Yanglin Soybean 10Q/A 2009 Q2 Quarterly report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A

Amendment No. 1

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

For the quarterly period ended June 30, 2009

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

For the transition period from _______ to _______

Commission file number 000-52127

YANGLIN SOYBEAN, INC.

(Exact name of registrant as specified in its charter)

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

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

(Address of principal executive offices)

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

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

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

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

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

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller Reporting Company x
(Do not check if a Smaller Reporting Company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of August 11, 2010, the Company had 20,465,119 shares of Common Stock, $0.001 par value per share issued and outstanding.

EXPLANATORY NOTE

This amendment no. 1 to our quarterly report on Form 10-Q for the quarter ended June 30, 2009 initially filed with the Securities and Exchange Commission (“Commission”) on August 19, 2009 is being filed to restate the financial statements for the three and six months ended June 30, 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 and six months ended June 30, 2009 have also been restated for the recognition of an exchange listing fee.

Yanglin Soybean, Inc.

INDEX

			Page
Part I — Financial Information

	Item 1.	Financial Statements	4

		a) Consolidated Balance Sheets as of June 30, 2009 (unaudited and as restated) and December 31, 2008 (as restated)	4

		b) Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and six months ended June 30, 2009 (unaudited) (as restated) and 2008 (unaudited)	5

		c) Consolidated Statements of Stockholders’ Equity for the six months ended June 30, 2009 (unaudited) (as restated)	6

		d) Consolidated Statements of Cash Flows for the six months ended June 30, 2009 (unaudited and as restated) and 2008 (unaudited)	7

		e) Notes to Consolidated Financial Statements (unaudited)	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55

	Item 4.	Controls and Procedures	56

Part II — Other Information

	Item 1	Legal Proceedings	57

	Item 1A.	Risk Factors	57

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	57

	Item 3	Defaults upon Senior Securities	57

	Item 4	Submission of Matters to a Vote of Security Holders	57

	Item 5	Other Information	57

	Item 6.	Exhibits	58

	Signatures		58

SPECIAL CAUTIONARY NOTICE REGARDING

FORWARD-LOOKING STATEMENTS

Certain matters discussed in this report, including matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended, or the Securities Act, and the Securities Exchange Act of 1934, as amended, or the Exchange Act, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. The words "anticipate," "believe," "estimate," "may," "expect" and similar expressions are generally intended to 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 captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report, as well as other factors which may be identified from time to time in our other filings with the Securities and Exchange Commission, or the SEC, or in the documents where such forward-looking statements appear. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements. Forward-looking statements contained in this report reflect our views and assumptions only as of the date this report is signed. Except as required by law, we assume no responsibility for updating any forward-looking statements.

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.

PART 1-FINANCIAL INFORMATION

ITEM 1-FINANCIAL STATEMENTS

YANGLIN SOYBEAN, INC.

CONSOLIDATED BALANCE SHEETS

AS AT JUNE 30, 2009, AND DECEMBER 31, 2008 (As restated)

(Stated in US Dollars)

	June 30, 2009 (Unaudited)			December 31, 2008
	(As restated)			(As restated)
ASSETS
Current assets
Cash	$	25,492,115		$	30,365,413
Cash-restricted		484,000			484,000
Trade receivables, net		67,847			8,043
Inventories		7,650,016			3,896,334
Advances to suppliers		8,340,976			10,597,701
Prepaid VAT and other taxes		3,220,365			920,083
Other receivables and prepaid expenses		76,455			114,990

Total current assets		45,331,774			46,386,564

Property, plant and equipment, net		29,966,756			31,529,936
Intangible assets, net		4,518,532			4,619,716
Prepaid deposits for equipment and construction					13,021

TOTAL ASSETS	$	79,817,062		$	82,549,237

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities
Short-term bank loans	$	10,665,030		$	6,711,214
Loans from related parties – current		59,169			55,149
Accounts payable		721			13,753
Other payables		836,514			683,403
Customers deposits		1,418,972			1,187,582
Accrued liabilities		654,223			591,979

Total current liabilities		13,634,629			9,243,080

Long-term liabilities
Loan from related parties – non-current		403,224			434,678
Warrant liability		57,494,516			-
TOTAL LIABILITIES		71,532,369			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		27,876,986			42,869,635
Statutory reserves		5,628,636			5,628,636
(Accumulated deficit) retained earnings		(32,510,671	)		17,184,524
Accumulated other comprehensive income		7,259,742			7,158,684

Total stockholders’ equity		8,284,693			72,871,479

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	79,817,062		$	82,549,237

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

YANGLIN SOYBEAN, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 (As restated), AND 2008 (Unaudited)

(Stated in US Dollars)

	For the three months ended June 30						For the six months ended June 30
	2009			2008			2009			2008
	(unaudited) (As restated)			(unaudited)			(unaudited) (As restated)			(unaudited)
Net sales	$	39,753,637		$	76,273,814		$	82,787,863		$	141,549,672
Cost of sales		(43,973,079	)		(71,857,724	)		(88,143,629	)		(130,296,704	)
Gross (loss) profit		(4,219,442	)		4,416,090			(5,355,766	)		11,252,968

Operating Expenses
Selling expenses		(60,303	)		(64,545	)		(129,553	)		(118,970	)
General and administrative expenses		(559,881	)		(552,129	)		(1,592,065	)		(1,244,941	)
Total operating expenses		(620,184	)		(616,674	)		(1,721,618	)		(1,363,911	)

(Loss) income from operations		(4,839,626	)		3,799,416			(7,077,384	)		9,889,057
Interest expense		(94,091	)		(264,980	)		(245,517	)		(513,903	)
Interest income		71,795			35,514			119,312			53,798
Other expenses		-			(14,348	)		(1,060	)		(14,348	)
Other income		-			-			29			-
Changes in fair value of warrants		2,441,628			-			29,556,583			-
(Loss) income before income taxes		(2,420,294	)		3,555,602			22,351,963			9,414,604
Income tax		-			-			-			-
Net (loss) income		(2,420,294	)		3,555,602			22,351,963			9,414,604
Foreign currency translation adjustment		(16,447	)		1,470,797			101,058			3,872,808
Comprehensive (loss) income	$	(2,436,741	)	$	5,026,399		$	22,453,021		$	13,287,412

(Loss) earnings per share
Basic	$	(0.12	)	$	0.18		$	1.12		$	0.47
Diluted	$	(0.12	)	$	0.10		$	0.68		$	0.26

Weighted average shares outstanding
Basic		20,000,003			20,000,003			20,000,003			20,000,003
Diluted		20,000,003			37,221,147			32,903,049			36,546,084

