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

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A

Amendment No. 3

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, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

As of May 13, 2010, the Company had 20,465,119 shares of Common Stock, $0.001 par value per share, outstanding.

EXPLANATORY NOTE

This amendment no. 3 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 restate the financial statements for the three months ended March 31, 2009 for the cumulative effect of adoption of new accounting principle requiring reclassification and revaluation of the warrants issued by the Company from shareholders’ equity to liabilities and recognizing the gain from changes in the fair value of such warrants since their original issuance. The beginning balances of certain items in the consolidated balance sheet, including retained earnings and additional paid-in capital, and of relevant items in other financial statements for the three months ended March 31, 2009 have also been restated for the recognition of an exchange listing fee.

Yanglin Soybean, Inc. 

INDEX

			Page
Part I — Financial Information			3
	Item 1.	Financial Statements	3
	(a)	Consolidated Balance Sheets as of March 31, 2009 (unaudited) (as restated) and December 31, 2008 (as restated)	3
	(b)	Consolidated Statements of Operations and Other Comprehensive Income for the three months ended March 31, 2009 (as restated) and 2008 (unaudited)	4
	(c)	Consolidated Statement of Changes in Stockholders’ Equity for the year ended December 31, 2008 (as restated) and for the three months ended March 31, 2009  (as restated) (unaudited)	5
	(d)	Consolidated Statements of Cash Flows for the three months ended March 31, 2009 (as restated) and 2008 (unaudited)	6
	(e)	Notes to Consolidated Financial Statements (as restated) (unaudited)	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (as restated)	47
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64
	Item 4.	Controls and Procedures (as restated)	64
Part II — Other Information			66
	Item 1	Legal Proceedings	66
	Item 1A.	Risk Factors	66
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	66
	Item 3	Defaults upon Senior Securities	66
	Item 4	(Removed and Reserved)	66
	Item 5	Other Information	66
	Item 6.	Exhibits	66
	Signatures		67

2

PART I—FINANCIAL INFORMATION

ITEM 1—FINANCIAL STATEMENTS

YANGLIN SOYBEAN INC.

CONSOLIDATED BALANCE SHEETS

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

(Stated in US Dollars) (As restated)

	March 31, 2009			December 31, 2008
	(Unaudited) (As restated)			(As restated)
ASSETS
Current assets
Cash	$	33,180,175		$	30,365,413
Cash-restricted		484,000			484,000
Trade receivables, net		8,053			8,043
Inventories		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 and prepaid expenses		43,394			114,990
Total current assets		49,414,732			46,386,564
Property, plant and equipment, net		30,566,502			31,529,936
Intangible assets, net		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	$	10,663,784		$	6,711,214
Loans from related parties – current		55,240			55,149
Accounts payable		4,461			13,753
Other payables		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
Loan from related parties – non-current		421,325			434,678
Warrant liability		59,936,144			-
TOTAL LIABILITIES		73,777,544			9,677,758
STOCKHOLDERS' EQUITY
Convertible preferred stock:
Series A $0.001 par value, 50,000,000 shares authorized; 9,999,999 shares issued and outstanding		10,000			10,000
Series B $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding		-			-
Common stock:
$0.001 par value, 100,000,000 shares authorized; 20,000,003 shares issued and outstanding		20,000			20,000
Additional paid-in capital		27,865,694			42,869,635
Statutory reserves		5,628,636			5,628,636
(Accumulated deficit) retained earnings		(29,998,878	)		17,184,524
Accumulated other comprehensive income		7,249,329			7,158,684
Total stockholders’ equity		10,774,781			72,871,479
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	84,552,325		$	82,549,237

The accompanying notes are an integral part of these consolidated financial statements

3

YANGLIN SOYBEAN INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2009 (As restated) AND 2008 (Unaudited)

(Stated in US Dollars)

	For the three months ended
	March 31,
	2009			2008
	(unaudited) (As restated)			(unaudited)
Net sales	$	43,032,326		$	65,275,858
Cost of sales		(44,174,348	)		(58,438,980
Gross (loss) profit		(1,142,022	)		6,836,878
Operating Expenses
Selling expenses		(69,246	)		(54,425	)
General and administrative expenses		(1,018,180	)		(692,812	)
Total operating expenses		(1,087,426	)		(747,273	)
(Loss) income from operations		(2,229,448	)		6,089,641
Interest expense		(93,505	)		(248,923	)
Interest income		71,725			18,284
Other income		29			-
Changes in fair value of warrants		27,114,955			-
Income before income taxes		24,863,756			5,859,002
Income tax		-			-
Net income		24,863,756			5,859,002
Foreign currency translation adjustment		90,645			2,402,012
Comprehensive income	$	24,954,401		$	8,261,014
Earnings per share
Basic	$	1.24		$	0.29
Diluted	$	0.63		$	0.17
Weighted average shares outstanding
Basic		20,000,003			20,000,003
Diluted		39,177,594			34,790,205

The accompanying notes are an integral part of these consolidated financial statements

4

YANGLIN SOYBEAN INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2008, AND THREE-MONTHS ENDED MARCH 31, 2009 (As restated) (Unaudited)

(Stated in US Dollars)

	Preferred stock													(Accumulated			Accumulated
	Series A				Common stock				Additional					deficit)			other
	Number of  shares		Amount		Number of  shares		Amount		paid-in  capital			Statutory  reserves		retained  earnings			comprehensive  income		Total
Balance, January 1, 2008		9,999,999	$	10,000		20,000,003	$	20,000	$	38,389,635		$	3,490,834	$	9,421,860		$	3,355,470	$	54,687,799
Net income															9,900,466					9,900,466
Stock exchange listing shares contributed by majority shareholder										4,480,000										4,480,000
Appropriations to surplus reserves													2,137,802		(2,137,802	)				-
Foreign currency translation adjustment																		3,803,214		3,803,214
Balance, December 31, 2008 (As restated)		9,999,999		10,000		20,000,003		20,000		42,869,635			5,628,636		17,184,524			7,158,684		72,871,479
Net income															24,863,756					24,863,756
Cumulative effect of adoption of new accounting principle-Reclassification of warrants from equity to derivative liabilities										(15,003,941	)				(72,047,158	)				(87,051,099	)
Foreign currency translation adjustment																		90,645		90,645
Balance, March 31, 2009 (As restated) (unaudited)		9,999,999	$	10,000		20,000,003	$	20,000	$	27,865,694		$	5,628,636	$	(29,998,878	)	$	7,249,329	$	10,774,781

The accompanying notes are an integral part of these consolidated financial statements

5

YANGLIN SOYBEAN INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 (As restated), AND 2008 (Unaudited)

(Stated in US Dollars)

	For the three months ended March 31,
	2009			2008
	(unaudited) (As restated)			(unaudited)
Cash flows from operating activities
Net income	$	24,863,756		$	5,859,002
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		983,446			440,587
Amortization		54,420			41,362
Loss on disposal of property, plant and equipment		229,912			43,196
Change in fair value of warrants		(27,114,955	)		-
Changes in operating assets and liabilities:
Trade receivable		-			14,122
Inventories		(2,408,856	)		(2,649,766
Advances to suppliers		3,204,941			(2,883,358	)
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				��
Purchase of property, plant and equipment		(197,424	)		-
Payment for construction in progress		-			173,331
Net cash used in investing activities		(197,424	)		173,331
Cash flows from financing activities
Proceeds from short-term bank loans		6,572,615			-
Principal payments for short-term bank loans		(2,620,045	)		-
Principal payments for loans from related parties		(22,876	)		(11,233	)
Net cash flows provided by (used in) financing activities		3,929,694			(11,233	)
Net increase in cash		2,776,227			972,977
Effect of foreign currency translation on cash		38,535			515,299
Cash- beginning of year		30,365,413			9,210,021
Cash- end of year	$	33,180,175		$	10,698,297
Supplementary cash flow information:
Interest paid	$	93,505		$	248,923

The accompanying notes are an integral part of these consolidated financial statements

6

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

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. On October 3, 2007, the Company executed a reverse-merger with Faith Winner Investments Limited (“Faith Winner (BVI)”) by an exchange of shares and 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 share 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 reverse-merger also included an equity financing of $21,500,000 by the issuance of 9,999,999 Series A Convertible Preferred Stock at $2.15 per share to ten accredited investors.

