Yanglin Soybean (YSYB) 10-Q 2008 Q3 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 September 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 November 13, 2008 was 20,000,003 shares.

Yanglin Soybean, Inc.

INDEX

Part I — Financial Information
	Item 1.	Financial Statements	3
		Notes to Condensed Consolidated Financial Statements (unaudited)	11
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55
	Item 4.	Controls and Procedures	56
Part II — Other Information
	Item 1A.	Risk Factors	59
	Item 6.	Exhibits	59
	Signatures		60

See the accompanying notes to the condensed consolidated financial statements

2

ITEM 1—FINANCIAL STATEMENTS

YANGLIN SOYBEAN INC.

FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Stated in US dollars) (Unaudited)

3

YANGLIN SOYBEAN INC.

CONTENTS	PAGES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	5
CONSOLIDATED BALANCE SHEETS	6 – 7
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME	8
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	9
CONSOLIDATED STATEMENTS OF CASH FLOWS	10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	11 – 28

4

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., ACA., LL.B., CPA(Practising)

To:  The board of directors and shareholders 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 of Yanglin Soybean Inc. and consolidated subsidiaries as of September 30, 2008, and for the three-month and nine-month periods then ended. These interim financial information statements are the responsibility of the company's management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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.
October 30, 2008	Certified Public Accountants

5

YANGLIN SOYBEAN INC.

CONSOLIDATED BALANCE SHEETS

AS AT SEPTEMBER 30, 2008 AND DECEMBER 31, 2007

(Stated in US Dollars)

	Notes		September 30, 2008		December 31, 2007
			(Unaudited)		(Audited)
ASSETS
Current assets
Cash and cash equivalents		2(k)	$	20,061,138	$	9,210,121
Pledged deposits		4		484,000		500,000
Trade receivables		2(j)&5		89,048		13,854
Inventories		2(i)&7		2,415,051		17,883,652
Advances to suppliers				14,601,105		5,736,267
Prepaid VAT and other taxes				784,963		2,457,137
Other receivables		6		59,166		27,896
Total current assets			$	38,494,471	$	35,828,927
Property, plant and equipment, net		2(g)&8		22,797,235		22,563,196
Intangible assets, net		2(e),(f)&9		4,673,461		3,444,081
Prepaid deposits for equipment and construction				11,928,846		8,896,327
TOTAL ASSETS			$	77,894,013	$	70,732,531
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term bank loans		10	$	4,376,304	$	12,305,000
Current portion of long-term bank loans		12		54,040		47,433
Accounts payable				61,283		12,921
Other payables		11		87,620		44,380
Customers deposits				1,624,486		2,656,777
Accrued liabilities				456,817		521,114
Total current liabilities			$	6,660,550	$	15,587,625
Long-term liabilities
Long-term bank loans		12		448,283		457,107
TOTAL LIABILITIES			$	7,108,833	$	16,044,732

See accompanying notes to consolidated financial statements

6

YANGLIN SOYBEAN INC.

CONSOLIDATED BALANCE SHEETS (Continued)

AS AT SEPTEMBER 30, 2008 AND DECEMBER 31, 2007

(Stated in US Dollars)

	Notes		September 30, 2008		December 31, 2007
			(Unaudited)		(Audited)
STOCKHOLDERS’ EQUITY
Preferred Stock – Series A $0.001 par value, 50,000,000 share authorized; 9,999,999 and 9,999,999 issued and outstanding as of September 30, 2008 and December 31, 2007 respectively		13	$	10,000	$	10,000
Common stock - $0.001 par value 100,000,000 shares authorized; 20,000,003 shares issued and outstanding as of September 30, 2008 and December 31, 2007 respectively		14		20,000		20,000
Additional paid-in capital		14		38,179,227		38,179,227
Statutory reserves		2(s)		3,490,834		3,490,834
Retained earnings				21,534,065		9,421,860
Accumulated other comprehensive income		2(t)		7,551,054		3,565,878
			$	70,785,180	$	54,687,799
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	77,894,013	$	70,732,531

See accompanying notes to consolidated financial statements

7

YANGLIN SOYBEAN INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Unaudited)

(Stated in US Dollars)

			Nine months ended September 30,						Three months ended September 30,
			2008			2007			2008			2007
	Notes
Net sales		2(m)&18	$	190,237,176		$	92,218,105		$	48,687,504		$	23,025,069
Cost of sales		2(n)&18		(175,551,015	)		(85,089,220	)		(45,254,311	)		(21,508,259	)
Gross profit			$	14,686,161		$	7,128,885		$	3,433,193		$	1,516,810
Selling expenses				(180,726	)		(98,453	)		(61,756	)		(29,386	)
General and administrative expenses				(1,750,924	)		(926,552	)		(505,983	)		(216,034	)
Income from operations			$	12,754,511		$	6,103,880		$	2,865,454		$	1,271,390
Interest income				81,151			36,830			27,353			11,272
Interest expenses				(708,978	)		(277,033	)		(195,075	)		(57,064	)
Other expenses-donations				(14,479	)		-			(131	)		-
Income from operations before income taxes			$	12,112,205		$	5,863,677		$	2,697,601		$	1,225,598
Income taxes		2(r)&16		-			-			-			-
Net income			$	12,112,205		$	5,863,677		$	2,697,601		$	1,225,598
Foreign currency translation adjustment				3,985,176			980,047			112,368			24,601
Comprehensive income			$	16,097,381		$	6,843,724		$	2,809,969		$	1,250,199
Basic earnings per share		15	$	0.61		$	0.29		$	0.13		$	0.06
Diluted earnings per share		15	$	0.32		$	0.29		$	0.07		$	0.06
Basic weighted average share outstanding		15		20,000,003			19,998,473			20,000,003			19,998,473
Diluted weighted average share outstanding		15		38,339,885			19,998,473			40,661,881			19,998,473