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

YANGLIN SOYBEAN, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2008 (As restated), AND FOR THE SIX MONTHS ENDED JUNE 30, 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		-		-		-		-		-			-		22,351,963			-		22,351,963
Cumulative effect of adoption of new accounting principle		-		-		-		-		(15,003,941	)		-		(72,047,158	)		-		(87,051,099	)
Share-based compensation expense		-		-		-		-		11,292			-		-			-		11,292
Foreign currency translation adjustment		-		-		-		-		-			-		-			101,058		101,058
Balance, June 30, 2009 (As restated) (unaudited)		9,999,999	$	10,000		20,000,003	$	20,000	$	27,876,986		$	5,628,636	$	(32,510,671	)	$	7,259,742	$	8,284,693

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

YANGLIN SOYBEAN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2009 (As restated), AND 2008 (Unaudited)

(Stated in US Dollars)

	For The Six Months Ended
	June 30
	2009			2008
	(unaudited) (As restated)			(unaudited)
Cash flows from operating activities
Net income	$	22,351,963		$	9,414,604
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		1,591,048			957,501
Amortization		107,552			42,217
Bad debt recovery		159			-
Gain/Loss on disposal of property, plant and equipment		230,025			(7,070	)
Share-based compensation expense		11,292			-
Change in fair value of warrants		(29,556,583	)		-
Changes in operating assets and liabilities:
Trade receivable		(59,965	)		14,327
Inventories		(3,749,191	)		(1,951,580	)
Advances to suppliers		2,271,800			(4,045,390	)
Amounts due to construction		-			(2,248,369	)
Prepaid VAT and other taxes		(2,299,546	)		(762,704	)
Other receivables		38,702			1,084,432
Accounts payable		(13,053	)		9,377
Other payables		4			(1,211,387	)
Customers deposits		229,812			471,718
Accrued liabilities		61,440			(83,426	)
Net cash (used in) provided by operating activities		(8,784,541	)		1,684,250

Cash flows from investing activities
Purchase of property, plant and equipment		(48,962	)		(107,766	)
Payment for construction in progress		-			-
Proceeds from sale of property, plant and equipment		-			7,070
Purchase of intangible assets		-			(1,062,953	)
Net cash used in investing activities		(48,962	)		(1,163,649	)

Cash flows from financing activities
Proceeds from short-term bank loans		6,575,842			-
Principal payments for short-term bank loans		(2,630,337	)		-
Principal payments for loans from related parties		(28,113	)		(23,005	)
Net cash flows provided by (used in) financing activities		3,917,392			(23,005	)

Net increase in cash		(4,916,111	)		497,596
Effect of foreign currency translation on cash		42,813			817,996
Cash- beginning of year		30,365,413			9,210,021
Cash- end of year	$	25,492,115		$	10,525,613

Supplementary cash flow information:
Interest paid	$	245,517		$	513,903

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

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

1.	BASIS OF PRESENTATION (Continued)

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 and six months ended June 30, 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”.

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

GENERAL

(a)	Restatement of 2008 Annual Consolidated Financial Statements and 2009 Interim 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 ASC 450 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

	As of and 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

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2.	GENERAL (Continued)

(a)	Restatement of 2008 Annual Consolidated Financial Statements and 2009 Interim unaudited Consolidated Financial Statements (continued)

	For the Year ended December 31, 2008
Consolidated Statement of Operations and Other Comprehensive Income	As previously reported		As restated

Stock exchanges 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

	As of and for the Year ended December 31, 2008
Consolidated Statement of Cash Flow	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

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2.	GENERAL (Continued)

(a)	Restatement of 2008 Annual Consolidated Financial Statements and 2009 Interim unaudited Consolidated Financial Statements (continued)

2009 RESTATEMENT

Effective January 1, 2009, we adopted the provisions of EITF 07-5, "Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entity's Own Stock". As a result of adopting EITF 07-5, 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.

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 $57,494,516 on June 30, 2009. The Company recognized $2,441,628 and $29,556,583 as non-cash income from the change in fair value of warrants for the three and six months ended June 30, 2009.

For the six months ended June 30, 2009, the Company recognized $11,292 as compensation expense for the stock options granted to the independent director.

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

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2.	GENERAL (Continued)

(a)	Restatement of 2008 Annual Consolidated Financial Statements and 2009 Interim unaudited Consolidated Financial Statements (continued)

	As of June 30, 2009
Consolidated Balance Sheet	As previously reported		As restated

Warrant liability	$	-	$	57,494,516
Additional paid-in capital		38,389,635		27,876,986
Retained earnings (accumulated deficit)		14,471,196		(32,510,671	)

	For the Three Months ended June 30, 2009							For the Six Months ended June 30, 2009
Consolidated Statement of Operations and Other Comprehensive Income	As previously reported			As restated				As previously reported			As restated

General and administrative expenses	$	(548,589	)		$	(559,881	)	$	(1,580,773	)	$	(1,592,065	)
Total operating expenses		(608,892	)			(620,184	)		(1,710,326	)		(1,721,618	)
(Loss) income from operations		(4,828,334	)			(4,839,626	)		(7,066,092	)		(7,077,384	)
Changes in fair value of warrants		-				2,441,628			-			(29,556,583	)
(Loss) income before income taxes		(4,850,630	)			(2,420,294	)		(7,193,328	)		22,351,963
Net (loss) income		(4,850,630	)			(2,420,294	)		(7,193,328	)		22,351,963
Comprehensive (loss) income		(4,867,077	)			(2,436,741	)		(7,092,270	)		22,453,021
(Loss) earnings per share:
Basic	$	(0.24	)		$	(0.12	)	$	(0.36	)	$	1.12
Diluted	$	(0.15	)		$	(0.12	)	$	(0.23	)	$	0.68
Weighted average shares outstanding-diluted		31,610,172				20,000,003			31,949,768			32,903,049

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2.	GENERAL (Continued)

(a)	Restatement of 2008 Annual Consolidated Financial Statements and 2009 Interim unaudited Consolidated Financial Statements (continued)

	For the six months ended June 30,2009
Consolidated Statement of Cash Flow	As previously reported			As restated

Net (loss) income	$	(7,193,328	)	$	22,351,963
Share-based compensation expense		-			11,292
Change in fair value of warrants		-			(29,556,583	)

	As of and for the six months ended June 30, 2009
Consolidated Statement of Changes in Stockholders’ Equity	As previously reported			As restated

Net (loss) income	$	(7,193,328	)	$	22,351,963
Additional paid-in capital		38,389,635			27,876,986
Retained earnings (accumulated deficit)		14,471,196			(32,510,671	)

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2.	GENERAL (Continued)

(b)	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:

	June 30, 2009		December 31, 2008	June 30, 2008
The closing rate at		6.8448	6.8542		6.8718
RMB : USD exchange rate
Average six months ended		6.8432			7.0726
RMB : USD exchange rate
Average three months ended		6.8399			6.9696
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.

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2.	GENERAL (Continued)

(c)	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. As of June 30, 2009, and for the three and six months ended June 30, 2009 and 2008, there were no written-down of inventories, since any write-downs below market are deemed temporary by management.

