Yanglin Soybean (YSYB) 10-Q 2010 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2010

¨ 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 ¨

*The registrant has not yet been phased into interactive data requirement.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “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 November 10, 2010, the Company had 20,465,119 shares of Common Stock, $0.001 par value per share, issued and outstanding.

Yanglin Soybean, Inc.

INDEX

			Page
Part I — Financial Information			3
	Item 1.	Financial Statements	3
	(a)	Consolidated Balance Sheets as of June 30, 2010 (unaudited) and December 31, 2009	3
	(b)	Consolidated Statements of Operations and Other Comprehensive Income for the three and six months ended June 30, 2010 and 2009 (as restated) (unaudited)	4
	(c)	Consolidated Statement of Changes in Stockholders’ Equity for the six months ended June 30, 2010 (unaudited)	5
	(d)	Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009 (as restated) (unaudited)	6
	(e)	Notes to Consolidated Financial Statements (unaudited)	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	48
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	68
	Item 4T.	Controls and Procedures	68
Part II — Other Information			70
	Item 1	Legal Proceedings	70
	Item 1A.	Risk Factors	70
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	70
	Item 3	Defaults upon Senior Securities	70
	Item 4	(Removed and Reserved)	70
	Item 5	Other Information	70
	Item 6.	Exhibits	70
	Signatures		70

2

PART 1-FINANCIAL INFORMATION

ITEM 1-FINANCIAL STATEMENTS

YANGLIN SOYBEAN, INC.

CONSOLIDATED BALANCE SHEETS

AS AT SEPTEMBER 30, 2010 (UNAUDITED), AND DECEMBER 31, 2009

(Stated in US Dollars)

	September 30, 2010		December 31, 2009
	(unaudited)
ASSETS
Current assets
Cash	$	28,651,562	$	34,811,611
Cash-restricted		247,961		1,740,605
Trade receivables, net		338		332
Inventories		1,303,051		8,356,345
Advances to suppliers		12,710		12,451
Prepaid VAT and other taxes		6,072,421		4,917,250
Other receivables and prepaid expenses		65,023		108,200
Total current assets		36,353,066		49,946,794
Property, plant and equipment, net		25,717,596		27,297,365
Assets held for sale		-		570,409
Intangible assets, net		4,342,790		4,415,908
TOTAL ASSETS	$	66,413,452	$	82,230,476
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term bank loans	$	7,464,803	$	20,476,218
Loans from related parties – current		56,073		53,676
Accounts payable		1,542		20,866
Other payables		34		824,424
Customers deposits		985,915		1,395,524
Accrued liabilities		558,091		635,474
Total current liabilities		9,066,458		23,406,182
Long-term liabilities
Long-term bank loan		5,225,363		-
Loan from related parties – non-current		265,630		314,191
Warrant liability		3,790,921		27,573,698
TOTAL LIABILITIES		18,348,372		51,294,071
STOCKHOLDERS' EQUITY
Convertible preferred stock:
Series A $0.001 par value, 50,000,000 shares authorized; 9,534,883 shares issued and outstanding		9,535		9,535
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; 20,465,119 shares issued and outstanding		20,465		20,465
Additional paid-in capital		27,922,238		27,899,749
Statutory reserves		5,628,636		5,628,636
Retained earnings/(accumulated deficit)		6,078,110		(9,953,046	)
Accumulated other comprehensive income		8,406,096		7,331,066
Total stockholders’ equity		48,065,080		30,936,405
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	66,413,452	$	82,230,476

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

3

YANGLIN SOYBEAN, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME FOR

THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010, AND 2009, AS RESTATED (UNAUDITED)

(Stated in US Dollars)

	For the three months ended September 30						For the nine months  ended September 30
	2010			2009			2010			2009
				(As restated)						(As restated)
Net sales	$	37,420,188		$	39,570,374		$	121,444,716		$	122,358,237
Cost of sales		(38,977,219	)		(43,915,230	)		(125,607,377	)		(132,058,859	)
Gross profit (loss)		(1,557,031	)		(4,344,856	)		(4,162,661	)		(9,700,622	)
Operating Expenses
Selling expenses		(61,496	)		(26,764	)		(193,411	)		(156,317	)
General and administrative expenses		(506,551	)		(679,885	)		(2,165,724	)		(2,041,925	)
Impairment loss of assets held for sale		(220,403	)		(584,699	)		(572,150	)		(584,699	)
Loss on disposal of property, plant and equipment		-			-			-			(230,025	)
Total operating expenses		(788,450	)		(1,291,348	)		(2,931,285	)		(3,012,966	)
Loss from operations		(2,345,481	)		(5,636,204	)		(7,093,946	)		(12,713,588	)
Interest expense		(149,595	)		(95,900	)		(727,072	)		(341,417	)
Interest income		18,256			18,676			69,748			137,988
Other (expenses) income		-			(204	)		(351	)		(1,235	)
Changes in fair value of warrants		11,962,404			3,167,950			23,782,777			32,724,533
Income(Loss) before income taxes and other comprehensive income		9,485,584			(2,545,682	)		16,031,156			19,806,281
Income tax		-			-			-			-
Net income(loss)		9,485,584			(2,545,682	)		16,031,156			19,806,281
Foreign currency translation adjustment		215,605			66,069			1,075,030			167,127
Other comprehensive income	$	9,701,189		$	(2,479,613	)	$	17,106,186		$	19,973,408
Earnings per share
Basic	$	0.46		$	(0.13	)	$	0.78		$	0.99
Diluted	$	0.32		$	(0.13	)	$	0.53		$	0.62
Weighted average shares outstanding
Basic		20,465,119			20,270,478			20,465,119			20,091,152
Diluted		30,000,002			20,270,478			30,000,002			32,034,068