See accompanying notes to consolidated financial statements

8

YANGLIN SOYBEAN INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2007 AND NINE MONTHS ENDED

SEPTEMBER 30, 2008 (Unaudited)

(Stated in US Dollars)

															Accumulated
	Common stock				Series A		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		-		12,248,936			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		10,000		26,140,787			-		-			-		26,150,789
Dividends		-		-				-			-		(7,988,359	)		-		(7,988,359	)
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		10,000		38,179,227			3,490,834		9,421,860			3,565,878		54,687,799
Bal., 1/1/2008		20,000,003	$	20,000		10,000		38,179,227			3,490,834		9,421,860			3,565,878		54,687,799
Net income		-		-		-		-			-		12,112,205			-		12,112,205
Foreign currency adjustment		-		-		-		-			-		-			3,985,176		3,985,176
Bal., 9/30/2008		20,000,003	$	20,000		10,000		38,179,227			3,490,834		21,534,065			7,551,054		70,785,180

See accompanying notes to consolidated financial statements

9

YANGLIN SOYBEAN INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 (Unaudited)

(Stated in US Dollars)

	Nine months ended September 30
	2008			2007
Cash flows from operating activities
Net income	$	12,112,205		$	5,863,677
Depreciation		1,546,582			1,519,796
Amortization		149,074			58,349
Gain on disposal of fixed assets		(7,144	)		(11,777	)
Adjustments to reconcile net income to net cash provided by operating activities:
Trade receivables		(72,740	)		191,832
Inventories		16,323,716			(742,027	)
Advances to suppliers		(8,306,554	)		(2,210	)
Amounts due to construction		(2,386,790	)		(902,168	)
Prepaid VAT and other taxes		1,798,972			(354,976	)
Other receivables		1,080,275			(6,294	)
Accounts payable		46,545			(734,617	)
Other payables		(1,223,490	)		1,166
Customers deposits		(1,185,324	)		419,812
Accrued liabilities		(96,592	)		(243,163	)
Net cash provided by operating activities	$	19,778,735		$	5,057,400
Cash flows from investing activities
Payment of plant and equipment		(296,071	)		(1,134,627	)
Sales proceeds of plant and equipment		7,144			53,665
Payment of intangible assets		(1,127,332	)		-
Decrease in pledged deposits		16,000			-
Net cash used in investing activities	$	(1,400,259	)	$	(1,080,962	)
Cash flows from financing activities
Bank borrowings		-			7,816,816
Bank loan repayments		(8,608,086	)		(6,675,314	)
Net cash (used in)/provided by financing activities	$	(8,608,086	)	$	1,141,502
Net in cash and cash equivalents sourced		9,770,389			5,117,940
Effect of foreign currency translation on cash and cash equivalents		1,080,628			184,578
Cash and cash equivalents–beginning of period		9,210,121			3,013,520
Cash and cash equivalents–end of period	$	20,061,138		$	8,316,038
Supplementary cash flow information:
Interest received	$	81,151		$	36,830
Interest paid		708,978			277,033

See accompanying notes to consolidated financial statements

10

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

Yanglin Soybean Inc. (the “Company”) (formerly known as Victory Divide Mining 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 September 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 engaged 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.

On January 18, 2008, the Company changed its name from Victory Divide Mining Company to Yanglin Soybean Inc.

11

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Method of accounting

The Company’s 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 December, 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

12

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 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.

13

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(g) Property, plant and equipment

Property, 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 property, plant and equipment are as follows:

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

14

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 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.

	September 30, 2008		December 31, 2007
Cash on hand	$	17,306	$	18,362
Industrial And Commercial Bank of China		519		-
Agricultural Development Bank of China		1,113,144		1,362,651
Agricultural Bank of China		18,930,169		7,829,108
	$	20,061,138	$	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:

	September 30, 2008		December 31, 2007		September 30, 2007
Twelve months ended RMB : USD exchange rate		-		7.3141		-
Nine months ended RMB : USD exchange rate		6.8551		-		7.5176
Average nine months ended RMB : USD exchange rate		6.9989		-		7.6758
Average three months ended RMB : USD exchange rate		6.8529		-		7.5691

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.

15

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 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, the seller’s price to the buyer is fixed or determinable, and collection is reasonably assured.