The Company is in the business of manufacturing, distributing and selling of non-genetically modified soybean products, including soybean oil, salad oil, soybean meal, etc., throughout the Province of Heilongjiang and other parts of People's Republic of China ("PRC").  The Company conducts its operations through the following subsidiaries: (a) a wholly-owned subsidiary in the British Virgin Islands: Faith Winner (BVI), (b) a wholly-owned subsidiary of Faith Winner (BVI) located in the PRC: Faith Winner (Jixian) Agriculture Development Company (“WFOE”) and (c) an entity located in the PRC: Yanglin Soybean Group Co., Ltd. (“Yanglin”), which is controlled by the Company through contractual arrangements with WFOE, as if Yanglin were a wholly-owned subsidiary of the Company.

The Company, its subsidiaries and Yanglin are collectively referred to as “the Group”.

Faith Winner (BVI) and WFOE have entered into a series of agreements respectively with Yanglin and as a result of such agreements WFOE gained control of all of Yanglin’s assets, management and business as if Yanglin were a wholly-owned subsidiary of WFOE. These agreements 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.  As described by the amendment, the exercise price of the exclusive purchase option shall be $17,000,000, or such greater amount as required by the then applicable Chinese law and regulations.  If WFOE elects to purchase the Equity Interests held by Shulin Liu and Huanqin Ding (collectively “the Shareholders”), all of the consideration net tax (the “ Consideration of Equity Transfer ” ) obtained by the Shareholders shall be used to repay Yanglin.  If WFOE elects to purchase the assets of Yanglin, Yanglin shall use all of the consideration net tax (the “ Consideration of Assets Transfer ” ) to repay WFOE. To the extent that the Consideration of Equity Transfer or Assets Transfer is greater than $17,000,000 as required by the then applicable law or for any other reasons, the excess shall be paid by Yanglin to WFOE as interest on the loan made under the Loan Agreement dated September 24, 2007 between WFOE and Yanglin.

7

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES (Continued)

Pursuant to the above-mentioned agreements, WFOE made a loan (“the Loan”) of $17 million on October 10, 2007 and it was utilized by Yanglin for working capital needs. In return, the Company obtained management control and an exclusive right to acquire all of the equity of Yanglin. The rights of existing shareholders of Yanglin were 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 Yanglin, 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, WFOE will be entitled to a management fee equal to 5% of Yanglin’s annual net sales 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 net sales of that year. The license fee and the management fee aforesaid – a total of 6% of the annual net sales of Yanglin – entitled by WFOE are designed to approximate Yanglin’s annual net profit. If the licensing and management fees entitled by WFOE exceed the net income after tax of Yanglin, Yanglin should not be obligated to pay WFOE any shortfall. In the event that the net income after tax is greater than the licensing and management fees entitled by WFOE, Yanglin should maintain any excess on its books and should not distribute any of such excess as a dividend in any manner to its shareholders until WFOE exercises its exclusive purchase option pursuant to the Exclusive Purchase Option Agreement dated September 24, 2007 between Yanglin and WFOE and as amended on April 3, 2009.

8

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES (Continued)

According to the exclusive purchase option agreement, 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 no other party has the 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 PRC 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. Therefore, the actual consideration of the investment in Yanglin is exactly the amount of the Loan. Under such contractual arrangements, all of the 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 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 aforementioned agreements, WFOE should be deemed to control Yanglin as a Variable Interest Entity.  The creditors of Yanglin do not have recourse to the Company’s other assets.

The accompanying unaudited consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they may not include all of the information and footnotes required by GAAP for complete consolidated financial statements. All adjustments that are, in the opinion of management, of a normal recurring nature and are necessary for a fair presentation of the consolidated financial statements have been included. Nevertheless, these financial statements should be read in conjunction with the Company’s audited consolidated financial statements contained in its Annual Report on Form 10-K for the year ended December 31, 2008 as originally filed with the Securities and Exchange Commission on April 13, 2009 and amended and re-filed on April 15, 2010. The results of operations for the three months ended March 31, 2009, are not necessarily indicative of the results that may be expected for any entire future fiscal year or any other interim period.

The Company’s common stock is listed on the Over-the-counter Bulletin Board (“OTCBB”) market and traded under the symbol “YSYB”.

9

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2. GENERAL

(a) Restatement of the 2008 Annual Consolidated Financial Statements and 2009 Quarterly unaudited Consolidated Financial Statements

 2008 RESTATEMENT

The Company has restated its consolidated financial statements as of and for the year ended December 31, 2008 to record the shares it committed to transfer to the Company’s Series A Preferred stockholders as a result of failure to list on a National Stock Exchange by December 31, 2008 The Company has now determined that in accordance with FAS 5, “Accounting for Contingencies”, the expense should be recorded during the year ended December 31, 2008 as the Company failed the listing requirement and incurred the expense on December 31, 2008. The Company has accounted for this as a contribution of capital and recorded an expense in the amount of $4,480,000 due to the share payment being made by the majority shareholder. Such shares were valued based on the closing market price on December 31, 2008.

Accordingly, changes have been made to the applicable line items associated with expense, income before income taxes, net income, comprehensive income, basic earnings per share, diluted earnings per share, additional paid in capital and retained earnings as of and for the year ended December 31, 2008.

The effect of the restatement on specific amounts provided in the consolidated financial statements is as follows:

	As of December 31, 2008
Consolidated Balance Sheet	As previously reported		As restated
Additional paid-in capital	$	38,389,635	$	42,869,635
Retained earnings		21,664,524		17,184,524

	For the Year Ended December 31, 2008
Consolidated Statement of Operations and Other Comprehensive Income	As previously reported		As restated
Stock exchange listing expense	$	-	$	(4,480,000	)
Income before income taxes		14,380,466		9,900,466
Net income		14,380,466		9,900,466
Comprehensive income		18,183,680		13,703,680
Earnings per share:
Basic	$	0.72	$	0.50
Diluted	$	0.38	$	0.26

10

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2. GENERAL (Continued)

(a) Restatement of the 2008 Annual Consolidated Financial Statements and 2009 Quarterly unaudited Consolidated Financial Statements (Continued)

	For the Year Ended December 31, 2008
Consolidated Statement of Cash Flows	As previously reported		As restated
Cash flows from operating activities:
Net income	$	14,380,466	$	9,900,466
Adjustments to reconcile net income to net cash provided by operating activities:
Stock exchange listing expense		-		4,480,000
Net cash provided by operating activities		30,834,483		30,834,483
Supplemental disclosure of non-cash investing activities:
Contribution from majority shareholder to settle stock exchange listing expense	$	-	$	4,480,000

	For the Year Ended December 31, 2008
Consolidated Statement of Changes in Stockholders’ Equity	As previously reported		As restated
Net income	$	14,380,466	$	9,900,466
Additional paid-in capital		38,389,635		42,869,635
Retained earnings	$	21,664,524	$	17,184,524

11

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2. GENERAL (Continued)

(a) Restatement of the 2008 Annual Consolidated Financial Statements and 2009 Quarterly unaudited Consolidated Financial Statements (Continued)

2009 RESTATEMENT

Effective January 1, 2009, we adopted the provisions of FAS 133, "Derivatives  and Hedging" (previously ElTF 07-5, "Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entity's Own Stock"). As a result of adopting FAS 133, warrants to purchase the Company's common stock previously treated as equity pursuant to the derivative treatment exemption were no longer afforded equity treatment as there was a down-round protection (full-ratchet down round protection). As a result, the warrants are not considered indexed to the Company's own stock, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings until such time as the warrants are exercised or expire.

As such, effective January 1, 2009, the Company reclassified the fair value of these warrants from equity to liability, as if these warrants were treated as a derivative liability since their issuance in October 2007.