(d)	Advertising

The Group expenses all advertising expenses as incurred. Advertising expenses included in selling expenses were nil and $4,348 for the six months ended June 30, 2009 and 2008 respectively. Advertising expenses for the three months ended June 30, 2009 and 2008 were nil and $216, respectively.

(e)	Shipping and handling

All shipping and handling costs are expensed as incurred and included in selling expense. Total shipping and handling expenses were $42,730 and $53,057 for the six months ended June 30, 2009 and 2008, respectively. Shipping and handling costs for the three months ended June 30, 2009 and 2008 were $20,426 and $26,876, respectively.

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2.	GENERAL (Continued)

(f)	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 $66,122 and $81,757 for the six months ended June 30, 2009, and 2008, respectively. The total provisions for employee pension for the three months ended June 30, 2009, and 2008 were $40,239 and $33,511, respectively.

(g)	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.

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2.	GENERAL (Continued)

(h)	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 June 30, 2009.

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2.	GENERAL (Continued)

(i)	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.

(j)	Warrant Liability

(k)	Stock-Based Compensation

The Company awards stock options and other equity-based instruments to its employees, directors and consultants (collectively “share-based payments”). Compensation cost related to such awards is measured based on the fair value of the instrument on the grant date and is recognized on a straight-line basis over the requisite service period, which generally equals the vesting period. All of the Company’s stock-based compensation is based on grants of equity instruments and no liability awards have been granted.

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2.	GENERAL (Continued)

(l)	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.

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

2.	GENERAL (Continued)

(l)	Recent accounting pronouncements (continued)

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.

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 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:

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

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.

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 June 30, 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 June 30, 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 June 30, 2009 and December 31, 2008, the Group’s restricted cash of $ 484,000 was kept 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.

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 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 June 30, 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 three and six months ended June 30, 2009 and 2008, all of the Group’s sales were generated within the PRC. In addition, all accounts receivable as of June 30, 2009 and December 31, 2008 are from entities within the PRC.

For the three and six months ended June 30, 2009 and 2008, no customer account for 10% or more of the Group’s revenue.

For the three and six months ended June 30, 2009 and 2008, no vendor accounted for 10% or more of the Group’s purchases.

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

5.	INVENTORIES

Inventories consist of the following:

	June 30, 2009		December 31, 2008
	(unaudited)
Finished goods	$	1,590,777	$	904,375
Raw materials		6,059,239		2,991,959
Balance at end of period	$	7,650,016	$	3,896,334

Inventories were pledged as collateral for certain loans.

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

6.	PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consist of the following:

	June 30, 2009			December 31, 2008
	(unaudited)
Building	$	9,298,264		$	5,908,205
Machinery and equipment		28,677,416			15,826,005
Office equipment		131,796			130,512
Motor vehicles		1,167,011			1,165,410
		39,274,487			23,030,132
Less: accumulated depreciation		(9,307,731	)		(7,725,246	)
		29,966,756			15,304,886
Construction in progress		-			16,225,050
Balance at end of period	$	29,966,756		$	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 June 30, 2009.

Building, machinery and equipment were pledged as collateral for certain loans.

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

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

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

	Three months ended June 30, 2009		Three months ended June 30, 2008		Six months ended June 30, 2009		Six months ended June 30, 2008
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Cost of sales and inventory		524,178		328,552	$	1,118,175	$	630,404
General and administrative expenses		83,424		188,362		472,873		327,097
Total depreciation expense		607,602		516,914	$	1,591,048	$	957,501

7.	INTANGIBLE ASSETS, NET

Intangible assets consist of the following:

	June 30, 2009			December 31, 2008
	(unaudited)
Land use rights, at cost	$	4,000,082		$	3,994,597
Railway use rights, at cost		1,197,990			1,151,125
Less: accumulated amortization		(679,540	)		(526,006	)
Balance at end of period	$	4,518,532		$	4,619,716

Land use rights were pledged as collateral for certain loans as of June 30, 2009 and December 31, 2008.

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

7.	INTANGIBLE ASSETS, NET (Continued)

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

	Three months ended June 30, 2009		Three months ended June 30, 2008		Six months ended June 30, 2009		Six months ended June 30, 2008
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Cost of sales	$	32,647	$	855	$	65,262	$	42,217
General and administrative expenses		20,485		-		42,290		-
Total amortization expenses	$	53,132	$	855	$	107,552	$	42,217

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

June 30,
2010	$	215,055
2011		215,055
2012		215,055
2013		215,055
2014		215,055
thereafter		3,443,257
	$	4,518,532

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

8.	SHORT-TERM BANK LOANS

(A)	Short-term bank loans consist of the following:

	June 30, 2009		December 31, 2008		Collaterals
Loans from Agricultural Development Bank of China, interest rates at 5.31% per annum, due October 29, 2009	$	6,282,141	$	6,711,214	Building, machinery and equipment and land use rights

Loans from Agricultural Development Bank of China, interest rates at 5.31%
per annum, due October 9, 2009		4,382,889		-	Inventories

Balance at end of period/year	$	10,665,030	$	6,711,214

These loans were obtained and used by Yanglin for working capital. Interest expense for the six months ended June 30, 2009 and 2008 were $228,165 and $483,204, respectively. Interest expense for the three months ended 30, 2009 and 2008 were $143,506 and $246,373 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 loan is secured by the Group’s assets, i.e., building, machinery and land use rights.

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

9.	RELATED PARTIES TRANSACTIONS

(A)	Loans from related parties consist of the following:

	June 30, 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	$	462,393		$	489,827

Current portion due within one year		(59,169	)		(55,149	)
	$	403,224		$	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 six months ended June 30, 2009 and 2008 were $17,352 and $24,318, respectively, and interest paid for the three months ended June 30, 2009 and 2008 were $8,507 and $12,226, 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 Industrial and Commercial Bank of China, using these houses as collaterals, and simultaneously loaned the proceeds to Yanglin to be used as working capital. These employees and officers have been making payments for interests on and principals of the loans to the banks directly, and Yanglin would reimburse them for the full amount later.

The future principal payments under the bank loans as of June 30, 2009 are as follows:

Year	Amount
Within one year	$	59,169
From one to five years		301,835
Greater than five years		101,389

Total	$	462,393

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

9.	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 six months ended June 30, 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 June 30, 2009.

10.	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:

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

10.	CONVERTIBLE PREFERRED STOCK AND WARRANTS (Continued)

	Number of warrants
Series of warrant	6/30/2009		12/31/2008		6/30/2008	Exercise price		Contractual term	Expiration Date
Series A		10,000,000		10,000,000	10,000,000	$	2.75	5 years	October 2, 2012
Series B		5,000,000		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	April 3, 2009
Series D		-		3,900,634	3,900,634	$	3.85	5 years	April 3, 2009
Series E		1,000,000		1,000,000	1,000,000	$	2.58	5 years	October 2, 2012
Series F		500,000		500,000	500,000	$	3.01	5 years	October 2, 2012
Total		16,500,000		36,003,170	36,003,170

On April 3, 2009, all J, C and D series of warrants expired and were unexercised.

