Yanglin Soybean 10Q/A 2009 Q1 Quarterly report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Amendment No. 2

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

For the quarterly period ended March 31, 2009

¨	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

(Former Name, Former Address And Former Fiscal Year, If Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

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

Large accelerated filer ¨		Accelerated filer ¨
Non-accelerated filer ¨		Smaller Reporting Company x
(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 ¨ No x

The number of shares of Common Stock outstanding on May 14, 2009 was 20,000,003 shares.

EXPLANATORY NOTE

This amendment no. 2 to our quarterly report on Form 10-Q for the quarter ended March 31, 2009 initially filed with the Securities and Exchange Commission (“Commission”) on May 15, 2009 is being filed to delete the statement on page 43 predicting less competition and the rising demand for soybeans in the future.

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	35

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	57

Item 4.	Controls and Procedures	58

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

ITEM 1—FINANCIAL STATEMENTS

YANGLIN SOYBEAN INC.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US dollars) (Unaudited)

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 – 34

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 stockholders of
		Yanglin Soybean Inc.

Report of Independent Registered Public Accounting Firm

We have reviewed the accompanying interim consolidated balance sheets of Yanglin Soybean Inc. as of March 31, 2009 and 2008, and the related consolidated statements of income, stockholders’ equity and cash flows statement for the three-month period then ended, in accordance with the standards of the Public Company Accounting Oversight Board (United States). All information included in these financial statements is the representation of the management of Yanglin Soybean Inc.

A review consists principally of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with the standards of the Public Company Accounting Oversight Board (United States), 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, China	Albert Wong & Co
May 14, 2009	Certified Public Accountants

YANGLIN SOYBEAN INC.

CONSOLIDATED BALANCE SHEETS

AS AT MARCH 31, 2009, AND DECEMBER 31, 2008

(Stated in US Dollars)

	Notes		March 31, 2009		December 31, 2008
			(unaudited)		(audited)
ASSETS
Current assets
Cash and cash equivalents		2(k)	$	33,180,175	$	30,365,413
Pledged deposits		4		484,000		484,000
Trade receivables, net	2(j)&5			8,053		8,043
Inventories	2(i)&7			6,310,433		3,896,334
Advances to suppliers				7,405,610		10,597,701
Prepaid VAT and other taxes				1,983,067		920,083
Other receivables		6		43,394		114,990
Total current assets			$	49,414,732	$	46,386,564
Property, plant and equipment, net	2(g)&8			30,566,502		31,529,936
Intangible assets, net	2(e),(f)&9			4,571,091		4,619,716
Prepaid deposits for equipment and construction				-		13,021
TOTAL ASSETS			$	84,552,325	$	82,549,237
LIABILITIES AND
STOCKHOLDERS’ EQUITY
Current liabilities
Short-term bank loans		10	$	10,663,784	$	6,711,214
Current portion of long-term bank loans		12		55,240		55,149
Accounts payable				4,461		13,753
Other payables		11		840,636		683,403
Customers deposits				1,233,626		1,187,582
Accrued liabilities				622,328		591,979
Total current liabilities			$	13,420,075	$	9,243,080
Long-term liabilities
Long-term bank loans		12		421,325		434,678
TOTAL LIABILITIES			$	13,841,400	$	9,677,758

See notes to consolidated financial statements

YANGLIN SOYBEAN INC.

CONSOLIDATED BALANCE SHEETS (Continued)

AS AT MARCH 31, 2009, AND DECEMBER 31, 2008

(Stated in US Dollars)

	Notes		March 31, 2009		December 31, 2008
			(unaudited)		(audited)
STOCKHOLDERS’ EQUITY
Preferred stock – Series A $0.001 par value, 50,000,000 shares authorized; 9,999,999 shares issued and outstanding as of March 31, 2009 and December 31, 2008		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 March 31, 2009 and December 31, 2008		14		20,000		20,000

Additional paid-in capital		14		38,389,635		38,389,635
Statutory reserves		2(t)		5,628,636		5,628,636
Retained earnings				19,413,325		21,664,524
Accumulated other comprehensive income		2(u)		7,249,329		7,158,684
			$	70,710,925	$	72,871,479
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	84,552,325	$	82,549,237

See notes to consolidated financial statements

YANGLIN SOYBEAN INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2009, AND 2008

(Stated in US Dollars) (unaudited)

		2009			2008
	Notes

Net sales	2(m)&18	$	43,032,326			65,275,858
Cost of sales	2(n)&18		(44,174,348	)		(58,438,980	)
Gross (loss)/profit		$	(1,142,022	)		6,836,878

Selling expenses			(69,246	)		(54,425	)
General and administrative expenses			(1,018,180	)		(692,812	)
(Loss)/income from operation		$	(2,229,448	)		6,089,641
Interest income			71,725			18,284
Interest expenses			(93,505	)		(248,923	)
Other income			29			-
(Loss)/income from operations before income taxes		$	(2,251,199	)		5,859,002

Income taxes	2(s)&16		-			-
Net (loss)/income attributable to common shareholders		$	(2,251,199	)		5,859,002

Foreign currency translation adjustment			90,645			2,402,012
Comprehensive income		$	(2,160,554	)		8,261,014
Basic earnings per share	15	$	(0.11	)		0.29
Diluted earnings per share	15	$	(0.06	)		0.17
Basic weighted average share outstanding	15		20,000,003			20,000,003
Diluted weighted average share outstanding	15		36,522,038			34,790,205

See notes to consolidated financial statements

YANGLIN SOYBEAN INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2008 AND THREE-MONTHS ENDED

MARCH 31, 2009

(Stated in US Dollars) (unaudited)

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

Bal., 1/1/2008		20,000,003	$	20,000		10,000		38,389,635		3,490,834		9,421,860			3,355,470		54,687,799
Net income		-		-		-		-		-		14,380,466			-		14,380,466
Appropriations to surplus reserves		-		-		-		-		2,137,802		(2,137,802	)		-		-
Foreign currency adjustment		-		-		-		-		-		-			3,803,214		3,803,214
Bal., 12/31/2008		20,000,003	$	20,000		10,000		38,389,635		5,628,636		21,664,524			7,158,684		72,871,479

Bal., 1/1/2009		20,000,003	$	20,000		10,000		38,389,635		5,628,636		21,664,524			7,158,684		72,871,479
Net loss		-		-		-		-		-		(2,251,199	)		-		(2,251,199	)
Appropriations to surplus reserves		-		-		-		-		-		-			-		-
Foreign currency
Adjustment		-		-		-		-		-		-			90,645		90,645
Bal., 3/31/2009		20,000,003	$	20,000		10,000		38,389,635		5,628,636		19,413,325			7,249,329		70,710,925

See notes to consolidated financial statements

YANGLIN SOYBEAN INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (unaudited)

	Three months ended March 31,
	2009			2008
Cash flows from operating activities
Net (loss)/income	$	(2,251,199	)	$	5,859,002
Depreciation		983,446			440,587
Amortization		54,420			41,362
Loss on disposal of property, plant and equipment		229,912			43,196

Adjustments to reconcile net income to net cash (used in)/provided by operating activities:
Accounts receivable		-			14,122
Inventories		(2,408,856	)		(2,649,766	)
Advances to suppliers		3,204,941			(2,655,383	)
Amounts due to construction		-			(227,975	)
Prepaid VAT and other taxes		(1,061,674	)		(382,049	)
Other receivables		71,730			623,257
Accounts payable		(9,308	)		(2,232	)
Other payables		156,368			(761,119	)
Customers deposits		44,546			462,853
Accrued liabilities		29,631			5,024
Net cash (used in)/provided by operating activities	$	(956,043	)	$	810,879

Cash flows from investing activities
Payment of plant and equipment		(197,424	)		-
Decrease of construction in progress		-			173,331
Net cash (used in)/provided by investing activities	$	(197,424	)	$	173,331

Cash flows from financing activities
Bank borrowings		6,572,615			-
Bank loan repayments		(2,642,921	)		(11,233	)
Net cash provided by/(used in) financing activities	$	3,929,694		$	(11,233	)

Net cash and cash equivalents sourced		2,776,227			972,977
Effect of foreign currency translation on cash and cash equivalents		38,535			515,299

Cash and cash equivalents–beginning of year		30,365,413			9,210,021
Cash and cash equivalents–end of year	$	33,180,175		$	10,698,297
Supplementary cash flow information:
Interest received	$	71,725		$	18,284
Interest paid		93,505			248,923

See notes to consolidated financial statements

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

1.	ORGANIZATION AND PRINCIPAL ACTIVITIES

Yanglin Soybean Inc. (the “Company”) was incorporated in the state of Nevada on May 26, 1921. Prior to October 3, 2007 the company had only nominal operations and assets. The Company currently operates through (1) itself, (2) one directly wholly-owned subsidiary in the British Virgin Islands: Faith Winner Investments Limited (“Faith Winner (BVI)”), (3) one directly wholly-owned subsidiary of Faith Winner (BVI) located in Mainland China: Faith Winner (Jixian) Agriculture Development Company (“Faith Winner (Jixian)” or “WFOE”) and (4) one operating company located in Mainland China: Heilongjiang Yanglin Soybean Group Co., Ltd. (“Yanglin”) which is controlled by the Company through contractual arrangements between WFOE and Yanglin, as if Yanglin were a wholly-owned subsidiary of the Company.