(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 $4,418 and $7,921 for the nine months ended September 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:

	Nine months ended September 30, 2008		Nine months ended September 30, 2007
Selling expenses	$	67,919	$	47,201
General and administrative expenses		2,639		-
	$	70,558	$	47,201

(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 $124,640 and $124,570 for the nine months ended September 30, 2008 and 2007 respectively.

16

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(r) Income taxes

The Group accounts for income taxes 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 September 30, 2008 and December 31, 2007.

(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.

17

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(u) Recent accounting pronouncements

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.

In March 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (“SFAS”) No. 161 “Disclosures about Derivative Instruments and Hedging Activities”. SFAS 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company is currently evaluating the impact of SFAS 161 on its consolidated financial statements but does not expect it to have a material effect.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. SFAS 162 directs the GAAP hierarchy to the entity, not the independent auditors, as the entity is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. SFAS 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to remove the GAAP hierarchy from the auditing standards. SFAS 162 is not expected to have a material impact on the Company’s financial statements.

18

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 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 trade receivable as of September 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 September 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 nine months ended September 30, 2008, and 2007, all of the Group’s sales were generated from the PRC. In addition, all trade receivable as of September 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 nine months ended September 30, 2008 and 2007, there was no customer who account for 10% or more of the Group’s revenue.

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

	September 30, 2008		December 31, 2007
Customer A	$	-	$	7,927
Customer B		-		7,140
Customer C		90,342		-

4. PLEDGED DEPOSITS

Pledged deposits are restricted cash kept in a trust account maintained in the United States for the purpose of investor and public relation affairs.

19

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

5. TRADE RECEIVABLES, NET

Details of trade receivables are as follows:

	September 30, 2008			December 31, 2007
Trade receivables, gross	$	90,342		$	15,067
Provision for doubtful debts		(1,294	)		(1,213	)
	$	89,048		$	13,854

All of the above trade receivables are due within 12 months of aging.

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

	September 30, 2008		December 31, 2007
Balance at beginning of the period/year	$	1,213	$	1,689
Reduction of bad debt expense		-		(569	)
Foreign exchange adjustment		81		93
Balance at end of the period/year	$	1,294	$	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

Details of other receivables are as follows:

	September 30, 2008		December 31, 2007
Advances to employees for purchasing materials	$	32,268	$	14,108
Loans to employees		1,717		9,777
Prepayments		20,902		-
Sundry		4,279		4,011
	$	59,166	$	27,896

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

20

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

7. INVENTORIES

Inventories comprise the followings:

	September 30, 2008		December 31, 2007
Finished goods	$	1,206,383	$	537,360
Raw materials		1,208,668		17,346,292
	$	2,415,051	$	17,883,652

8. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net comprise the followings:

	September 30, 2008			December 31, 2007
At cost
Buildings	$	6,715,805		$	7,060,690
Machinery and equipment		19,653,982			17,900,662
Office equipment		143,036			134,060
Motor vehicles		1,202,164			1,054,995
	$	27,714,987		$	26,150,407
Less: accumulated depreciation		(7,745,275	)		(5,931,919	)
	$	19,969,712		$	20,218,488
Construction in progress		2,827,523			2,344,708
	$	22,797,235		$	22,563,196

As of September 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 nil 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.

21

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 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 as follows:

		Nine months ended September 30, 2008		Nine months ended September 30, 2007
Cost of sales	$	1,107,194	$	1,264,617
General and administrative expenses		439,387		255,179
	$	1,546,581	$	1,519,796

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 $1,225,365 and $6,199,515 at September 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

Details of intangible assets, net are as follows:

	September 30, 2008			December 31, 2007
Land use rights, at cost	$	3,994,072		$	3,743,422
Railway rights, at cost		1,150,974			-
Less: accumulated amortization		(471,585	)		(299,341	)
	$	4,673,461		$	3,444,081

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

	Nine months ended September 30, 2008		Nine months ended September 30, 2007
Cost of sales	$	63,992	$	58,349
Selling expenses		85,082		-
	$	149,074	$	58,349

As of September 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.

22

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

10. SHORT-TERM BANK LOANS

Details of short-term bank loans are as follows:

	September 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	$	-	$	8,203,333
Loans from Agricultural Development Bank of China, interest rates at 7.29% -7.47% per annum, due November 21, 2008		4,376,304		4,101,667
	$	4,376,304	$	12,305,000

Interest expenses for the nine months ended September 30, 2008 and 2007 were $672,509, and $246,260 respectively.

11. OTHER PAYABLES

Details of other payables are as follows:

	September 30, 2008		December 31, 2007
Due for employees	$	34	$	10,670
Deposits received for construction		87,586		-
Sundry		-		33,710
	$	87,620	$	44,380

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

23

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

12. LONG-TERM BANK LOANS

Details of long-term bank loans are as follows:

	September 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	$	502,323		$	504,540
Current portion due within one year		(54,040	)		(47,433	)
	$	448,283		$	457,107

Interest expenses for the nine months ended September 30, 2008 and 2007 were $36,469 and $30,773 respectively.

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

Year
2009	$	54,040
2010		58,681
2011		63,727
2012		54,576
2013		57,875
2014 and thereafter		213,424
	$	502,323

24

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 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.