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. Such shares were valued based on the closing market price of $4.48 per share on December 31, 2008.

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

10.	CONVERTIBLE PREFERRED STOCK AND WARRANTS (Continued)

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.

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

10.	CONVERTIBLE PREFERRED STOCK AND WARRANTS (Continued)

CHANGES IN ACCOUNTING PRINCIPLE

Effective January 1, 2009, the Company adopted the provisions of ElTF 07-5, "Determining Whether an instrument (or an Embedded Feature) is Indexed to an Entity's Own Stock". As a result of adopting ElTF 07-5, 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 $57,494,516 on June 30, 2009. The Company recognized $2,441,628 and $29,556,583 as income from the change in fair value of warrants for the three and six months ended June 30, 2009, respectively.

The fair value was calculated using the Black-Scholes option pricing model. The assumptions that were used to calculate fair value as of June 30, 2009 and December 31, 2008(for January 1, 2009 opening balance sheet) were as follows:

Investor Warrants:	6/30/2009			12/31/2008

Expected volatility		116.8	%		108.1	%

Risk free rate		1.64	%		0.11%-1	%

Expected terms		3.26			0.25-3.76

Expected dividend yield		-			-

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

10.	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 six month ended June 30, 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		(19,503,170	)		2.93		12,482,029
Outstanding at June 30, 2009		16,500,000		$	2.96	$	2,920,000

The terms of outstanding warrants as of June 30, 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-$3.50		16,500,000		3.26	$	2.96		16,500,000	$	2.96

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

11.	STOCK OPTIONS

At the time the Company appointed an independent director, the Company agreed to grant the director, as part of his compensation, 20,000 stock options annually. The stock options will be granted at the end of each quarter with the exercise price being the stock price at the last trading day of the quarter. During the three months ended June 30, 2009, the Company granted 5,000 options to the independent director in connection with his service in the second quarter of 2009. The options have an exercise price of $3.00 per share and are fully vested on the date of grant.

The Company valued the stock options by the Black Scholes model with the following assumptions:

Number of Options Issued	Expected Term		Expected Volatility			Dividend Yield			Risk Free Interest Rate			Grant Date Fair Value

5,000		5		116.8	%		0	%		2.54	%	$	11,292

The following is a summary of the option activity:

	Options		Weighted-average exercise price		Aggregate Intrinsic Value
Outstanding at December 31, 2008		-		-		-
Issued		5,000		3.00		-
Exercised		-		-		-
Expired		-		-		-
Outstanding at June 30, 2009		5,000	$	3.00	$	-

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

12.	EARNINGS PER SHARE

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

	Three months ended June 30						Six months ended June 30
	2009			2008			2009		2008
	(as restated)						(as restated)

Numerator
Earnings:

Earnings for the purpose of basic earnings per share	$	(2,420,294	)		$	3,555,602	$	22,351,963	$	9,414,604
Effect of dilutive potential common stock		-				-		-		-
Earnings(loss) for the purpose of dilutive earnings per share	$	(2,420,294	)		$	3,555,602	$	22,351,963	$	9,414,604

Denominator
Number of shares:

Weighted average number of common stock for the purpose of basic earnings per share		20,000,003				20,000,003		20,000,003		20,000,003
Effect of dilutive potential common stock - conversion of convertible preferred stock		-				9,999,999		9,999,999		9,999,999
Effect of dilutive potential common stock - conversion of warrants		-				7,221,144		2,903,047		6,546,082
Weighted average number of common stock for the purpose of dilutive earnings per share		20,000,003				37,221,146		32,903,049		36,546,084

Because the Company reported a net loss for the three months ended June 30, 2009, common stock equivalents were anti-dilutive; therefore, the amounts reported for basic and diluted loss per share for that period are the same.

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

13.	INCOME TAXES

The Group has not recorded any income tax provision for the three and six months ended June 30, 2009, since the Group has estimated that its estimated annual effective income tax rate will be zero.

As of June 30, 2009, the Group had net operating tax losses carried forward of $34,311 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 June 30, 2009.

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

14.	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 $58,797,659 and $65,744,088, respectively as at June 30,2009 and December 31, 2008.

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

Balance Sheets as of June 30, 2009 and December 31, 2008

	June 30, 2009		December 31, 2008
	(Unaudited)
	(as restated)
Cash – restricted	$	484,000	$	484,000

Investments in subsidiaries		65,474,928		72,421,357

Total assets	$	65,958,928	$	72,905,357

Other current liabilities	$	179,719	$	33,878
Warrant liabilities		57,494,516		-

Total liabilities		57,674,235		33,878

Total shareholders’ equity		8,284,693		72,871,479

Total liabilities and shareholders’ equity	$	65,958,928	$	72,905,357

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (As restated)

(Unaudited) (Stated in US Dollars)

14.	PARENT-ONLY FINANCIAL STATEMENTS (Continued)

Statements of Operations for the six months ended June 30:

	2009			2008
	(unaudited)			(unaudited)
	(as restated)
Investment (loss) income	$	(6,946,429	)	$	9,426,604
General and administrative expenses		(157,133	)		(12,000	)
(Loss) income from operations before income taxes		(7,103,562	)		9,414,604
Change in fair value of warrants		29,556,583			-
Income before income taxes		22,453,021			9,414,604
Income taxes		-			-
Net income	$	22,453,021		$	9,414,604

ITEM 2-MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS 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, as originally filed with Securities and Exchange Commission on April 30, 2009 and amended and refiled on April 15, 2010.

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.

Company Overview

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 June 30, 2009, we generated total revenue of approximately $40.0 million with a net loss of approximately $4.9 million, exclusive of a non-cash income of $2.4 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.

Major Performance Factors

Revenue

We derive our revenue mainly from the sales of 3 main products, namely soybean oil (4th grade), salad oil and soybean meal. The revenue may be affected by the following factors:

·	Processing capacity of soybean;

·	Pricing of the products; and

·	Market demand.

Processing capacity of soybean. Our current annual processing capacity of soybean is 520,000 metric tons. We processed approximately 91,233 metric tons in the three months ended June 30, 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:

Availability and price of raw materials, especially soybeans;

Operating efficiency of production facilities; and

Government policy or direct purchase.

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 (Loss)

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 June 30, 2009.

It should be noted that, in the near future, our profitability may be influenced materially by the following factors in the future, including but not limited to: the expected increase in soybean output of United States and South America in 2010 and later, 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.

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. In the second quarter of 2009, the major items in selling expenses were loading and handling and sales-related staff salaries.

General and administrative expenses include the depreciation of office buildings and equipment, office expenses and supplies, management and administrative salaries, business travel, and professional fees related to listing in US, 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. In the second quarter of 2009, the major items in general and administrative expenses were salaries of management and administrative staff, depreciation of office building and equipment, business travel and professional fees related to listing in US.