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. As a result of the shares exchange, Faith Winner (BVI) became a wholly-owned subsidiary of the Company.

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 $1,410. Accordingly, the consolidated statements of income include the results of operations of Heilongjiang Yanglin Soybean Group Co., Ltd from the acquisition date through December 31, 2007.

Faith Winner (BVI) and WFOE entered into a series of agreements respectively with Yanglin and as a result of such arrangements WFOE gained control of all of Yanglin’s assets, management and business as if Yanglin were a wholly-owned subsidiary of WFOE. These contractual arrangements included a loan agreement, a consigned management agreement, two consignment agreements of equity interests, an exclusive purchase option agreement, a registered trademark transfer contract and a trademark licensing agreement. The Consignment Agreements were entered into on September 1, 2007, and the other agreements were all signed on September 24, 2007. The exclusive purchase option agreement and the consigned management agreement were amended as of April 3, 2009.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

1.	ORGANIZATION AND PRINCIPAL ACTIVITIES (Continued)

Pursuant to those agreements, WFOE made a loan of $17 million and covenanted to satisfy Yanglin’s working capital in future to Yanglin (the “Loan”). In return, the Company obtained the management control and an exclusive right to acquire all of the equity of Yanglin. The rights of existing shareholders of Yanglin are assigned by the consignment of equity interests to Faith Winner (BVI). The exclusive purchase agreement and the loan agreement restrict both Yanglin and its shareholders from significant decisions including but not limited to any amendments of articles of association or rules of the Company, any change in registered capital, any transfer, mortgage or disposal of Yanglin’s assets or income in a way that would affect WFOE’s security interest, entering any material contract (exceeding RMB5 million in value) and distributing any dividends to the shareholders. Pursuant to the consigned management agreement between WFOE and Yanglin, Yanglin agreed to entrust the business operations of Yanglin and its management to WFOE until WFOE formally acquires all equity or substantially all the assets of Yanglin. Under the consigned management agreement as amended on April 3, 2009, WFOE will provide financial, technical and human resources management services to Yanglin which will enable WFOE to control Yanglin's operations, assets and cash flows. In turn, it will be entitled to 5% of Yanglin’s revenue on a yearly basis.

Under the Registered Trademark Transfer Agreement, Yanglin agreed to transfer to WFOE all of its rights in connection with the two trademarks, including without limitation the title of the trademarks and right to license ( the “Transferred Trademark”) for a purchase price of $1,000,000, which is subject to a purchase price adjustment based on the minimum appraised value on intellectual property (“IP”) rights allowed under PRC laws and regulations for such transfer. Under the Trademark Licensing Agreement, WFOE agreed to grant an exclusive license to Yanglin, for a term of 10 years, to use the Transferred Trademark for an annual licensing fee equal to 1% of Yanglin’s revenue of that year. The license fee and the management fee aforesaid –total of 6% of the revenue of Yanglin-entitled by WFOE are designed to approximate Yanglin’s annual net profit before tax. Any excess profit in Yanglin will not be distributed as dividend according to the contractual arrangements until WFOE exercises the Option Agreement to acquire all shareholders’ equity interest of Yanglin. If the 6% of licence and management fees exceed the net profit before tax of Yanglin, the amount entitled to WFOE is limited to the actual annual net profit before tax of Yanglin under the contracts.

According to the exclusive purchase option agreement, the WFOE has the exclusive purchase option to purchase all or part of Yanglin’s shareholders’ equity interest in Yanglin when and as permitted under PRC laws and regulations and any other party has no right to purchase any equity from the shareholders of Yanglin. The agreement provides that, unless otherwise required under PRC laws and regulations, the consideration for the equity transfer or the asset transfer under the agreement will be $17 million or such greater amount as required by the then applicable Chinese law and regulations (the “Option Price”). Under the loan agreement and the exclusive purchase option agreement, the money received as the Option Price by the shareholders of Yanglin upon execution of the option shall be used to satisfy the repayment of the Loan, that is, any amount of money received by Yanglin’s shareholders shall be paid back to WFOE as the repayment of Loan. Therefore, the actual consideration of the investment in Yanglin is exactly the amount of the Loan. Under such contractual arrangements, all of assets and equity including any residual profits of Yanglin are totally controlled by WFOE and will be formally captured upon exercise of the exclusive purchase option.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

1.	ORGANIZATION AND PRINCIPAL ACTIVITIES (Continued)

The loan of $17 million to Yanglin is considered as an investment in Yanglin by the Company through a series of contractual arrangements by way of the Loan. As a result of entering into the abovementioned agreements, WFOE should be deemed to control Yanglin as a Variable Interest Entity as required by FASB Interpretation No. 46 (revised December 2003) Consolidation of Variable Interest Entities, and Interpretation of ARB No. 51. The reverse-merger also included an equity financing of $21,500,000 by the issuance of 10,000,000 Series A Convertible Preferred Stock at $2.15 per share to 10 accredited investors.

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

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)	Method of accounting

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

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

Accordingly, the accompanying financial statements are those of the accounting acquirer: Faith Winner (BVI). The historical stockholders’ equity of the accounting acquirer prior to the share exchange has been retroactively restated as if the share exchange transaction occurred as of the beginning of the first period presented.

(b)	Principles of consolidation

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

Name of Company	Place of incorporation	Attributable interest

Faith Winner Investments Ltd	British Virgin Islands		100	%

Faith Winner (Jixian) Agriculture Development Company	PRC		100	%

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

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(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 as at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management made these estimates using the best information available at the time the estimates were made; however actual results could differ materially from those estimates.

(d)	Economic and political risks

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

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

(e)	Land use rights

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

(f)	Railway use rights

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

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(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		3.5 - 30 years
Office equipment		4 - 20 years
Motor vehicles		6 - 10 years

The costs 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 when incurred, whereas significant renewals and betterments are capitalized.

(h)	Accounting for the impairment of long-lived assets

The long-lived assets held and used by the Group are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of changes in technologies or situation in the industry. Determination of recoverability of assets to be held and used is done by comparing the carrying amount of an asset to the future net undiscounted cash flows to be generated by the asset.

If such assets are considered to be impaired, the impairment losses to be recognized are measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less estimated costs of disposal.

During the reporting years, there were no impairment losses.

(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 production overheads.

(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 after considering a variety of factors, including the length of time past due, significant one-time events and the company’s historical experience. Bad debts are written off as incurred.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(k)	Cash and cash equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

	March 31, 2009		March 31, 2008
Cash on hand	$	101,052	$	18,140
Industrial And Commercial Bank of China		521		-
Agricultural Development Bank of China		567,405		705,761
Agricultural Bank of China		32,499,587		9,974,396
Hongkong and Shanghai Banking Corp.		11,610		-
Total cash and cash equivalents	$	33,180,175	$	10,698,297

(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:

	March 31, 2009		December 31, 2008		March 31, 2008
Twelve months ended		-		6.8542		-
RMB : USD exchange rate
Three months ended		6.8456		-		7.0222
RMB : USD exchange rate
Average three months ended		6.8466		-		7.1757
RMB : USD exchange rate

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

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(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. Write-down of inventory to lower of cost or market value is also reflected in cost of revenues.

