Yanglin Soybean 10Q 2008 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended June 30, 2008

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

For the transition period from _______ to _______

Commission file number 000-52127

YANGLIN SOYBEAN, INC.

(Exact name of registrant as specified in its charter)

Nevada	20-4136884
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

99 Fan Rong Street, Jixian County, Heilongjiang 155900 P.R. China

(Address of principal executive offices)

Registrant’s telephone number, including area code: (86) 469-467-8077

VICTORY DIVIDE MINING COMPANY

(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 o

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer x	Smaller Reporting Company o
(Do not check if a 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 o No x

The number of shares of Common Stock outstanding on August 13, 2008 was 20,000,003 shares.

Yanglin Soybean, Inc.

INDEX

Part I — Financial Information

	Item 1.	Financial Statements	1

		Notes to Condensed Consolidated Financial Statements (unaudited)	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46

	Item 4.	Controls and Procedures	47

Part II — Other Information

	Item 1A.	Risk Factors	50

	Item 6.	Exhibits	62

	Signatures		63

YANGLIN SOYBEAN INC.

FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US dollars) (Unaudited)

YANGLIN SOYBEAN INC.

CONTENTS		PAGES

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		1

CONSOLIDATED BALANCE SHEETS		2 – 3

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME		4

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY		5

CONSOLIDATED STATEMENTS OF CASH FLOWS		6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		7 – 24

ALBERT WONG & CO.

CERTIFIED PUBLIC ACCOUNTANTS

7th Floor, Nan Dao Commercial Building

359-361 Queen’s Road Central

Hong Kong

Tel : 2851 7954

Fax: 2545 4086

ALBERT WONG

B.Soc., Sc., LL.B., P.C.LL., Barrister-at-law, C.P.A.(Practising).

To:	The board of directors and stockholders of
	Yanglin Soybean Inc.

Report of Independent Registered Public Accounting Firm

We have reviewed the accompanying interim consolidated balance sheets, related consolidated statements of income, stockholders’ equity and cash flows statement of Yanglin Soybean Inc. and consolidated subsidiaries as of June 30, 2008, and for the three-month and six-month periods then ended. These interim financial information statements are the responsibility of the company's management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

Hong Kong	Albert Wong & Co.
August 10, 2008.	Certified Public Accountants

YANGLIN SOYBEAN INC.

CONSOLIDATED BALANCE SHEETS

AS AT JUNE 30, 2008 AND DECEMBER 31, 2007

(Stated in US Dollars)

	Notes		June 30, 2008		December 31, 2007
			(Unaudited)		(Audited)
ASSETS
Current assets
Cash and cash equivalents		2(k)	$	10,525,613	$	9,210,121
Pledged deposits		4		500,000		500,000
Accounts receivable		2(j)&5		-		13,854
Inventories		2(i)&7		21,043,340		17,883,652
Advances to suppliers				10,269,097		5,736,267
Prepaid VAT and other taxes				3,400,284		2,457,137
Other receivables		6		36,587		27,896

Total current assets			$	45,774,921	$	35,828,927
Property, plant and equipment, net		2(g)&8		23,140,896		22,563,196
Intangible assets, net		2(e),(f)&9		4,716,324		3,444,081
Prepaid deposits for equipment
and construction				11,783,012		8,896,327

TOTAL ASSETS			$	85,415,153	$	70,732,531
LIABILITIES AND
STOCKHOLDERS’ EQUITY
Current liabilities
Short term bank loans		10	$	13,097,005	$	12,305,000
Current portion of long term bank
loans		12		50,486		47,433
Accounts payable				23,381		12,921
Other payables		11		75,408		44,380
Customers deposits				3,313,283		2,656,777
Accrued liabilities				468,014		521,114

Total current liabilities			$	17,027,577	$	15,587,625
Long term liabilities
Long term bank loans		12		412,365		457,107

TOTAL LIABILITIES			$	17,439,942	$	16,044,732

See accompanying notes to consolidated financial statements

YANGLIN SOYBEAN INC.

CONSOLIDATED BALANCE SHEETS (Continued)

AS AT JUNE 30, 2008 AND DECEMBER 31, 2007

(Stated in US Dollars)

	Notes		June 30, 2008		December 31, 2007
			(Unaudited)		(Audited)
STOCKHOLDERS’ EQUITY
Preferred Stock – $0.001 par value 50,000,000 share authorized ; 9,999,999 and 9,999,999 issued and outstanding as of June 30, 2008 and December 31, 2007 respectively.		13	$	2,923,815	$	2,923,815

Common stock - $0.001 par value 100,000,000 shares authorized; 20,000,003 shares issued and outstanding as of June 30, 2008 and December 31, 2007		14		20,000		20,000
Additional paid-in capital		14		27,277,053		27,277,053
Statutory reserves		2(s)		3,490,834		3,490,834
Retained earnings				26,824,823		17,410,219
Accumulated other comprehensive
income		2(t)		7,438,686		3,565,878
			$	67,975,211	$	54,687,799

TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY			$	85,415,153	$	70,732,531

See accompanying notes to consolidated financial statements

YANGLIN SOYBEAN INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007(Unaudited)

(Stated in US Dollars)

			Six months ended June 30,						Three months ended June 30,
			2008			2007			2008			2007
	Notes

Net sales		2(m)&18	$	141,549,672		$	69,193,036		$	76,273,814		$	33,899,190
Cost of sales		2(n)&18		(130,296,704	)		(63,580,961	)		(71,857,724	)		(31,602,970	)

Gross profit			$	11,252,968		$	5,612,075		$	4,416,090		$	2,296,220

Selling expenses				(118,970	)		(69,067	)		(64,545	)		(51,454	)
General and administrative
expenses				(1,244,941	)		(710,518	)		(552,129	)		(285,998	)

Income from operation			$	9,889,057		$	4,832,490		$	3,799,416		$	1,958,768
Interest income				53,798			25,558			35,514			13,122
Interest expenses				(513,903	)		(219,969	)		(264,980	)		(108,905	)
Other expenses				(14,348	)		-			(14,348	)		-

Income from operations before
income taxes			$	9,414,604		$	4,638,079		$	3,555,602		$	1,862,985
Income taxes		2(r)&16		-			-			-			-

Net income			$	9,414,604		$	4,638,079		$	3,555,602		$	1,862,985

Foreign currency translation
adjustment				3,872,808			955,446			1,470,797			709,619

Comprehensive income			$	13,287,412		$	5,593,525		$	5,026,399		$	2,572,604

Basic earnings per share		15	$	0.471		$	0.232		$	0.178		$	0.093

Diluted earnings per share		15	$	0.258		$	0.232		$	0.096		$	0.093

Basic weighted average
share outstanding		15		20,000,003			19,998,473			20,000,003			19,998,473

Diluted weighted average
share outstanding		15		36,546,084			19,998,473			37,221,146			19,998,473

See accompanying notes to consolidated financial statements

YANGLIN SOYBEAN INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2007 AND SIX-MONTHS ENDED

JUNE 30, 2008 (Unaudited)

(Stated in US Dollars)

															Accumulated
	Common stock						Additional								other
	Number				Preferred		paid-in			Statutory		Retained			comprehensive
	of share		Amount		stock		capital			reserves		earnings			income		Total

Bal., 1/1/2007		18,500,000	$	18,500		-		12,228,936			1,716,827		8,860,198			889,190		23,733,651
Net income		-		-		-		-			-		10,324,028			-		10,324,028
Reverse acquisition		1,497,608		1,498		-		(210,496	)		-		-			-		(208,998	)
Addition of capital		2,395		2		2,923,815		15,238,613			-		-			-		18,162,430
Appropriations to
surplus reserves		-		-		-		-			1,774,007		(1,774,007	)		-		-
Foreign currency
adjustment		-		-		-		-			-		-			2,676,688		2,676,688

Bal., 12/31/2007		20,000,003	$	20,000		2,923,815		27,277,053			3,490,834		17,410,219			3,565,878		54,687,799

Bal., 1/1/2008		20,000,003	$	20,000		2,923,815		27,277,053			3,490,834		17,410,219			3,565,878		54,687,799
Net income		-		-		-		-			-		9,414,604			-		9,414,604
Foreign currency
adjustment		-		-		-		-			-		-			3,872,808		3,872,808

Bal., 3/31/2008		20,000,003	$	20,000		2,923,815		27,277,053			3,490,834		26,824,823			7,438,686		67,975,211

See accompanying notes to consolidated financial statements

YANGLIN SOYBEAN INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007 (Unaudited)

(Stated in US Dollars)

	Six months ended June 30
	2008			2007
Cash flows from operating activities
Net income	$	9,414,604		$	4,638,079
Depreciation		957,501			1,013,297
Amortization		42,217			38,626
Gain on disposal of fixed assets		(7,070	)		(11,694	)

Adjustments to reconcile net income to net cash provided by operating activities:
Accounts receivable		14,327			148,611
Inventories		(1,951,580	)		(848,279	)
Advances to suppliers		(4,045,390	)		(175,404	)
Amounts due to construction		(2,248,369	)		(895,839	)
Prepaid VAT and other taxes		(762,704	)		(192,263	)
Other receivables		1,084,432			(1,536,924	)
Accounts payable		9,377			(725,276	)
Other payables		(1,211,387	)		8,372
Customers deposits		471,718			2,308,804
Accrued liabilities		(83,426	)		(115,914	)
Net cash provided by operating activities	$	1,684,250		$	3,654,196

Cash flows from investing activities
Payment of plant and equipment		(107,766	)		(713,760	)
Sales proceeds of plant and equipment		7,070			53,289
Payment of intangible assets		(1,062,953	)		-

Net cash used in investing activities	$	(1,163,649	)	$	(660,471	)

Cash flows from financing activities
Bank loan repayments		(23,005	)		(3,901,312	)

Net cash used in financing activities	$	(23,005	)	$	(3,901,312	)

Net in cash and cash equivalents sourced/(used in)		497,596			(907,587	)

Effect of foreign currency translation on cash and
cash equivalents		817,996			36,233

Cash and cash equivalents–beginning of year		9,210,021			3,013,520

Cash and cash equivalents–end of year	$	10,525,613		$	2,142,166

Supplementary cash flow information:
Interest received	$	53,798		$	25,558
Interest paid		513,903			219,969

See accompanying notes to consolidated financial statements

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

1.	ORGANIZATION AND PRINCIPAL ACTIVITIES

Yanglin Soybean Inc. (the “Company”) was incorporated in the state of Nevada on May 26, 1921. Prior to October 3, 2007 the company has only nominal operations and assets.

On October 3, 2007, the Company executed a reverse-merger with Faith Winner Investments Limited (“Faith Winner (BVI)”) by an exchange of shares whereby the Company issued 18,500,000 common shares at $0.001 par value in exchange for all Faith Winner (BVI) shares.

The exchange transaction was accounted for as a reverse acquisition in accordance with Statements of Financial Accounting Standards (“SFAS”) No. 141. “Business Combinations”. The 1,494,173 shares of Yanglin Soybean Inc. outstanding prior to the stock exchange transaction were accounted for at the net book value at the time of the transaction, which was a deficit of $210,496. Accordingly, the consolidated statements of income include the results of operations of Heilongjiang Yanglin Soybean Group Co., Ltd from the acquisition date through June 30, 2008, and 2007.

Faith Winner (BVI) formed Faith Winner (Jixian) Agriculture Development Company (“Faith Winner (Jixian)” or “WFOE”), which entered into a series of agreements with Heilongjiang Yanglin Soybean Group Co., Ltd. (“Yanglin”) including but not limited to management, loan, purchase option, consignment, trademark licensing, non-competition, etc. The Consignment Agreements was entered on September 1, 2007, and the other agreements were all signed on September 24, 2007. As a result of entering the abovementioned agreements, WFOE deem to control Yanglin as a Variable Interest Entity as required by FASB Interpretation No. 46 (revised December 2003) Consolidated of Variable Interest Entities, an Interpretation of ARB No. 51. The reverse-merger also included an equity financing of $21,500,000 by the issuance of 10,000,000 Series A Convertible Preferred Stock at $2.15 per share to 10 accredited investors.

The Company, through its subsidiaries and Yanglin, (hereinafter, collectively referred to as “the Group”), is now in the business of manufacturing, distribution, and selling of non-genetically modified soybean oil, soybean salad oil, and soybean meal throughout the Province of Heilongjiang, China.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)

Method of Accounting

The Company’s condensed interim consolidated financial statements have been prepared in accordance with US GAAP.

The interim results of operations are not necessarily indicative of the results to be expected for the fiscal year ending June, 2008. The Company’s consolidated balance sheet as of December 31, 2007 has been taken from the Company’s audited consolidated balance sheet as of the date. All other financial statements contained herein are unaudited and, in the opinion of management, contain all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of financial position, results of operations and cash flows for the period presented. The Company’s accounting policies and certain other disclosure are set forth in the notes to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto.

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures 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 from those estimates. This basis of accounting differs in certain material respects from that used for the preparation of the books of account of the Company’s principal subsidiaries, which are prepared in accordance with the accounting principles and the relevant financial regulations applicable to enterprises with limited liabilities established in the PRC, the accounting standards used in the places of their domicile. The accompanying condensed interim consolidated financial statements reflect necessary adjustments not recorded in the books of account of the Company's subsidiaries to present them in conformity with US GAAP.

(b)

Principles of Consolidation

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

Name of Company	Place of incorporation	Attributable interest

Faith Winner Investments Ltd	British Virgin Islands		100	%

Faith Winner (Jixian) Agriculture Development Company	PRC		100	%

Heilongjiang Yanglin Soybean Group Co. Ltd	PRC		100	%
*Deemed variable interest entity member

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(c)

Use of estimates

The preparation of the financial statements in conformity with generally accepted accounting principles 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 periods. Management made these estimates using the best information available at the time the estimates were made; however actual results could differ materially from those estimates.