Income Tax

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

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

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

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

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

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

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

However, as Yanglin has been recognized as a Key Leading Enterprise in the Industrialization of Agriculture Industry by the PRC’s central government, Yanglin had enjoyed a complete exemption from income taxes until 2009. Our status is usually 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 second quarter of 2009. Therefore, even if Yanglin does not obtain tax exemption benefit, the group still has no income tax expense in the second quarter of 2009.

Results of Operations

The Three Months Ended June 30, 2009 Compared with the Three Months Ended June 30, 2008

The following table shows the operating results for the three months ended June 30, 2009, and June 30, 2008.

Consolidated Statement of Operations and Comprehensive (Loss) Income	The three months ended Jun. 30, 2009			The three months ended Jun. 30, 2008
	($)			($)
	(unaudited)			(unaudited)
Sales revenue (net of discounts, returns and allowances)	$	39,753,637		$	76,273,814
Cost of sales		(43,973,079	)		(71,857,724	)
Gross (loss) profit		(4,219,442	)		4,416,090
Selling expenses		(60,303	)		(64,545	)
General and administrative expenses		(559,881	)		(552,129	)
(Loss) income from operations		(4,839,626	)		3,799,416
Interest income		71,795			35,514
Interest expense		(94,091	)		(264,980	)
Other expenses		-			(14,348	)

Changes in fair value of warrants		2,441,628			-
(Loss) income from operations before income tax		(2,420,294	)		3,555,602
Income tax		-			-
Net (loss) income		(2,420,294	)		3,555,602
Foreign currency translation adjustment		(16,447	)		1,470,797
Comprehensive (loss) income	$	(2,436,741	)	$	5,026,399

Net Sales

	For The Three Months Ended June 30				Period to Period Change
	2009 Amount ($)		2008 Amount ($)		Amount ($)			%
Soybean meal	$	24,255,224	$	42,986,207	$	(18,730,983	)		-43.6	%
Soybean oil		10,327,314		24,574,383		(14,247,069	)		-58.0	%
Salad Oil		1,882,974		8,713,224		(6,830,249	)		-78.4	%
Squeezed oil		358,026		-		358,026
Soy protein concentrates		355,116		-		355,116
Low-temp soy meal		2,574,983		-		2,574,983
Total Net Sales	$	39,753,637	$	76,273,814	$	(36,520,177	)		-47.9	%

Net sales revenue was $39,753,637 for the three months ended June 30, 2009, a decrease of $36,520,177 or -47.9% from $76,273,814 for the three months ended June 30, 2008. An analysis by product shows that the revenue of soybean meal, soybean oil and salad oil all decreased period over period at rates of -43.6%, -58.0% and -78.4%, respectively. This decrease was due to our policy of reducing production volume voluntarily in reaction to the difficulties 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, exceeding 3 million tons each month since October 2008. The imported beans are sold at a price substantially lower than domestically produced soybeans, about $78, or 18.2% lower per ton on average. This had a serious negative impact on the domestic soybean producers and on the price level of domestic soybeans. In addition, this had a significant negative impact on the Chinese domestic market of imported-soybean byproducts as such imported-soybean byproducts can be sold at lower prices than domestic soybean byproducts.

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

In the three months ended June 30, 2009, we processed 91,233 metric tons of soybeans and produced 64,363 tons of soybean meal, 12,725 tons of soybean oil and 2,127 tons of salad oil, compared to 117,480 metric tons of soybeans, 94,042 tons of soybean meal, 15,013 tons of soybean oil and 4,825 tons of salad oil respectively for the three months ended June 30, 2008, resulting in negative growth rates of 22.3%, 31.6%, 15.2% and 55.9%, respectively.

Consequently, in the three months ended June 30, 2009, we sold 65,025 tons of soybean meal, 12,352 tons of soybean oil and 2,089 tons of salad oil, achieving negative growth rates of -30.6%, -18.9% and -56.8%, respectively, over the three months ended June 30, 2008, when we sold 93,695 tons of soybean meal, 15,229 tons of soybean oil and 4,837 tons of salad oil. Thus, 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 though the government had completed its national reserve purchase program by the end of June 2009, its action has effectively raised our costs of raw materials up till now, and our operations will still be affected by it, as the raw materials we are using now were all harvested in 2008 and mostly purchased by the end of 2008. 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 (Loss) Profit

	For The Three Months Ended June 30,												Period to Period Change
	2009 Amount ($)			% of Sales Revenue			2008 Amount ($)			% of Sales Revenue			Amount ($)			%
Soybean meal	$	(27,108,821	)		111.8	%	$	(40,186,571	)		93.5	%	$	13,077,750			-32.5	%
Soybean oil		(11,128,107	)		107.8	%		(23,472,855	)		95.5	%		12,344,748			-52.6	%
Salad oil		(2,025,787	)		107.6	%		(8,198,298	)		94.1	%		6,172,512			-75.3	%
Squeezed oil		(400,381	)		111.8	%		-			-			(400,381	)		-
Soy protein concentrates		(420,258	)		118.3	%		-			-			(420,258	)		-
Low-temp soy meal		(2,889,725	)		112.2	%		-			-			(2,889,725	)		-
Cost of sales	$	(43,973,079	)		110.6	%	$	(71,857,724	)		94.2	%	$	27,884,645			-38.8	%

Soybean meal	$	(2,853,597	)		-11.8	%	$	2,799,636			6.5	%	$	(5,653,233	)		-201.9	%
Soybean oil		(800,793	)		-7.8	%		1,101,528			4.5	%		(1,902,321	)		-172.7	%
Salad oil		(142,813	)		-7.6	%		514,926			5.9	%		(657,739	)		-127.7	%
Squeezed oil		(42,355	)		-11.8	%		-			-			(42,355	)		-
Soy protein concentrates		(65,142	)		-18.3	%		-			-			(65,142	)		-
Low-temp soy meal		(314,742	)		-12.2	%		-			-			(314,742	)		-
Gross (loss) profit	$	(4,219,442	)		-10.6	%	$	4,416,090			5.8	%	$	(8,635,532	)		-195.5	%

Our cost of sales for the three months ended June 30, 2009 decreased by $27,884,645 or 38.8% over the three months ended June 30, 2008, while the ratio of cost as a percentage to net sales value rose from 94.2% to 110.6% over the period. On the other hand, we recorded a gross loss of $4,219,442 in the three months ended June 30, 2009, in comparison to a gross profit of $4,416,090 in the three months ended June 30, 2008, and the gross profit margin dropped from 5.8% for the three months ended June 30, 2008 to -10.6% for the three months ended June 30, 2009. 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 conducted by PRC government as previously discussed.