(o)	Advertising

The Group expenses all advertising expenses as incurred. Advertising expenses included in selling expenses were nil and $4,132 for the three months ended March 31, 2009 and 2008 respectively.

(p)	Shipping and handling

All shipping and handling costs are expensed as incurred. The allocation of shipping and handling expenses between selling expenses and general and administrative expenses is shown as follows:

	Three months ended March 31, 2009		Three months ended March 31, 2008

Selling expenses	$	22,304	$	23,607
General and administrative expenses		-		2,574
Total shipping and handling expenses	$	22,304	$	26,181

(q)	Research and development

All research and development costs are expensed as incurred. The research and development costs included in general and administrative expenses were $2,376 and $4,596 for the three months ended March 31, 2009, and 2008 respectively.

(r)	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 funds included in general and administrative expenses were $25,883 and $48,246 for the three months ended March 31, 2009, and 2008 respectively.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(s)	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.

(t)	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 net income after taxation, 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 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 $ 3,752,424 and common welfare fund of $1,876,212 as of March 31, 2009.

(u)	Comprehensive income

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

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(v)	Recent accounting pronouncements

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 April 2008, the FASB issued FASB Staff Position (FSP) FAS 142-3, Determination of the Useful Life of Intangible Assets, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets. This Staff Position is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. Application of this FSP is not currently applicable to the Company as the Company’s intangible assets consist of land used rights which has a fixed useful life of 47 years.

In May 2008, the FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts, an interpretation of FASB Statement No. 60 (SFAS 163). This statement clarifies accounting for financial guarantee insurance contracts by insurance enterprises under FASB Statement No. 60, Accounting and Reporting by Insurance Enterprises. SFAS 163 is effective for fiscal years and interim periods within those years, beginning after December 15, 2008. As the Company does not issue financial guarantee insurance contracts, it does not expect the adoption of this standard to have an effect on its financial position or results of operations.

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.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

3.	CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

Financial instruments which potentially expose the Group to concentrations of credit risk, consists of cash and accounts receivable as of March 31, 2009 and December 31, 2008. The Group performs ongoing evaluations of its cash position and credit evaluations to ensure sound collections and minimize credit losses exposure.

As of March 31, 2009 and December 31, 2008, 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 three months ended March 31, 2009 and 2008, all of the Group’s sales were generated from the PRC. In addition, all accounts receivable as of March 31, 2009 and December 31, 2008 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.

No customer accounted for 10% or more of the Group’s revenue in the three months ended March 31, 2009 and 2008 respectively.

For the three months ended March 31, 2009 and year ended December 31, 2008, the customer account for 10% or more of the Group’s accounts receivable are as follows:

		March 31, 2009				December 31, 2008
Customer A			9,364				9,352

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

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.

5.	TRADE RECEIVABLES, NET

Details of trade receivables are as follows:

	March 31, 2009			December 31, 2008

Trade receivables, gross	$	9,364		$	9,352
Provision for doubtful debts		(1,311	)		(1,309	)
Net balance at end of period/year	$	8,053		$	8,043

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

An analysis of the allowance for doubtful accounts for the three months ended March 31, 2009 and year ended December 31, 2008 is as follows:

	March 31, 2009		December 31, 2008

Balance at beginning of period/year	$	1,309	$	1,213
Addition of bad debt expense		-		14
Foreign exchange adjustment		2		82
Balance at end of period/year	$	1,311	$	1,309

An 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.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

6.	OTHER RECEIVABLES

Details of other receivables are as follows:

	March 31, 2009		December 31, 2008
Advances to employees for purchasing materials	$	32,780	$	32,271
Advances for traveling		4,735		11,417
Loans to employees		-		57,902
Sundry		5,879		13,400
Balance at end of period/year	$	43,394	$	114,990

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

7.	INVENTORIES

Inventories comprise the following:

	March 31, 2009		December 31, 2008

Finished goods	$	699,986	$	904,375
Raw materials		5,610,447		2,991,959
Balance at end of period/year	$	6,310,433	$	3,896,334

As of March 31, 2009, raw materials with book value of $4,011,628 and finished goods with book value of $ 372,648 of the Group were pledged as collateral under certain loan arrangements. These loans were primarily obtained for general working capital.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

8.	PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment comprise the followings:

	March 31, 2009			December 31, 2008
At cost
Building	$	9,297,179		$	5,908,205
Machinery and equipment		28,671,508			15,826,005
Office equipment		130,676			130,512
Motor vehicles		1,166,874			1,165,410
	$	39,266,237		$	23,030,132
Less: accumulated depreciation		(8,699,735	)		(7,725,246	)
	$	30,566,502		$	15,304,886
Construction in progress		-			16,225,050
Balance at end of period/year	$	30,566,502		$	31,529,936

As of March 31, 2009, building with net book value of $ 1,222,561 and machinery and equipment with net book value of $ 5,993,638 of the Group were pledged as collateral under certain loan arrangements. These loans were primarily obtained for general working capital.

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

	Three months ended March 31, 2009		Three months ended March 31, 2008

Cost of sales	$	593,997	$	301,852
General and administrative expenses		389,449		138,735
Total depreciation expenses	$	983,446	$	440,587

Construction in progress mainly comprises capital expenditures for construction of the Group’s corporate campus, including offices, factories and staff dormitories. It 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. There is no capital commitment of these projects as at March 31, 2009.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

9.	INTANGIBLE ASSETS, NET

Intangible assets are as follows:

	March 31, 2009			December 31, 2008

Land use rights, at cost	$	3,999,615		$	3,994,597
Railway use rights, at cost		1,152,571			1,151,125
Less: accumulated amortization		(581,095	)		(526,006	)

Balance at end of period/year	$	4,571,091		$	4,619,716

Amortization expenses are included in the statement of income and comprehensive income as follows:

	Three months ended March 31, 2009		Three months ended March 31, 2008

Cost of sales	$	21,805	$	20,805
General and administrative expenses		32,615		20,557
Total amortization expenses	$	54,420	$	41,362

As of March 31, 2009, land use rights with net book value of $1,283,307 of the Group were pledged as collateral under certain loan arrangements. These loans were primarily obtained for general working capital.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

10.	SHORT-TERM BANK LOANS

Short-term bank loans are as follows:

	March 31, 2009		December 31, 2008

Loans from Agricultural Development Bank of China, interest rates at 5.31%-6.66%per annum, due October 29, 2009	$	4,090,218	$	6,711,214

Loans from Agricultural Development Bank of China, interest rates at 5.31%per annum, due October 9, 2009		2,191,189		-

Loans from Agricultural Development Bank of China, interest rates at 5.31%per annum, due October 10, 2009		1,460,792		-

Loans from Agricultural Development Bank of China, interest rates at 5.31%per annum, due October 10, 2009		2,921,585		-

Balance at end of period/year	$	10,663,784	$	6,711,214

Interest paid for the three months ended March 31, 2009 and 2008 were $84,659 and $236,831, respectively.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

11.	OTHER PAYABLES

Other payables are as follows:

	March 31, 2009		December 31, 2008
Due for construction	$	823,379	$	670,368
Due for employees		4,257		35
Sundry		13,000		13,000
Balance at end of period/year	$	840,636	$	683,403

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

12.	LONG-TERM BANK LOANS

Long-term bank loans are as follows:

	March 31, 2009			December 31, 2008
Loans from Industrial And Commercial
Bank of China, interest rates at 7.722%
and 9.405% per annum respectively,
with various installments, final
due October 28, 2016	$	476,565		$	489,827

Current portion due within one year		(55,240	)		(55,149	)
Balance at end of period/year	$	421,325		$	434,678

All of the installments due in 2008 were paid on their due dates. Interest paid for the three months ended March 31, 2009 and 2008 were $8,845 and $12,092, respectively.