25

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 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 $38,179,227.

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:

	Nine months ended September 30,
	2008		2007
Earnings:
Earnings for the purpose of basic earnings per share	$	12,112,205	$	5,863,677
Effect of dilutive potential common stock		-		-
Earnings for the purpose of dilutive earnings per share	$	12,112,205	$	5,863,677
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		8,339,883		-
Weighted average number of common stock for the purpose of dilutive earnings per share		38,339,885		19,998,473

26

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Stated in US Dollars) (Unaudited)

16. INCOME TAXES

(a) The Company being registered in the State of Nevada and which conducts all of its business through its subsidiaries incorporated in PRC, is not subject to any income tax. The subsidiaries are Faith Winner (BVI), Faith Winner (Jixian), and 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 taxes computed at the U.S. statutory rate and the rate of Group’s provision for income taxes is as follows:

	Nine months ended September 30,
	2008			2007
U.S. statutory rate		34	%		34	%
Foreign income not recognized in the U.S.		(34)	%		(34)	%
PRC EIT		25	%		33	%
Tax exemption		(25	)%		(33	)%
Provision for income taxes		-			-

(b) For 2008, the PRC EIT 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 taxes of $12,112,205, and $5,863,677 for the nine months ended September 30, 2008, and 2007, respectively, was attributed to subsidiaries with operations in China. Income taxes related to China income for the nine months ended September 30, 2008, and 2007 are nil, and nil, respectively.

The combined effects of the income taxes exemptions and reductions available to the Company for the nine months ended September 30, 2008, and 2007 are as follows:

	Nine months ended September 30,
	2008		2007
Tax holiday effect	$	3,028,051		1,935,013
Basic net income per share effect		0.15		0.10

(c) No deferred tax has been provided as there are no material temporary differences arising during the nine months ended September, 2008 and 2007.

27

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 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, trade 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 engaged in manufacturing, distribution, and selling of non-genetically modified soybean oil, soybean salad oil, and soybean meal throughout the Province of Heilongjiang, China. The Group has contracted with customers with three types of product altogether.

For the nine months ended September 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 nine months ended September 30, 2008
	Soybean meal			Soybean oil			Salad oil			Consolidated
Net sales	$	113,332,034			55,754,467			21,150,675			190,237,176
Cost of sales		(104,983,766	)		(51,377,511	)		(19,189,738	)		(175,551,015	)
	$	8,348,268			4,376,956			1,960,937			14,686,161

For the nine months ended September 30, 2007
	Soybean meal			Soybean oil			Salad oil			Consolidated
Net sales	$	55,597,513			27,542,959			9,077,633			92,218,105
Cost of sales		(52,619,470	)		(24,441,110	)		(8,028,640	)		(85,089,220	)
	$	2,978,043			3,101,849			1,048,993			7,128,885

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.

28

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. The production of concentrated protein, defatted soy powder and textured protein will be launched in early 2009.

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.

29

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.

30

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%.

31

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

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 Variable Interest Entity (“VIE”), Yanglin Soybean Group Co. Ltd (“Yanglin”)

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:

32

	Nine months ended Sep. 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		-			-

Results of Operations

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

	The three months ended Sep. 30, 2008 ($)			The three months ended Sep. 30, 2007 ($)
Consolidated Statement of Operations	(unaudited)			(unaudited)
Sales Revenue (net of discounts, returns and allowances)		48,687,504			23,025,069
Other sales		-			-
Cost of sales		(45,254,311	)		(21,508,259	)
Gross Profit		3,433,193			1,516,810
Selling expenses		(61,756	)		(29,386	))
General and administrative expenses		(505,983	))		(216,034	))
Income from operations		2,865,454			1,271,390
Interest income		27,353			11,272
Interest expense		(195,075	))		(57,064	))
Other expenses		(131	))		-
Income from operations before income tax		2,697,601			1,225,598
Income tax		-			-
Net Income		2,697,601			1,225,598
Foreign currency translation adjustment		112,368			24,601
Comprehensive income		2,809,969			1,250,199

33

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

Net Sales

	For The Three Months Ended Sep. 30				Period to Period Change
Item	2008 Amount ($)		2007 Amount ($)		Amount ($)		%
Soybean meal		32,469,832		12,665,170		19,804,662		156.4	%
Soybean oil		11,217,242		7,682,206		3,535,036		46.0	%
Salad Oil		5,000,430		2,677,693		2,322,737		86.7	%
Total Net Sales		48,687,504		23,025,069		25,662,435		111.5	%

Net sales revenue was $48,687,504 for the three months ended September 30, 2008, an increase of $25,662,435 or 111.5% from $23,025,069 for the three months ended September 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 156.4%, 46.0% and 86.7% respectively. This outstanding performance was primarily due to the 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. This trend continued into early July 2008, then soybean price started to drop and has been continuously falling till the end of September, but were still much higher than that at the end of last September. The average selling price of soybean meal in the third quarter of 2008 increased by 104.1% over the third quarter of 2007, while that of soybean oil and salad oil rose by 32.9% and 21%, respectively over the same period of 2007. Such material increase inevitably caused a rise in our sales revenue.

