of $2,854,278 and $2,447,643 as of September 30, 2012 and December 31, 2011, including net losses of $495,915 and $582,400 for the nine months ended September 30, 2012 and 2011, respectively. In addition, current liabilities exceeded current assets by $3,315, 503 and $2,931,175 as of September 30, 2012 and December 31, 2011, respectively. These matters raise substantial doubt about the Company’s ability to continue as a going concern.

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The Company finances its operations primarily through short-term bank borrowings and advances from related parties and/or officers/shareholders. In order to complete the construction of SD Chaoying cultural and entertainment center, approximately $3.0 million (equivalent to RMB 19 million) of capital is expected to be needed. The Company, taking into accounts the available banking facilities, internal financial resource, and supports from related companies, believes it has sufficient working capital to meet its present obligation for at least the next twelve months. Management is taking actions to address the company's financial condition and deteriorating liquidity position. The following sets forth management’s plans for dealing with the adverse effects of the conditions:

(a) Sale of housing inventories: Proceeds to be received from the sale of the remaining housing of the two completed residential buildings are expected to amount to approximately $0.5 million.

(b) Rental and management fee revenue from the cultural and entertainment center: Annual rental revenue is estimated to be approximately $0.68 million per year. Management fee revenue will be charged to commercial tenants at 3% of annual gross revenue. As of September 30, 2012, the Company has not commenced collecting rental and management fee revenue for the culture and entertainment center.

(c) Additional advances from related companies and affiliates: Mr. Bai, our Chief Executive Officer, advanced $83,081 to the Company in the current period to finance operations and the costs to maintain the Company’s public status in the U.S. In addition, Shaanxi Chaoying Beauty & Cosmetics Group, which is also an affiliate, is anticipated to provide up to approximately $790,000 (equivalent to RMB 5 million) of capital to support operations. Shaanxi Chaoying Beauty & Cosmetics Group advanced $12,640 for the nine-month period ended September 30, 2012 to the Company to finance its operations.

The Company may require additional funds and may seek to raise such funds though public and private financings or from other sources. There is no assurance that management’s plans will be realized or the additional financing will be available at all or that, if available, such financing will be obtainable on terms favorable to the Company or that any additional financing will not be dilutive. The consolidated financial statements do not include any adjustments that might result from the outcome of those uncertainties.

INFLATION

Inflation has not had a material impact on our business.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this quarterly report on Form 10-Q contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause its actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond its control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this quarterly report in its entirety, including but not limited to its financial statements and the notes thereto. Except for its ongoing obligations to disclose material information under the Federal securities laws, the Company undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. For any forward-looking statements contained in any document, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.Under the supervision and with the participation of our management, including our Chief Executive Officer, Yanbiao Bai, and Principal Financial Officer, Yonghong Ren, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Control Over Financial Reporting.During the most recent quarter ended September 30, 2012, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) ) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On June 6, 2000, we received a notice to inform us that we may have a potential liability from waste disposal in the Casmalia Disposal Site at Santa Barbara County, California. We were given a choice of either signing an agreement that would toll the statute of limitations for eighteen (18) months in order to allow us to resolve any liability with the government without incurring costs associated with being named a defendant in a lawsuit, or becoming an immediate defendant in a lawsuit. We signed the tolling agreement. On November 20, 2001, the tolling agreement was extended for an additional 18 months. On May 20, 2003 the tolling agreement was again extended for an additional 18 months and on November 24, 2004 the tolling agreement was again extended for additional 18 months. On June 29, 2004, we received a proposed settlement from the EPA in the amount of $21,131, which had been accrued as other payable. We are waiting for communication from the government concerning payment of the final settlement. As of September 30, 2012 and subsequent to December 31, 2011, the Company had not received further correspondences from the EPA regarding this matter.

On June 7, 2011, Weifang Shili Hesin Engineering Equipment Co., Ltd. (the “Plaintiff”) filed a complaint against SD Chaoying at the Basic People's Court of Changle County in Shandong Province, China, for alleged damages caused by SD Chaoying for not performing appropriately and completely the obligations in accordance with the agreement signed by both parties on April 28, 2011. Pursuant to the agreement, SD Chaoying agreed to transfer: (1) the rights of development, construction, and land of the #1 and #2 residential buildings for RMB 7.6 million, or $1,207,518, and (2) the 12 unsold residential units in the #3 and #4 residential buildings at a price as agreed upon. As of September 30, 2012, the Plaintiff paid $95,468 (equivalent to RMB 600,000) deposit as agreed upon, and prepaid $186,182 (equivalent to RMB 1,170,114), both of which were recorded as Other Payables under current liabilities. Plaintiff was seeking for the discharge of the original agreement signed, the return of prepayment of $186,182 (equivalent to RMB 1,170,114), repayment of the deposit plus 100% penalty, totaling $190,936 (equivalent to RMB 1,200,000), and for attorneys’ fees and costs. The Company disputed Plaintiff’s claim for a land use right certificate of underlying construction base of the #1 and #2 residential buildings, which certificate was inseparable from other part of the land and was not specifically stated in the agreement. The Company also disputed Plaintiff’s entitlement to the amounts claimed and instructed the Company’s legal counsel to contest the action, while concurrently pursuing opportunities for reasonable settlement. The case went to trial on July 7, 2011. On November 15, 2011, the Basic People's Court of Changle County pronounced its judgment against Plaintiff and that SD Chaoying had no liability. The verdict was released by the court on March 23, 2012. An appeal was filed on April 6, 2012 by the Plaintiff. The hearing for the appeal was held on May 16, 2012 at the Intermediate Court in Weifang City, Shandong Province, China. On July 16, 2012, the Intermediate Court in Weifang City issued a decision and held that SD Chaoying should not be found liable. The decision is a final adjudication by the courts in China. Hence, the estimated contingent liabilities of approximately $36,942 (or RMB 240,000) recorded in other payable as of December 31, 2011 have been reversed in current quarter this year.

Other than stated above, there are no material pending legal proceedings to which the Registrant is a party or as to which any of its property is subject, and no such proceedings are known to the Registrant to be threatened or contemplated against it.

Item 1A. Risk Factors

A smaller reporting company is not required to provide the information required by this Item.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures

Not Applicable

Item 5. Other Information

None

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Item 6. Exhibits

XBRL Exhibit

SIGNATURE

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.

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