The future principal payments under the bank loans as of March 31, 2009 are as follows:

Year
2009	$	55,240
2010		58,254
2011		62,041
2012		65,828
2013		69,613
2014		73,400
Thereafter		92,189
Total	$	476,565

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

13.	PREFERRED STOCK AND WARRANTS

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

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

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

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

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

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

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

13.	PREFERRED STOCK AND WARRANTS (Continued)

Pursuant to the Registration Rights Agreement dated as of October 3, 2007 by and among the Company and certain holders (the Holders), the Company agreed to have a registration statement registering certain of the securities of the Holders declared effective with the Securities and Exchange Commission on or prior to the Effectiveness date defined in the Registration Rights Agreement or pay the liquidated damages.

Although the registration statement has not yet been declared effective, pursuant to a Waiver and Release dated December 31, 2008, the Holders have waived their right to the liquidated damages for the Company’s failure to have the registration statement declared effective on or prior to the Effectiveness date under Registration Rights Agreement.

In exchange for the waiver and release of the liquidated damages, the Company entered into an Agreement dated December 31, 2008 (the Agreement). Under the Agreement, the Company agreed to hire and engage, by February 28, 2009, three (3) independent directors as defined by NASDAQ Rule 4200(a)(15) and who are acceptable to the Holders. Further, the Company shall comply with all of the provisions of NASDAQ Rule 4350 by February 28, 2009. If these requirements are not met, the Company shall pay to each Holder five percent (5%) of its initial investment under the Securities Purchase Agreement by and among the Company and the Holders dated October 3, 2007. On February 27, we signed an addendum to the Agreement with the Holders, which extended the deadline for hiring and engaging three (3) independent directors to March 13, 2009. On March 9, 2009, the Company adopted a form of new Bylaws, appointed three (3) independent directors, established three (3) standing committees under the Board of Directors (audit committee, compensation committee and governance and nominating committee), and approved the articles of the three (3) abovementioned standing committees and the Code of Conduct and Ethics, thus has been compliant with the provisions of NASDAQ Rule 4350. In addition, the Company agreed to effect and announce, no later than June 30, 2009, a change to the Company’s current independent audit firm and engage a new independent audit firm listed as a Top 10 audit firm according to Public Accounting Report’s 2008 Annual Audit Rankings to audit the 2009 financial statements and review the interim financial statements as of June 30, 2009. If these requirements are not met, the Company shall pay to each Holder ten percent (10%) of its initial investment under the Securities Purchase Agreement. Furthermore, the Company and the Holders agreed to extend the required Effectiveness date of the Company’s Registration Statement filed with the Securities and Exchange Commission to June 30, 2009.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(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 $38,389,635.

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:

	Three months ended March 31,
	2009			2008

Net (loss)/income	$	(2,251,199	)	$	5,859,002

Beneficial conversion feature on Series A preferred stock		-			-
Net (loss)/income attributable to common shareholders	$	(2,251,199	)	$	5,859,002
Earnings:
Earnings for the purpose of basic earnings per share	$	(2,251,199	)	$	5,859,002
Effect of dilutive potential common stock		-			-
Earnings for the purpose of dilutive earnings per share	$	(2,251,199	)	$	5,859,002

Number of shares:
Weighted average number of common stock for the purpose of basic earnings per share		20,000,003			20,000,003
Effect of dilutive potential common stock
- conversion of convertible preferred stock		9,999,999			9,999,999
Effect of dilutive potential common stock
- conversion of warrants		6,522,036			4,790,203
Weighted average number of common stock for the purpose of dilutive earnings per share		36,522,038			34,790,205

Earnings per share
Basic earnings per share	$	(0.11	)	$	0.29
Dilutive earnings per share	$	(0.06	)	$	0.17

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

16.	INCOME TAXES

(a)

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

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

However, Yanglin has been named as a leading enterprise in the agricultural area and awarded with a tax exemption for the years up to 2009. After 2009, 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:

	2009			2008

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

(b)

For 2008 and 2009, the PRC corporate income tax rate was 25%. Heilongjiang Yanglin Soybean Group Co., Ltd is entitled to tax exemptions (tax holidays) for 2008 and till the end of 2009.

(Loss)/income before income tax expenses of $(2,251,199), and $5,859,002 for the three months ended March 31, 2009, and 2008 respectively, were attributed to subsidiaries with operations in China. Income tax (benefit) expense related to China income for the three months ended March 31, 2009 and 2008 are nil, and nil, respectively.

The combined effects of the income tax expense exemptions and reductions available to the Company for the years ended March 31, 2009, and 2008 are as follows:

	Three months ended March 31,
	2009		2008

Tax holiday effect	$	-	$	1,935,639
Basic net income per share effect		-		0.10

(c)

No deferred tax has been provided as there are no material temporary differences arising during the three months ended March 31, 2009 and 2008.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

17. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

18. SALES BY PRODUCTS

The Company operates in one business segment, manufacturing, distribution, and selling of non-genetically modified soybean products, including soybean oil, soybean salad oil, and soybean meal, throughout the Province of Heilongjiang and other parts of China.

For the three months ended March 31, 2009 and 2008, the Group’s net sales and cost of sales from these three product types, namely soybean meal, soybean oil and salad oil, are shown as follows:

For the three months ended March 31, 2009
2009	Soybean			Soybean
	meal			oil			Salad oil			Consolidated

Net sales	$	29,515,153		$	11,594,584		$	1,922,589		$	43,032,326
Cost of sales		(30,115,761	)		(12,088,009	)		(1,970,578	)		(44,174,348	)
Product result	$	(600,608	)	$	(493,425	)	$	(47,989	)	$	(1,142,022	)

For the three months ended March 31, 2008
2008	Soybean			Soybean
	meal			oil			Salad oil			Consolidated

Net sales	$	37,875,995		$	19,962,842		$	7,437,021		$	65,275,858
Cost of sales		(34,945,118	)		(17,120,390	)		(6,373,472	)		(58,438,980	)
Product result	$	2,930,877		$	2,842,452		$	1,063,549		$	6,836,878

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

19. RELATED PARTIES TRANSACTIONS

The following material transactions with related companies, in the opinion of the directors, during the periods were opinion of the directors, carried out in the ordinary course of business and on normal commercial terms:

On October 3, 2007, we entered into a consulting agreement (“Consulting Agreement”) with our ex-President, Chief Executive Officer and Chief Financial Officer, Glenn A. Little. Pursuant to the Consulting Agreement, the services to be performed by Mr. Little include providing advice, information and true and correct copies of documents regarding our historical records and operations to our auditors, attorneys, officers and directors, and signing such documents as they may reasonably request and providing information to the extent the requested information is reasonably available to Mr. Little. In consideration thereof, Mr. Little will be paid the sum of $550,000; provided, however, that as a condition to the making of the foregoing payment, he shall have: (i) delivered a resignation from all officer positions effective upon delivery, (ii) delivered a resignation as director which shall be effective on the tenth (10th) day after we mail a Schedule 14f-1 to our shareholders of record; and (iii) appointed Mr. Shulin Liu as our director and Chief Executive Officer and Mr. Shaocheng Xu as our Chief Financial Officer. Mr. Little completed the provision of the services and was paid $550,000 as provided in the Consulting Agreement on October 4, 2007.

On November 2, 2006, Yanglin entered into a Financial Consulting Agreement (the “MHA Agreement”) with Mass Harmony Asset Management Limited (“MHA”). Pursuant to the MHA Agreement, Yanglin has paid MHA an aggregate of RMB 300,000 (approximately US$ 39,891), half of which was paid within five business days upon the execution of the MHA Agreement, and the balance was paid within five business days after the closing of a reverse merger.

Additionally MHA has also received 1% of the issued and outstanding common stock of the Company post-private placement (including the underlying common stock of the Series A Preferred Stock) and warrants to purchase common stock of the Company valued at 5% of the dollar amount of private placement at an exercise price of 140% of the Series A Preferred Stock price. i.e. 500,000 warrants.

The services MHA has rendered, pursuant to the MHA Agreement, include initial due diligence on Yanglin, preparing Yanglin’s business plan and assisting in the corporate restructuring and financial documentation. Our former director, Yang Miao, who has resigned recently, is the Managing Director and a shareholder of MHA.