On January 1, 2009, the Company recorded as a cumulative effect adjustment by decreasing additional paid-in capital by $15,003,941 and decreasing the beginning balance of retained earnings by $72,047,158, and recording $87,051,099 as a warrant liability to recognize the fair value of such warrants on January 1, 2009. The fair value of the warrants was $59,936,144 on March 31, 2009. The Company recognized $27,114,955 as non-cash income from the change in fair value of warrants for the three months ended March 31, 2009.

The effect of the restatement on specific amounts provided in the unaudited consolidated financial statements is as follows:

	As of March 31, 2009
Consolidated Balance Sheet	As previously reported		As restated
Warrant liability	$	-	$	59,936,144
Additional paid-in capital		38,389,635		27,865,694
Retained earnings (accumulated deficit)		19,413,325		(29,998,878	)

12

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2. GENERAL (Continued)

(a) Restatement of the 2008 Annual Consolidated Financial Statements and 2009 Quarterly unaudited Consolidated Financial Statements (Continued)

	For the Three Months Ended March 31, 2009
Consolidated Statement of Operations and Other Comprehensive Income	As previously reported			As restated
Changes in fair value of warrants	$	-		$	27,114,955
(Loss) income from operations before income taxes		(2,251,199	)		24,863,756
Net (loss) income		(2,251,199	)		24,863,756
Other comprehensive (loss) income		(2,160,554	)		24,954,401
(Loss) earnings per share:
Basic	$	(0.11	)	$	1.24
Diluted	$	(0.06	)	$	0.63
Weighted average shares outstanding - diluted		36,522,038			39,177,594

	For the Three Months Ended March 31, 2009
Consolidated Statement of Cash Flows	As previously reported			As restated
Net (loss)/income	$	(2,251,199	)	$	24,863,756
Change in fair value of warrants		-		$	(27,114,955)

	For the Three Months Ended March 31, 2009
Consolidated Statement of Changes in Stockholders’ Equity	As previously reported			As restated
Net (loss) income	$	(2,251,199	)	$	24,863,756
Additional paid-in capital	$	38,389,635		$	27,865,694
Retained earnings (accumulated deficit)		19,413,325			(29,998,878	)

13

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2. GENERAL (Continued)

 (b) Principles of consolidation

The share exchange transaction as disclosed in Note 1 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).  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.

The unaudited consolidated financial statements include the accounts of the Company and the following subsidiaries, as well as Yanglin, a variable interest entity of which WFOE is the primary beneficiary as defined by FIN 46 (R) “Consolidation of Variable Interest Entities.” All intercompany transactions and accounts have been eliminated in consolidation.

Name of Company	Place of  incorporation	Attributable  interest
Faith Winner Investments Ltd	British Virgin Islands		100	%
Faith Winner (Jixian) Agriculture Development Company	PRC		100	%
Heilongjiang Yanglin Soybean Group Co. Ltd*	PRC		100	%

*Deemed variable interest entity

(c) Use of estimates

The preparation of the financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.   Items subject to such estimates and assumptions include the carrying value and estimated useful lives of long-lived assets; valuation allowances for receivables; valuation of warrant liabilities; inventory and deferred tax assets. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ from those estimates. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.

14

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2. GENERAL (Continued)

(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) Intangible assets

Intangible assets include land use rights and railway use rights.

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

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.

(f) 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 consolidated statement of operations and comprehensive (loss) income. The cost of maintenance and repairs is charged to operations when incurred, whereas significant renewals and betterments are capitalized.

15

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2. GENERAL (Continued)

(g) Accounting for the impairment of assets held for sale

The assets held for sale 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 held for sale are reported at the lower of the carrying amount or fair value less estimated costs of disposal.

(h) Inventories

Inventories consist of finished goods and raw materials, and are stated at the lower of cost or market value. The cost of inventories is measured using the weighted average method. Finished goods are comprised of direct materials, direct labor and an appropriate proportion of production overheads.

(i) Trade receivables

Trade receivables are recognized and carried at the original invoice amount less an 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.

The Group writes off trade receivable against its allowance after reasonable collection efforts have been made and the accounts are deemed uncollectible.

(j) Customer Deposits

Customer deposits represents advance payments from customers prior to the delivery of goods.  The Company requires full payment from customers prior to delivery. Customer deposits are recognized in revenue upon delivery of goods.

16

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2. GENERAL (Continued)

(k) Foreign currency translation

The accompanying consolidated financial statements are presented in United States dollars.  The reporting currency of the Group is the U.S. dollar (USD). WFOE 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.  There is no assurance that the RMB amounts could have been, or could be, converted into USD at the rates used in translation.

17

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2. GENERAL (Continued)

(l) Revenue recognition

Revenue is 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.

(m) Costs of sales

Cost of sales consists primarily of direct material costs, direct labor cost, and applicable overhead costs attributable to the production of products.  Permanent write-down of inventory to the lower of cost or market value is also reflected in the cost of revenues. For the three months ended March 31, 2009 and 2008, there was no write down of inventories.

(n) 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.

(o) Shipping and handling

All shipping and handling costs are expensed as incurred and included in selling expense.  Total shipping and handling expenses were $22,304 and $26,181 for the three months ended March 31, 2009 and 2008, respectively.

18

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2. GENERAL (Continued)

(p) Pension and Employee Benefits

Full time employees in PRC entities participate in a government mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. The PRC labor regulations require the Group to accrue for these benefits based on certain percentages of the employees' salaries. Management believes full time employees who have passed the probation period are entitled to such benefits.  The total provisions for employee pension were $25,883 and $48,246 for the three months ended March 31, 2009, and 2008 respectively.

(q) 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 the future realization is uncertain.

The Group applied the provisions of FIN 48, “Accounting For Uncertainty In Income Taxes”, which provides clarification related to the process associated with accounting for uncertain tax positions recognized in our consolidated financial statements. FIN 48 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. FIN 48 also provides guidance related to, among other things, classification, accounting for interest and penalties associated with tax positions, and disclosure requirements

The Group recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in our consolidated statements of operation. The Group’s policy for recording interest and penalties associated with audits is to record such items as a component of income tax expense.

19

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2. GENERAL (Continued)

(r) Statutory reserves

Pursuant to the applicable laws in PRC, PRC entities are required to make appropriations to three non-distributable reserve funds, namely the statutory surplus reserve, statutory public welfare fund, and discretionary surplus reserve, based on after-tax net earnings as determined in accordance with the PRC GAAP, after offsetting any prior years’ losses. Appropriation to the statutory surplus reserve should be at least 10% of the after-tax net earnings until the reserve is equal to 50% of the Company's registered capital.  Appropriation to the statutory public welfare fund is 5% to 10% of the after-tax net earnings.  The statutory public welfare fund is established for the purpose of providing employee facilities and other collective benefits to the employees and is non-distributable other than in liquidation.  Beginning from January 1, 2006, enterprises have no further requirements to make the appropriation to the statutory public welfare fund.  Discretionary surplus reserve is a prescribed percentage approved by the shareholder. The Group does not make appropriations to the discretionary surplus reserve fund.

As provided in WFOE’s and Yanglin’s Articles of Association, WFOE’s and 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 any.

The Company established a statutory surplus reserve as well as a statutory public 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.

20

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2. GENERAL (Continued)

(s) Other comprehensive income

Other 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 other 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.

(t) Earnings  per share

The Company reports earnings per share in accordance with the provisions of FAS 128, "Earnings Per Share”. FAS 128 requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock using the treasury method.

(u) Value-added tax (“VAT”)

Sales represent the involved value of goods, net of a VAT. All of Yanglin’s products that are sold in PRC are subject to a Chinese VAT on the gross sales price. VAT from sales may be offset by VAT paid on purchase of raw materials included in the cost of producing the finished goods.

21

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2. GENERAL (Continued)

(v) Warrant Liability

Effective January 1, 2009, we adopted the provisions of FAS 133, "Derivatives and Hedging" (previously EITF 07-5, "Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entity's Own Stock"). As a result of adopting FAS 133, warrants to purchase the Company's common stock previously treated as equity pursuant to the derivative treatment exemption were no longer afforded equity treatment as there was a down-round protection (full-ratchet down round protection). As a result, the warrants are not considered indexed to the Company's own stock, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings until such time as the warrants are exercised or expire.