The growth in sales volume also contributed to the increase in sales revenue. In the three months ended September 30, 2008, we sold 59,228 tons of soybean meal, 8,588 tons of soybean oil and 3,658 tons of salad oil, achieving a growth rate of 25.6%, 9.8% and 54.3% respectively over the three months ended September 30, 2007, in which we sold 47,146 tons of soybean meal, 7,818 tons of soybean oil and 2,370 tons of salad oil. We sold almost as much of our products as we could produce even though we increased our processing volume by 25.6% over the period, from 58,880 tons of soybean to 73,976 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 and from the highly effective sales and distribution network.

34

Cost of Sales and Gross Profit

	For The Three Months Ended September 30												Period to Period Change
	2008						2007
	Amount ($)			% of Sales Revenue			Amount ($)			% of Sales Revenue			Amount ($)			%
Soybean meal		(29,852,077	)		91.9	%		(12,109,328	)		95.6	%		17,742,749			146.5	%
Soybean oil		(10,784,266	)		96.1	%		(6,996,867	)		91.1	%		3,787,399			54.1	%
Salad Oil		(4,617,968	)		92.4	%		(2,402,064	)		89.7	%		2,215,904			92.2	%
Cost of Sales		(45,254,311	)		92.9	%		(21,508,259	)		93.4	%		23,746,052			110.4	%
																	0.0	%
Soybean meal		2,617,755			8.1	%		555,842			4.4	%		2,061,913			371.0	%
Soybean oil		432,976			3.9	%		685,339			8.9	%		(252,363	)		-36.8	%
Salad Oil		382,462			7.6	%		275,629			10.3	%		106,833			38.8	%
Gross Profit		3,433,193			7.1	%		1,516,810			6.6	%		1,916,383			126.3	%

Our cost of sales for the three months ended September 30, 2008 rose by $23,746,052 or 110.4% over the three months ended September 30, 2007, while the ratio of cost as a percentage to net sales value fell from 93.4% to 92.9% over the period, bringing an improvement in gross margin. The main reasons for the change in absolute value were the significant increase in the price of soybeans and the growth in processing volume, while the drop in the ratio to sales revenue was caused mainly by the reduction in production overhead.

35

The price of soybean, the major component of cost of sales, has been in a continuously increasing channel since the start of 2007, and through to the second quarter of this year. It started to fall in the third quarter. 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. So the purchase price of soybean in the third quarter of 2008 was materially higher than that in the same period of 2007. For comparison, the local purchase price of soybean was around RMB5200 (or USD, VAT inclusive) at the beginning of July 2008, while that in early July 2007 was only around RMB 1950 (or USD, VAT inclusive).. As a result, the average unit cost of sales of soybean meal, soybean oil and salad oil rose by 96.2%, 40.3% and 24.6% respectively. On the other hand, the fact that our processing volume was increased by 25.6% over the period also helped bring the cost of sales up.

Meanwhile, the ratio of cost of sales as a percentage of sales revenue decreased by 0.5%, improving gross profit margin by a little. The major reason was that production overhead in the third quarter of 2008 was even a little bit lower that in the same period of 2007, though processing volume was increase by around one-fourth. This was partly due to the semi-fixed nature of production overhead, which doesn’t change much while the operating activity level is within a certain range. Other contributing factors included the improvement in operating efficiency and the fact that a considerable portion of Factory No. 2 is now under renovation in preparation for the launch of new deep processing products.

Operating Expenses

	For The Three Months Ended September 30												Period to Period Change
	2008						2007
	Amount ($)			% of Sales Revenue			Amount ($)			% of Sales Revenue			Amount ($)		%
Selling Expenses		(61,756	)		0.1	%		(29,386	)		0.1	%		32,370		110.2	%
General & Administrative Expenses		(505,983	)		1.0	%		(216,034	)		0.9	%		289,949		134.2	%
Interest Income		27,353			0.1	%		11,272			0.0	%		16,081		142.7	%
Interest Expenses		(195,075	)		0.4	%		(57,064	)		0.2	%		138,011		241.9	%
Other Expenses		(131	)		0.0	%					0.0	%		131
Income from operations before tax		2,697,601			5.5	%		1,225,598			5.3	%		1,472,003		120.1	%

36

Selling expenses for the three months ended September 30, 2008 increased by $32,370 or 110.2%, over the three months ended September 30, 2007. This was mainly due to the sales and marketing efforts for the new deep processing products to be launched and 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 remained at 0.1% 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 September 30, 2008 rose by $289,949 or134.2% over the three months ended September 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 rose from 0.9% to 1.0% over the period.

Interest income rose by $16,081 or 142.7% over the period, mainly due to the increased bank deposit. Interest expenses increased by $138,011 or 241.9% 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.

Income from operations before income tax increased by $1,472,003 or 120.1% for the three months ended September 30, 2008 as compared to the same period in 2007. During the periods, operating margin rose from 5.3% to 5.5%. The major reason for such changes was that the growth rate of sales revenue outweighed that of cost of sales, while the amounts of operating and finance expenses are very small if compared to sales revenue.