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

20. PARENT-ONLY FINANCIAL STATEMENTS

As mentioned in note 1 to the financial statements, as a result of entering into the contractual agreements, WFOE is deemed to control Yanglin as a Variable Interest Entity. These agreements may have the restrictions on the ability of Yanglin to transfer funds to the parent through intercompany loans, advances and cash dividends which consist of additional paid in capital, statutory reserves and retained earnings of $63,519,751 and $65,744,088 respectively as at March 31, 2009 and December 31, 2008.

The following presents unconsolidated financial information of the parent company only:

Condensed Balance Sheets as of March 31, 2009 and December 31, 2008

	3/31/2009		12/31/2008

Pledged deposits - restricted	$	484,000	$	484,000
Investments in subsidiaries		70,287,665		72,421,357
Total assets	$	70,771,665	$	72,905,357

Other current liabilities	$	60,740	$	33,878
Total liabilities	$	60,740	$	33,878

Total shareholders’ equity		70,710,925		72,871,479
Total liabilities and shareholders’ equity	$	70,771,665	$	72,905,357

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

(Stated in US Dollars) (Unaudited)

20. PARENT-ONLY FINANCIAL STATEMENTS (Continued)

Condensed Income Statements as of March 31, 2009 and 2008

	2009			2008

Investment (loss) income	$	(2,224,337	)	$	5,871,002
General and administrative expenses		(26,862	)		(12,000	)
Loss from operation before income taxes	$	(2,251,199	)	$	5,859,002
Income taxes		-			-
Net (loss) income attributable to common shareholders	$	(2,251,199	)	$	5,859,002

ITEM 2-MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 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 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 ordinary soybean oil, salad oil and soybean meal in bulk package, which are sold throughout China to our customers directly or through distributors. Most of our customers (approximately 80)% are located 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 ordinary soybean oil, salad oil and soybean meal. We plan to broaden our product line to include high end products such as squeezed oil, powdered soy oil and protein concentrates, textured protein and defatted soybean powder, while greatly enlarging the production capacity of salad oil. We installed equipment for manufacturing squeezed oil and expanded the production line for salad oil and have started production of these products at the end of 2007. The production facilities for powdered soy oil have been built and are now in the trial production and “debugging” phase. The pilot production of protein concentrates began in late 2008, with small quantities of commercial grade products provided to customers. Defatted soy powder will be launched in 2009, and the production line of textured protein will also be put into operation in 2009.

We sell our products under the “Yanglin” brand name primarily to various geographic regions of the PRC through our various distribution channels. In the three months ended March 31, 2009, we processed approximately 95,343 tons of soybeans and generated total revenues amounting to approximately $43 million with net loss amounting to $2.25 million.

Our goal is to become the market leader in the non-GM soybean industry of China, and we believe that we can accomplish this objective in the near future. We are now considering future expansion and an acquisition plan, with the intention of significantly increasing our processing capacity. The plan is still in a preliminary stage, but this will be a vital step in achieving our objective. We are also making great efforts to improve and strengthen our management and internal control over financial reporting. We have engaged Ernst & Young as a consultant on our Sarbanes-Oxley compliance project, and Ernst & Young’s project team has finished their review of our internal control over financial reporting. By the end of 2008, we were close to successfully completing the project . This project is a great opportunity to reinforce our capability to protect the interests of the company and its shareholders while improving management effectiveness and efficiency.

Organizational History

Yanglin Soybean Inc. (f/k/a, Victory Divide Mining Company, the “Company”) was incorporated in the state of Nevada on May 26, 1921. Prior to October 3, 2007 the company had only nominal operations and assets.

Faith Winner (BVI) formed Faith Winner (Jixian) Agriculture Development Company (“Faith Winner (Jixian)” or “WFOE”), then Faith Winner (BVI) and WFOE 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. As a result of such arrangements WFOE gained control of all of Yanglin’s assets, management and business as if Yanglin were a wholly-owned subsidiary of WFOE, so WFOE is deemed to control Yanglin as a Variable Interest Entity as required by FASB Interpretation No. 46 (revised December 2003) Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.

However, the shareholders of Yanglin, Mr. Shulin Liu with his wife, Mrs. Huanqin Ding, also have effective control over Faith Winner (BVI) and WFOE as our subsidiaries, because they beneficially own approximately 91% of our common stock through their 100% holding in Winner State (BVI) and thus have a controlling interest in us.

Pursuant to those agreements, WFOE made a loan of $17 million and intended to satisfy Yanglin’s working capital needs in the future (the “Loan”). In return, the Company obtained the management control of Yanglin and an exclusive right to acquire all of the equity of Yanglin. The rights of existing shareholders of Yanglin are assigned by the consignment of equity interests to Faith Winner (BVI). The exclusive purchase agreement as amended on April 3, 2009 and the loan agreement restrict both Yanglin and its shareholders from significant decisions including but not limited to any amendments of articles of assocaiton or rules of the Company, any change in registered capital, any transfer, mortgage or disposal of Yanglin’s assets or income in a way that would affect WFOE’s security interest, entering any material contract (exceeding RMB5 million in value) and distributing any dividends to the shareholders. Pursuant to the consigned management agreement between WFOE and Yanglin, Yanglin agreed to entrust the business operations of Yanglin and its management to WFOE until WFOE formally acquires all equity or substantially all the assets of Yanglin. Under the consigned management agreement as amended on April 3, 2009, WFOE will provide financial, technical and human resources management services to Yanglin which will enable WFOE to control Yanglin's operations, assets and cash flows. In turn, it will be entitled to 5% of Yanglin’s revenue on a yearly basis.

Under the Registered Trademark Transfer Agreement, Yanglin agreed to transfer to WFOE all of its rights in connection with the two trademarks, including without limitation the title of the trademarks and right to license ( the “Transferred Trademark”) for a purchase price of $1,000,000, which is subject to a purchase price adjustment based on the minimum appraised value on intellectual property (“IP”) rights allowed under PRC laws and regulations for such transfer. Under the Trademark Licensing Agreement, WFOE agreed to grant an exclusive license to Yanglin, for a term of 10 years, to use the Transferred Trademark for an annual licensing fee equal to 1% of Yanglin’s revenue of that year. The license fee and the management fee aforesaid – total of 6% of the revenue of Yanglin- entitled to WFOE are designed to approximate Yanglin’s annual net profit before tax of Yanglin. Any excess profit in Yanglin will not be distributed as dividend according to the contractual arrangements until WFOE exercises the Exclusive Purchase Option Agreement to acquire all shareholders’ equity interest of Yanglin. If the 6% of licence and management fees exceed the net profit before tax of Yanglin, the amount entitled to WFOE is limited to the actual annual net profit before tax of Yanglin under the contracts.

According to the exclusive purchase option agreement, the WFOE has the exclusive purchase option to purchase all or part of Yanglin’s shareholders’ equity interest in Yanglin when and as permitted under PRC laws and regulations and any other party has no right to purchase any equity from the shareholders of Yanglin. The agreement provides that, unless otherwise required under PRC laws and regulations, the consideration for the equity transfer or the asset transfer under the agreement will be $17 million or such greater amount as required by the then applicable Chinese law and regulations (the “Option Price”). Under the loan agreement and the exclusive purchase option agreement, the money received as the Option Price by the shareholders of Yanglin upon execution of the option shall be contributed to Yanglin and used to satisfy the repayment of the Loan, that is, any amount of money received by Yanglin’s shareholders shall be paid back to WFOE as the repayment of Loan on behalf of Yanglin. Therefore, the actual consideration of acquisition of the direct investment in Yanglin is exactly the amount of the Loan. Under such contractual arrangements, all of assets and equity including any residual profits of Yanglin are totally controlled by WFOE and will be formally captured upon exercise of the exclusive purchase option.

The reverse-merger also included an equity financing of $21,500,000 by the issuance of 10,000,000 Series A Convertible Preferred Stock at $2.15 per share to 10 accredited investors.

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

On January 17, 2008, the Company changed its name from “Victory Divide Mining Company” to Yanglin Soybean, Inc.”