As described above, the Company responded to the soybean market’s situation by reducing purchase and production volume, and as a result, the amount of 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 time 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 June 30												Period to Period
	2009			% of Sales			2008			% of Sales			Change
	Amount ($)			Revenue			Amount ($)			Revenue			Amount ($)			%
Selling Expenses	$	(60,303	)		0.2	%	$	(64,545	)		0.1	%	$	(4,242	)		-6.6	%
General & Administrative Expenses		(559,881	)		1.4	%		(552,129	)		0.7	%		7,752			1.4	%
Total Operating Expenses	$	(620,184	)		1.6	%	$	(616,674	)		0.8	%	$	3,510			0.6	%

Selling expenses for the three months ended June 30, 2009 decreased by $4,242 or 6.6% as compared to the three months ended June 30, 2008. This was basically in line with the decrease in sales volume over the period. As a percentage of net sales, selling expenses increased from 0.1% to 0.2% period over period, mostly due to the decrease in sales revenue.

General and administrative expenses for the three months ended June 30, 2009 increased by $7,752 or 1.4% over the three months ended June 30, 2008. These expenses were mainly depreciation of fixed assets used for management purpose. As a percentage of net sales, general and administrative expenses rose from 0.7% for the three months ended June 30, 2008 to 1.4% for the three months ended June 30, 2009. Such change in ratio was obviously caused in large part by the decrease of sales revenue over the period.

We expect that although selling expenses may remain stable in the remaining time of 2009, as we will not likely increase sales volume during this period (please refer to the sections “Net Sales” and “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.

Net (Loss) Income

	For The Three Months Ended June 30												Period to Period
	2009			% of Sales			2008			%of Sales			Change
	Amount ($)			Revenue			Amount ($)			Revenue			Amount ($)			%
Income from operations	$	(4,839,626	)		-12.2	%	$	3,799,416			5.0	%	$	(8,639,042	)		-227.4	%
Interest expenses		(94,091	)		-0.2	%		(264,980	)		-0.3	%		170,889			-64.5	%
Interest income		71,795			0.2	%		35,514			0.0	%		36,281			102.2	%
Other expense		-			0.0	%		(14,348	)		0.0	%		14,348			-100.0	%
Changes in fair value of warrants		2,441,628			6.1	%		-			0.0	%		2,441,628		-
Income tax		-			-			-			-			-			-
Net (loss) income	$	(2,420,294	)		-6.1	%	$	3,555,602			4.7	%	$	(5,975,896	)		-168.1	%

Income from operations fell by 227.4% or $8,639,042 for the three months ended June 30, 2009, to a loss of $4,839,626, as compared to a profit of $3,799,416 for the three months ended June 30, 2008, primarily due to the same reasons of the decrease in sales revenue and the drop 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 5.0% to a negative 12.2%.

Interest expenses decreased by $170,889 or 64.5% from the three months ended June 30, 2008 to the three months ended June 30, 2009. The changes were mainly caused by the decrease of bank borrowings, due to reduced working capital needs as we decreased our production volume. Interest income saw an increase of 102.2%, because we were able to keep a large cash reserve as we reduced operation level.

Effective January 1, 2009, we adopted the provisions of EITF 07-5, "Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entity's Own Stock". As a result of adopting EITF 07-5, we recorded non-cash income of $2,441,628 for the second 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 (loss) income, after including the abovementioned non-cash income from the change in fair value of warrants, decreased by 168.1% from the three months ended June 30, 2008, to the three months ended June 30, 2009. During the same period, net profit margin decreased from 4.7% to a negative 6.1%.

Earnings Per Share

	For The Three Months Ended June 30,
	2009			2008
	(Unaudited) (As restated)			Unaudited
Net (Loss) Income for Basic Earnings Per Share	$	(2,420,294	)	$	3,555,602
Basic Weighted Average Number of Shares		20,000,003			20,000,003
Net (Loss) Income per Share – Basic	$	(0.12	)	$	0.18
Net (Loss) Income for Diluted Earnings Per Share	$	(2,420,294	)	$	3,555,602
Diluted Weighted Average Number of Shares		20,000,003			37,221,147
Net (Loss) Income per Share – Diluted	$	(0.12	)	$	0.10

Basic and diluted earnings per share (EPS) for the quarter ended June 30, 2009, as restated, were $(0.12) and $(0.12), compared to $0.18 and $0.10 for the same quarter last year, as restated.

The Six Months Ended June 30, 2009 Compared with the Six Months Ended June 30, 2008

The following table shows the operating results for the six months ended June 30, 2009 and June 30, 2008.

	The six months ended Jun. 30, 2009 ($)			The six months ended Jun. 30, 2008 ($)
Consolidated Statement of Operations	(unaudited)			(unaudited)
Sales revenue (net of discounts, returns and allowances)	$	82,787,863		$	141,549,672
Cost of sales		(88,143,629	)		(130,296,704	)
Gross (loss) profit		(5,355,766	)		11,252,968
Selling expenses		(129,553	)		(118,970	)
General and administrative expenses		(1,592,065	)		(1,244,941	)
(Loss) income from operations		(7,077,384	)		9,889,057
Interest income		119,312			53,798
Interest expense		(245,517	)		(513,903	)
Other income		29			-
Other expenses		(1,060	)		(14,348	)
Changes in fair value of warrants		29,556,583			-
Income from operations before income tax		22,351,963			9,414,604
Income tax		-			-
Net income		22,351,963			9,414,604
Foreign currency translation adjustment		101,058			3,872,808
Comprehensive income	$	22,453,021		$	13,287,412

Net Sales

	For The Six Months Ended June 30				Period to Period Change
	2009		2008
Item	Amount ($)		Amount ($)		Amount ($)			%
Soybean meal	$	53,773,137	$	80,862,202	$	(27,089,065	)		-33.5	%
Soybean oil		21,922,595		44,537,225		(22,614,630	)		-50.8	%
Salad Oil		3,719,970		16,150,245		(12,430,275	)		-77.0	%
Squeezed oil		443,479		-		443,479
Soy protein concentrates		354,945		-		354,945
Low-temp soy meal		2,573,737		-		2,573,737
Total Net Sales	$	82,787,863	$	141,549,672	$	(58,761,809	)		-41.5	%

Net sales was $82,787,863 for the six months ended June 30, 2009, a decrease of $58,761,809 or 41.5% from $141,549,672 for the six months ended June 30, 2008. An analysis by product shows that the revenue of the three main products, namely soybean meal, soybean oil and salad oil all dropped period over period at rates of -33.5%, -50.8% and -77.0% respectively. This decrease was due to our policy to reduce production volume voluntarily in reaction to the difficulties caused by a series of factors, but primarily due to the Chinese government’s national reserve purchase of soybeans (please refer to the section “net sales” in the discussion of results of operations for the three months ended June 30, 2009).

In the six months ended June 30, 2009, we processed 186,575 metric tons of soybeans and produced 140,869 tons of soybean meal, 26,871 tons of soybean oil and 3,950 tons of salad oil, compared to 223,880 metric tons of soybeans, 179,138 tons of soybean meal, 28,505 tons of soybean oil and 9,283 tons of salad oil respectively for the six months ended June 30, 2008, resulting in negative growth rates of -16.7%, -21.4%, -5.7% and -57.5%, respectively.