As such, effective January 1, 2009, the Company reclassified the fair value of these warrants from equity to liability, as if these warrants were treated as a derivative liability since their issuance in October 2007.

22

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2. GENERAL (Continued)

(w) Recent accounting pronouncements

In April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”. FSP FAS 157-4 amends FAS 157 and provides additional guidance for estimating fair value in accordance with FAS 157 when the volume and level of activity for the asset or liability have significantly decreased and also includes guidance on identifying circumstances that indicate a transaction is not orderly for fair value measurements. This FSP shall be applied prospectively with retrospective application not permitted. This FSP shall be effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity early adopting this FSP must also early adopt FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”. Additionally, if an entity elects to early adopt either FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” or FSP FAS 115-2 and FAS 124-2, it must also elect to early adopt this FSP. The adoption of FSP FAS 157-4 did not have a material impact on the Company’s consolidated financial statements.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 166, Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140 (“FAS 166”) [ASC 860], which requires entities to provide more information regarding sales of securitized financial assets and similar transactions, particularly if the entity has continuing exposure to the risks related to transferred financial assets. FAS 166 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets and requires additional disclosures. FAS 166 is effective for fiscal years beginning after November 15, 2009. The Company has not completed the assessment of what impact FAS 166 will have on the Company’s financial condition, results of operations or cash flows.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R) (“FAS 167”), which modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. FAS 167 clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. FAS 167 requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity. FAS 167 also requires additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. FAS 167 is effective for fiscal years beginning after November 15, 2009. The Company has not completed the assessment of what impact FAS 167 will have on the Company’s financial condition, results of operations or cash flows.

23

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2. GENERAL (Continued)

(w) Recent accounting pronouncements (continued)

In July 2009, the FASB issued SFAS 168, “The FASB Accounting Codification and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS 168"). SFAS 168 supersedes SFAS 162 issued in May 2008. SFAS 168 will become the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. The adoption of SFAS 168 is not expected to have a material impact on our consolidated financial position or results of operations.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption.

24

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

3. FAIR VALUE

The Company has categorized our assets and liabilities recorded at fair value based upon the fair value hierarchy specified by FASB ASC 820.

The levels of fair value hierarchy are as follows:

l Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access.

l Level 2 inputs utilize other-than-quoted prices that are observable, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

l Level 3 inputs are unobservable and are typically based on our own assumptions, including situations where there is little, if any, market activity.

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties.  As of March 31, 2009, the carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, other receivables, short-term bank loans, 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.

4. CREDIT RISK AND CUSTOMERS AND SUPPLIERS CONCENTRATIONS

Financial instruments which potentially expose the Group to concentrations of credit risk, is 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 of customers to ensure sound collections and minimize credit losses exposure.

CASH- U.S. ACCOUNTS– (RESTRICTED)

As of March 31, 2009 and December 31, 2008, the Group’s restricted cash of $ 484,000 was held in bank account in the U.S. cash accounts at financial institutions in the U.S. may exceed the federal depository insurance coverage limits. In October 2008, the FDIC increased its insurance from $100,000 per depositor to $250,000 and to an unlimited amount for non-interest bearing accounts. The coverage increase, which is temporary, extends through December 31, 2013 and June 30, 2010, respectively. All of the cash held in the U.S. is fully insured. Lastly, there is no unrestricted cash in U.S. accounts.

25

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

4. CREDIT RISK AND CUSTOMERS AND SUPPLIERS CONCENTRATIONS(Continued)

CASH- PRC ACCOUNTS– (RESTRICTED AND UN-RESTRICTED)

As of March 31, 2009 and December 31, 2008, respectively, the Group’s cash was with banks in the PRC where there is currently no rule or regulation mandated on obligatory insurance of bank accounts.

SALES AND VENDOR CONCENTRATIONS

For the years ended December 31, 2008 and the three months ended March 31, 2009, respectively, all of the Group’s sales were generated within the PRC. In addition, all accounts receivable as of December 31, 2008 and March 31, 2009 are from entities within the PRC.

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

For the three months ended March 31, 2009 and 2008, no vendor accounted for 10% or more of the Group’s purchases.

5. CASH-RESTRICTED

Cash-restricted consists of the following at:

	March 31, 2009		December 31, 2008
	(unaudited)
Bank deposits held in trust account – U.S.	$	484,000	$	484,000
	$	484,000	$	484,000

Cash-restricted represents $484,000 as of March 31, 2009 and December 31, 2008, maintained in a trust account in the United States for the purpose of payment for investor and public relations costs.

26

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

6. TRADE RECEIVABLES, NET

Details of trade receivables consist of the following at:

	March 31, 2009			December 31, 2008
	(unaudited)
Trade receivables, gross	$	9,364		$	9,352
Allowance for doubtful accounts		(1,311	)		(1,309	)
Net balance at end of period	$	8,053		$	8,043

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

	The three months ended March 31, 2009		The year ended December 31, 2008
	(unaudited)
Balance at beginning of period	$	1,309	$	1,213
(Reduction) / Addition of bad debt expense		-		14
Foreign exchange adjustment		2		82
Balance at end of period	$	1,311	$	1,309

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

27

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

7. INVENTORIES

Inventories consist of the following:

	March 31, 2009			December 31, 2008
	(unaudited)
Finished goods		$	699,986		$	904,375
Raw materials			5,610,447			2,991,959
Balance at end of 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 were pledged as collateral under certain loan arrangements. These loans were primarily obtained for general working capital.

28

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

8. OTHER RECEIVABLES AND PREPAID EXPENSES

Details of other receivables and prepaid expenses consist of the following:

	March 31, 2009		December 31, 2008
	(unaudited)
Advances for materials	$	32,780	$	32,271
Advances for travel		4,375		11,417
Loans to employees		-		57,902
Other		5,879		13,400
Balance at end of year	$	43,394	$	114,990

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

9. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

	March 31, 2009			December 31, 2008
	(unaudited)
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 year	$	30,566,502		$	31,529,936

Construction in progress mainly comprised of capital expenditures for construction of the Group’s corporate campus, including offices, factories and staff dormitories. Depreciation expense commenced during year 2009, which is when the facilities were put into service.  There is no further capital commitment on these projects as of March 31, 2009.

29

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

9. PROPERTY, PLANT AND EQUIPMENT (Continued)

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 were pledged as collateral under certain loan arrangements. These loans were primarily obtained for general working capital.

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

	Three months ended March 31,2009		Three months ended March31, 2008
	(unaudited)		(unaudited)
Cost of sales	$	593,997		$	301,852
General and administrative expenses		389,449			138,735
Total depreciation expenses	$	983,446		$	440,587

10. INTANGIBLE ASSETS

Intangible assets consist of the following:

	March 31, 2009			December 31, 2008
	(unaudited)
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 year	$	4,571,091		$	4,619,716

Land use rights were pledged as collateral for certain loans as of March 31, 2009 and December 31, 2008.

30

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

10. INTANGIBLE ASSETS (Continued)

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

	Three months ended March 31, 2009		Three months ended March 31, 2008
	(unaudited)		(unaudited)
Cost of sales	$	21,805	$	20,805
General and administrative expenses		32,615		20,557
Total amortization expense	$	54,420	$	41,362

The estimated aggregate amortization expenses for intangible assets for the five succeeding years are as follows:

March 31,
2010	$	217,681
2011		217,681
2012		217,681
2013		217,681
2014		217,681
thereafter		3,482,687
	$	4,571,091

31

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

11. SHORT-TERM BANK LOANS

(A) Short-term bank loansconsist of the following:

	March 31, 2009		December 31, 2008		Collaterals
	(unaudited)
Loans from Agricultural Development					Building,
Bank of China, interest rates at 5.31%-6.66%					machinery and equipment and
per annum, due October 29, 2009	$	4,090,218	$	6,711,214	land use rights
Loans from Agricultural Development					Building,
Bank of China, interest rates at 5.31%					machinery and equipment and
per annum, due October 9, 2009		2,191,189		-	land use rights
Loans from Agricultural Development
Bank of China, interest rates at 5.31%
per annum, due October 10, 2009		1,460,792		-	Inventories
Loans from Agricultural Development
Bank of China, interest rates at 5.31%
per annum, due October 10, 2009		2,921,585		-	Inventories
Balance at end of period/year	$	10,663,784	$	6,711,214

These loans were obtained and used by Yanglin for working capital. Interest paid for the three months ended March 31, 2009 and 2008 were $84,659 and $236,831, respectively.