(d)

Economic and political risks

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

The Group’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Group’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

(e)

Land use rights

Land use rights are stated at cost less accumulated amortisation. Amortisation is provided over the respective useful lives, using the straight-line method. Estimated useful lives range from 22 to 50 years.

(f)

Railway use rights

Railway use rights are stated at cost less accumulated amortisation. Amortisation is provided over the respective useful lives, using the straight-line method. Estimated useful life is 10 years.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(g)

Property, plant and equipment

Plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method. Estimated useful lives of the plant and equipment are as follows:

Buildings	10 - 35 years
Machinery and equipment	6 - 30 years
Office equipment	4 - 20 years
Motor vehicles	10 years

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized.

(h)

Accounting for the impairment of long-lived assets

The Group periodically evaluates the carrying value of long-lived assets to be held and used, including intangible assets subject to amortization, when events and circumstances warrant such a review, pursuant to the guidelines established in SFAS No. 144. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognised based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair market values are reduced for the cost to dispose.

During the reporting periods, there was no impairment loss.

(i)

Inventories

Inventories consist of finished goods, and raw materials, and are stated at the lower of cost or market value. Substantially all inventory costs are determined using the weighted average basis. Finished goods are comprised of direct materials, direct labor and an appropriate proportion of overhead.

(j)

Trade receivables

Trade receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for doubtful accounts is maintained for all customers in consideration of a variety of factors, including the length of past due, significant one-time events and the company’s historical experience. Bad debts are written off as incurred.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(k)

Cash and cash equivalents

The Company considers all highly liquidate investments purchased with original maturities of three months or less to be cash equivalents. The Company maintains bank accounts only in the PRC. The Company does not maintain any bank accounts in the United States of America.

	June 30, 2008		December 31, 2007
Cash on hand	$	140,305	$	18,362
Industrial And Commercial Bank of China		516		-
Agricultural Development Bank of China		1,505,317		1,362,651
Agricultural Bank of China		8,879,475		7,829,108

	$	10,525,613	$	9,210,121

(l)

Foreign currency translation

The accompanying financial statements are presented in United States dollars. The reporting currency of the Group is the U.S. dollar (USD). Faith Winner (Jixian) and Yanglin use its local currency, Renminbi (RMB), as its functional currency. Results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the end of period exchange rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income in stockholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

The PRC government imposes significant exchange restrictions on fund transfers out of the PRC that are not related to business operations. These restrictions have not had a material impact on the Group because it has not engaged in any significant transactions that are subject to the restrictions.

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

	June 30, 2008		December 31, 2007		June 30, 2007
Twelve months ended
RMB : USD exchange rate		-		7.3141		-
Six months ended
RMB : USD exchange rate		6.8718		-		7.6248
Average six months ended
RMB : USD exchange rate		7.0726		-		7.7300

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

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(m)

Revenue recognition

Revenue represents the invoiced value of goods sold recognized upon the delivery of goods to customers. Revenue is recognized when all of the following criteria are met: Persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, and the seller’s price to the buyer is fixed or determinable

(n)

Costs of sales

Cost of sales consists primarily of direct material costs, direct labor cost, direct depreciation and related direct expenses attributable to the production of products. Written-down of inventory to lower of cost or market is also reflected in cost of revenues.

(o)

Advertising

The Group expensed all advertising costs as incurred. Advertising expenses included in selling expenses were $4,348 and nil for the six months ended June 30, 2008 and 2007 respectively.

(p)

Shipping and handling

The distribution of shipping and handling expenses between selling expenses and general and administrative expenses is shown as follows:

	Six months ended June 30, 2008		Six months ended June 30, 2007

Selling expenses	$	50,446	$	34,700
General and administrative expenses		2,611		-

	$	53,057	$	34,700

(q)	Retirement benefits

Retirement benefits in the form of contributions under defined contribution retirement plans to the relevant authorities are charged to the statements of income as incurred. The retirement benefit funding included in general and administrative expenses were $81,757 and $32,928 for the six months ended June 30, 2008 and 2007 respectively.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(r)

Income taxes

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

(s)

Statutory reserves

As stipulated by the PRC’s Company Law and as provided in the Faith Winner (Jixian), and Yanglin’s Articles of Association, Faith Winner and Heilongjiang Yanglin’s net income after taxation can only be distributed as dividends after appropriation has been made for the following:

(i)

Making up cumulative prior years’ losses, if any;

(ii)

Allocations to the “Statutory surplus reserve” of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital, which is restricted for set off against losses, expansion of production and operation or increase in registered capital;

(iii)

Allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company's “Statutory common welfare fund”, which is restricted for capital expenditure for the collective benefits of the Company's employees; and

(iv)

Allocations to the discretionary surplus reserve, if approved in the shareholders’ general meeting.

On December 31, 2001, Heilongjiang Yanglin established a statutory surplus reserve as well as a statutory common welfare fund and commenced to appropriate 10% and 5%, respectively of the PRC net income after taxation to these reserves. The amounts included in the statutory reserves consisted of surplus reserve of $2,327,222 and common welfare fund of $1,163,612 as of December 31, 2007 and June 30, 2008.

(t)

Comprehensive income

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

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(u)

Recent accounting pronouncements

In February 2007, FASB issued Statement of Financial Accounting Standards No. (“SFAS”) 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Entities that elect the fair value option will report unrealized gains and losses in earnings at each subsequent reporting date. The fair value option may be elected on an instrument-by-instrument basis, with a few exceptions. SFAS 159 also establishes presentation and disclosure requirements to facilitate comparisons between entities that choose different measurement attributes for similar assets and liabilities. The requirements of SFAS 159 are effective for our fiscal year beginning on January 1, 2008. The Company does not anticipate that the adoption of this standard will have a material impact on these consolidated financial statements.

In December 2007, the SEC issued Staff Accounting Bulletin No. 110 (“SAB 110”). SAB 110 permits companies to continue to use the simplified method, under certain circumstances, in estimating the expected term of “plain vanilla” options beyond December 31, 2007. SAB 110 updates guidance provided in SAB 107 that previously stated that the Staff would not expect a company to use the simplified method for share option grants after December 31, 2007. Adoption of SAB 110 is not expected to have a material impact on the Company’s consolidated financial statements

In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (“SFAS”) No. 160, "Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended December 31, 2009. The Company is currently evaluating the impact of SFAS 160 on its consolidated financial statements but does not expect it to have a material effect

In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (“SFAS”) No. 141(R), "Business Combinations”. SFAS 141(R) establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, an any noncontrolling interest in the acquiree, recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended December 31, 2009. The Company is currently evaluating the impact of SFAS 141(R) on its consolidated financial statements but does not expect it to have a material effect.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

3.	CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

Financial instruments which potentially expose the Group to concentrations of credit risk, consists of cash and accounts receivable as of June 30, 2008 and December 31, 2007. The Group performs ongoing evaluations of its cash position and credit evaluations to ensure sound collections and minimize credit losses exposure.

As of June 30, 2008 and December 31, 2007, the Group’s bank deposits were all conducted with banks in the PRC where there is currently no rule or regulation mandated on obligatory insurance of bank accounts.

For the six months ended June 30, 2008, and 2007, all of the Group’s sales were generated from the PRC. In addition, all accounts receivable as of June 30, 2008 and December 31, 2007, also arose in the PRC.

The maximum amount of loss exposure due to credit risk that the Group would bear if the counter parties of the financial instruments failed to perform represents the carrying amount of each financial asset in the balance sheet.

Normally the Group does not require collateral from customers or debtors.

For the six months ended June 30, 2008 and 2007, there was no customer who account for 10% or more of the Group’s revenue.

For the six months ended June 30, 2008 and year ended December 31, 2007, the customer account for 10% or more of the Group’s accounts receivable are as follows:

	June 30, 2008		December 31, 2007

Customer A	$	-	$	7,927
Customer B		-		7,140

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

4.	PLEDGED DEPOSITS

Pledged deposits are restricted cash kept in a trust account maintained in U.S. for the purpose of investor relation or public relation affairs.

5.	ACCOUNTS RECEIVABLE, NET

	June 30, 2008		December 31, 2007

Accounts receivable, gross	$	-	$	15,067
Provision for doubtful debts		-		(1,213	)
	$	-	$	13,854

All of the above accounts receivable are due within 12 months of aging.

An analysis of the allowance for doubtful accounts for the six months ended June 30, 2008 and year ended December 31, 2007 is as follows:

	June 30, 2008			December 31, 2007

Balance at beginning of the period/year	$	1,213		$	1,689
Reduction of bad debt expense		(1,237	)		(569	)
Foreign exchange adjustment		24			93
Balance at end of the period/year	$	-		$	1,213

Allowance was made when collection of the full amount is no longer probable. Management reviews and adjusts this allowance periodically based on historical experience, current economic climate as well as its evaluation of the collectibility of outstanding accounts. The Group evaluates the credit risks of its customers utilizing historical data and estimations of future performance.

6.	OTHER RECEIVABLES

Other receivables are as follows:

	June 30, 2008		December 31, 2007

Advances to employees for purchasing materials	$	27,345	$	14,108
Loans to employees		-		9,777
Prepayments		4,269		-
Sundry		4,973		4,011
	$	36,587	$	27,896

Loans to employees are unsecured, interest-free, and repayable on demand.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

7.	INVENTORIES

Inventories comprise the followings:

	June 30, 2008		December 31, 2007

Finished goods	$	1,086,865	$	537,360
Raw materials		19,956,475		17,346,292
	$	21,043,340	$	17,883,652

8.	PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net comprise the followings:

	June 30, 2008			December 31, 2007
At cost
Building	$	6,699,485		$	7,060,690
Machinery and equipment		19,606,218			17,900,662
Office equipment		142,688			134,060
Motor vehicles		1,122,900			1,054,995
	$	27,571,291		$	26,150,407
Less: accumulated depreciation		(7,254,102	)		(5,931,919	)
	$	20,317,189		$	20,218,488
Construction in progress		2,823,707			2,344,708
	$	23,140,896		$	22,563,196

As of June 30, 2008 and December 31, 2007, building with net book value of nil and $3,135,292 respectively and machinery and equipment with net book value of $6,504,028 and $5,190,309 respectively of the Company were pledged as collateral under certain loan arrangements. These loans were primarily obtained for general working capital.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

8.	PROPERTY, PLANT AND EQUIPMENT, NET (Continued)

Depreciation expense is included in the statement of income and comprehensive income as follows:

	Six months ended June 30, 2008		Six months ended June 30, 2007

Cost of sales	$	630,404	$	840,233
General and administrative
expenses		327,097		173,064
	$	957,501	$	1,013,297

Construction in progress represents direct costs of construction and design fees incurred. Capitalization of these costs ceases and the construction in progress is transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided until it is completed and ready for intended use. Capital commitments in respect of these projects were $1,134,715 and $6,199,515 at June 30, 2008 and December 31, 2007 respectively.

Construction in progress mainly comprises capital expenditures for construction of the Group’s corporate campus, including offices, factories and staff dormitories.

9.	INTANGIBLE ASSETS, NET

Intangible assets, net are as follows:

	June 30, 2008			December 31, 2007

Land use rights, at cost	$	3,984,365		$	3,743,422
Railway rights, at cost		1,148,177			-
Less: accumulated amortization		(416,218	)		(299,341	)

	$	4,716,324		$	3,444,081

Amortization expense is included in the statement of income and comprehensive income as follows:

	Six months ended June 30, 2008		Six months ended June 30, 2007

Cost of sales	$	42,217	$	38,626

	$	42,217	$	38,626

As of June 30, 2008 and December 31, 2007, land use rights with net book value of nil and $1,233,393 of the Group were pledged as collateral under certain loan arrangements. These loans were primarily obtained for general working capital.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

10.

SHORT TERM BANK LOANS

Short term bank loans are as follows:

	June 30, 2008		December 31, 2007
Loans from Agricultural Development Bank of China, interest rates at 7.02% - 7.47% per annum, due August 29, 2008	$	8,731,337	$	8,203,333

Loans from Agricultural Development Bank of China, interest rates at 7.29% - 7.47% per annum, due November 21, 2008		4,365,668		4,101,667
	$	13,097,005	$	12,305,000

Interest paid for the six months ended June 30, 2008 and 2007 were $483,204, and $100,454, respectively.

11.

OTHER PAYABLES

Other payables are as follows:

	June 30, 2008		December 31, 2007

Due for employees	$	34	$	10,670
Deposits received for construction		75,374		-
Sundry		-		33,710
	$	75,408	$	44,380

Due for employees are unsecured, interest-free, and repayable on demand. They are travel and expenses reimbursements.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

12.

LONG TERM BANK LOANS

Long term bank loans are as follows:

	June 30, 2008			December 31, 2007
Loans from Industrial And Commercial Bank of China, interest rates at 8.892% -9.405% per annum with various installments, final due October 28, 2016	$	462,851		$	504,540
Current portion due within one year		(50,486	)		(47,433	)
	$	412,365		$	457,107

Interest paid for the six months ended June 30, 2008 and 2007 were $24,318 and $10,610 respectively.

The future principal payments under the bank loans as of June 30, 2008 are as follows:

Year

2009	$	54,260
2010		58,032
2011		61,805
2012		65,577
2013		69,348
Thereafter		103,343
	$	412,365

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

13.