Major Performance Factors

Revenue

We derive our revenue mainly from the sales of 3 main products, namely ordinary soybean oil, salad oil and soybean meal. Revenue may be affected by the following factors:

·	Processing capacity of soybean;
·	Pricing of soybean oil, salad oil and soybean meal; and,

·	Market demand

Processing capacity of soybean. Our current annual processing capacity of soybean is 520,000 metric tons, which is sufficient for our current level of operations.

Pricing of soybean oil, salad oil and soybean meal. Generally, we determine the price of our products based on market price and our cost, while there is an overall trend towards price increases to compensate for inflation and strong demand for soybean products. We believe that our price is usually more competitive than those of our major competitors, which are mostly state owned enterprises (SOEs), because we have higher operating efficiencies and better cost controls.

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 more than sufficient to absorb our production, and our products have been recognized as high quality and competitively priced, we can sell substantially all of our production volume, and we believe that there is a considerable growth potential for our sales revenue, especially after we expand our production capacity and when our new high-end products, which will be sold at higher prices, 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 materials mainly refers to soybean, and it accounts for the most significant part of the cost of sales, over 90%. Labor cost is relatively low and only makes up less than 1% of the cost of sales. Production overhead includes auxiliary materials, utility expenses, machinery maintenance costs, inspection costs and other related expenses. Depreciation costs are applied to manufacturing facilities and equipment, such as production lines, steam generators, factory buildings, etc.

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

·	The availability and price of raw materials, especially soybeans; and,
·	Output ratio and operating efficiency of production facilities.

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

Output ratio and operating efficiency of production facilities. Output ratio is the ratio between the input of raw materials, mostly soybeans, and the output of finished products. The more units of finished products we can produce using a single unit of raw material, the higher the output ratio. As the labor, production overheads and manufacturing related depreciation expenses are mostly of a fixed nature, generally, the more we produce, the lower the unit cost will be. Our output ratio and operating efficiency are continuously being raised, due to the recent purchase and renovation of facilities and equipment, the enhanced competence and proficiency of our staff and the improvement of our 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. As we are a middle stream processor, and the profit margin of middle stream processing is usually relatively stable, our gross profit ranged between 7% to 9% over the past 4 years.

Operating Expenses

Operating expenses consist of selling expenses and general and administrative expenses. Generally, operating expenses occupy only a small portion of total costs and expenses.

Selling expenses generally include business development expenses, sales meeting expenses, loading and handling, advertising, sales-related staff salaries and welfare expenses, and travel expenses. We expect that these expenses will rise considerably in the following years, as we will be recruiting more sales staff and expanding our sales network, establishing new sales channels, and investing in promotions and advertising to promote and sell our new products.

General and administrative expenses cover the depreciation of office buildings and equipment, office expenses and supplies, and management and administrative salaries. These expenses are generally of a fixed nature. There may be an increase in these expenses, as we will restructure our organizational structure and improve our management systems. As a public company, we are required to maintain our internal control over financial reporting to comply with the Sarbanes-Oxley Act, which involves substantial redesign and restructure of our internal control system and processes. We expect that this will cause a material increase in our management expenses.

Income Tax

We are a company incorporated in the State of Nevada and Faith Winner (BVI) is incorporated under the laws of the British Virgin Islands, and we conduct all our operations under certain contractual arrangements with Yanglin, a PRC company.

Although we are subject to United States taxation, we do not anticipate incurring significant United States income tax liability for the foreseeable future because:

We do not conduct any material business or maintain any branch office in the United States;

the earnings generated from our non-U.S. operating companies are generally eligible for a deferral from United States taxation until such earnings are repatriated to the United States; and,

we believe that we will not generate any significant amount of income inclusions under the income imputation rules applicable to a United States company that owns "controlled foreign corporations" for United States federal income tax purposes.

Therefore, we have made no provision for U.S. federal income taxes or tax benefits on the undistributed earnings and/or losses.

Yanglin, a PRC company, has income tax liabilities in the PRC. PRC enterprise income tax is calculated based on taxable income determined under PRC accounting principles. In accordance with Income Tax Law applicable to domestic companies, we are generally subject to an enterprise income tax rate of 25%.

However, as Yanglin has been recognized as a Key Leading Enterprise in the Industrialization of Agriculture Industry by a collection of government agencies, including the National Development and Reform Commission, the Department of Finance and the Department of Agriculture, we enjoy a complete exemption from income taxes. Our status is reviewed every two years, and the next review has been postponed by the government until the end of 2009.

Results of Operations

The following table shows the operating results for the three months ended March 31, 2009 and March 31, 2008.

Consolidated Statement of Operations	The three months ended Mar. 31, 2009 ($) (unaudited)			The three months ended Mar. 31, 2008 ($) (unaudited)

Sales Revenue (net of discounts, returns and allowances)		43,032,326			65,275,858
Other sales		-			-
Cost of sales		(44,174,348	)		(58,438,980	)
Gross Profit		(1,142,022	)		6,835,346
Selling expenses		(69,246	)		(54,425	)
General and administrative expenses		(1,018,180	)		(692,812	)
Income from operations		(2,229,448	)		6,089,641
Interest expense		(93,505	)		(248,923	)
Interest income		71,725			18,284
Other income		29			-
Other expense		-			-
Income before income taxs		(2,251,199	)		5,859,002
Income tax		-			-
Net Income		(2,251,199	)		5,859,002
Foreign currency translation adjustment		90,645			2,402,012
Comprehensive income		(2,160,554	)		8,261,014

Three Months Ended March 31, 2009 Compared with Three Months Ended March 31, 2008

Net Sales

	For the Three Months Ended March 31				Period to Period Change
Item	2009 Amount ($)		2008 Amount ($)		Amount ($)			%
Soybean meal		29,515,153		37,875,995		(8,360,842	)		(22.1	)
Soybean oil		11,594,584		19,962,842		(8,368,258	)		(41.9	)
Salad Oil		1,922,589		7,437,021		(5,514,432	)		(74.1	)
Total Net Sales		43,032,326		65,275,858		(22,243,532	)		(34.1	)

Net sales were $43,032,326 for the three months ended March 31, 2009, a decrease of $22,243,532 or 34.1% from $65,275,858 for three months ended March 31, 2008. The decreases of the net sales of soybean meal, soybean oil and salad oil for the three months ended March 31, 2009 as compared with those for the same period of 2008 were 22.1%, 41.9% and 74.1%, respectively. This decrease was caused by a series of factors, but primarily due to the Chinese government’s national reserve purchase of soybeans.

For several years, China has been importing genetically-modified (GM) soybeans from the U.S. and South America. Such soybeans have been imported in large volumes reaching the peak from October 2008 to February 2009, exceeding 3 million tons each month during the period. The imported beans are sold at a price substantially lower than domestically produced soybeans, about $78, or 18.2% lower per ton on average. This had a serious negative impact on the domestic soybean producers and on the price level of domestic soybeans. In addition, this had a significant negative impact on the Chinese domestic market of imported-soybean byproducts as such imported-soybean byproducts can be sold at lower prices than domestic soybean byproducts.

In response to the phenomena, the Chinese government launched a national strategic reserve purchase program in late 2008, especially in China’s major soybean-producing area, Heilongjiang Province, in order to sustain the prices of domestic non-GM soybeans and protect the interests of the soybean-producing farmers. In this purchase program, the government purchased over 3 million tons of soybeans by January 2009, and also extended the deadline of this purchase program to the end of June 2009, with the goal of purchasing another 3 million tons of soybeans. The government offered the domestic soybean farmers a price approximately $52, or 12.1% per ton higher than the average market price in our local area. Thus the local price level of soybean was raised, and we experienced difficulty in purchasing soybeans at competitive prices. Thus, we incurred losses under the double effects of the higher price for raw materials and the lower price for our soybean products. Due to this market phenomenon, our losses increased as we increased our soybean production. Under such a severe situation, the Company reduced its processing and production volume to reduce losses.

In the three months ended March 31, 2009, we processed 95,343 metric tons of soybeans and produced 76,505 tons of soybean meal, 14,145 tons of soybean oil and 1,925 tons of salad oil, compared to 106,400 metric tons of soybeans, 85,096 tons of soybean meal, 13,492 tons of soybean oil and 4,458 tons of salad oil respectively for the three months ended March 31, 2008, resulting in growth rates of -10.4%, -10.1%, 4.8% and -56.8%, respectively.