(B) Credit lines

The Group has a credit line of up to $27.8 million (equivalent to RMB 190 million) with Agricultural Development Bank of China.

The term of the credit line is for one year. The amount to be borrowed within this credit line can only be used to purchase soybeans.  The interest rate is 6.93% and subject to adjustment depending on the interest rate of loans adjusted by the People’s Bank of China. The loans is secured by the Group’s assets, i.e., building, machinery and land use rights.

32

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

12. OTHER PAYABLES

Other payables consist of the following:

	March 31, 2009		December 31, 2008
	(unaudited)
Due for construction	$	823,379	$	670,368
Others		17,257		13,035
Balance at end of year	$	840,636	$	683,403

Due for construction represents the balance due to respective contractors, which consists primarily of retainage payable which is expected to be paid after one year from the time Yanglin accepts the work. The work was accepted in 2009. Yanglin expects to pay the balance in 2010.

33

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

13. RELATED PARTIES TRANSACTIONS

A) Loans from related parties consist of the following:

	March 31, 2009			December 31, 2008
	(unaudited)
Loans from certain employees, interest rates at 7.722% and 9.405% per annum respectively, with various installments, due October 28, 2016	$	476,565		$	489,827
Current portion due within one year		(55,240	)		(55,149	)
	$	421,325		$	434,678

These loans were obtained and used by Yanglin for working capital. 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.

These loans are between Yanglin, Mr, Shulin Liu, the CEO of Yanglin, and certain employees and officers of Yanglin. Mr. Shulin Liu gifted 12 houses to these employees and officers for their long-term services, and these employees and officers personally obtained mortgage loans from the Industrial and Commercial Bank of The PRC, using these houses as collateral.  The employees simultaneously loaned the proceeds to Yanglin to be used as working capital. These employees and officers have been making principal and interest payments on the loans directly to the bank and Yanglin will reimburse them for the full amount at a later date.

The future principal payments under the bank loans are as follows:

For the twelve month ended March 31,
2010	$	55,240
2011		58,254
2012		62,041
2013		65,828
2014		69,613
Thereafter		165,589
Total	$	476,565

34

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

13. RELATED PARTIES TRANSACTIONS(Continued)

B) Heilongjiang Yanglin Group Seed Co. Ltd.

Heilongjiang Yanglin Group Seed Co. Ltd. “Yanglin Seed Co.”, which is wholly owned and managed by Mr. Shulin Liu, our chief executive officer, is an affiliate of the Company. Yanglin Seeds Co. supplies the farmers with “Yanglin” brand soybean seeds which provide higher oil yield. Pursuant to annual intentional supply agreements with the Company, the farmers sell the harvested soybeans to Yanglin. Yanglin Seeds Co. extends favorable commercial terms to these farmers, such as competitive price, for them to purchase “Yanglin” soybean seeds. Meanwhile, Yanglin offers cash-upon-delivery payment terms to the farmers for purchases of the harvested soybeans grown from “Yanglin” soybean seeds. These arrangements ensure that we maintain good relations with our suppliers, enjoy a stable supply of soybeans that meet our high quality standards. There was no related party transaction or commitment between Yanglin Seed Co. and the Group for the three months ended March 31, 2009 and 2008.

C) Stock exchange listing shares contributed by majority shareholder

In connection with the sale of the Series A Convertible Preferred Stock during October 2007, the Company committed to apply to list and have its shares of common stock traded on the Nasdaq Capital Market, the Nasdaq Global Select Market or the Nasdaq Global Market or any successor market thereto (collectively, “Nasdaq”), or the New York Stock Exchange or any successor market thereto (together with Nasdaq, each a “National Stock Exchange”), no later than December 31, 2008. As a result of failing to achieve such listing, the Company’s majority shareholder, Winner State Investments Limited, committed to transfer 1,000,000 shares of common stock in the Company to the purchasers of shares of Series A Convertible Preferred Stock. The Company has accounted for this as a contribution of capital by its majority stockholder and recorded a charge to operations in the amount of $4,480,000 for the year ended December 31, 2008 (specifically in the fourth quarter of 2008) based on the closing market price of $4.48 per share on December 31, 2008. This change was the same as the restatement of beginning retained earnings as of January 1, 2009. These shares have not been transferred as of March 31, 2009.

14. CONVERTIBLE PREFERRED STOCK AND WARRANTS

SERIES A

On October 3, 2007, the Company sold 9,999,999 shares of Series A Preferred Stock and various stock purchase warrants for cash consideration totaling $21.5 million dollars. In addition, in connection with the sale of the Preferred Stock, certain advisors were provided warrants.  The number of shares, exercise price and contractual terms eligible to be purchased with the warrants are summarized in the following table:

35

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

14. CONVERTIBLE PREFERRED STOCK AND WARRANTS(Continued)

	Number of warrants
Series of warrant	3/31/2009		12/31/2008		Exercise price		Contractual term	Expiration Date
Series A		10,000,000		10,000,000	$	2.75	5 years	October 2, 2012
Series B		5,000,000		5,000,000	$	3.50	5 years	October 2, 2012
Series J		7,801,268		7,801,268	$	2.37	1.5 years	April 3, 2009
Series C		7,801,268		7,801,268	$	3.03	5 years	October 2, 2012
Series D		3,900,634		3,900,634	$	3.85	5 years	October 2, 2012
Series E		1,000,000		1,000,000	$	2.58	5 years	October 2, 2012
Series F		500,000		500,000	$	3.01	5 years	October 2, 2012
Total		36,003,170		36,003,170

Series A Convertible 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 Series A Convertible Preferred Stock.  In the event of a liquidation of the Company, holders of Series A Convertible Preferred Stock are entitled to receive a distribution equal to $2.15 per share prior to any distribution to the holders of common stock or any other stock that ranks junior to the Series A Convertible Preferred Shares. Series A Convertible 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.  Series A Convertible Preferred Stock will participate based on their respective “as-if” conversion rates if the Company declares any dividends.  Holders of Series A Convertible Preferred Stock 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 Convertible Preferred Stock.

The gross proceeds of the sale were $21.5 million. The proceeds from the sale were allocated to Series A Convertible Preferred Stock, warrants and beneficial conversion features based on the relative fair value of the securities.  The value of Series A Convertible Preferred Stock was determined by reference to the market price of the common stock into which it converts, and the fair value of the warrants was calculated using the Black-Scholes model with the following assumptions:  expected life of 5 year, expected dividend rate of 0%, volatility of 27% and an interest rate of 4.24%.

The Company recognized a beneficial conversion feature discount on Series A Convertible Preferred Stock at its intrinsic value, which was the fair value of the common stock at the commitment date for Series A Convertible 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 sheet on the date of issuance of Series A Convertible Preferred Stocks since these shares were convertible at the issuance date.

36

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

14. CONVERTIBLE PREFERRED STOCK AND WARRANTS(Continued)

Each share of Series A Convertible Preferred Shares is convertible into one share of Common Stock, subject to standard adjustment provisions as set forth in the Certificate of Designations for our Series A Convertible Preferred Shares,

In connection to the Series A Convertible Preferred Stock as described above, on October 10, 2007, the Company also issued 1,000,000 Series E warrants at an exercise price of $2.58 per share and 500,000 Series F warrants at an exercise price of $3.01 per share to an investment banker and financial advisor, respectively.  These warrants each have a five year term.  The fair value of Series E warrants was $532,800 and Series F warrants was $205,452, and was recorded as offering cost of Series A Convertible Preferred Stock transaction.

The fair value of the Series E and F warrants was calculated using the Black-Scholes model with the following assumptions:  expected life of 5 year, expected dividend rate of 0%, volatility of 27% and an interest rate of 4.24%.