PREFERRED STOCK AND WARRANTS

On October 3, 2007, the Company sold 10,000,000 shares of Series A Preferred Stock and various stock purchase warrants for cash consideration totaling $21.5 million dollars. The exercise price, expiration date and number of share eligible to be purchased with the warrants are summarized in the following table:

Series of warrant	Number of shares		Exercise price		Contractual term
Series A		10,000,000	$	2.75		5.00 years
Series B		5,000,000	$	3.50		5.00 years
Series J		7,801,268	$	2.37		1.50 years
Series C		7,801,268	$	3.03		5.00 years
Series D		3,900,634	$	3.85		5.00 years

The Series A preferred stock has liquidation rights senior to common stock and to any other class or series of stock issued by the Company not designated as ranking senior to or pari passu with the Series A Preferred Share. In the event of a liquidation of the Company, holders of Series A preferred stock are entitled to receive a distribution equal to $2.15 per share of Series A preferred stock prior to any distribution to the holders of common stock or any other stock that ranks junior to the Series A Preferred Shares. The Series A preferred stock is entitled to non-cumulative dividends only upon declaration of dividends by the Company. To date, no dividends have been declared or accrued. The Series A preferred stock will participate based on their respective as-if conversion rates if the Company declares any dividends. Holders of Series A Preferred Shares also have voting rights required by applicable law and the relevant number of votes shall be equal to the number of shares of Common Stock issuable upon conversion of Series A Preferred Shares.

The gross proceeds of the transaction were $21.5 million. The proceeds from the transaction were allocated to the Series A preferred stock, warrants and beneficial conversion feature based on the relative fair value of the securities. The value of the Preferred Series A was determined by reference to the market price of the common shares into which it converts, and the gross value of the warrants was calculated using the Black –Scholes model with the following assumptions: expected life of 5 year, volatility of 27% and an interest rate of 4.24%.

The Company recognized a beneficial conversion feature discount on the Series A preferred stock at its intrinsic value, which was the fair value of the common stock at the commitment date for the Series A preferred stock investment, less the effective conversion price but limited to the $21.5 million of proceeds received from the sale. The Company recognized the $8.0 million beneficial conversion feature as an increase in paid in capital in the accompanying consolidated balance sheets on the date of issuance of the Series A preferred shares since the Series A preferred shares were convertible at the issuance date.

The agreement, also provides that if the Company doesn’t file, or if the registration statements aren’t declared effective throughout the required period, or if the company ceases to trade on certain exchanges as defined, the Company shall pay damages equal to 1.5% of the amount invested for each calendar month capped at a cumulative damage payment amount of 15%. Further, if the Company fails to obtain a listing on NASDAQ or the New York Stock Exchange, then 1,000,000 shares of common stock of the company will be given to the investors. The company is accounting for these penalties in accordance with FAS 5 - Accounting for Contingencies, whereby the penalty will not be recorded as a liability until and if it is probable the penalty will be incurred. No penalty has been recorded in the accompanying consolidated financial statements for this instance.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

14.

CAPITALIZATION

As a result of the Group’s reverse-merger on October 3, 2007, the Group’s capital structure has been changed. The number of common stock was 20,000,003 after reverse-merger. The common stock is $20,000 with paid-in capital $27,277,053.

15.

EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share attributable to the common stock holders is based on the following data:

	Six months ended June 30,
		2008		2007
Earnings:
Earnings for the purpose of basic earnings per share	$	9,414,604	$	4,638,079
Effect of dilutive potential common stock - conversion of convertible preferred stock		-		-
Effect of dilutive potential common stock - conversion of warrants		-		-

Earnings for the purpose of dilutive earnings per share	$	9,414,604	$	4,638,079

Number of shares:
Weighted average number of common stock for the purpose of basic earnings per share		20,000,003		19,998,473
Effect of dilutive potential common stock - conversion of convertible preferred stock		9,999,999		-
Effect of dilutive potential common stock - conversion of warrants		6,546,082		-
Weighted average number of common stock for the purpose of dilutive earnings per share		36,546,084		19,998,473

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

16.

INCOME TAXES

(a)

The Company is registered in the State of Nevada whereas its subsidiary, Faith Winner (BVI) being incorporated in the British Virgin Islands is not subject to any income tax and conducts all of its business through its PRC subsidiary, Faith Winner (Jixian) and VIE, Yanglin (see note 1).

Faith Winner (Jixian), and Yanglin, being registered in the PRC, are subject to PRC’s Enterprise Income Tax. Under applicable income tax laws and regulations, an enterprise located in PRC, including the district where our operations are located, is subject to a 25% enterprise income tax (“EIT”).

However, Yanglin has been named as a leading enterprise in the agricultural area and awarded with a tax exemption for the years up to 2008. After 2008, review is required for the extension of the tax exemption status.

A reconciliation between the income tax computed at the U.S. statutory rate and the Group’s provision for income tax is as follows:

	Six months ended June 30,
	2008			2007

U.S. statutory rate		34	%		34	%
Foreign income not recognized in the U.S.		(34	)%		(34	)%
PRC Enterprise Income Tax		25	%		33	%
Tax exemption		(25	)%		(33	)%

Provision for income tax		-			-

(b)

For 2008, the PRC corporate income tax rate was 25% (2007: 33%). Heilongjiang Yanglin Soybean Group Co., Ltd are entitled to tax exemptions (tax holidays) for 2007 to 2008.

Income before income tax expenses of $9,414,604, and $4,638,079 for the six months ended June 30, 2008, and 2007, respectively, was attributed to subsidiaries with operations in China. Income tax expense related to China income for the six months ended June 30, 2008, and 2007 are nil, and nil, respectively.

The combined effects of the income tax expense exemptions and reductions available to the Company for the six months ended June 30, 2008, and 2007 are as follows:

	Six months ended June 30,
	2008		2007

Tax holiday effect	$	2,353,651		1,530,566
Basic net income per share effect		0.16		0.08

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTHS ENDED JUNE 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

17.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, other receivables, accounts payable, and other payables, approximate their fair values because of the short maturity of these instruments and market rates of interest available to the Group.

18.

SALES BY PRODUCTS

The Group operates in one business segment, manufacturing, distribution, and selling of non-genetically modified soybean oil, soybean salad oil, and soybean meal throughout the Province of Heilongjiang, China. The Group currently is engaged in the manufacturing and selling of soybean products. The Group has contracted with customers with three types of product altogether.

For the six months ended June 30, 2008 and 2007, the Group’s net sales and cost of sales from these three product types, soybean meal, soybean oil and salad oil products are shown as follows:

For the six months ended June 30, 2008
	Soybean meal			Soybean oil			Salad oil			Consolidated

Net sales	$	80,862,202			44,537,225			16,150,245			141,549,672
Cost of sales		(75,131,689	)		(40,593,245	)		(14,571,770	)		(130,296,704	)


	$	5,730,513			3,943,980			1,578,475			11,252,968

For the six months ended June 30, 2007
	Soybean meal			Soybean oil			Salad oil			Consolidated

Net sales	$	42,932,343			19,860,753			6,399,940			69,193,036
Cost of sales		(40,510,142	)		(17,444,243	)		(5,626,576	)		(63,580,961	)


	$	2,422,201			2,416,510			773,364			5,612,075

The Group’s operations are located in the PRC. All revenue is from customers in the PRC. All of the Group’s assets are located in the PRC. Sales are carried out in the PRC. Accordingly, no analysis of the Group's sales and assets by geographical market is presented.

ITEM 2-MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the notes to those financial statements appearing elsewhere in this Form 10-Q. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set forth under "Forward Looking Statements" and "Item 1A. Risk Factors" and elsewhere in this Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements.

Company Overview

We are a leading non-genetically modified (non-GM) soybean processor in the PRC. We currently manufacture soybean oil, salad oil and soybean meal which are sold throughout China to our customers directly or through distributors. We conduct our sales mainly in Northern China.

Our manufacturing process includes sifting, crushing, heating and pressing soybeans, extracting and separating oil from crushed soybeans, and cleansing, hydrating and packaging of oil as well as drying and packaging soybean meal. Currently, our main products include soybean oil, salad oil and soybean meal. We plan to broaden our product line to include high end products such as squeezed oil, powdered oil and protein concentrates, textured protein and defatted soybean powder, while greatly enlarging the production capacity of salad oil. We have installed the equipment for manufacturing squeezed oil and expanded the production line for salad oil and have started production of these products by the end of 2007. The production facilities for powdered oil have been built and are now in trial production phase. We have also begun to build facilities for manufacturing soybean protein concentrates, textured protein and defatted soy powder, and these production lines will be put into operations within the 3^rd quarter of 2008.

Our goal is to become the champion in the non-GM soybean industry of China, and we are confident that we can accomplish it in the near future, provided that sufficient funding can be obtained and the general political and economical environment of our operations does not suffer significant and sudden changes. We are now considering future expansion and acquisition plan, with the intention to triple our processing capacity. The plan is now still in preliminary stage, but this will nevertheless be a vital step in achieving our objective. On the other hand, we are also making great efforts to improve and strengthen our management and internal control system. We have engaged Ernst & Young as our consultant on the Sarbanes-Oxley compliance project, and Ernst & Young’s project team has started to review our internal control procedures. We believe that we can complete the project successfully by the end of 2008, providing ourselves with a great opportunity to reinforce our capability to protect the interests of the company and the shareholders and improve management effectiveness and efficiency.

Major Performance Factors

Revenue

We derive our revenue mainly from the sales of 2 main products, namely soybean oil (4^th grade) and soybean meal. The revenue may be affected by the following factors:

è	Processing capacity of soybean;

è	Pricing of soybean oil and soybean meal;

è	Market demand

Processing capacity of soybean. Our current annual processing capacity of soybean is 520,000 metric tons, which is sufficient for our current production plan of processing about 420,000 metric tons of soybean in 2008.

Pricing of soybean oil and soybean meal. Generally speaking, we determine the price of our products based on market price and our cost, while there is an overall trend of increase to compensate for the inflation.

Market demand. The growth potential of our revenue depends on the market demand for our products. As the total market demand for these products is much larger than that is sufficient to absorb our production, and our products have been recognized as of high quality and competitive price, we can sell almost all of our production volume, and we believe that there is high growth potential for our sales revenue, especially when our high-end products are put into the market.

Cost of Sales

Cost of sales generally consists of four major parts: raw materials, labor, production overhead and manufacturing related depreciation. Raw material mainly refers to soybean, and it accounts for the most significant part of the cost of sales (COS), or about 94%. Labor cost is relatively low and only makes up a very small portion of COS. Production overhead includes auxiliary materials, utility expenses, machinery maintenance costs, inspection costs and other related expenses. Depreciation costs are applied to manufacturing facilities and equipment, such as production lines, steam generators, factory buildings, etc.

Cost of sales is mainly determined by the following factors, directly or indirectly:

è	The availability and price of raw materials, especially soybeans.

è	Operating efficiency of production facilities.

The availability and price of raw materials, especially soybeans. Raw material cost accounts for the major portion of COS, and soybean is the only major raw material, so the fluctuation in its price will have a material impact on our cost. The price of soybean may be affected by a series of factors, including the production volume of soybeans, the transactions of soybeans on futures market, etc. Meanwhile, if there is shortage in supply of raw materials, our production facilities will have to operate at lower than the achievable maximum efficiency. As our processing volume occupies a relatively small portion of total soybean supply of Heilongjiang Province, let alone the whole China, we expect that this factor will have little influence over our cost.

Operating efficiency of production facilities. As the labor, production overhead and manufacturing related depreciation expenses are mostly of a fixed nature, generally speaking, the more we produce, the lower the unit cost. Our operating efficiency is being raised continuously, due to the enhanced competence and proficiency of staff and the improvement in management skills.

Gross Profit

Gross profit is the result of the combined effects of the following factors: (a) the selling price of our products, (b) the sales volume and the individual profit margin of each product, and (c) the cost of sales. Currently the profit margin of our soybean oil and meal are relatively stable, so is gross profit. We expect that the overall gross profit will rise in the future, as we will be launching some high-end products with higher profit margin.

Operating Expenses

Operating expenses comprise of selling expenses and general & administrative expenses. Generally speaking, operating expenses occupy only a very small portion of total costs and expenses. For the past two years, the ratio of operating expenses as a percentage of net sales value was kept at lower than 1.3%.

Selling expenses generally include business development expenses, sales meeting expenses, loading & handling, advertising, and sales-related staff salaries and welfare expenses, and travel expenses. We expect that these expenses will rise materially in the following years, as we will be recruiting more sales staff and expanding sales network, establishing new sales channels, plus inputting investment in promotion and advertising, to promote the sale of our new products.

General & administrative expenses cover the depreciation of office buildings and equipment, office expenses & supplies, management & administrative salaries, etc. These expenses are, generally speaking, more of a fixed nature. There may be increase in these expenses, as we will restructure our organizational structure and improve management institutions. Besides, we are now implementing our Sarbanes-Oxley Act compliance project of our internal control system and have engaged Ernst & Young as our consultant on this project. As this project involves the redesigning and restructuring of the whole internal control procedures and its processes, we expect that it will cause a material increase in our management expenses.

Income Tax

A reconciliation between the income tax computed at the U.S. statutory rate and the Group’s provision for income tax is as follows:

	Three months ended March 31,
	2008			2007

U.S. statutory rate		34	%		34	%
Foreign income not recognized in the U.S.		(34	)%		(34	)%
PRC Enterprise Income Tax		25	%		33	%
Tax exemption		(25	)%		(33	)%

Provision for income tax		-			-

Results of Operations

The following table shows the operating results for the three months ended June 30, 2008, and June 30, 2007.