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

4

YANGLIN SOYBEAN, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 (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, December 31, 2009		9,534,883	$	9,535		20,465,119	$	20,465	$	27,899,749	$	5,628,636	$	(9,953,046	)	$	7,331,066	$	30,936,405
Net income		-		-		-		-		-		-		16,031,156			-		16,031,156
Share-based compensation expense		-		-		-		-		22,489		-		-			-		22,489
Foreign currency translation adjustment		-		-		-		-		-		-		-			1,075,030		1,075,030
Balance, September 30, 2010		9,534,883	$	9,535		20,465,119	$	20,465	$	27,922,238	$	5,628,636	$	6,078,110		$	8,406,096	$	48,065,080

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

5

YANGLIN SOYBEAN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010, AND 2009 (AS RESTATED) (UNAUDITED)

(Stated in US Dollars)

	For the nine months ended  September 30
	2010			2009
				(as restated)
Cash flows from operating activities
Net income	$	16,031,156		$	19,806,281
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation		2,144,596			2,463,971
Amortization		161,963			161,345
Share-based compensation expense		22,489			22,938
Bad debt expense		450			(93	)
Impairment loss of assets held for sale		572,150			584,699
Loss on disposal of property, plant and equipment		-			230,025
Change in fair value of warrants		(23,782,777	)		(32,724,533	)
Changes in operating assets and liabilities:
Trade receivable		-			(16,112	)
Inventories		7,101,408			1,481,436
Advances to suppliers		1,216			10,581,995
Prepaid VAT and other taxes		(1,034,778	)		(2,535,093	)
Other receivables		42,966			(52,409	)
Accounts payable		(19,415	)		(9,182	)
Other payables		-			1
Customers deposits		(430,978	)		491,431
Accrued liabilities		(86,898	)		117,592
Net cash used in operating activities		723,548			604,292
Cash flows from investing activities
Purchase of property, plant and equipment		(862,103	)		(87,400	)
Net cash used in investing activities		(862,103	)		(87,400	)
Cash flows from financing activities
Proceeds from short-term bank loans		-			6,575,842
Cash - restricted		1,497,107			26,862
Principal payments for short-term bank loans		(8,068,775	)		(13,301,136	)
Principal payments for loans from related parties		(52,868	)		(110,322	)
Net cash flows used in/provided by financing activities		(6,624,536	)		(6,808,754	)
Net decrease in cash		(6,763,091	)		(6,291,862	)
Effect of foreign currency translation on cash		603,042			69,256
Cash- beginning of period		34,811,611			30,365,413
Cash- end of period	$	28,651,562		$	24,142,807
Supplementary cash flow information:
Interest paid	$	727,072		$	341,417

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

6

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

1. ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION

Yanglin Soybean, Inc. (the “Company”) was incorporated in the State of Nevada on May 26, 1921. Prior to October 3, 2007, the Company had only nominal operations and assets. On October 3, 2007, the Company executed a reverse-merger with Faith Winner Investments Limited (“Faith Winner (BVI)”) by an exchange of shares and the Company issued 18,500,000 common shares at $0.001 par value in exchange for all Faith Winner (BVI) shares. As a result of the share exchange, Faith Winner (BVI) became a wholly-owned subsidiary of the Company. The exchange transaction was accounted for as a reverse acquisition in accordance with Accounting Standards Codification 805 “Business Combinations”. The reverse-merger also included an equity financing of $21,500,000 by the issuance of 9,999,999 Series A Convertible Preferred Stock at $2.15 per share to ten accredited investors.