Consequently, in the three months ended March 31, 2009, we sold 76,353 tons of soybean meal, 14,246 tons of soybean oil and 2,224 tons of salad oil, achieving growth rates of -9.9%, 7.7% and -50.0%, respectively, over the three months ended March 31, 2008, when we sold 84,700 tons of soybean meal, 13,226 tons of soybean oil and 4,451 tons of salad oil. So there has been a large decrease in sales revenue.

We expect that the difficult situation may last for a considerable period in the future, because the government has prolonged the deadline of its national reserve purchase program until the end of June 2009, with the objective of purchasing another 3 million tons of soybeans. Whether or not the situation may change depends on a series of factors, including the government’s reaction to the demands of domestic soybean processors, and the change in the production volume and hence supply to the Chinese market of imported soybeans from the U.S. and South America. We will adjust our policies in response to the changes in the situation, and will increase our processing and production volume to increase sales revenues when the markets are restored to normal status and become profitable for us.

Cost of Sales and Gross Profit

	For The Three Months Ended March 31											Period to Period
	2009			% of Sales			2008			%of Sales		Change
	Amount ($)			Revenue			Amount ($)			Revenue		Amount ($)			%
Soybean meal		(30,115,761	)		102.0			(34,945,118	)		92.3		4,829,357			(13.8	)
Soybean oil		(12,088,009	)		104.3			(17,120,390	)		85.8		5,032,381			(29.4	)
Salad Oil		(1,970,578	)		102.5			(6,373,472	)		85.7		4,402,894			(69.1	)
Cost of Sales		(44,174,348	)		102.7			(58,438,980	)		89.5		14,264,632			(24.4	)

Soybean meal		(600,608	)		(2.0	)		2,930,877			7.7		(3,531,485	)		(120.5	)
Soybean oil		(493,425	)		(4.3	)		2,842,452			14.2		(3,335,877	)		(117.4	)
Salad Oil		(47,989	)		(2.5	)		1,063,549			14.3		(1,111,538	)		(104.5	)
Gross (Loss)/ Profit		(1,142,022	)		(2.7	)		6,836,878			10.5		(7,978,900	)		(116.7	)

Our cost of sales for the three months ended March 31, 2009 decreased by $14,264,632 or 24.4% as compared to the three months ended March 31, 2008, from $58,438,980 to $44,174,348, while the ratio of cost as a percentage to net sales increased materially to 102.7% from 89.5% over the same period. We recorded a gross loss of $1,142,022 in the three months ended March 31, 2009, in comparison to a gross profit of $6,836,878 in the three months ended March 31, 2008, and gross profit margin decreased from 10.5% to -2.7% period over period. The main reasons for the changes in the cost of sales and gross profit were the negative impact of imported soybeans and the national reserve purchase program conducted by the Chinese government, as described above.

As described above, the Company responded to the soybean market’s situation by reducing purchase and production volume, and as a result, our cost of sales was lowered. This policy, however, could only minimize gross loss instead of increasing our gross profit. Meanwhile, to reduce costs of raw materials, we have been purchasing soybeans that do not meet the government’s strict standards (the government requires that the water content of soybeans be lower than 13%, while we have purchased soybeans with water content of 17% to 18)%, because the purchase price of such soybeans were closer to past market prices. However, the high water content of such soybeans decreased the output of soybean oil, which decreased our gross margin.

We expect that our cost of sales and gross profit, if any, may remain at relatively low levels during the remaining first half of 2009. At the same time, we anticipate that gross margins may improve in the later part of 2009, as we estimate that soybean production in the U.S. will only increase slightly in 2009, while soybean production in South America will be reduced during the same time period. Consequently, there may be less imported soybeans in China’s market after harvest season in 2009 and, as a result, these imports and the imported-soybean byproducts may be at higher prices in China’s market, which will increase the competitiveness of our soybean products.

To counter the current difficulties, we have taken and will take a combination of measures, including purchasing soybeans with higher water content as mentioned above. We will also implement strict cost-saving measures. Along with other domestic processors, we are now lobbying the government to grant subsidies to soybean processors for using domestically-produced soybeans, so that we can be competitive and profitable in the current market.

Operating Expenses

	For The Three Months Ended March 31										Period to Period
	2009			% of Sales		2008			% of Sales		Change
	Amount ($)			Revenue		Amount ($)			Revenue		Amount ($)		%
Selling Expenses		(69,246	)		0.2		(54,425	)		0.1		14,821		27.2
General & Administrative Expenses		(1,018,180	)		2.4		(692,812	)		1.1		325,368		47.0
Total Operating Expenses		(1,087,426	)		2.5		(747,237	)		1.1		340,189		45.5

Selling expenses for the three months ended March 31, 2009 increased by $14,821 or 27.2% as compared to the three months ended March 31, 2008. This increase was mainly due to the increase in the utilization fees of the dedicated sub-railway used for transporting our products to the main railway system. As a percentage of net sales, selling expenses increased from 0.1% to 0.2% period over period.

General and administrative expenses for the three months ended March 31, 2009 increased by $325,368 or 47.0% over the three months ended March 31, 2008. The increase was primarily due to two reasons: the one-time loss of about $229,912 for the disposal of fixed assets and the increase in depreciation expenses due to the addition of equipment used for management and administration purposes. As a percentage of net sales, general and administrative expenses increased from 1.1% for the three months ended March 31, 2008 to 2.4% for the three months ended March 31, 2009. Apart from increase in absolute value, such change in ratio was due to the decrease of sales revenue over the period.

We expect that although selling expenses may remain stable in the remaining first half of 2009, as we will not likely increase sales volume during this period (please refer to the sections “Net Sales” , “Cost of Sales and Gross Profit” above), selling expenses will increase over the coming years. Therefore, we plan to expand our sales network and develop new sales channels. General and administrative expenses may also increase, because we will change our organizational structure to prepare for future expansion. In addition, as we are preparing to be listed on NASDAQ, there will be increased expenses related to our financial reporting, compliance, internal controls and corporate governance systems in compliance with relevant rules and regulations.

Income from Operations and Net Income

	For The Three Months Ended March 31											Period to Period
	2009			% of Sales			2008			%of Sales		Change
	Amount ($)			Revenue			Amount ($)			Revenue		Amount ($)			%
Income from operations		(2,229,448	)		(5.2	)		6,089,641			9.3		8,319,089			(136.6	)
Interest expenses, net		(21,780	)		0.1			(230,639	)		0.4		208,859			(90.6	)
Other income, net of expenses		29			0.0			0			0.0		(29	)		100.0
Income tax		-			-			-			-		-			-
Net income		(2,251,199	)		(5.2	)		5,859,002			9.0		(8,110,201	)		(138.4	)

Income from operations fell by 136.6% or $8,319,089 for the three months ended March 31, 2009, to a loss of $2,229,448, as compared to a profit of $6,089,641 for the three months ended March 31, 2008, primarily due to the decrease in sales revenue and in gross margin (please refer to the sections “Net Sales” and “Cost of Sales and Gross Profit” above). At the same time, operating margin fell from 9.3% to a negative 5.2%. We estimate that this ratio may fall in the second quarter of 2009, due to the continued impact of imported soybeans and the government purchase program, but it is possible that the margin may improve later in 2009 due to the reasons described above in the “Cost of Sales and Gross Profit” section.

Net interest expenses decreased by $208,859 or 90.6% from the three months ended March 31, 2008 to the three months ended March 31, 2009. As a percentage of net sales, net interest expense was only 0.1% for the three months ended March 31, 2009, compared to 0.4% for the three months ended March 31, 2008. The changes were mainly due to the decrease of bank borrowings, reduced working capital needs, and the significant drop in interest rates.

Since we have been recognized as a “Key Leading Enterprise” in the agriculture industry by the Chinese government, we enjoy a complete exemption from income taxes. This status is usually reviewed in every two years, and the next review has currently been scheduled for the end of 2009.

Net income decreased by $8,110,201 or 138.4% from the three months ended March 31, 2008 to the three months ended March 31, 2009. During the same period, net profit margin fell from 9.0% to a negative 5.2%. This was due to the same reasons as described above.