Consolidated Statement of Operations	The three months ended Jun. 30, 2008 ($)			The three months ended Jun. 30, 2007 ($)
	(unaudited)			(unaudited)
Sales Revenue (net of discounts, returns and allowances)		76,273,814			33,899,190
Other sales		-			-
Cost of sales		(71,857,724	)		(31,602,970	)
Gross Profit		4,416,090			2,296,220
Selling expenses		(64,545	)		(51,454	)
General and administrative expenses		(552,129	)		(285,998	)
Income from operations		3,799,416			1,958,768
Interest income		35,514			13,122
Interest expense		(264,980	)		(108,905	)
Other expenses		(14,348	)		-
Income from operations before income tax		3,555,602			1,862,985
Income tax		-			-
Net Income		3,555,602			1,862,985
Foreign currency translation adjustment		1,470,797			709,619
Comprehensive income		5,026,399			2,572,604

The Three Months Ended June 30, 2008 Compared with the Three Months Ended June 30, 2007

Net Sales

	For The Three Months Ended June 30				Period to Period Change
Item	2008 Amount ($)		2007 Amount ($)		Amount ($)		%
Soybean meal		42,986,207		19,976,136		23,010,071		115.2	%
Soybean oil		24,574,383		10,469,289		14,105,094		134.7	%
Salad Oil		8,713,224		3,453,765		5,259,459		152.3	%
Total Net Sales		76,273,814		33,899,190		42,374,624		125.0	%

Net sales revenue was $76,273,814 for the three months ended June 30, 2008, an increase of $42,374,624 or 125.0% from $33,899,190 for the three months ended June 30, 2007. An analysis by product shows that the revenue of soybean meal, soybean oil and salad oil achieved impressive period over period growth rates of 115.2%, 134.7% and 152.3% respectively. This outstanding performance was primarily due to the significant increase in the market price of soybean products, assisted by the growth in our sales volume.

The price of processed soybean products went up continuously during 2007 and through to the second quarter of 2008, in line with the increasing soybean price. The average selling price of soybean meal in the second quarter of 2008 increased by $200 per ton or 77.3% over the second quarter of 2007, while that of soybean oil and salad oil rose by $767 per ton or 90.6%, and $895 per ton or 98.9%, respectively over the same period of 2007. It can be seen that the selling prices of soybean oil and salad oil were almost doubled between the two comparable periods. This factor contributed to the significant increase in our sales revenue.

In the three months ended June 30, 2008, we sold 93,695 tons of soybean meal, 15,229 tons of soybean oil and 4,837 tons of salad oil, achieving a growth rate of 21.4%, 23.2% and 26.9% respectively over the three months ended June 30, 2007, in which we sold 77,182 tons of soybean meal, 12,366 tons of soybean oil and 3,813 tons of salad oil. We sold almost as much of our products as we could produce even though we increased our processing volume by 21.9% over the period, from 96,390 tons of soybean to 117,480 tons. This is because the demand for soybean products in PRC market has continuously exceeded the supply, and our sales also benefited from our efforts in capitalizing on the favorable reputation of our products among customers.

Cost of Sales and Gross Profit

	For The Three Months Ended June 30												Period to Period Change
	2008						2007
	Amount ($)			% of Sales Revenue			Amount ($)			% of Sales Revenue			Amount ($)		%
Soybean meal		(40,186,571	)		93.5	%		(18,983,388	)		95.0	%		21,203,183		111.7	%
Soybean oil		(23,472,855	)		95.5	%		(9,507,643	)		90.8	%		13,965,212		146.9	%
Salad Oil		(8,198,298	)		94.1	%		(3,111,939	)		90.1	%		5,086,359		163.4	%
Cost of Sales		(71,857,724	)		94.2	%		(31,602,970	)		93.2	%		40,254,754		127.4	%

Soybean meal		2,799,636			6.5	%		992,748			5.0	%		1,806,888		182.0	%
Soybean oil		1,101,528			4.5	%		961,645			9.2	%		139,883		14.5	%
Salad Oil		514,926			5.9	%		341,827			9.9	%		173,099		50.6	%
Gross Profit		4,416,090			5.8	%		2,296,220			6.8	%		2,119,870		92.3	%

Our cost of sales for the three months ended June 30, 2008 rose by $40,254,754 or 127.4% over the three months ended June 30, 2007, while the ratio of cost as a percentage to net sales value rose from 93.2% to 94.2% over the period. The main reasons for the change in absolute value were the significant increase in the price of soybeans and the growth in production volume, while the growth in the ratio to sales revenue was caused mainly by large increase of the price of raw materials over the period, while lower cost soybean purchased by the end of last year had been consumed in the first quarter of 2008.

The price of soybean has been in a continuously increasing channel since the start of 2007, and through to the second quarter of this year. It was caused by two reasons. First, the drought in the summer of 2007 caused soybean production volume to fall significantly in Heilongjiang province. Second, the continuously low price in 2006 and prior years discouraged the farmers from planting soybean, and this caused a shrink in the growing area of soybean in China. The reduction in supply caused the unit purchase price of soybean in our local area to rise materially. For example, the price was around $386 per ton (Value Added Tax-inclusive) at the end of June 2007, and it went up gradually to $763 per ton at the end of June 2008, almost doubled over the period. As soybean occupies a major share in cost, cost of sales inevitably rose as a result.

Meanwhile, the ratio of cost of sales as a percentage of sales revenue increased by 1%, cutting down gross profit margin by a little. We have been implementing a strategy of building up as much stock as we can buy upon and after the harvest of each year, usually in early October, limited only by our storage capacity and availability of working capital. This lower cost stock will be used to maintain continuous production in the coming year. We have achieved exceptionally outstanding performance in the first quarter of 2008, thanks to this policy. However, such inventory ran out by the end of the first quarter. Thus the average cost of raw materials rose significantly thereafter. Though as a mid-stream processor, we can pass on most of the rising costs of raw materials to our customers or down-stream manufacturers, it is inevitable that we must bear part of that costs. Thus, there was a slight drop in gross profit margin.

Operating Expenses

	For The Three Months Ended June 30												Period to Period Change
	2008						2007
	Amount ($)			% of Sales Revenue			Amount ($)			% of Sales Revenue			Amount ($)		%
Selling Expenses		(64,545	)		0.08	%		(51,454	)		0.15	%		13,091		25.4	%
General & Administrative Expenses		(552,129	)		0.72	%		(285,998	)		0.84	%		266,131		93.1	%
Interest Income		35,514			0.05	%		13,122			0.04	%		22,392		170.6	%
Interest Expenses		(264,980	)		0.35	%		(108,905	)		0.32	%		156,075		143.3	%
Other Expenses		(14,348	)		0.02	%		-			-			-		-
Income from operations before tax		3,555,602			4.7	%		1,862,985			5.5	%		1,692,617		90.9	%

Selling expenses for the three months ended June 30, 2008 increased by $13,091 or 25.4% over the three months ended June 30, 2007. This was mainly due to the increase in sales-related shipping and handling expenses, which usually is related to sales volume directly. As a percentage of sales revenue, selling expenses fell from 0.15% to 0.08% over the period, due to the material increase in the value of our sales revenue over the period.

General and administrative expenses for the three months ended June 30, 2008 rose by $266,131 or 93.1% over the three months ended June 30, 2007. The increase was primarily due to the management, legal, consulting and other expenses spent to strengthen our reporting, compliance, internal controls and corporate governance systems to be compliant with U.S. securities laws and regulations applicable to a U.S. public-listed company. In 2008, as a major measure to achieve compliance to Sarbanes-Oxley Act, we have engaged Ernst & Young as our consultant, and material expenses have been accrued for this issue. As a percentage of sales revenue, general and administrative expenses fell from 0.84% to 0.72% over the period, because of the material increase in the value of our sales revenue over the period.

Interest income rose by $22,392 or 170.6% over the period, mainly due to the increased bank deposit. Interest expenses increased by $156,075 or 143.3% over the period, and the reasons were the growth in the balance of short-term bank borrowings due to higher demand of working capital and the rise of the interest rate. Other expenses for the three months ended June 30, 2008 was donation to charity. No such expenses occurred in the same period of 2007.

Income from operations before income tax increased by $1,692,617 or 90.9% for the three months ended June 30, 2008 as compared tothe same period in 2007. During the periods, operating margin fell from 5.5% to 4.7%. The major reason for such changes was the increase in cost of sales as described above in section “Cost of Sales and Gross Profit”, while the ratio of selling expenses and general and administrative expenses as a percentage of net sales was quite small.

Net Income

	For The Three Months Ended June 30										Period to Period Change
	2008					2007
	Amount ($)		% of Sales Revenue			Amount ($)		% of Sales Revenue			Amount ($)		%
Income tax		-		-			-		-			-		-
Net income		3,555,602		4.7	%		1,862,985		5.5	%		1,692,617		90.9	%
Foreign currency translation adjustment		1,470,797		1.9	%		709,619		2.1	%		761,178		107.3	%
Comprehensive income		5,026,399		6.6	%		2,572,604		7.6	%		2,453,795		95.4	%

Since we have been recognized as a Key Leading Enterprise in the Industrialization of Agriculture Industry by the government, we can enjoy a complete exemption from income taxes. Though the status needs to be reviewed every two years by the government, we are confident that in the foreseeable future we will continue to enjoy this favorable policy due to our size of operations and status in this industry.

Net income increased by $1,692,617 or 90.9% for the three months ended June 30, 2008 as compared to the same period of 2007.. During the same periods, net profit margin fell from 5.5% to 4.7%. This was in accordance with the change in gross profit margin and operating margin, mainly due to the fact that it is impossible for a mid-stream processor to transfer 100% of the effect of the significant increase in soybean price to down-stream manufacturers.

As the exchange rate of China’s currency, RMB, against US Dollar keeps increasing, the average rate had risen from 1USD to 7.68964RMB for the three months ended June 30, 2007 to 1USD to 6.96957RMB for the three months ended June 30, 2008, and we have achieved $1,470,797 of foreign currency translation gains for the three months ended June 30, 2008, compared to $709,619 for the three months ended June 30, 2007. Due to this reason, the comprehensive income for the three months ended June 30, 2008 reached $5,026,399, an increase of $2,453,795 or 95.4% over $2,572,604 for the three months ended June 30, 2007.

However, the change of foreign exchange rate can be affected by a series of complicated factors, including but not limited to, the government’s policy, the trend on global money market, the general economic status of the countries, etc., so we cannot estimate, with any reasonable certainty, the effect of these fluctuations on our future business, product pricing, results of operations or financial conditions, but the fluctuation of the RMB may materially and adversely affect your investment if the current trend of appreciation of RMB is reversed.

The following table shows the operating results for the six months ended Jun 30, 2008 and Jun 30, 2007.

Consolidated Statement of Operations	The six months ended Jun. 30, 2008 ($)			The six months ended Jun. 30, 2007 ($)
	(unaudited)			(unaudited)
Sales Revenue (net of discounts, returns and allowances)		141,549,672		$	69,193,036
Other sales		-			-
Cost of sales		(130,296,704	)		(63,580,961	)
Gross Profit		11,252,968			5,612,075
Selling expenses		(118,970	)		(69,067	)
General and administrative expenses		(1,244,941	)		(710,518	)
Income from operations		9,889,057			4,832,490
Interest income		53,798			25,558
Interest expense		(513,903	)		(219,969	)
Other expenses		(14,348	)		-
Income from operations before income tax		9,414,604			4,638,079
Income tax		-			-
Net Income		9,414,604			4,638,079
Foreign currency translation adjustment		3,872,808			955,446
Comprehensive income		13,287,412			5,593,525

Six Months Ended June 30, 2008 Compared with Six Months Ended June 30, 2007

Net Sales

	For The Six Months Ended June 30				Period to Period Change
Item	2008 Amount ($)		2007 Amount ($)		Amount ($)		%
Soybean meal		80,862,202		42,932,343		37,929,859		88.3	%
Soybean oil		44,537,225		19,860,753		24,676,472		124.2	%
Salad Oil		16,150,245		6,399,940		9,750,305		152.3	%
Total Net Sales		141,549,672		69,193,036		72,356,636		104.6	%

Net sales revenue was $141,549,672 for the six months ended June 30, 2008, an increase of $72,356,636 or 104.6% from $69,193,036 for the six months ended June 30, 2007. An analysis by product shows that the revenue of soybean meal, soybean oil and salad oil achieved impressive period over period growth rates of 88.3%, 124.2% and 152.3% respectively. This outstanding performance was primarily due to the significant increase in the market price of soybean products, assisted by the growth in our sales volume.

The price of processed soybean products went up continuously during 2007 and through the first six months of 2008, in line with the increasing soybean price. The average selling price of soybean meal in first half of 2008 increased by $199 per ton or 78.4% over the first half of 2007, while that of soybean oil and salad oil rose by $779 per ton or 99%, and $911 per ton or 110.1%, respectively over the same period of 2007. It can be seen that the selling prices of soybean oil and salad oil were almost or even more than double between the two comparable periods. This factor contributed to the significant increase in our sales revenue.

In the six months ended June 30, 2008, we sold 178,395 tons of soybean meal, 28,455 tons of soybean oil and 9,288 tons of salad oil, achieving a growth rate of 5.5%, 12.7% and 20.1% respectively over the six months ended June 30, 2007, in which we sold 169,159 tons of soybean meal, 25,247 tons of soybean oil and 7,733 tons of salad oil. We sold almost as much of our products as we could produce even though we increased our processing volume by 13.7% over the period, from 196,907 tons of soybean to 223,880 tons. This is because the demand for soybean products in PRC market has continuously exceeded the supply, and our sales also benefited from our efforts in capitalizing on the favorable reputation of our products among customers.