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%. In connection with the sale of the Series A Convertible Preferred Stock during October 2007, the Company committed to apply to list and have its shares of common stock traded on the Nasdaq Capital Market, the Nasdaq Global Select Market or the Nasdaq Global Market or any successor market thereto (collectively, “Nasdaq”), or the New York Stock Exchange or any successor market thereto (together with Nasdaq, each a “National Stock Exchange”), no later than December 31, 2008. As a result of failing to achieve such listing, the Company’s majority shareholder, Winner State Investments Limited, committed to transfer 1,000,000 shares of common stock in the Company to the purchasers of shares of Series A Convertible Preferred Stock of the Company. The Company has accounted for this as a contribution of capital by its majority stockholder and recorded a charge to operations in the amount of $4,480,000 for the year ended December 31, 2008 (specifically in the fourth quarter of 2008). Such shares were valued based on the closing market price of $4.48 per share on December 31, 2008.

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 (“SEC”) on or prior to the Effectiveness Date defined in the Registration Rights Agreement, which was December 31, 2008, or pay the liquidated damages.

37

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

14. CONVERTIBLE PREFERRED STOCK AND WARRANTS(Continued)

Although the registration statement was not declared effective as of December 31, 2008, 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, 2009, the Company 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) above mentioned standing committees and the Code of Conduct and Ethics, and 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.  The Company has engaged UHY LLP, Inc. as its independent audit firm starting with the quarter ended June 30, 2009. 

If these requirements were not met, the Company had to 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 September 30, 2009. The Company has complied with these requirements as of September 30, 2009 and the Registration Statement was declared effective by the SEC on June 29, 2009.

38

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

14. CONVERTIBLE PREFERRED STOCK AND WARRANTS(Continued)

CHANGES IN ACCOUNTING PRINCIPLE

Effective January 1, 2009, the Company adopted the provisions of FAS 133, "Derivatives and Hedging" (previously ElTF 07-5, "Determining Whether an instrument (or an Embedded Feature) is Indexed to an Entity's Own Stock"). As a result of adopting FAS 133, warrants to purchase 34,503,170 of the Company's common stock previously treated as equity pursuant to the derivative treatment exemption were no longer afforded equity treatment as there was a down-round protection (full-ratchet down round protection). As a result, the warrants are not considered indexed to the Company's own stock, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings until such time as the warrants are exercised or expire.

As such, effective January 1, 2009, the Company reclassified the fair value of these warrants from equity to liability, as if these warrants were treated as a derivative liability since their issuance in October 2007. On January 1, 2009, the Company recorded as a cumulative effect adjustment by decreasing additional paid-in capital amounting to $15,003,941 and decreasing beginning retained earnings amounting to $72,047,158 and recording $87,051,099 as a warrant liability to recognize the fair value of such warrants on January 1, 2009. The fair value of the warrants was $59,936,144 on March 31, 2009. The Company recognized $27,114,955 as income from the change in fair value of warrants for the three months ended March 31, 2009.

The fair value was calculated using the Black-Scholes option pricing model. The assumptions that were used to calculate fair value as of March 31, 2009 and December 31, 2008 (for January 1, 2009 opening balance sheet) were as follows:

Investor Warrants:	3/31/2009			12/31/2008
Expected volatility		124.2	%		108.1	%
Risk free rate		1.15	%		0.11%-1	%
Expected terms		3.51			0.25-3.76
Expected dividend yield		-			-

39

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

14. CONVERTIBLE PREFERRED STOCK AND WARRANTS(Continued)

Expected volatility is based on average volatility of historical share trade information. The Company believes this method produces an estimate that is representative of the Company's expectations of future volatility over the expected term of these warrants. The Company has no reason to believe future volatility over the expected remaining life of these warrants is likely to differ materially from historical volatility. The expected life is based on the remaining term of the warrants. The risk-free interest rate is based on U.S. Treasury securities according to the remaining term of the warrants.

SERIES B

Series B Convertible Preferred Stock has par value of $0.001 per share and each share of the Series B Convertible Preferred Shares is convertible into one share of the Common Stock, subject to standard adjustment provisions in the Certificate of Designations for Series B Convertible Preferred Shares.

The following table summarizes warrant activity for the three month ended March 31, 2009, and the year ended December 31, 2008:

	Warrants		Weighted-average       exercise price		Aggregate Intrinsic Value
Outstanding at December 31, 2007		36,003,170	$	2.95	$	55,784,977
Issued		-		-
Exercised		-		-
Expired		-		-
Outstanding at December 31, 2008		36,003,170		2.95	$	55,064,914
Issued		-		-
Exercised		-		-
Expired
Outstanding at March 31, 2009		36,003,170		2.95	$	55,064,914

40

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

14. CONVERTIBLE PREFERRED STOCK AND WARRANTS(Continued)

The terms of outstanding warrants as of March 31, 2009 are as follows:

	Warrants outstanding						Warrants exercisable
Range of exercise prices	Number outstanding		Weighted average remaining contractual life (years)		Weighted average exercise price		Number exercisable		Weighted average exercise price
$2.58-$3.85		36,003,170		2.75	$	2.95		36,003,170	$	2.95

41

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

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
	(as restated)
Numerator
Earnings:
Earnings for the purpose of basic earnings per share	$	24,863,756	$	5,859,002
Effect of dilutive potential common stock		-		-
Earnings for the purpose of dilutive earnings per share	$	24,863,756	$	5,859,002
Denominator
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		9,177,592		4,790,203
Weighted average number of common stock for the purpose of dilutive earnings per share		39,177,594		34,790,205

42

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

16. INCOME TAXES

The Group has not recorded any income tax provision for the three months ended March 31, 2009, since the Group has estimated that its estimated annual effective income tax rate will be zero.

As of March 31, 2009, the Group had net operating tax losses carried forward of $24,306 in the US and will expire in year 2028. The Group has established a full valuation allowance against its net deferred tax assets due to the Group’s history of pre-tax losses in the US and tax holiday exemption in PRC and the resulting likelihood that the deferred tax assets are not realizable.

The Group is not aware of any unrecorded tax liabilities which would impact the Group’s financial position or its results of operations as of March 31, 2009.

43

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

16. INCOME TAXES (Continued)

44

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

17 VARIABLE INTEREST ENTITY

The Company, as a primary beneficiary of Yanglin, consolidates Yanglin, as a Variable Interest Entity (“VIE”), of which we are the primary beneficiary. The liabilities recognized as a result of consolidating a VIE do not represent additional claims on our general assets; rather, they represent claims against the specific assets of the consolidated VIE. Conversely, assets recognized as a result of consolidating a VIE do not represent additional assets that could be used to satisfy claims against our general assets. Reflected in the March 31, 2009 and December 31, 2008 balance sheets are consolidated VIE assets of $84 million and $82 million, respectively, which are comprised mainly of cash, inventory and property and equipment. VIE liabilities mainly consist of short term bank loans and payables for working capital.  

18 PARENT-ONLY FINANCIAL STATEMENTS

As mentioned in note 1 to the consolidated 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 restrictions on the ability of Yanglin to transfer funds to the Company through intercompany loans, advances and cash dividends which consist of additional paid in capital, statutory reserves and retained earnings of $63,610,396 and $65,744,088 respectively as at March 31, 2009 and December 31, 2008.

45

YANGLIN SOYBEAN INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

18 PARENT-ONLY FINANCIAL STATEMENTS (Continued)

The following tables present unconsolidated financial information of the Company only:

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

	March 31, 2009		December 31, 2008
	(Unaudited) (As restated)		(As restated)
Cash – restricted	$	484,000	$	484,000
Other prepayment				-
Investments in subsidiaries		70,287,665		72,421,357
Total assets	$	70,771,665	$	72,905,357
Other current liabilities	$	60,740	$	33,878
Warrant liabilities		59,936,144		-
Total liabilities		59,996,884		33,878
Total shareholders’ equity		10,774,781		72,871,479
Total liabilities and shareholders’ equity	$	70,771,665	$	72,905,357

Statements of Operations and Other Comprehensive Income for the three months ended March 31, 2009 and 2008

	2009			2008
	(As restated)
Investment (loss) income	$	(2,224,337	)	$	5,871,002
General and administrative expenses		(26,862	)		(12,000	)
(Loss) income from operations before income taxes		(2,251,199	)		5,859,002
Change in fair value of warrants		27,114,955
Income before income taxes		24,863,756			5,859,002
Income taxes		-			-
Net income	$	24,863,756		$	5,859,002

46

ITEM 2-MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the unaudited consolidated financial statements, and the related footnotes thereto, appearing elsewhere in this report, and in conjunction with management’s discussion and analysis and the audited consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2008.