Liquidity and Capital Resources

Generally, we finance our business with cash flows 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 of the majority of our working capital.

Because we usually pay cash to our suppliers upon purchase of soybeans, there is a greater need for cash during harvest seasons. 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 until the end of the year and for the following half year, we will have sufficient raw materials to maintain smooth operations and convert finished products to cash, and (iii) we will repay the short-term loans that we had taken by end of June or July the following year.

Our working capital requirements may be influenced by 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

Three Months Ended March 31, 2009 Compared with Three Months Ended March 31, 2008

Cash used in operating activities for the three months ended March 31, 2009 was $956,043, while cash provided by operating activities for the three months ended March 31, 2008 was $810,879. This change was mainly due to the increase in the cost of inventories, especially those of raw materials.

As described above, at the end of 2008, the Chinese government conducted a national strategic reserve purchase program of soybeans, which was designed to uphold the price of domestically produced non-GM soybeans. Consequently, we had to input more cash resources to procure raw materials, reaching $2.4 million in the three months ended March 31, 2009. We also spent $1 million more cash in prepaid Value Added Taxes (“VAT”), which mostly comprises the incoming VAT included in the gross purchase price of the soybean we have purchased.

Due to the decrease in purchasing volume, we released $3.2 million from advances to suppliers, which was used to secure the supply of raw materials.

Generally, our cash flows are stable, as we sell mostly on a cash basis, with ignorable trade receivables, and usually, our products are sold just a few days after they are produced. For the three months ended March 31, 2009, our cash flows were affected negatively by the increasing costs of raw materials. We expect that this will continue in the second quarter of 2009, but the cash flow status may be improved later in the year, as it is possible that we may be able to increase our revenue and profit (please refer to the section “Net Sales” and “Cost of Sales and Gross Profit” above).

Investing Activities

Three Months Ended March 31, 2009 Compared with Three Months Ended March 31, 2008

Net cash used in investing activities for the three months ended March 31, 2009 was $197,424, compared to net cash provided by investing activities $173,331 for the three months ended March 31, 2008. This increase was primarily due to the completion of the majority of our construction projects, including the renovation of our Plant 2, and the corresponding payments for the plant and equipment during this period. All net cash used in the three months ended March 31, 2009 was payment for plant and equipment.

We satisfied the demand for cash used in capital investments with a short-term bank loan, supplemented by our cash reserves.

Financing Activities

Three Months Ended March 31, 2009 Compared with Three Months Ended March 31, 2008

Net cash provided by financing activities was $3,929,694 for the three months ended March 31, 2009, compared to net cash used in financing activities of $11,233 for the three months ended March 31, 2008. This change was primarily due to our bank borrowing of $6,572,615 and repayment of $2,642,921 of bank loans due.

Loans

The balance of short-term bank loans was $10,663,784 at March 31, 2009, compared to the balance of short-term bank loans was $6,711,214 at December 31, 2008. This was caused by the additional bank loans made in the first three months of 2009, used to satisfy the needs for purchasing soybeans with higher average cost (please refer to the section “Cost of Sales and Gross Profit” above).

The balance of our long-term bank loan was about $421,325 at March 31, 2009, plus a current portion of $55,240, payable within one year of the balance sheet date.

Currently we have a credit line of up to RMB 190 million, or about USD 27.76 million, 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.

As is shown in the Exhibit 10.17 to Registration Statement on Form S-1 (amendment no. 4), filed with the Commission on February 17, 2009 (English translation of The Approval to Maximum Credit Line of Crop Purchase Loan for Heilongjiang Yanglin Soybean Group Co. Ltd.), The material terms of the credit line are:

1.	The term of the credit line is one year.
2.	The circumstances under which the funds can be borrowed: The loan borrowed within this credit line can only be used to purchase crops. In Yanglin’s case, the loan can only be used to purchase soybeans.
3.	The additional approvals that may be required: When Yanglin applies to actually borrow the funds, the bank should confirm the conditions and/or circumstances of the loan, and report to the appropriate higher level within the bank to verify, examine and approve such applications, before actually releasing any money to Yanglin under the maximum credit line.
4.	The restrictions on the use of the funds: The funds borrowed from this credit line can only be used to purchase crops. In Yanglin’s case, the funds can only be used to purchase soybeans.
5.	The interest rate is 6.93%, subject to adjustment. The circumstances under which the interest rate is subject to adjustment and whether there are any limits on such adjustments: When the People’s Bank of China adjust the interest rate of loans, the bank has the right and discretion to adjust the interest rate of loans accordingly.
6.	Whether the loans would be secured by Yanglin’s assets: The loans would be secured by Yanglin’s assets, i.e., building, machinery and land use rights.
7.	The other material terms are: Secured loan shall have preference over credit loan; The Company shall purchase insurance for pledged assets, with the bank having first priority.

Future Cash Commitments

We have no future cash commitments as at March 31, 2009.

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

Accordingly, the accompanying financial statements are those of the accounting acquirer, Faith Winner (BVI). The historical stockholders’ equity of the accounting acquirer prior to the share exchange has been retroactively restated as if the share exchange transaction occurred as of the beginning of the first period presented.

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

Use of estimates

Economic and political risks

Land use rights

Railway use rights

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

Property, plant and equipment

Buildings		10 - 35 years
Machinery and equipment		3.5 - 30 years
Office equipment		4 - 20 years
Motor vehicles		6 - 10 years

Accounting for the impairment of long-lived assets

If such assets are considered to be impaired, the impairment losses to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less estimated costs of disposal.

During the reporting years, there was no known impairment losses.

Inventories

Trade receivables

Cash and cash equivalents

The Company considers all highly liquidate investments purchased with original maturities of three months or less to be cash equivalents.

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

	March 31, 2009		December 31, 2008		March 31, 2008
Twelve months ended		-		6.8542		-
RMB : USD exchange rate
Three months ended		6.8456		-		7.0222
RMB : USD exchange rate
Average three months ended		6.8466		-		7.1757
RMB : USD exchange rate

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.

Revenue recognition

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 inventory to the lower of cost or market value is also reflected in cost of revenues.

Advertising

The Group expenses all advertising expenses as incurred.

Shipping and handling

All shipping and handling costs are expensed as incurred.

Research and development

All research and development costs are expensed as incurred.

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.

Income taxes

Statutory reserves

(i)

Making up cumulative prior years’ losses, if any;

(ii)

(iii)

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

Comprehensive income

Recent accounting pronouncements

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]	$	476,565	$	55,240	$	120,295	$	135,441	$	165,589
[Capital Lease Obligations]		-		-		-		-		-
[Operating Lease Obligations]		-		-		-		-		-
[Purchase Obligations]		-		-		-		-		-

ITEM 3—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

ITEM 4—CONTROLS AND PROCEDURES

a. 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 March 31, 2009.

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 March 31, 2009, 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.

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.

Our internal control over financial reporting was not effective as a result of the following identified material weakness and significant deficiencies: That the Company does not have an accounting policy manual based on U.S. GAAP.

Remediation Initiative and Progress

We have already formulated the Financial Management Procedure under China GAAP and released it formally after approval of senior management. This procedure became effective on September 1, 2008. We will draft the Accounting Manual under US GAAP, and it will include accounting policies and the detailed procedures of accounting treatments. To complete this task, we need the help of competent professional accounting advisors. We are currently seeking such advisors.

There will be the significant costs involved for engaging professional accounting advisors; studying and researching U.S. GAAP; drafting, revising and approving our accounting manual; and training and educating our accounting staff with the knowledge of U.S.GAAP.

b. Changes in Internal Controls over Financial Reporting

During the quarter ended March 31, 2009, 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

Not required.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS

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

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

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

SIGNATURES

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

	Yanglin Soybean, Inc.

Date: June 12, 2009	By:	/s/ SHULIN LIU
		Shulin Liu Chief Executive Officer (Principal Executive Officer)

	Yanglin Soybean, Inc.

Date: June 12, 2009	By:	/s/ SHAOCHENG XU
		Shaocheng Xu Chief Financial Officer (Principal Financial and Accounting Officer)

Yanglin Soybean (YSYB) Inactive 10-Q/A2009 Q1 Quarterly report (amended)