Cost of Sales and Gross Profit

	For The Six Months Ended June 30												Period to Period Change
	2008						2007
	Amount ($)			% of Sales Revenue			Amount ($)			% of Sales Revenue			Amount ($)		%
Soybean meal		(75,131,689	)		92.9	%		(40,510,142	)		94.4	%		34,621,547		85.5	%
Soybean oil		(40,593,245	)		91.1	%		(17,444,243	)		87.8	%		23,149,002		132.7	%
Salad Oil		(14,571,770	)		90.2	%		(5,626,576	)		87.9	%		8,945,194		159.0	%
Cost of Sales		(130,296,704	)		92.1	%		(63,580,961	)		91.9	%		66,715,743		104.9	%

Soybean meal		5,730,513			7.1	%		2,422,201			5.6	%		3,308,312		136.1	%
Soybean oil		3,943,980			8.9	%		2,416,510			12.2	%		1,527,470		63.9	%
Salad Oil		1,578,475			9.8	%		773,364			12.1	%		805,111		104.1	%
Gross Profit		11,252,968			7.9	%		5,612,075			8.1	%		5,640,893		100.5	%

Our cost of sales for the six months ended June 30, 2008 rose by $66,715,743 or 104.9% over the six months ended June 30, 2007, while the ratio of cost as a percentage to net sales value rose from 91.9% to 92.1% over the period. The main reasons for the change in absolute value were the significant increase in the price of soybeans and the growth in production volume, while the growth in the ratio to sales revenue was caused mainly by large increase of the price of raw materials over the period.

The price of soybean has been in a continuously increasing trend since the start of 2007, and through to the second quarter of this year. It was caused by two reasons. First, the drought in the summer of 2007 caused soybean production volume to fall significantly in Heilongjiang province. Second, the continuously low price in 2006 and prior years discouraged the farmers from planting soybean, and this caused a shrink in the growing area of soybean in China. The reduction in supply caused the unit purchase price of soybean in our local area to rise materially. For example, the price was around $386 per ton (Value Added Tax-inclusive) at the end of June 2007, and it went up gradually to $763 per ton at the end of June 2008, almost doubled over the period. As soybean occupies a major share in cost, cost of sales inevitably rose as a result.

Meanwhile, the ratio of cost of sales as a percentage of sales revenue increased by 0.2% over the two comparable periods, hence a mild decrease in gross profit margin. We have been implementing a strategy of building up as much stock as we can buy upon and after the harvest of each year, usually in early October, limited only by our storage capacity and availability of working capital. This lower cost stock will be used to maintain continuous production in the coming year. We have achieved exceptionally outstanding performance in the first quarter of 2008, due to this policy, but such inventory ran out by the end of the first quarter, so the average cost of raw materials rose significantly thereafter.

Operating Expenses

	For The Six Months Ended June 30												Period to Period Change
	2008						2007
	Amount ($)			% of Sales Revenue			Amount ($)			% of Sales Revenue			Amount ($)		%
Selling Expenses		(118,970	)		0.08	%		(69,067	)		0.10	%		49,903		72.3	%
General & Administrative Expenses		(1,244,941	)		0.88	%		(710,518	)		1.03	%		534,423		75.2	%
Interest Income		53,798			0.04	%		25,558			0.04	%		28,240		110.5	%
Interest Expenses		(513,903	)		0.36	%		(219,969	)		0.32	%		293,934		133.6	%
Other Expenses		(14,348	)		0.01	%		-			-			-		-
Income from operations before tax		9,414,604			6.7	%		4,638,079			6.7	%		4,776,525		103.0	%

Selling expenses for the six months ended June 30, 2008 increased by $49,903 or 72.3% over the six months ended June 30, 2007. This was mainly due to the increase in sales-related shipping and handling expenses, which usually is related to sales volume directly. As a percentage of sales revenue, selling expenses fell from 0.1% to 0.08% over the period, thanks to the material increase in the value of our sales revenue over the period.

General and administrative expenses for the six months ended June 30, 2008 rose by $534,423 or 75.2% over the six months ended June 30, 2007. The increase was primarily due to the management, legal, consulting and other expenses spent to strengthen our reporting, compliance, internal controls and corporate governance systems to be compliant with U.S. securities laws and regulations applicable to a U.S. listed company. For example, as a major measure to achieve compliance to Sarbanes-Oxley Act, we have engaged Ernst & Young as our consultant, and material expenses have been accrued for this cause. As a percentage of sales revenue, general and administrative expenses fell from 1.03% to 0.88% over the period, because of the material increase in the value of our sales revenue over the period.

Interest income rose by $28,240 or 110.5% over the period, mainly due to the increased amount of cash inflow and thus a larger deposit balance in bank account in a dynamic sense. Interest expenses saw a growth of $293,934 or 133.6% over the period, and the reasons were the growth in the balance of short-term bank borrowings due to higher demand of working capital and the rise of the interest rate. Other expenses for the six months ended June 30, 2008 was donation to charity. No such expenses occurred in the same period of 2007.

Income from operations before income tax saw a growth of $4,776,525 or 103.0% for the six months ended June 30, 2008 over the same period in 2007. At the same time, operating margin remained at the same level. Though the material increase in cost of sales due to price rise of soybean affected gross profit margin, the relatively small operating expenses in comparison to the enormous absolute value of sales revenue greatly compensated for the impact.

Net Income

	For The Six Months Ended June 30										Period to Period Change
	2008					2007
	Amount ($)		% of Sales Revenue			Amount ($)		% of Sales Revenue			Amount ($)		%
Income tax		-		-			-		-			-		-
Net income		9,414,604		6.7	%		4,638,079		6.7	%		4,776,525		103.0	%
Foreign currency translation adjustment		3,872,808		2.7	%		955,446		1.4	%		2,917,362		305.3	%
Comprehensive income		13,287,412		9.4	%		5,593,525		8.1	%		7,693,887		137.5	%

Since we have been recognized as a Key Leading Enterprise in the Industrialization of Agriculture Industry by the government, we can enjoy a complete exemption from income taxes. Though the status needs to be reviewed each two years by the government, we are confident that in the foreseeable future we will continue to enjoy this favorable policy due to our size of operations and status in this industry.

Net income increased by $1,692,617 or 90.9% from the three months ended June 30, 2007 to the three months ended June 30, 2008. At the same time, net profit margin fell from 5.5% to 4.7%. This was in accordance with the change in gross profit margin and operating margin, mainly due to the fact that it is impossible for a mid-stream processor to transfer 100% of the effect of the significant increase in soybean price to down-stream manufacturers.

As the exchange rate of China’s currency, RMB, against US Dollar keeps increasing, the average rate had risen from 1USD to 7.72999RMB for the six months ended June 30, 2007 to 1USD to 7.07263RMB for the six months ended June 30, 2008, and we have achieved $3,872,808 of foreign currency translation gains for the six months ended June 30, 2008, compared to $ 955,446 for the six months ended June 30, 2007. Due to this reason, the comprehensive income for the six months ended June 30, 2008 reached $13,287,412, an increase of $7,693,887 or 137.5% over $5,593,525 for the six months ended June 30, 2007.

However, the change of foreign exchange rate can be affected by a series of complicated factors, including but not limited to, the government’s policy, the trend on global money market, the general economic status of the countries, etc.. Thus we cannot estimate, with any reasonable certainty, the effect of these fluctuations on our future business, product pricing, results of operations or financial conditions. However, the fluctuation of the RMB may materially and adversely affect your investment if the current trend of appreciation of RMB is reversed.

Liquidity and Capital Resources

Generally, we finance our business with cash flow from operations and short-term bank loans and we use shareholders’ equity investment and retained earnings to meet capital expenditures.

Working capital mainly consists of raw materials purchases, salaries, production overhead (auxiliary materials, utilities, etc.) and finance expenses. Raw materials (soybean) purchases comprise the majority of our working capital.

Because we usually pay cash to our suppliers upon purchase of soybeans, there is a higher than normal need for cash around harvest season. Our pattern of operations is as follows: (i) we will keep a large cash reserve by early October, which is harvest time, and take short-term loans from banks at that time (ii) we will build up a substantial inventory of soybeans so that for the period till the end of the year and for the following half year, we will have sufficient raw materials to maintain smooth operations and convert finished products to cash, and (iii) we will repay the short-term loans that we had taken by end of June or July the following year.

Our working capital requirements may be influenced by quite a few factors, including the fluctuation of raw material prices, cash flow, competition, our relationships with suppliers or customers, the availability of credit facilities and financing alternatives, none of which can be predicted with high level of certainty.

Operating Activities

The Six Months Ended June 30, 2008 Compared with the Six Months Ended June 30, 2007

Cash provided by operating activities for the six months ended June 30, 2008 was $1,684,250, while cash provided by operating activities for the six months ended June 30, 2007 was $3,654,196. This drop was mainly caused by the significant rise in soybean price in year 2007 and through to the second quarter of 2008.

As mentioned above (please refer to the section “Cost of Sales and Gross Profit” in the comparison between financial results for the six months ended June 30, 2008 and that for the six months ended June 30, 2007), the local purchase price of soybean was around $386 per ton (VAT-inclusive) at the end of June 2007, and it went up gradually to $763 per ton at the end of June 2008, almost doubled over the period.

Thus we had to spend a great more amount of cash on procuring and maintaining our inventories. In the six months ended June 30, 2008, cash of $1,951,580 was used in procuring and maintaining inventories, compared to only $848,279 in the six months ended June 30, 2007. In addition, cash of $4,045,390 was used as advances to suppliers in the six months ended June 30, 2008, compared to merely $175,404 in the six months ended June 30, 2007. We used to pay almost negligible advances to suppliers. However, due to the material fall in soybeans supply, we have to pay large advances to major suppliers to secure the supply of raw materials.

Generally speaking, our cash flows are healthy and stable, as we have very large sales revenue and we sell mostly on cash basis, with negligible accounts receivable. The fall in the amount of cash provided by operating activities was a temporary situation, mainly due to the exceptional rise in soybean price since the beginning of 2007 and up till now. We expect that the trend of soybean price will be a descending one after the harvest of 2008, because the price rise has motivated Chinese farmers to expand growing areas of soybean, which will result in increase in supply and fall in price.

Investing Activities

The Six Months Ended June 30, 2008 Compared with the Six Months Ended June 30, 2007

Net cash used in investing activities was $1,163,649 for the six months ended June 30, 2008, compared to net cash used in investing activities of $660,471 for the six months ended June 30, 2007. The increase in amount was mainly contributed by the purchase of intangible assets of $1,062,953. While in the six months ended June 30, 2007, there were $713,760 of payment for plant and equipment.

The Six Months Ended June 30, 2008 Compared with the Six Months Ended June 30, 2007

Net cash used in financing activities for the six months ended June 30, 2008 was $23,005. It was spent for bank loan repayments. As a comparison, the bank repayments amounted to $3,901,312 during the six months ended June 30, 2007.

Loans

The balance of short-term bank loans was $13,097,005 at June 30, 2008, compared to $12,305,000 at December 31, 2007. This increase was mainly due to the increase in demand for working capital, caused mainly by both the increase need for raw materials to satisfy the material growth of processing volume and the rise in soybean price (please refer to the section “Cost of Sales and Gross Profit” in the comparison between the financial results of 2007 and 2006 above).

The balance of our long-term bank loan was about $412,365 at June 30, 2008, compared to $457,107 at December 31, 2007.

Currently we have a credit line of up to RMB600 million, or about USD87.31 million using the closing exchange rate of 1USD to 6.87180RMB at June 30, 2008, based on our credit rank AA granted by Agricultural Development Bank. We believe that this would be sufficient for our future working capital needs at the current operation and capacity level.

Future Cash Commitments

Our capital commitments amounted to $1,134,715 at June 30, 2008. They were made mostly for our new equipment and facilities. This demand for investment capital will be mainly met with the proceeds from our private placement mentioned above, and partly with the company’s cash reserves.

Critical Accounting Policies and Estimates

Management's discussion and analysis of its financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. Our financial statements reflect the selection and application of accounting policies which require management to make significant estimates and judgments. See note 1 to our consolidated financial statements, "Summary of Significant Accounting Policies and Organization". We believe that the following reflect the more critical accounting policies that currently affect our financial condition and results of operations:

Method of Accounting

The Company’s condensed interim consolidated financial statements have been prepared in accordance with US GAAP.

Principles of Consolidation

Name of Company	Place of incorporation		Attributable interest

Faith Winner Investments Ltd		British Virgin Islands		100%

Faith Winner (Jixian) Agriculture Development Company		PRC		100%

Heilongjiang Yanglin Soybean Group Co. Ltd		PRC		100%
*Deemed variable interest entity member

Use of estimates

Economic and political risks

Land use rights

Railway use rights

Railway use rights are stated at cost less accumulated amortisation. Amortisation is provided over the respective useful lives, using the straight-line method. Estimated useful life is 10 years.

Property, plant and equipment

Buildings			10 -35 years
Machinery and equipment			6 - 30 years
Office equipment			4 - 20 years
Motor vehicles			10 years

Accounting for the impairment of long-lived assets

During the reporting periods, there was no impairment loss.

Inventories

Trade receivables

Trade receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for doubtful accounts is maintained for all customers in considering with a variety of factors, including the length of past due, significant one-time events and the company’s historical experience. Bad debts are written off as incurred.

Cash and cash equivalents

Foreign currency translation

Revenue recognition

Costs of sales

Income taxes

Statutory reserves

(1)

Making up cumulative prior years’ losses, if any;

(2)

(3)

(4)

Allocations to the discretionary surplus reserve, if approved in the shareholders’ general meeting.

Comprehensive income

Recent accounting pronouncements

The Company does not anticipate that the adoption of this standard will have a material impact on these consolidated financial statements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

ITEM 3—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument may change as a result of changes in interest rates, exchange rates, commodity prices, equity prices and other market changes. Our cash and cash equivalents are held for working capital purposes and consist primarily of bank deposits. We do not enter into investments for trading or speculative purposes.

Interest Rate Risk

Our exposure to interest rate risk primarily relates to the interest income generated by excess cash invested in demand deposits. We have not used derivative financial instruments in our investment portfolio in order to reduce interest rate risk. Interest earning instruments carry a degree of interest rate risk. We have not been exposed nor do we anticipate being exposed to material risks due to changes in interest rates.