Consequently, in the six months ended June 30, 2009, we sold 141,378 tons of soybean meal, 26,598 tons of soybean oil and 4,313 tons of salad oil, resulting in negative growth rates of -20.7%, -6.5% and -53.6%, respectively, over the six months ended June 30, 2008, we sold 178,395 tons of soybean meal, 28,455 tons of soybean oil and 9,288 tons of salad oil. Thus, there has been a large decrease in sales revenue.

Cost of Sales and Gross (Loss) Profit

	For The Six Months Ended June 30												Period to Period Change
	2009			% of Sales			2008			% of Sales
	Amount ($)			Revenue			Amount ($)			Revenue			Amount ($)			%
Soybean meal	$	(57,222,038	)		106.4	%	$	(75,131,689	)		92.9	%	$	(17,909,651	)		-23.8	%
Soybean oil		(23,216,668	)		105.9	%		(40,593,245	)		91.1	%	��	(17,376,577	)		-42.8	%
Salad Oil		(3,903,058	)		104.9	%		(14,571,770	)		90.2	%		(10,668,712	)		-73.2	%
Squeezed oil		(493,482	)		111.3	%		-			-			493,482
Soy protein concentrates		(420,055	)		118.3	%		-			-			420,055
Low-temp soy meal		(2,888,328	)		112.2	%		-			-			2,888,328
Cost of sales	$	(88,143,629	)		106.5	%	$	(130,296,704	)		92.1	%	$	(42,153,075	)		-32.4	%

Soybean meal	$	(3,448,901	)		-6.4	%	$	5,730,513			7.1	%	$	(9,179,414	)		-160.2	%
Soybean oil		(1,294,073	)		-5.9	%		3,943,980			8.9	%		(5,238,053	)		-132.8	%
Salad oil		(183,088	)		-4.9	%		1,578,475			9.8	%		(1,761,563	)		-111.6	%
Squeezed oil		(50,003	)		-11.3	%		-			-			(50,003	)
Soy protein concentrates		(65,110	)		-18.3	%		-			-			(65,110	)
Low-temp soy meal		(314,591	)		-12.2	%		-			-			(314,591	)
Gross (loss) profit	$	(5,355,766	)		-6.5	%	$	11,252,968			7.9	%	$	(16,608,734	)		-147.6	%

Our cost of sales for the six months ended June 30, 2009 fell by $42,153,075 or 32.4% over the six months ended June 30, 2008, while the ratio of cost as a percentage to net sales value rose from 92.1% to 106.5% over the period. On the other hand, we recorded a gross loss of $5,355,766 in the six months ended June 30, 2009, in comparison to a gross profit of $11,252,968 in the six months ended June 30, 2008, and the gross profit margin dropped from 7.9% in 2008 a six months loss of 6.5%. The main reasons for the changes in the cost of sales and gross (loss) profit were the negative impact of imported soybeans and the national reserve purchase conducted by PRC government (please refer to the section “Cost of Sales and Gross Profit” in the discussion of results of operations for the three months ended June 30, 2009).

Operating Expenses

	For The Six Months Ended June 30												Period to Period
	2009			% of Sales			2008			% of Sales			Change
	Amount ($)			Revenue			Amount ($)			Revenue			Amount ($)		%
Selling Expenses	$	(129,553	)		0.2	%	$	(118,970	)		0.1	%	$	10,583		8.9	%
General & Administrative Expenses		(1,592,065	)		1.9	%		(1,244,941	)		0.9	%		347,124		27.9	%
Total Operating Expenses	$	(1,721,618	)		2.1	%	$	(1,363,911	)		1.0	%	$	357,707		26.2	%

Selling expenses for the six months ended June 30, 2009 increased by $10,583 or 8.9% as compared to the six months ended June 30, 2008. This was basically due to the amortization of the usage fees of the dedicated railway that classified into selling expenses. As a percentage of net sales, selling expenses increased from 0.1% to 0.2% period over period, mostly due to the decrease in sales revenue.

General and administrative expenses for the six months ended June 30, 2009 rose by $347,124 or 27.9% over the six months ended June 30, 2008. These expenses were mainly depreciation of fixed assets used for management purpose. As a percentage of net sales, general and administrative expenses rose from 0.9% for the six months ended June 30, 2008 to 1.9% for the six months ended June 30, 2009.

We expect that although selling expenses may remain stable in the remaining time 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 (Loss) 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.

Net Income

	For The Six Months Ended June 30												Period to Period
	2009			% of Sales			2008			%of Sales			Change
	Amount ($)			Revenue			Amount ($)			Revenue			Amount ($)			%
Income from operations	$	(7,077,384	)		-8.5	%	$	9,889,057			7.0	%	$	(16,966,441	)		-171.6	%
Interest expenses		(245,518	)		-0.3	%		(513,903	)		-0.4	%		268,385			-52.2	%
Interest income		119,312			0.1	%		53,798			0.0	%		65,514			121.8	%
Other expense		(1,060	)		0.0	%		(14,348	)		0.0	%		13,288			-92.6	%
Other income		29			0.0	%	-				0.0	%		29			-
Changes in fair value of warrants		29,556,583			35.7	%		-			-			29,556,583			-
Income tax		-			-			-			-			-			-
Net income	$	22,351,963			27.0	%	$	9,414,604			6.7	%	$	12,937,359			137.4	%

Income from operations decreased by 171.6% or $16,966,441 for the six months ended June 30, 2009, to a loss of $7,077,384, as compared to a profit of $9,889,057 for the six months ended June 30, 2008, primarily due to the same reasons of the decrease in sales revenue and the drop in gross margin (please refer to the sections “Net Sales” and “Cost of Sales and Gross (Loss) Profit” above). At the same time, operating margin fell from 7.0% to a negative 8.5%.

Interest expenses decreased by $268,385 or 52.2% from the six months ended June 30, 2008 to the six months ended June 30, 2009. As a percentage of net sales, interest expense was only 0.3% for the six months ended June 30, 2009, compared to 0.4% for the six months ended June 30, 2008. The changes were mainly caused by the decrease of bank borrowings, due to shrinked working capital needs as we reduced our production volume. Interest income saw an increase of 121.8%, because we were able to keep a large cash reserve as we reduced operation level.

Effective January 1, 2009, we adopted the provisions of EITF 07-5, "Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entity's Own Stock". As a result of adopting EITF 07-5, we recorded non-cash income of $29,556,583 for the six months ended June 30, 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.

Net income, after including the abovementioned non-cash income from the change in fair value of warrants, increased by 137.4% from the six months ended June 30, 2008, to the six months ended June 30, 2009. During the same period, net profit margin increased from 6.7% to 27.0%.