Net Income

	For The Three Months Ended September 30										Period to Period Change
	2008					2007
	Amount ($)		% of Sales Revenue			Amount ($)		% of Sales Revenue			Amount ($)		%
Income tax		-		-			-		-			-		-
Net income		2,697,601		5.5	%		1,225,598		5.3	%		1,472,003		120.1	%
Foreign currency translation adjustment		112,368		0.2	%		24,601		0.1	%		87,767		356.8	%
Comprehensive income		2,809,969		5.8	%		1,250,199		5.4	%		1,559,770		124.8	%

37

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 $1,472,003 or 120.1% for the three months ended September 30, 2008 as compared to the same period of 2007. During the same periods, net profit margin rose from 5.3% to 5.5%. This improvement in net margin was in accordance with the change in gross profit margin and operating margin, mainly due to the fact that the increase in sales revenue outweighed that of cost of sales.

Due to the increase of average foreign exchange ratio of Chinese RMB to US Dollar, we have achieved $112,368 of foreign currency translation gains for the three months ended September, 2008, compared to $24,601 for the three months ended September 30, 2007. Due to this reason, the comprehensive income for the three months ended September 30, 2008 reached $2,809,969, an increase of $1,559,770 or 124.8% over $1,250,199 for the three months ended September 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.

38

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

	The nine months ended September 30, 2008 ($)			The nine months ended September 30, 2007 ($)
Consolidated Statement of Operations	(unaudited)			(unaudited)
Sales Revenue (net of discounts, returns and allowances)		190,237,176			92,218,105
Other sales		-			-
Cost of sales		(175,551,015	)		(85,089,220	)
Gross Profit		14,686,161			7,128,885
Selling expenses		(180,726	)		(98,453	)
General and administrative expenses		(1,750,924	)		(926,552	)
Income from operations		12,754,511			6,103,880
Interest income		81,151			36,830
Interest expense		(708,978	)		(277,033	)
Other expenses		(14,479	)		-
Income from operations before income tax		12,112,205			5,863,677
Income tax		-			-
Net Income		12,112,205			5,863,677
Foreign currency translation adjustment		3,985,176			980,047
Comprehensive income		16,097,381			6,843,724

39

Nine Months Ended September 30, 2008 Compared with Nine Months Ended September 30, 2007

Net Sales

	For The Nine Months Ended Sep. 30				Period to Period Change
Item	2008 Amount ($)		2007 Amount ($)		Amount ($)		%
Soybean meal		113,332,034		55,597,513		57,734,521		103.8	%
Soybean oil		55,754,467		27,542,959		28,211,508		102.4	%
Salad Oil		21,150,675		9,077,633		12,073,042		133.0	%
Total Net Sales		190,237,176		92,218,105		98,019,071		106.3	%

Net sales revenue was $190,237,176 for the nine months ended September 30, 2008, an increase of $98,019,071 or 106.3% from $92,218,105 for the nine months ended September 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 103.8%, 102.4% and 133.0% respectively. This outstanding performance was primarily due to the 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. This trend continued into early July 2008, then soybean price started to drop and has been continuously falling till the end of September, but were still much higher than that at the end of last September. The average selling price of soybean meal in the first three quarters of 2008 increased by 85.6% over the first three quarters of 2007, while that of soybean oil and salad oil rose by 80.7% and 81.8%, respectively over the same period of 2007. Such material increase inevitably caused a rise in our sales revenue.

The growth in sales volume also contributed to the increase in sales revenue. In the nine months ended September 30, 2008, we sold 237,623 tons of soybean meal, 37,043 tons of soybean oil and 12,946 tons of salad oil, achieving a growth rate of 9.9%, 12.0% and 28.1% respectively over the nine months ended September 30, 2007, in which we sold 216,305 tons of soybean meal, 33,065 tons of soybean oil and 10,103 tons of salad oil. We sold almost as much of our products as we could produce even though we increased our processing volume by 16.4% over the period, from 255,787 tons of soybean in the nine months ended September 30, 2007 to 297,856 tons in the nine months ended September 30, 2008. 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 and from the highly effective sales and distribution network.

40

Cost of Sales and Gross Profit

	For The Nine Months Ended September 30												Period to Period Change
	2008						2007
	Amount ($)			% of Sales Revenue			Amount ($)			% of Sales Revenue			Amount ($)		%
Soybean meal		(104,983,766	)		92.6	%		(52,619,470	)		94.6	%		52,364,296		99.5	%
Soybean oil		(51,377,511	)		92.1	%		(24,441,110	)		88.7	%		26,936,401		110.2	%
Salad Oil		(19,189,738	)		90.7	%		(8,028,640	)		88.4	%		11,161,098		139.0	%
Cost of Sales		(175,551,015	)		92.3	%		(85,089,220	)		92.3	%		90,461,795		106.3	%
Soybean meal		8,348,268			7.4	%		2,978,043			5.4	%		5,370,225		180.3	%
Soybean oil		4,376,956			7.9	%		3,101,849			11.3	%		1,275,107		41.1	%
Salad Oil		1,960,937			9.3	%		1,048,993			11.6	%		911,944		86.9	%
Gross Profit		14,686,161			7.7	%		7,128,885			7.7	%		7,557,276		106.0	%

Our cost of sales for the nine months ended September 30, 2008 rose by $90,461,795 or 106.3% over the nine months ended September 30, 2007, while the ratio of cost as a percentage to net sales value remained 92.3% 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 processing volume, while the fact that the ratio to sales revenue was stable was mainly incurred by the nature of the middle-stream processing industry we are in and the matching trend of the prices of soybean and that of soybean products.