Foreign Currency Risk

Our business is operated in the PRC, and its value is effectively denominated in Renminbi. The fluctuation of foreign exchange rate between U.S. dollars and Renminbi could affect the value of our common stock. Our revenues and expenses are primarily denominated in Renminbi, and so our exposure to foreign exchange risks should generally be limited. We do not have material monetary assets and liabilities denominated in U.S. dollars, although to the extent that we do in the future, the fluctuation of foreign exchange rate would affect the value of these monetary assets and liabilities denominated in U.S. dollars. Generally, appreciation of Renminbi against U.S. dollars will devaluate the assets and liabilities denominated in U.S. dollar, while devaluation of Renminbi against U.S. dollars will appreciate the assets and liabilities denominated in U.S. dollar. In China, very limited hedging transactions are available to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to successfully hedge our exposure at all.

The conversion of RMB into foreign currencies, including U.S. dollars, has been based on rates set by the People’s Bank of China. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy has resulted in an appreciation of the RMB against the U.S. dollar by approximately 6% during 2007 and approximately 12% since the change of the policy to the end of 2007. While the international reaction to the RMB revaluation has generally been positive, there remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation of the RMB against the U.S. dollar. We use the U.S. dollar as the reporting currency for our financial statements. Fluctuations in exchange rates, primarily those involving the U.S. dollar, may affect our costs and operating margins as well as our net income reported in U.S. dollars. For example, to the extent that we need to convert U.S. dollars into RMB for our operations, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we receive from the conversion. Assuming we had converted the U.S. dollar denominated cash balance equivalent to US$52.6 million as of July 1, 2008 into RMB at the exchange rate of US$1.00 for RMB6.92 and, the respective People’s Bank of China rates as of July 1, 2008, this cash balance would have been RMB364.0 million. Assuming a further 10% appreciation of the RMB against the U.S. dollar, this cash balance would have decreased to RMB327.6 million as of July 1, 2008. Conversely, if we decide to convert our RMB into U.S. dollars for the purpose of making payments for dividends for business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us.

Commodity Price Risk

We engage in manufacturing of non-genetically modified soybean-based products in the PRC. Our main raw materials are commodities. Our exposure to commodity price risk is directly related to fluctuations of PRC domestic market and indirectly related to that of international market. For example, the soybean price went up from RMB 1.23 per 500 grams at the beginning of the last year to RMB 2.13 per 500 grams at the end of 2007, and in early March 2008 it has climbed to as high as RMB 2.75 per 500 grams. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to commodity price risk.

ITEM 4—CONTROLS AND PROCEDURES

Management’s Report on Internal Control over Financial Reporting

Disclosure Controls and Procedures

As required by Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2008.

Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.

Management conducted its evaluation of disclosure controls and procedures under the supervision of our chief executive officer and our chief financial officer. Based upon, and as of the date of this evaluation, our chief executive officer and chief financial officer concluded that, as of June 30, 2008, our disclosure controls and procedures were not effective due to the material weaknesses and significant deficiencies in our internal control over financial reporting described below.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. The Company's internal control system over financial reporting is a process designed under the supervision of the Company's Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with United States generally accepted accounting principles (“U.S. GAAP”). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.

Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2008. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Based on our assessment, we determined that, as of June 30, 2008, our internal control over financial reporting was not effective as a result of the following identified material weakness and significant deficiencies.

The significant deficiencies and material weaknesses include: there is no complete version of Code of Conduct has been formulated; there is lack of the articles for the board of directors and of independent directors; special committees of the board have not been established; no formal accounting manual has been issued; the procedures for managing the management procedures have not been stipulated. They will be described in details in the section “Management’s Remediation Initiatives and Interim Measures” below.

As we have disclosed in our prior SEC filings, we conduct all of our operations through our Chinese operating subsidiaries, which were privately owned until October 2007. At the time of their acquisition, these Chinese companies did not have in place the financial controls and procedures required of a U.S. public company. Now as a public company, we are implementing and will continue to implement remediation initiatives and interim measures with respect to our internal controls over financial reporting.

Management’s Remediation Initiatives and Interim Measures

The following is a description of each deficiency or weakness with respect to our internal controls over financial reporting identified by our outside auditors and the remediation initiatives that we have implemented or intend to implement in the near future.

The Company has not formulated a complete Code of Conduct applicable to all staff, with Chinese and English version, defining acceptable business conduct, conflict of interests and other expected moral behavior, and including anti-fraud mechanism. Also the procedure ruling the drafting, revision, reviewing, approval and issue of the Code should be formulated. Besides, no formal system has been set up for reporting of fraud.

Remediation Initiative

We are now drafting a Code of Conduct, and expect to finalize it in the third quarter of 2008. Meanwhile we will formulate a procedure ruling the drafting, revision, reviewing, approval and issue of the Code, which is also to be done in the third quarter. The Code and the procedure will then be reviewed thoroughly and approved by the board of directors. We will also establish a channel for issuing and communicating the Code of Conduct to all staff, and the Code will be issued and distributed formally, while we will start communication and training at the same time.

The cost involved will include that of drafting, revision, reviewing and approval, issuing and distributing, and communicating and training.

The Company does not have a formal system for employees to report and expose fraud.

Remediation Initiative

Currently we have a hot-line telephone system for reporting fraud. We will develop this into a formal mechanism of anti-fraud. The first stage is to design the system framework and determine the components to be included. Then we must develop the detailed procedures and regulations for identifying, reporting and investigating fraud. Such procedures and regulations will be reviewed and approved by the board of management. The system will then be established and implemented in the third quarter of 2008. We will then provide training to employees on how to use the system and start operation of the system after training is completed.

The cost of implementing this measure will mainly comprise the cost of designing, revision, reviewing and approval of the system, training employees, operating and maintenance of the system.

The Company currently does not have a complete set of Articles for the board of directors. The Company now does not have any independent director.

Remediation Initiative

We are now drafting the Articles for the board of directors. The step is expected to be completed in the third quarter of 2008. It will then be reviewed and approved by the board of directors. Meanwhile, we are now also seeking appropriate candidates for at least 3 independent directors through various channels. The board of directors will then review the career and educational background of each candidate and interview them, and make final decision by the end of October 2008.

The measure will incur the costs of drafting, revision, reviewing and approval of the Articles, finding appropriate candidates, reviewing of personal background, and interviewing.

The special committees of the board, including audit committee, appointment committee and compensation committee, have not been established.

Remediation Initiative

We will establish the committees and appoint qualified directors as their members. Audit committee will be formed by at least 3 directors with appropriate level of financial knowledge, within which there will be at least 1 financial expert. It is difficult to find qualified persons for these roles, so we need some time to find them, and we expect that the three committees will be established by the end of October 2008.

The relevant costs will be that of reviewing of candidates and recruiting, and the remuneration of committee members. Currently the remuneration of a director is about $10,000 per year.

The Company does not have an accounting policy manual based on U.S. GAAP and have not formulated formal procedures on the accounting treatment of significant transactions and processes.

Remediation Initiative

We will finish drafting the accounting manual in the third quarter of 2008, and it will include accounting policies and the detailed procedures of accounting treatments of business transactions and other affairs in it. The manual will be released to all accounting staff, and training will start at the same time and take about 1 month. We are also eagerly seeking accountants or external consultants skilled and experienced in several key areas of accounting to enhance the competence of our accounting team. The task will be finished by the end of October 2008.

We expect that there will be the costs of studying and researching U.S. GAAP, drafting, revision, reviewing and approval of the accounting manual, issuing and distributing, and training and educating.

The Company does not have a formal procedure on review, update and approval of the management procedures.

Remediation Initiative

We will formulate a formal procedure on the issue, and it will be reviewed and approved by the board of directors by the end of the third quarter of 2008. The procedure will require written confirmation from key managers for the issue of management procedures. The procedure will be released to relevant management and administration staff, and training will be provided to them then. We will also conduct training when material change is made to the procedures.

The cost involved will include drafting, revision, reviewing and approval of the procedure, releasing and training.

Changes in Internal Controls over Financial Reporting

During the quarter ended June 30, 2008, there was no change in our internal controls over financial reporting that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 1A—RISK FACTORS

You should carefully consider the following risk factors before investing in our common stock. Our business and results of operations could be seriously harmed by any of the following risks. The trading price of our common stock could decline due to any of these risks, and you may lose part or all of your investment.

Risks Related To Our Business

Our raw material supply is vulnerable to natural disasters, which could severely disrupt the normal operation of our business and therefore adversely affect our business.

As soybeans are our main raw materials and most of our soybeans are grown in and obtained from farmers in the Heilongjiang province, natural disasters such as drought, earthquakes, floods, and heavy rains in Heilongjiang may lead to a shortage in our supply of soybeans and result in soybean price increases, and consequently adversely affect our operations.

Our efforts to expand into soybean deep-processing and manufacture value added products may not be successful.

In order to grow our business and achieve higher profit margins, we have begun to construct new plants and add new equipment to manufacture value added products such as high-grade oil, protein concentrate, textured protein, powdered oil, etc. If the consumers do not accept our new products, the market for such products has not fully developed, or we do not have experienced sales personnel to market such products, we may not achieve the result as we expect and our business operation and financial conditions may be adversely affected.

Soybean prices fluctuate greatly. This may adversely affect our operations.

As a commodity, soybeans are subject to the price fluctuation of the commodity market in China and indirectly to the international commodity market. For example, the soybean price went up from RMB 1.23 per 500 grams at the beginning of the last year to RMB 2.13 per 500 grams at the end of 2007, and in early March 2008 it has climbed to as high as RMB 2.75 per 500 grams, due to both the shortage in soybean supply caused by a severe drought in 2007 and farmers’ cutting growing areas of soybeans brought by the continuously low price level by the end of 2006. If the soybean price increases significantly, we may have a problem obtaining adequate working capital to satisfy the raw materials needs of our operations.

Our full capacity may be reached soon. Our growth may be impacted if we could not expand our capacity in the near future.

The designed capacity of our facilities is 520,000 tons per year and the maximum utilization rate for our industry is approximately 90%. We processed 385,000 tons of soybean in 2007 and we expect to process about 420,000 tons in 2008. We will soon need additional capacity to grow our business. If we are not able to build or acquire new facilities in 2009, the growth of our business maybe adversely affected.

We do not have long-term soybean supply contracts, which could have a material adverse effect on us.

Currently, we source about 70% of our raw materials from farmers with whom we have a long term relationship and about 30% from intermediaries who purchase directly from other farmers. However, we do not have long term contracts with the farmers or the intermediaries. All current supply contracts with the soybean farmers are one-year contracts without fixed prices. Therefore, we may not be able to control supply risks. Any significant fluctuation in price of our raw materials could have a material adverse effect on the manufacturing cost of our products.

We have tried to mitigate the risks by paying attractive premium to those farmers who purchase “Yanglin” soybean seeds, cultivate and plant them and then sell the soybeans to us in order to guarantee our soybean supplies. However, if our competitors also pay premium or even pay higher premium to attract the suppliers, we may lose our advantage in purchasing price and lose some of the soybean supplies.

The soybean price is largely beyond our control in addition to natural disaster or supply competition.

The soybean price may also be affected by other factors in addition to natural disasters or supply competition, such as global commodity price increase, government control or suppliers’ financial difficulties. We may have limited options in the short-term for alternative supply if our suppliers fail for any reason, including suppliers’ business failure or financial difficulties to continue the supply of raw materials. Moreover, identifying and accessing alternative sources may increase our costs. Although raw materials are generally available and we have not experienced any raw material shortage in the past, we cannot assure that the necessary materials will continue to be available to us at prices currently in effect or acceptable to us.

Some of our land may be reclaimed by the government and this may materially impact our operations.

Most land in China is state-owned and land use rights may be granted, transferred, leased or allocated. Allocated land use rights are generally provided by the government for an indefinite period (usually to state-owned entities) and cannot be pledged, mortgaged, leased, or transferred by the user. As the same time, allocated land can be reclaimed by the government at any time. The lands occupied by our Factory No. 1 and No. 2 is allocated land and accordingly subject to the risk of being reclaimed. We are in the process of applying for the land use rights over Factory No. 2 to be changed to transferred. Although the risk being reclaimed is very small because the government is encouraging the growth of our industry and in general the market economy system will continue to support our business, we cannot guarantee the land will not be reclaimed in the future.

We may lose our advantages if there is emergence of new production technologies for other competitors.

Our business is dependent on our ability to utilize current technologies to produce high quality products with low cost. Currently, we employ advanced technologies now available in our manufacturing process. However, newer and better manufacturing technologies may emerge. If we are unable to adapt the production processes to newer and more efficient manufacturing technologies that may be used by our competitors to manufacture products that are of higher quality or at a lower cost, we may lose market share and our financial performance may be adversely affected because we do not have the financial resources to build new facilities using such new technologies.

Our manufacturing process is highly dangerous, which could cause adverse effects on our operation.

In our manufacturing process, we use highly inflammable and explosive chemical solutions. Therefore, fires and explosions could occur, which could cause delay in our production, damages to our facilities and injuries to our workers.

We receive a significant portion of our revenues from a small number of customers. Our business will be harmed if our main customers reduce their orders from us.

Our customers mainly comprise approximately 40 distributors of soybean oil and other soybean products, as well as soybean food product and animal feed manufacturers. Although our sales are widely diversified among our customers and our largest customer accounts for only 10% of our total sales, our top ten customers accounted for about 34% of our net sales in fiscal 2007. Dependence on a few customers could make it difficult to negotiate attractive prices for our products and could expose us to the risk of substantial losses if a single dominant customer ceases purchasing. If we lose any customers and are unable to replace them with other customers that would purchase a similar amount of our products, our revenues and net income would decline considerably.

Our product delivery is dependent upon the efficiency of the rail system and any disruption in the services or increase in transportation costs will have a material adverse impact on our operations.