CAUTIONARY STATEMENT REGARDING FUTURE RESULTS,

FORWARD-LOOKING INFORMATION AND CERTAIN IMPORTANT FACTORS

In this report we make, and from time to time we otherwise make, written and oral statements regarding our business and prospects, such as projections of future performance, statements of management’s plans and objectives, forecasts of market trends, and other matters that are forward-looking statements. Statements containing the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimates,” “projects,” “believes,” “expects,” “anticipates,” “intends,” “target,” “goal,” “plans,” “objective,” “should” or similar expressions identify forward-looking statements. Our actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation, as discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report, as well as other factors, which may appear in documents, reports, filings with the Securities and Exchange Commission, news releases, written or oral presentations made by officers or other representatives made by us to analysts, stockholders, investors, news organizations and others, and discussions with management and other of our representatives.

Our future results, including results related to forward-looking statements, involve a number of risks and uncertainties. No assurance can be given that the results reflected in any forward-looking statements will be achieved. Any forward-looking statement speaks only as of the date on which such statement is made. Our forward-looking statements are based upon assumptions that are sometimes based upon estimates, data, communications and other information from suppliers, government agencies and other sources that may be subject to revision. There are other factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or which are reflected from time to time in any forward-looking statement.

We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Company Overview

We are a leading, comprehensive non-genetically modified (non-GM) soybean processor in People’s Republic of China (“PRC”). We currently manufacture ordinary soybean oil, salad oil and soybean meal in bulk package, along with other products in smaller quantities, which are sold throughout the PRC directly to our customers or through distributors. Approximately 80% of our customers are located in Northern PRC.

47

Our operating facilities are located in Jixian County, a major soybean production area in Heilongjiang Province, which is the main soybean growing region in the PRC. We maintain healthy, long-term relationships with local farmers and soybean vendors which help to ensure the stability of our supply of raw materials. Farmers deliver soybeans directly to our factories, thus we enjoy savings in transportation and purchasing costs. Our relationship with customers (mostly distributors) are also well established so we are able to require them to pay the full amount in advance, minimizing accounts receivable and supplementing our working capital.

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.  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 generated total revenue of approximately $43.0 million with a net loss of approximately $2.3 million, exclusive of a non-cash income of $27.1 million resulting from the change in fair value of warrants, which was not related to our operations.

Our goal is to become the market leader in the PRC’s non-GM soybean industry, and believe that we can accomplish this objective in the near future. We are considering future expansion and acquisition opportunities, with the goal of significantly increasing our processing capacity, but we will only make a definite decision after the market and industrial environments improve materially.

We are also working to improve and strengthen our management and internal control over financial reporting. We engaged Ernst & Young as a consultant on our Sarbanes-Oxley compliance project, and they finished their review of our internal control system over financial reporting in 2008. This project reinforced our ability to protect the interests of the company and its shareholders, while improving management effectiveness and efficiency. The management has been conducting self assessment of the effectiveness of our internal control systems ever since then, and continuously rectifying the weakness and deficiencies found in the process. We also hired outside financial consultants recently to enhance our financial reporting capability.

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Major Performance Factors

Revenue

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

l Processing capacity of soybean;

l Pricing of the products;

l Market demand

Processing capacity of soybean. Our current annual processing capacity of soybean is 520,000 metric tons. We processed approximately 95,343 metric tons in the three months ended March 31, 2009. Based on these figures, it can be estimated that the current production capacity is sufficient for current demand.

Pricing of the products. In general, our products are priced consistently with market prices, with consideration for cost of sales. However, prices are affected by several factors, including but not limited to: the pricing trends for domestic soybeans, the cost and volume of imported soybeans, temporary sudden changes in supply-demand relationship, and general economic factors and income level of consumers.

Market demand. Revenue growth potential depends on market demand for our products. We believe that high growth potential for our sales revenue exists due to several factors: 1) total market demand for our products exceeds current production levels; 2) our products are recognized as high quality; 3) we maintain excellent relationships with our customers; and, 4) we generally sell almost all of our production volume.

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 determined primarily by the following factors, either directly or indirectly:

l Availability and price of raw materials, especially soybeans;

l Operating efficiency of production facilities; and

l Government policy or direct purchase.

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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.

Government policy or direct purchase. Usually the price of soybean is determined by market mechanism, however, government policy may have a significant impact on it. For example, the PRC government conducted a national strategic purchase from late 2008 to June 2009 and effectively raised the purchase price of soybeans in the market, by offering a price, which was about 10% higher over normal market price, to farmers. Such and similar actions of the government may materially affect our cost of sales.

Gross Profit

Gross profit (loss) 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. Under normal circumstances our gross profit margin has been in the range from 7% to 9%, based on previous experience until 2008.

However, if exceptional circumstances exist, gross margin may be seriously affected. Due to extremely unfavorable environmental factors, such as the national purchase of soybean by the PRC government at higher than market price, and the low cost imports of soybean at large volume, we have suffered a gross loss for the three months ended March 31, 2009.

It should be noted that, in the near future, our profitability may be influenced materially by the following factors, including but not limited to: the expected increase in soybean output of United States and South America in 2010, which may mean more imports to the PRC; the possible appreciation of RMB against USD, which may cause imported soybean to be cheaper; the uncertainties in the policies of Chinese government, etc.

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Operating Expenses

Operating expenses consist of selling expenses and general & administrative expenses. Operating expenses represent 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. They are usually relative to sales volume.

General and administrative expenses include the depreciation of office buildings and equipment, office expenses and supplies, and management and administrative salaries, etc. These expenses are typically fixed. General and administrative expenses may increase, as we revise our organizational structure and improve our management systems and internal control system and processes.

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%.

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However, as Yanglin has been recognized as a Key Leading Enterprise in the Industrialization of Agriculture Industry by the PRC’s central government, Yanglin had enjoyed a complete exemption from income taxes until 2009. Our status is reviewed every two years. Other than the PRC's central government's award, a review by the local tax authority is also required in order to enjoy a 2009 tax exemption.

The Group is in taxable loss position in the first quarter of 2009. Therefore, even if Yanglin does not obtain tax exemption benefit, the group still has no income tax expense in the first quarter of 2009.

Warrant Liability

Effective January 1,2009, we adopted the provisions of FAS 133, "Derivatives and Hedging" ("FAS 133") (previously ElTF 07-5, "Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entity's Own Stock"). As a result of adopting FAS 133, warrants to purchase the Company's common stock previously treated as equity pursuant to the derivative treatment exemption were no longer afforded equity treatment as there was a down-round protection (full-ratchet down round protection). As a result, the warrants are not considered indexed to the Company's own stock, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings until such time as the warrants are exercised or expire.

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 ($)			The three months ended Mar. 31, 2008 ($)
	(unaudited) (as restated)			(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 (loss) 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			-
Changes in fair value of warrants		27,114,955			-
Income before income taxs		24,863,756			5,859,002
Income tax		-			-
Net Income		24,863,756			5,859,002
Foreign currency translation adjustment		90,645			2,402,012
Comprehensive income		24,954,401			8,261,014

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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	)

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.

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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	)

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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.

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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 (as restated)			% 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
Changes in fair value of warrants		27,114,955			63.0			-			-		27,114,955			100.0
Income tax		-			-			-			-		-			-
Net income		24,863,756			57.8			5,859,002			9.0		19,004,754			324.4

Income from operations decreased by 136.6% or $8,319,089 for the three months ended March 31, 2009, to a loss of $2,229,448, from 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.

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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.