The price of soybean, the major component of cost of sales, has been in a continuously increasing channel since the start of 2007, and through to the second quarter of this year. It started to fall in the third quarter. 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. So the purchase price of soybean in the first three quarters of 2008 was materially higher than that in the same period of 2007. For comparison, the local purchase price of soybean was around RMB5200 (or USD, VAT inclusive) at the beginning of July 2008, while that in early July 2007 was only around RMB 1950 (or USD, VAT inclusive).. As a result, the average unit cost of sales of soybean meal, soybean oil and salad oil rose by 85.6%, 80.7% and 81.8% respectively. On the other hand, the fact that our processing volume was increased by 16.4% over the period also helped bring the cost of sales up.

41

Meanwhile, the ratio of cost of sales as a percentage of sales revenue remained stable. The major reasons were: first, we are in the middle-stream processing business, and generally speaking, this industry features stable gross profit and ratio of cost of sales. Second, basically, the trend of change of the price of soybean and that of soybean products will tend to match with each other, thus helping to stabilize the gross profit and the ratio of cost of sales.

Operating Expenses

	For The Nine Months Ended September 30												Period to Period Change
	2008						2007
	Amount ($)			% of Sales Revenue			Amount ($)			% of Sales Revenue			Amount ($)		%
Selling Expenses		(180,726	)		0.1	%		(98,453	)		0.1	%		82,273		83.6	%
General & Administrative Expenses		(1,750,924	)		0.9	%		(926,552	)		1.0	%		824,372		89.0	%
Interest Income		81,151			0.0	%		36,830			0.0	%		44,321		120.3	%
Interest Expenses		(708,978	)		0.4	%		(277,033	)		0.3	%		431,945		155.9	%
Other Expenses		(14,479	)		0.0	%					0.0	%		14,479
Income from operations before tax		12,112,205			6.4	%		5,863,677			6.4	%		6,248,528		106.6	%

Selling expenses for the nine months ended September 30, 2008 increased by $82,273 or 83.6%, over the nine months ended September 30, 2007. This was mainly due to the sales and marketing efforts for the new deep processing products to be launched and 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 remained at 0.1% over the period, due to the material increase in the value of our sales revenue over the period.

42

General and administrative expenses for the nine months ended September 30, 2008 rose by $824,372 or 89.0% over the nine months ended September 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 1.0% to 0.9% over the period, as there was significant increase in sales revenue.

Interest income rose by $44,321 or 120.3% over the period, mainly due to the increased bank deposit. Interest expenses increased by $431,945 or 155.9% 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.

Income from operations before income tax increased by $6,248,528 or 106.6% for the nine months ended September 30, 2008 as compared to the same period in 2007. During the period, operating margin remained stable at 6.4%. The major reason for it being stable was that we are in the middle-stream processing industry featuring stable operating margin and that the operating expenses are very small if compared to sales revenue.

Net Income

	For The Nine Months Ended September 30										Period to Period Change
	2008					2007
	Amount ($)		% of Sales Revenue			Amount ($)		% of Sales Revenue			Amount ($)		%
Income tax		-		-			-		-			-		-
Net income		12,112,205		6.4	%		5,863,677		6.4	%		6,248,528		106.6	%
Foreign currency translation adjustment		3,985,176		2.1	%		980,047		1.1	%		3,005,129		306.6	%
Comprehensive income		16,097,381		8.5	%		6,843,724		7.4	%		9,253,657		135.2	%

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.

43

Net income increased by $6,248,528 or 106.6% for the nine months ended September 30, 2008 as compared to the same period of 2007. During the same period, net profit margin remained at 6.4%. This was in accordance with stable gross profit margin and operating margin.

Due to the increase of average foreign exchange ratio of Chinese RMB to US Dollar, we have achieved $3,985,176 of foreign currency translation gains for the nine months ended September, 2008, compared to $980,047 for the nine months ended September 30, 2007. Due to this reason, the comprehensive income for the nine months ended September 30, 2008 reached $16,097,381, an increase of $9,253,657 or 135.2% over $6,843,724 for the nine months ended September 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.

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.

44

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 Nine Months Ended September 30, 2008 Compared with the Nine Months Ended September 30, 2007

Cash provided by operating activities for the nine months ended September 30, 2008 was $19,778,735, while cash provided by operating activities for the nine months ended September 30, 2007 was $5,057,400. This great improvement was mainly caused by a largely increased net profit and the efficient production and realization of inventories.