Approximately 70% of our products are transported to our customers by rail. We are largely dependent upon the efficiency of China’s rail system and network to deliver our products. Any disruption of their service will largely impact our ability to fulfill our orders on a timely basis and recognize revenue. Also any increase in transportation costs may deter our customers and lead them to source products from other nearby suppliers, thus negatively affecting our sales.

Potential environmental liability could have a material adverse effect on our operations and financial condition.

To the knowledge of management, we have complied with the prescribed standard of environment protection as evidenced by a certificate issued by the government. Although it has not been alleged by government officials that we have violated any current environmental regulations, we cannot assure that the government will not amend the current environmental protection laws and regulations. Our business and operating results may be materially and adversely affected if we were to be held liable for violating existing environmental regulations or if we were to increase expenditures to comply with environmental regulations affecting our operations.

Inadequate funding for our capital expenditure may affect our growth strategy and profitability.

Our continued growth depends upon our ability to raise capital from outside sources. To maintain our profitability, we should increase the efficiency and achieve economies of scale in production of those low-margin products, and at the same time to develop those high-margin products. Adequate funding is needed to expand the production scale or develop new products. However, adequate funding is dependent upon a number of factors, including but without limitation the nation’s or the world’s economy, our business condition, the financial environment as well as the relevant legal environment. If we are unable to obtain sufficient financing, our growth and profitability may be adversely limited.

The sales price fluctuation for our products is periodic, which could affect on our financial results.

The prices of our products vary seasonably, among others, by the change of soybean supply and demand. Usually, our prices are lowest during the soybean harvest time between October and December and on the peak from January to February because of the Chinese New Year. However, the price also subject to other conditions. As a result, we believe that period-to-period comparisons of our historical results of businesses are not necessarily meaningful and that you should not rely on them as an indication for future performance. It is also possible that our quarterly results of operations may be below the expectations of public market analysts and investors.

Risks Related To Our Management and Internal Control

It will probably cost us a long time to establish adequate management and internal controls. As a result, there may be some operation risks with respect to our business management.

We are constantly striving to establish and improve our business management and internal accounting control to forecast, budget and allocate our funds. However, as a Chinese company that has just become a US public company, it is difficult for us to hire and retain a sufficient number of qualified employees of management and internal control in a short period. It will also probably take us a long time to educate our employees about the internal control. As a result, we may experience difficulty in collecting financial data and preparing financial statements, books of account and corporate records, and instituting business practices that meet international standards in a short period.

The following is a description of each deficiency or weakness with respect to our internal controls over financial reporting identified by our outside auditors.

The Company does not have a formal system for employees to report and expose fraud.

The Company currently does not have a complete set of Articles for the board of directors. The Company now does not have any independent director.

The special committees of the board, including audit committee, appointment committee and compensation committee, have not been established.

The Company does not have an accounting policy manual based on U.S. GAAP and have not formulated formal procedures on the accounting treatment of significant transactions and processes.

The Company does not have a formal procedure on review, update and approval of the management procedures.

Because of the above-referenced deficiencies and weaknesses in our disclosure controls and procedures and internal control over financial reporting, we may be unable to to comply with the Sarbanes-Oxley Act’s internal controls requirements, and therefore may not be able to obtain the independent auditor certifications that the Sarbanes-Oxley Act requires publicly-traded companies to obtain.

We depend on key personnel for our business operations, whose discontinuance could incur our high replacement cost.

Our future success depends substantially on the continued services of our executive officers, especially Mr. Shulin Liu, our chairman and chief executive officer, Mr. Zhongtai Guo, chief operating officer, and Mr. Shaocheng Xu, chief financial officer. If one or more of our key executive officers are unable or unwilling to continue in their present positions, we may not be able to replace them readily, if at all. Therefore, our business may be severely disrupted, and we may incur additional expenses and take additional time to recruit and retain new officers.

We may not be able to effectively protect our intellectual property, which could harm our business and competitive position.

Our success depends, in part, on our ability to protect our proprietary rights. At present, we have registered the trademarks for “Yanglin” logo in China which are currently used for all our products. We cannot assure you that we will be able to effectively protect our trademarks in the future. Currently, implementation of PRC intellectual property-related laws has historically been lacking, primarily because of ambiguities in the PRC laws and difficulties in enforcement. Accordingly, intellectual property rights and confidentiality protections in the PRC may not be as effective as in the United States or other developed countries.

We may be exposed to intellectual property infringement and other claims by third parties, which, if successful, could cause us to pay significant damage awards and incur other costs.

While we believe that the technology we use is not protected by any patent or intellectual property rights, we face the risk of being the subject of intellectual property infringement claims. The validity and scope of claims relating to the manufacturing of soybean products may involve complex technical, legal and factual questions and analysis and, therefore, may be highly uncertain. The defense and prosecution of intellectual property suits, patent opposition proceedings and related legal and administrative proceedings can be both costly and time consuming and may significantly divert the efforts and resources of our technical and management personnel. An adverse determination in any such litigation or proceedings to which we may become a party could subject us to significant liability, including damage awards to third parties, require us to seek licenses from third parties, to pay ongoing royalties, or to redesign our products or subject us to injunctions preventing the manufacture and sale of our products. Protracted litigation could also result in our customers or potential customers deferring or limiting their purchase or use of our products until resolution of such litigation. Further, we do not have adequate product liability insurance coverage against defective products as our products are manufactured according to fairly basic formulas. Any disputes so far have been resolved through friendly negotiations. There is no guarantee that we will not be involved in any legal proceedings should such negotiations fail one day.

Risks Related to Our Expansion

Our plans for future expansion may not be implemented or successful.

While we have expansion plans, which include manufacturing “Value-added” and refined soybean products, expanding our production lines and expanding our sales, there is no guarantee that such plans will be implemented or that they will be successful. These plans are subject to, among other things, the feasibility to meet the challenges we face, our ability to arrange for sufficient funding for more manufacturing facilities and the increasing working capital and the ability to hire qualified and capable employees to carry out these expansion plans.

Our personnel may not effectively support our growth and therefore impeding the expansion plan.

We currently have sufficient experienced and skilled employees for our business operations. But if our business and markets grow and develop, it will be necessary for us to expand our operation in an orderly fashion, which will put added pressure on our management and operational infrastructure. We may not have the requisite experience to manage and operate a larger, more modern manufacturing plant and bigger production lines. In addition, we may face challenges in product offerings and in integrating acquired businesses. These events would increase demands on our existing management, workforce and facilities. Failure to satisfy these increased demands could interrupt or adversely affect our operations and cause production backlogs, longer product development time frames and administrative inefficiencies.

We may not able to increase our sources for soybean supply. As a result, we may not support our plan to increase production.

In order to increase our raw material supplies, we intend to expand our soybean supply area through securing additional farmland soybean agreements, which in turn will be accomplished through contract negotiations with private farmers and cooperation with state-owned farms. However, it is difficult to obtain access to farmlands from private farmers or state-owned farms. If we cannot expand the soybean supply area, we may not be able to increase the supplies of the soybean and our plan to increase soybean production.

We may have difficulty to expand our sales network in domestic market or to explore new overseas market.

We intend to intensify our marketing efforts in the PRC by expanding existing sales and marketing network coverage to reach more areas by establishing more sales offices within the PRC and maybe in other countries such as Singapore, Malaysia, Canada and the United States. However, overseas consumers may not accept the value of non-generically modified soybean products and may not like to pay the premium of it. It also may be difficult to expand the sales channels in China’s markets if we are unable to advertise our products through various forms of media. But the advertising in commercial magazines, popular newspapers or over the internet will enhance our sales costs.

Our acquisition plan may not succeed, which will adversely affect our overall expansion plan.

We plan to expand our production facilities through the acquisition of approximately 3 to 4 additional factories, which can increase our current annual soybean production capacity up to about 1.5 million tons of soybeans over the next 3 years. However, it will be difficult for us to negotiate the acquisition with those factories, which may bargain for higher acquiring prices. Additionally, the acquisition will be submitted to the government for approval. That process may increase the risk of the acquisition failure or increase our acquisition cost, which decreases the value of the acquisition. If we fail to acquire any factories, our revenue and financial conditions could be adversely affected.

Risks Related To Our Industry

China’s commitments to the World Trade Organization may intensify competition.

In connection with its accession to the World Trade Organization, China made many commitments including opening its markets to foreign products, allowing foreign companies to conduct distribution business and reducing customs duties. Foreign manufacturers may begin to manufacture non-genetically modified soybean products and ship their products or establish manufacturing facilities in China. Competition from foreign companies may reduce profit margins and hence our business results would suffer.

If the substitute products for soybean oil increase, we may lose our market share of soybean oil market.

Substitute products for soybean oil, such as vegetable oil of peanut and palm oil could increase the intensity of competition faced by us. With the appearance of substitute products for soybean oil, consumers have more choices. Part of consumers may prefer vegetable oil. As a result, we may lose our market share of soybean oil market.

If we are not be able to maintain competitive in non-genetically modified soybean product business, we may not achieve sufficient product revenues.

At present, we are the largest and most integrated private non-genetically modified soybean producer in China. Our products compete with a multitude of products developed, manufactured and marketed by others and we expect competition from new market entrants in the future. Our current competitors are the other domestic non-genetically modified soybean companies and global manufacturers who may enter the non-genetically modified soybean business. Although currently we view ourselves in a favorable position, we may not remain competitive if existing or future competing products may provide better quality, greater utility, lower cost or other benefits from their intended uses than our products, or may offer comparable performance at lower cost. If our products fail to capture and maintain market share, we may not achieve sufficient product revenues, and our business would suffer.

The inability of the PRC government to keep the PRC a genetically modified-free soybean zone will remove our competitive edge and negatively impact our operations.

We distinguish ourselves from our competitors in that we manufacture and sell non-genetically modified soybean products. Because the PRC is a non-genetically modified soybean growing zone, our competitors are not the large, better capitalized producers of genetically modified soybean products. The PRC has one of the strictest bio-safety regulations in the world, requiring safety certificates and labeling of genetically modified products. However, with so much genetically modified soybeans being imported into the country, there is a question as to whether the PRC is able to keep it a genetically modified-free soybean zone. If the PRC is unsuccessful in keeping the PRC a genetically modified-free soybean zone and our soybeans are tainted through pollination, we will lose our competition edge and this would adversely affect our operations.

Our failure to comply with ongoing governmental regulations could hurt our operations and reduce our market share.

In China, the food industry is undergoing increasing regulations as environmental awareness increases in China. The trend is that the Chinese government toughens its regulations and penalties for violations of environmental regulations. New regulatory actions are constantly changing our industry. Although we believe we have complied with applicable government regulations, there is no assurance that we will be able to do so in the future.

Risks Related To Doing Business In China

We face the risk that changes in the policies of the PRC government could have a significant impact upon the business we may be able to conduct in the PRC and the profitability of such business.

All of our business operations are conducted in China. Accordingly, our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. The Chinese economy differs from the economies of most developed countries in many respects, including level of government involvement in economic activities, stage of national development, and control of foreign exchange.

While the Chinese economy has grown significantly in the past 20 years, the growth has been uneven, both geographically and among various sectors of the economy. Policies of the PRC government can have significant effects on the economic conditions of the PRC. The PRC government has confirmed that economic development will follow the model of a market economy. Under this direction, we believe that the PRC will continue to strengthen its economic and trading relationships with foreign countries and business development in the PRC will follow market forces. While we believe that this trend will continue, we cannot assure you that this will be the case. A change in policies by the PRC government could adversely affect our interests by, among other factors: changes in laws, regulations or the interpretation of laws and regulations, confiscatory taxation, restrictions on currency conversion, imports or sources of supplies, or the expropriation or nationalization of private enterprises. Although the PRC government has been pursuing economic reform policies for more than two decades, we cannot assure you that the government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting the PRC’s political, economic and social life.

Recent PRC regulations relating to the establishment of offshore companies by PRC residents may subject our PRC resident shareholders to personal liability and limit our ability to inject capital into our PRC subsidiaries, limit our subsidiaries’ ability to distribute profits to us or otherwise adversely affect us.

China State Administration of Foreign Exchange, or the SAFE, issued a public circular on October 21, 2005 concerning the acquisition by an offshore company controlled by PRC residents of onshore assets in China. This circular requires that (1) a PRC resident shall register with a local branch of the SAFE before he or she establishes or controls an overseas special purpose vehicle, or SPV, for the purpose of overseas equity financing (including convertible debt financing); (2) when a PRC resident contributes the assets of or his or her equity interests in a domestic enterprise to an SPV, or engages in overseas financing after contributing assets or equity interests to an SPV, such PRC resident must register his or her interest in the SPV and any changes in such interest with a local branch of the SAFE; and (3) when the SPV undergoes a material change outside of China, such as a change in share capital or merger or acquisition, the PRC resident shall, within 30 days from the occurrence of the event that triggers the change, register such change with a local branch of the SAFE. Furthermore, PRC residents who are shareholders of SPVs established before November 1, 2005 are required to register with a local branch of the SAFE before March 31, 2006.

The beneficial owners of our company who are PRC residents are required to update their respective registrations with the local branch of the SAFE. However, we cannot assure you that these beneficial owners will update their registrations with the local branch of the SAFE in full compliance with the October 2005 SAFE circular. The failure or inability of beneficial owners of our company who are resident in the PRC to comply with the registration procedures set forth in the October 2005 SAFE circular may subject these beneficial owners to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute dividends to us or otherwise adversely affect our business.

Contractual arrangements through which we have established control of Yanglin may not be as effective in providing operational control as direct ownership. If Yanglin fails to perform its obligations under these contractual arrangements, we may have to legally enforce such arrangements and our business, financial condition and results of operations may be materially and adversely affected if these arrangements cannot be enforced.

We rely on contractual arrangements with Yanglin and its shareholders for operating our business. These contractual arrangements may not be as effective in providing us with control over Yanglin as direct ownership.