Earnings Per Share

	For The Six Months Ended June 30,
	2009		2008
	(Unaudited) (As restated)		(Unaudited)
Net Income for Basic Earnings Per Share	$	22,351,963	$	9,414,604
Basic Weighted Average Number of Shares		20,000,003		20,000,003
Net Income per Share – Basic	$	1.12	$	0.47
Net Income for Diluted Earnings Per Share	$	22,351,963	$	5,859,002
Diluted Weighted Average Number of Shares		32,903,049		36,546,084
Net Income per Share – Diluted	$	0.68	$	0.26

Basic and diluted earnings per share (EPS) for the six months ended June 30, 2009, as restated, were $1.12 and $0.68, compared to $0.47 and $0.26 for the same period 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.

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

The Six Months Ended June 30, 2009 Compared with the Six Months Ended June 30, 2008

Cash used in operating activities for the six months ended March 31, 2009 was $ 8,784,541, while cash provided by operating activities for the six months ended June 30, 2008 was $1,684,250 This was mainly due to the increase in the cost of inventories, especially those of raw materials, caused by the rise in soybean price due to the PRC government’s purchase at higher than market price, and the increase in prepaid VAT and other taxes, which are paid when raw material is purchased.

At the end of 2008, the PRC government conducted a national strategic reserve purchase of soybeans, which was designed to uphold the price of domestically produced non-GM soybeans (please refer to the sections “Net Sales” and “Cost of Sales and Gross Profit” above). The designated purchase price was about $52 per ton higher than normal market price, and we had to purchase soybeans at close to this price level for a considerable part of our raw materials. Consequently, we had to input more cash resources to procure raw materials, and the number reached $3.7 million in the six months ended June 30, 2009. We also spent $2.3 million more cash into prepaid VAT, which mostly comprises the incoming VAT included in the gross purchase price of the soybean we have bought.

Due to the decrease in purchasing volume, we released $2.3 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 cash basis, with minimal trade receivables, and usually, our products are sold just a few days after they are produced. For the six months ended June 30, 2009, our cash flows were affected negatively by the increasing costs of raw materials, and we expect that the cash flows status may be improved later, as it’s possible that we may be able to increase our revenue and profit and the sales of our products is still very robust (please refer to the section “Net Sales” and “Cost of Sales and Gross (Loss) Profit” above).

Investing Activities

The Six Months Ended June 30, 2009 Compared with the Six Months Ended June 30, 2008

Net cash used in investing activities for the six months ended June 30, 2009 was $ 48,962, compared to net cash used in investing activities $1,163,649 for the six months ended June 30, 2008. The major reason for this change was that we have completed the majority of our construction projects, including the renovation of Plant 2, and there was a part of the payments for these plant and equipment in this period. All the cash used in the six months ended June 30, 2009, was payment for plant and equipment.

Financing Activities

The Six Months Ended June 30, 2009 Compared with the Six Months Ended June 30, 2008

Net cash provided by financing activities was $ 3,917,392 for the six months ended June 30, 2009, compared to net cash used in financing activities of $23,005 for the six months ended June 30, 2008. The major reason for this change was that we increased our bank borrowing by $ 6,575,842 while we only repaid $ 2,658,450 of bank loans due.

Loans

The balance of short-term bank loans was $10,665,030 at June 30, 2009, as compared to $6,711,214 at December 31, 2008. This was caused by the additional bank loans made to satisfy the needs for purchasing soybeans with higher average cost (please refer to the section “Cost of Sales and Gross (Loss) Profit” above).

The balance of our long-term bank loans was about $462,393 at June 30, 2009, compared to $489,827 at December 31, 2008. This was caused by repayment of the principal. These loans are related-party transactions 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 they personally obtained mortgage loans from Industrial and Commercial Bank of China, using these houses as collaterals, and borrowed the loans simultaneously to Yanglin to be used as working capital. These employees and officers have been making payments for interests on and principals of the loans to the banks directly, and Yanglin would pay them back in full amount later.

Currently we have a credit line of up to RMB 190 million, or about USD 28 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.

The material terms of the credit line are:

1.	The term of the credit line is one year.

2.	The circumstances under which the funds can be borrowed: The loan borrowed within this credit line can only be used to purchase crops, i.e. soybeans in our case.

The additional approvals that may be required: When Yanglin applies to actually borrow the funds, the bank should confirm the conditions and/or circumstances of the loan, and report to the appropriate higher level within the bank to verify, examine and approve such applications, before actually releasing any money to Yanglin under the maximum credit line.

4.	The restrictions on the use of the funds: The funds borrowed from this credit line can only be used to purchase crops, i.e. soybeans in our case.

The interest rate is 6.93%, subject to adjustment. The circumstances under which the interest rate is subject to adjustment and whether there are any limits on such adjustments: When the People’s Bank of China adjust the interest rate of loans, the bank has the right and discretion to adjust the interest rate of loans accordingly.

6.	Whether the loans would be secured by Yanglin’s assets: The loans would be secured by Yanglin’s assets, i.e., building, machinery and land use rights.

7.	The other material terms are: Secured loan shall have preference over credit loan; The Company shall purchase insurance for pledged assets, with the bank having first priority.

Commitments and Contingencies

We have no future cash commitments or contingent liabilities as at June 30, 2009.

Critical Accounting Policies and Estimates

The preparation of our unaudited interim condensed 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, accrued expenses, the estimated useful lives for amortizable intangible assets and property, plant and equipment, and warrants granted in connection with various financing transactions.

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.

Please refer to our Annual Report on Form 10-K for the year ended December 31, 2008 filed with the SEC for a discussion of our critical accounting policies. During the three months ended June 30, 2009, there were no material changes to these policies.

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.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

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 June 30, 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 June 30, 2009, our disclosure controls and procedures were not effective due to the material weaknesses and significant deficiencies in our internal control over financial reporting described below.

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

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

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

The Company does not maintain a sufficient depth of personnel with an appropriate level of accounting knowledge, experience and training in the selection and application of US GAAP and related SEC disclosure requirements.

The Company does not have an accounting policy manual base 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

We will draft the Accounting Manual under US GAAP, and it will include accounting policies and the detailed procedures of accounting treatments. To complete this task, we need the help of competent professional accounting advisors. We are currently seeking such advisors. We will also engage such advisors to deliver training to our own accounting staff on the selection and application of US GAAP and related SEC disclosure requirements.

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

b. Changes in Internal Controls over Financial Reporting

During the quarter ended June 30, 2009, there was no other change in our internal controls over financial reporting, except as described above, that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 1A—RISK FACTORS

Not required.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS

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

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

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

SIGNATURES

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

	Yanglin Soybean, Inc.

Date: August 13, 2010	By:	/s/ SHULIN LIU
		Shulin Liu Chief Executive Officer (Principal Executive Officer)

	Yanglin Soybean, Inc.

Date: August 13, 2010	By:	/s/ SHAOCHENG XU
		Shaocheng Xu Chief Financial Officer (Principal Financial and Accounting Officer)

Yanglin Soybean (YSYB) Inactive 10-Q/A2009 Q2 Quarterly report (amended)