As mentioned above, the net income increased by $6,248,528 or 106.6% for the nine months ended September 30, 2008 as compared to the same period of 2007. Considering that we sell mostly on cash basis, with negligible accounts receivable, we can reasonably conclude that there was a significantly larger cash inflow from operations in the three quarters of 2008 than that in the same period of 2007.

On the other hand, in first quarter and in the early part of the second quarter of 2008, we had been utilizing the large inventory of raw materials we had built up in the last quarter of 2007, and had been processing the soybeans purchased later on and realizing the finish goods into cash in an efficient way, thus we were able to release $16,323,716 from inventories.

Generally speaking, our cash flows are healthy and stable, as we have very large sales revenue and we sell mostly on cash basis.

Investing Activities

The Nine Months Ended September 30, 2008 Compared with the Nine Months Ended September 30, 2007

Net cash used in investing activities was $1,400,259 for the nine months ended September 30, 2008, compared to net cash used in investing activities of $1,080,962 for the nine months ended September 30, 2007. The increase in amount was mainly contributed by the $1,127,332 purchase of intangible assets,. while the amount used to purchase plant and equipment decreased from $1,134,627 to $296,071 over the period.

45

Financing Activities

The Nine Months Ended September 30, 2008 Compared with the Nine Months Ended September 30, 2007

Net cash used in financing activities for the nine months ended September 30, 2008 was $8,608,086. It was spent for bank loan repayments. As a comparison, there were bank repayments of $6,675,314 and bank borrowings of $7,816,816 during the nine months ended September 30, 2007.

Loans

The balance of short-term bank loans was $4,376,304 at September 30, 2008, compared to $12,305,000 at December 31, 2007. The balance decreased due to large repayment made in the 2008.

The balance of our long-term bank loan was about $448,283 at September 30, 2008, compared to $457,107 at December 31, 2007.

Currently we have a credit line of up to RMB600 million, or about USD87.53 million using the closing exchange rate of 1USD to 6.8551 RMB at September 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 $1,225,365 at September 30, 2008. They were made mostly for our new equipment and facilities. This demand for investment capital will be mainly met with the company’s cash inflows generated from operations..

46

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 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 December, 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.

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.

47

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

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.

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.

48

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.

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.

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

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	6 - 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.

49

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.

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.

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.

50

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.

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

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, and collection is reasonably assured.

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.

51

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.

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:

(1)	Making up cumulative prior years’ losses, if any;
(2)	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;

(3)	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
(4)	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.

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.

52

Recent accounting pronouncements

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.

In March 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (“SFAS”) No. 161 “Disclosures about Derivative Instruments and Hedging Activities”. SFAS 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company is currently evaluating the impact of SFAS 161 on its consolidated financial statements but does not expect it to have a material effect.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. SFAS 162 directs the GAAP hierarchy to the entity, not the independent auditors, as the entity is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. SFAS 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to remove the GAAP hierarchy from the auditing standards. SFAS 162 is not expected to have a material impact on the Company’s financial statements.

53

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Tabular Disclosure of Contractual Obligations

	Payments due by period
Contractual obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
[Long-Term Debt Obligations]	$	502,323	$	54,040	$	122,408	$	112,451	$	213,424
[Capital Lease Obligations]		-		-		-		-		-
[Operating Lease Obligations]		-		-		-		-		-
[Purchase Obligations]		-		-		-		-		-

54

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 RMB 6.92 and, the respective People’s Bank of China rates as of July 1, 2008, this cash balance would have been RMB 364.0 million. Assuming a further 10% appreciation of the RMB against the U.S. dollar, this cash balance would have decreased to RMB 327.6 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, 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. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to commodity price risk.

55

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 September 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 September 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.

56

Management assessed the effectiveness of our internal control over financial reporting as of September 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 September 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.

1) 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 fourth 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 fourth 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.

2) 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 fourth 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.

57

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.

3) 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 fourth 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 December 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.

4) 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 December 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.

5) 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 fourth 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 December 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.

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

58

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 fourth 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 September 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

We operate in a rapidly changing environment that involves certain risks and uncertainties, some of which are beyond our control. You should carefully review and consider the information regarding certain factors that could materially affect our business, financial condition or future results set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and in our Current Report on Form 10-Q for the quarter ended June 30, 2008. No material changes have occurred since the quarter ended June 30, 2008 to the risk factors previously presented, other than the addition of the following:

Risks Related To Doing Business In China

Our chief executive officer could decide to sell his majority interest in the Company, causing disruption in the operations and the calling of the loan to the domestic Chinese Yanglin Soybean Group Co., and it may adversely affect our financial condition and results of operation.

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). Our loan in the amount of approximately $17 million to the domestic Chinese Yanglin Soybean Group Co. Ltd. is recallable should Mr. Shulin Liu decide to sell his and/or his wife’s majority interest in the Company. This could cause disruption in our operations and as a consequence may adversely affect our financial condition and results of operation.

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.

59

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

	Yanglin Soybean, Inc.
Date: November 14, 2008	By:	/s/ SHAOCHENG XU
		Shaocheng Xu Chief Financial Officer (Principal Financial and Accounting Officer)

60