Effective January 1, 2009, we adopted the provisions of FAS 133, "Derivatives and Hedging" ("FAS 133"). As a result of adopting FAS 133, we recorded non-cash income of $27,114,955 for the first quarter of 2009, as restated, resulting from the change in fair value of warrants issued to investors in conjunction with the Company’s Series A Convertible Preferred Stock in October 2007. The accounting treatment of the warrants resulted from an anti-dilution provision to the warrant holders.

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, after including the abovementioned non-cash income from the change in fair value of warrants, increased by 324.4% from the three months ended March 31, 2008, to the three months ended March 31, 2009. During the same period, net profit margin increased from 9.0% to 57.8%.

Earnings Per Share

	For The Three Months Ended March 31,
	2009		2008
	Unaudited As restated		Unaudited
Net Income for Basic Earnings Per Share	$	24,863,756	$	5,859,002
Basic Weighted Average Number of Shares		20,000,003		20,000,003
Net Income per Share – Basic	$	1.24	$	0.29
Net Income for Diluted Earnings Per Share	$	24,863,756	$	5,859,002
Diluted Weighted Average Number of Shares		39,177,594		34,790,205
Net Income per Share – Diluted	$	0.63	$	0.17

Basic and diluted earnings per share (EPS) for the quarter ended March 31, 2009, as restated, were $1.24 and $0.63, compared to $0.29 and $0.17 for the same quarter last year, as restated.

Liquidity and Capital Resources

Generally, we finance our business with cash flow from operations and short-term bank loans. Working capital is current assets less current liabilities, and our operational cash demand consists mainly of raw materials purchases, salaries, production overhead (auxiliary materials, utilities, etc.) and financing expenses, of which raw materials (soybean) purchases comprise the majority.

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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.

Currently we have an additional credit line of up to RMB 190 million, or approximately USD 27.8 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.

Our operational cash requirements may be influenced by many factors, including the fluctuation of raw material prices, cash flow, competition, relationships with suppliers or customers, availability of credit facilities and financing alternatives. Under the current operational level, we can satisfy this demand with short-term loans from the Bank and our own cash reserves, within the next twelve months.

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).

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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.

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.

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 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 soybeans.

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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., inventory, 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.

Commitments and Contingencies

We have no future cash commitments or contingent liabilities as of March 31, 2009.

Critical Accounting Policies and Estimates

The preparation of our audited consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to exercise its judgment. We exercise considerable judgment with respect to establishing sound accounting policies and in making estimates and assumptions that affect the reported amounts of our assets and liabilities, our recognition of revenues and expenses, and disclosure of commitments and contingencies at the date of the financial statements.

On an ongoing basis, we evaluate our estimates and judgments. Areas in which we exercise significant judgment include, but are not necessarily limited to, the estimated useful lives for amortizable intangible assets and property, plant and equipment, and fair value of warrants granted in connection with various financing transactions in circumstances where the use of that accounting method is deemed to be appropriate. 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 situations related to 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.

We base our estimates and judgments on a variety of factors including our historical experience, knowledge of our business and industry, current and expected economic conditions, the attributes of our services and products and the regulatory environment. We periodically re-evaluate our estimates and assumptions with respect to these judgments and modify our approach when circumstances indicate that modifications are necessary.

While we believe that the factors we evaluate provide us with a meaningful basis for establishing and applying sound accounting policies, we cannot guarantee that the results will always be accurate. Since the determination of these estimates requires the exercise of judgment, actual results could differ from such estimates.

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During the quarter ended March 31, 2009, there were no material changes to these policies.

Economic and Political Risks

The Group’s operations are conducted in the PRC. Accordingly, the Group’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, so the Group’s operations 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.

Inventories

We apply weighted average method to measure the cost of inventories on a monthly basis, to compensate for the frequent fluctuation in soybean prices.

Warrant liability

Effective January 1, 2009, we adopted the provisions of 133, "Derivatives and Hedging" ("FAS 133") (previously ElTF 07-5, "Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entity's Own Stock"). As a result of adopting FAS 133, warrants to purchase the Company's common stock previously treated as equity pursuant to the derivative treatment exemption were no longer afforded equity treatment as there was a down-round protection (full-ratchet down round protection). As a result, the warrants are not considered indexed to the Company's own stock, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings until such time as the warrants are exercised or expire.

As such, effective January 1, 2009, the Company reclassified the fair value of these warrants from equity to liability, as if these warrants were treated as a derivative liability since their issuance in October 2007.

Recent accounting pronouncements(Please change based on the footnote)

In April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”. FSP FAS 157-4 amends FAS 157 and provides additional guidance for estimating fair value in accordance with FAS 157 when the volume and level of activity for the asset or liability have significantly decreased and also includes guidance on identifying circumstances that indicate a transaction is not orderly for fair value measurements. This FSP shall be applied prospectively with retrospective application not permitted. This FSP shall be effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. An entity early adopting this FSP must also early adopt FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”. Additionally, if an entity elects to early adopt either FSP FAS 107-1 or APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” or FSP FAS 115-2 and FAS 124-2, it must also elect to early adopt this FSP. The adoption of FSP FAS 157-4 did not have a material impact on the Company’s consolidated financial statements.

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In June 2009, the FASB issued Statement of Financial Accounting Standards No. 166, Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140 (“FAS 166”) [ASC 860], which requires entities to provide more information regarding sales of securitized financial assets and similar transactions, particularly if the entity has continuing exposure to the risks related to transferred financial assets. FAS 166 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets and requires additional disclosures. FAS 166 is effective for fiscal years beginning after November 15, 2009. The Company has not completed the assessment of what impact FAS 166 will have on the Company’s financial condition, results of operations or cash flows.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No. 46(R) (“FAS 167”), which modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. FAS 167 clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. FAS 167 requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity. FAS 167 also requires additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. FAS 167 is effective for fiscal years beginning after November 15, 2009. The Company has not completed the assessment of what impact FAS 167 will have on the Company’s financial condition, results of operations or cash flows.

In July 2009, the FASB issued SFAS 168, “The FASB Accounting Codification and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS 168"). SFAS 168 supersedes SFAS 162 issued in May 2008. SFAS 168 will become the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. The adoption of SFAS 168 is not expected to have a material impact on our consolidated financial position or results of operations.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption.

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Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

We have certain fixed contractual obligations and commitments that include future estimated payments.  Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the tables, in order to assist in the review of this information within the context of our consolidated financial position, results of operations, and cash flows.

The following tables summarize our contractual obligations as of March 31, 2009, and the effect these obligations are expected to have on our liquidity and cash flows in future periods.

	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]		-		-		-		-		-

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

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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.

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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.

Our internal control over financial reporting was not effective as a result of the following identified material weaknesses:

A) The Company does not maintain personnel with a sufficient level of accounting knowledge, experience and training in the selection and application of US GAAP and related SEC disclosure requirements. As a result, we discovered certain deficiencies in our internal controls that were considered to be material weaknesses. These deficiencies related to our financial closing procedures and errors in classification of warrants and the restatement of the 2008 financial statement for the stock listing expense.

C) The Company does not have an accounting policy manual based on US GAAP.

Both control deficiencies could result in material misstatements of significant accounts and disclosures that would result in a material misstatement to our interim or annual consolidated financial statements that would not be prevented or detected. Accordingly, the management has determined that these control deficiencies constitute material weaknesses.

Remediation Initiative and Progress

To remediate the situation, we need the help of competent professional accounting advisors, and we have engaged an accounting consulting firm to help with the preparation of the Company’s consolidated financial statements and deliver training to our own accounting staff on the selection and application of US GAAP and related SEC disclosure requirements. Meanwhile, the management has decided that we will draft the accounting manual using our own staff and enlisting the help from professional advisors.

There will be 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.

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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. (REMOVED AND RESERVED)

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.

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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: May 14, 2010	By:	/s/ SHULIN LIU
		Shulin Liu Chief Executive Officer  (Principal Executive Officer)

	Yanglin Soybean, Inc.
Date: May 14, 2010	By:	/s/ SHAOCHENG XU
		Shaocheng Xu Chief Financial Officer (Principal Financial and Accounting Officer)

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