Under the current contractual arrangements, as a legal matter, if Yanglin fails to perform its obligations under these contractual arrangements, we may have to (i) incur substantial costs and resources to enforce such arrangements, and (ii) rely on legal remedies under PRC law, which we cannot be sure would be effective.

These contractual arrangements are governed by PRC law and provide for the resolution of disputes through either arbitration or litigation in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. If Yanglin fails to perform its obligations under these contractual arrangements, we may have to rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages, which we cannot be sure would be effective. In addition, the legal environment in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event that we are unable to enforce these contractual arrangements, our business, financial condition and results of operations could be materially and adversely affected.

Our business is largely subject to the uncertain legal environment in China and your legal protection could be limited.

The Chinese legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which precedents set in earlier legal cases are not generally used. The overall effect of legislation enacted over the past 20 years has been to enhance the protections afforded to foreign invested enterprises in China. However, these laws, regulations and legal requirements are relatively recent and are evolving rapidly, and their interpretation and enforcement involves uncertainties. These uncertainties could limit the legal protections available to foreign investors, such as the right of foreign invested enterprises to hold licenses and permits such as requisite business licenses. In addition, all of our executive officers and our directors are residents of China, and substantially all the assets of these persons are located outside the U.S. As a result, it could be difficult for investors to effect service of process in the U.S., or to enforce a judgment obtained in the U.S. against us or any of these persons.

You may experience difficulties in effecting service of legal process and enforcing judgments against us and our management in China.

Substantially all of our assets and our subsidiaries are located in China. In addition, all of our directors and officers reside within China, including our certified public accountant (“CPA”), Albert Wong & Co. As a result, it may not be possible to effect service of process within the United States or elsewhere outside of China upon most of our directors and officers and our CPA, including with respect to matters arising under the U.S. federal securities laws or applicable state securities laws. Moreover, China is not a party to any treaties providing for reciprocal enforcement of judgments of courts with the United States or most other western jurisdictions. As a result, recognition and enforcement in China of judgments of a court in the United States or any other jurisdictions mentioned above in relation to any matter may be difficult or impossible. In addition, you will have difficulties in bring an original action in a Chinese court to enforce liabilities against our directors, officers and our CPA based upon the U.S. federal securities laws.

The Chinese government exerts substantial influence over the manner in which we must conduct our business activities.

China only recently has permitted provincial and local economic autonomy and private economic activities. Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, import and export tariffs, environmental regulations, land use rights, property and other matters. We believe that our operations in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy, or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we hold in Chinese properties.

Inflation in China may inhibit our activity to conduct business in China.

In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation. During the past ten years, the rate of inflation in China has been as high as 20.7% and as low as -2.2%. These factors have led to the adoption by Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. While inflation has been more moderate since 1995, high inflation may in the future cause Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our products.

Restrictions on currency exchange may limit our ability to receive and use our revenues effectively.

The majority of our revenues will be settled in Renminbi and U.S. Dollars, and any future restrictions on currency exchanges may limit our ability to use revenue generated in Renminbi to fund any future business activities outside China or to make dividend or other payments in U.S. dollars. Although the Chinese government introduced regulations in 1996 to allow greater convertibility of the Renminbi for current account transactions, significant restrictions still remain, including primarily the restriction that foreign-invested enterprises may only buy, sell or remit foreign currencies after providing valid commercial documents at those banks in China authorized to conduct foreign exchange business. In addition, conversion of Renminbi for capital account items, including direct investment and loans, is subject to governmental approval in China, and companies are required to open and maintain separate foreign exchange accounts for capital account items. We cannot be certain that the Chinese regulatory authorities will not impose more stringent restrictions on the convertibility of the Renminbi.

The fluctuation of the Renminbi may materially and adversely affect your investment.

The value of our common stock will be affected by the foreign exchange rate between U.S. dollars and Renminbi, and between those currencies and other currencies in which our sales may be denominated. For example, to the extent that we need to convert U.S. dollars into Renminbi for our operational needs and should the Renminbi appreciate against the U.S. dollar at that time, our financial position, the business of the company, and the price of our common stock may be harmed. If we decide to convert our Renminbi into U.S. dollars for the purpose of declaring dividends on our common stock or for other business purposes and the U.S. dollar appreciates against the Renminbi, the U.S. dollar equivalent of our earnings from our subsidiaries in China would be reduced.

We may not be able to distribute our assets upon liquidation and dividend payment will be subject to restrictions under Chinese foreign exchange rule.

Our assets are predominately located inside China. Under the laws governing foreign investment enterprises in China, dividend distribution and liquidation are allowed but subject to special procedures under the relevant laws and rules. Any dividend payment will be subject to the decision of the board of directors and subject to foreign exchange rules governing such repatriation. Any liquidation is subject to both the relevant government agency’s approval and supervision as well the foreign exchange control. This may generate additional risk for our investors in case of liquidation.

We may be treated as a resident enterprise for PRC tax purposes as the Enterprise Income Tax Law became effective on January 1, 2008, which may subject us to PRC income tax for any dividends we receive from our subsidiaries and PRC income tax withholding for any dividends we pay to our non-PRC shareholders.

The Enterprise Income Tax Law provides that enterprises established outside of China whose “de facto management bodies” are located in China are considered “resident enterprises” and will generally be subject to the uniform 25.0% enterprise income tax rate as to their global income, including income we receive from our subsidiaries. The term “de facto management bodies” is not defined under the Enterprise Income Tax Law and it is currently unclear in which situations a non-PRC enterprise’s “de facto management body” is located in China. All of our management is currently based in China, and if a majority of the members of our management team continue to be located in China after the effective date of the Enterprise Income Tax Law, we may be considered a PRC resident enterprise and therefore subject to PRC enterprise income tax at the rate of 25% on our worldwide income, which will include any dividend income we receive from our subsidiaries. If we are required under the Enterprise Income Tax Law to pay income tax for any dividends we receive from our subsidiaries, our revenues could decrease significantly.

We have limited business insurance coverage in China, which could harm our business.

We are exposed to many risks, including equipment failures, natural disasters, industrial accidents, power outages, and other business interruptions. We do not carry business interruption insurance and as a result, we may be required to pay for financial and other losses, damages and liabilities, including those caused by natural disasters and other events beyond our control, out of our own funds, which could have a material adverse effect on our business, financial condition and results of operations.

Our property and equipment insurance does not cover the full value of our property and equipment, which leaves us with exposure in the event of loss or damage to our properties or claims filed against us. We currently do not carry any product liability or other similar insurance. We cannot assure you that we would not face liability in the event of the failure of any of our products. This is particularly true given our plan to significantly expand our sales into international markets, like the United States, where product liability claims are more prevalent.

Except for property and automobile insurance, we do not have other insurance such as business liability or disruption insurance coverage for our operations in the PRC. We do not maintain a reserve fund for warranty or defective products claims. Our costs could substantially increase if we experience a significant number of warranty claims. We have not established any reserve funds for potential warranty claims since historically we have experienced few warranty claims for our products so that the costs associated with our warranty claims have been low. If we experience an increase in warranty claims significantly, it would have a material adverse effect on our financial condition and results of operations.

Any future outbreak of severe acute respiratory syndrome or avian influenza in China, or similar adverse public health developments, may severely disrupt our business and operations.

A renewed outbreak of severe acute respiratory syndrome, the Avian Flu or another widespread public health problem in China, where all of our manufacturing facilities are located and where all of our revenues are derived from, could have a negative effect on our operations. In addition, there have been confirmed human cases of avian influenza in PRC, Vietnam, Iraq, Thailand, Indonesia, Turkey, Cambodia and other countries which have proven fatal in some instances. If such an outbreak or any other similar epidemic were to spread in China, where our operations are located, it may adversely affect our business and operating results. Such an outbreak could have an impact on our operations as a result of quarantines or closures of our manufacturing facilities or the retail outlets, which would severely disrupt our operations, the sickness or death of our key officers and employees, and a general slowdown in the Chinese economy.

Risks Related To The Market For Our Stock

Our Common Stocks subject to price volatility and may result in losses for investors.

The stock market has experienced significant price and volume fluctuations that have particularly affected the trading prices of equity securities of many companies that have business operations exclusively in China. These fluctuations have often been unrelated or disproportionate to the operating performance of many of these companies. Any negative change in the public’s perception of these companies could decrease our stock price regardless of our operating results. The market price of our common stock has been and may continue to be volatile. We expect our stock price to be subject to fluctuations as a result of a variety of factors, including factors beyond our control.

These factors include without limitation actual or anticipated variations in our quarterly operating results, announcements of technological innovations or new products or services by us or our competitors, announcements relating to strategic relationships or acquisitions, additions or terminations of coverage of our common stock by securities analysts, statements by securities analysts regarding us or our industry, conditions or trends in the our industry, and changes in the economic performance and/or market valuations of other soybean product companies.

The prices at which our common stock trades will affect our ability to raise capital, which may have an adverse affect on our ability to fund our operations.

Our common stock may be considered to be a “penny stock” and, as such, the market for our common stock may be further limited by certain SEC rules applicable to penny stocks.

To the extent the price of our common stock remains below $5.00 per share or we have net tangible assets of $2,000,000 or less, our common shares will be subject to certain “penny stock” rules promulgated by the SEC. Those rules impose certain sales practice requirements on brokers who sell penny stock to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000). For transactions covered by the penny stock rules, the broker must make a special suitability determination for the purchaser and receive the purchaser’s written consent to the transaction prior to the sale. Furthermore, the penny stock rules generally require, among other things, that brokers engaged in secondary trading of penny stocks provide customers with written disclosure documents, monthly statements of the market value of penny stocks, disclosure of the bid and asked prices, disclosure of the compensation to the brokerage firm, and disclosure of the sales person working for the brokerage firm. These rules and regulations adversely affect the ability of brokers to sell our common shares and limit the liquidity of our securities.

We do not intend to pay cash dividends in the foreseeable future.

We do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business. In addition, the terms of any future debt or credit facility may preclude us from paying any dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of potential gain in your investment for the foreseeable future.

Our chief executive officer could exert significant influence over our significant corporate decisions and may act in a manner that advances his best interests and not necessarily those of other stockholders.

Our Chief Executive Officer, Mr. Shulin Liu and his wife Mrs. Huanqin Ding, beneficially own approximately 91% of our common stock through their 100% holding in Winner State (BVI). As a result, Mr. Liu may be able to influence significantly the outcome of all matters requiring stockholder approval, including the election and removal of directors and any merger, consolidation, or sale of all or substantially all of our assets and he may act in a manner that advances his best interests and not necessarily those of other stockholders, including investors in this offering, by, among other things: delaying, deferring or preventing a change in control of us; entrenching our management and/or our board of directors; impeding a merger, consolidation, takeover or other business combination involving us; discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us; or causing us to enter into transactions or agreements that are not in the best interests of all stockholders.

There is currently a very limited trading market for our common stock

Our common stock is quoted on the OTCBB. However, our bid and asked quotations have not regularly appeared on the OTCBB for any consistent period of time. There is no established trading market for our common stock and our common stock may never be included for trading on any stock exchange or through any other quotation system (including, without limitation, the NASDAQ Stock Market). You may not be able to sell your shares due to the absence of a trading market.

We will incur increased costs as a result of changes in laws and regulations relating to corporate governance matters.

As a public reporting company, we will need to comply with the Sarbanes-Oxley Act of 2002 and the related rules and regulations adopted by the SEC, including expanded disclosures, accelerated reporting requirements and more complex accounting rules. Compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and other requirements will increase our costs and require additional management resources. Additionally, these laws and regulations could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. We are presently evaluating and monitoring developments with respect to these laws and regulations and cannot predict or estimate the amount or timing of additional costs we may incur to respond to their requirements.

We may not be able to achieve and maintain an effective system of internal control over financial reporting, a failure which may prevent us from accurately reporting our financial results or detecting and preventing fraud.

We are subject to reporting obligations under the U.S. securities law. Beginning with out annual report on Form 10-K for the fiscal year ending December 31, 2007, we will be required to prepare a management report on our internal control over financial reporting containing our management’s assessment of the effectiveness of our internal control over financial reporting. In addition, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal controls over our financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective our independent registered public accounting firm may still decline to attest to the effectiveness or may issue a report that is qualified if it is not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future.

We may require additional capital, which may not be available on commercially reasonable terms, or at all.

Capital raise through the sale of equity securities may result in dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. Financing may be unavailable in amounts or on terms acceptable to us, or at all. Failure to obtain such additional capital could have an adverse impact on our business strategies and growth prospects.

Our future capital raising and the conversion of our outstanding shares of preferred stock and warrants may dilute our shareholders’ equities.

If we need to obtain external financing, our capital raising could require us to sell additional equity or debt securities or obtain credit facilities. The sale of additional equity or equity-linked securities could result in additional dilution to our then existing shareholders. In addition the conversion of outstanding shares of preferred stock and exercise of warrants into common stock may dilute our then existing shareholders’ equities. Certain registration rights have been granted to holders of the preferred stock and warrants. Pursuant to the registration rights agreement, certain holders of the preferred stock and warrants have the demand rights to require us to register the shares common stock held by these holders. Therefore, as our existing shareholders, your share equities may be diluted upon the conversion of outstanding shares of preferred stock, exercise of warrants and sale of common stock pursuant to the registration rights agreement.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS

31.1		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

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

	Yanglin Soybean, Inc.

Date: August 14 , 2008	By:	/s/ SHULIN LIU
		Shulin Liu Chief Executive Officer (Principal Executive Officer)

	Yanglin Soybean, Inc.

Date: August 14 , 2008	By:	/s/ SHAOCHENG XU
		Shaocheng Xu Chief Financial Officer (Principal Financial and Accounting Officer)

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Yanglin Soybean (YSYB) Inactive 10-Q2008 Q2 Quarterly report

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