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

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

Faith Winner (BVI) and WFOE have entered into a series of agreements respectively with Yanglin and as a result of such agreements WFOE gained control of all of Yanglin’s assets, management and business as if Yanglin were a wholly-owned subsidiary of WFOE. These agreements included a loan agreement, a consigned management agreement, two consignment agreements of equity interests, an exclusive purchase option agreement, a registered trademark transfer contract and a trademark licensing agreement. The consignment agreements were entered into on September 1, 2007, and the other agreements were all signed on September 24, 2007. The exclusive purchase option agreement and the consigned management agreement were amended as of April 3, 2009. As described by the amendment, the exercise price of the exclusive purchase option shall be $17,000,000, or such greater amount as required by the then applicable Chinese law and regulations. If WFOE elects to purchase the Equity Interests held by Shulin Liu and Huanqin Ding (collectively “the Shareholders”), all of the consideration net tax (the “ Consideration of Equity Transfer ” ) obtained by the Shareholders shall be used to repay Yanglin. If WFOE elects to purchase the assets of Yanglin, Yanglin shall use all of the consideration net tax (the “Consideration of Assets Transfer ” ) to repay WFOE. To the extent that the Consideration of Equity Transfer or Assets Transfer is greater than $17,000,000 as required by the then applicable law or for any other reasons, the excess shall be paid by Yanglin to WFOE as interest on the loan made under the Loan Agreement dated September 24, 2007 between WFOE and Yanglin.

7

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

1. ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION (Continued)

Pursuant to the above-mentioned agreements, WFOE made a loan (“the Loan”) of $17 million on October 10, 2007 and it was utilized by Yanglin for working capital needs. In return, the Company obtained management control and an exclusive right to acquire all of the equity of Yanglin. The rights of existing shareholders of Yanglin were assigned by the consignment of equity interests to Faith Winner (BVI). The exclusive purchase agreement and the loan agreement restrict both Yanglin and its shareholders from significant decisions including but not limited to any amendments of articles of association or rules of Yanglin, any change in registered capital, any transfer, mortgage or disposal of Yanglin’s assets or income in a way that would affect WFOE’s security interest, entering any material contract (exceeding RMB5 million in value) and distributing any dividends to the shareholders. Pursuant to the consigned management agreement between WFOE and Yanglin, Yanglin agreed to entrust the business operations of Yanglin and its management to WFOE until WFOE formally acquires all equity or substantially all the assets of Yanglin. Under the consigned management agreement as amended on April 3, 2009, WFOE will provide financial, technical and human resources management services to Yanglin which will enable WFOE to control Yanglin's operations, assets and cash flows. In turn, WFOE will be entitled to a management fee equal to 5% of Yanglin’s annual net sales on a yearly basis.

Under the Registered Trademark Transfer Agreement, Yanglin agreed to transfer to WFOE all of its rights in connection with the two trademarks, including without limitation the title of the trademarks and right to license (the “Transferred Trademark”) for a purchase price of $1,000,000, which is subject to a purchase price adjustment based on the minimum appraised value of intellectual property (“IP”) rights allowed under PRC laws and regulations for such transfer. Under the Trademark Licensing Agreement, WFOE agreed to grant an exclusive license to Yanglin, for a term of 10 years, to use the Transferred Trademark for an annual licensing fee equal to 1% of Yanglin’s net sales of that year. The license fee and the management fee aforesaid – a total of 6% of the annual net sales of Yanglin – entitled by WFOE are designed to approximate Yanglin’s annual net profit. If the licensing and management fees entitled by WFOE exceed the net income after tax of Yanglin, Yanglin should not be obligated to pay WFOE any shortfall. In the event that the net income after tax is greater than the licensing and management fees entitled by WFOE, Yanglin should maintain any excess on its books and should not distribute any of such excess as a dividend in any manner to its shareholders until WFOE exercises its exclusive purchase option pursuant to the Exclusive Purchase Option Agreement dated September 24, 2007 between Yanglin and WFOE and as amended on April 3, 2009.

8

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

1. ORGANIZATION, PRINCIPAL ACTIVITIES AND BASIS OF PRESENTATION (Continued)

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

The loan of $17 million to Yanglin is considered as an investment in Yanglin by the Company through a series of contractual arrangements by way of the Loan. As a result of entering into the aforementioned agreements, WFOE should be deemed to control Yanglin as a Variable Interest Entity.  The creditors of Yanglin do not have recourse to the Company’s other assets.

The accompanying unaudited consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they may not include all of the information and footnotes required by GAAP for complete consolidated financial statements. All adjustments that are, in the opinion of management, of a normal recurring nature and are necessary for a fair presentation of the consolidated financial statements have been included. Nevertheless, these financial statements should be read in conjunction with the Company’s audited consolidated financial statements contained in its Annual Report on Form 10-K for the year ended December 31, 2009 as filed with the Securities and Exchange Commission on April 15, 2010. The results of operations for the nine months ended September 30, 2010, are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.

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

9

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

2. GENERAL

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

The Company has restated its consolidated financial statements as of and for the year ended December 31, 2008 to record the shares its major shareholder, Winner State Investments Limited, 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 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 additional paid in capital and retained earnings in the 2009 financial statements. Opening retained earnings at January 1, 2009 was decreased by $4.48 million, while additional paid in capital was increased by $4.48 million.

Effective January 1, 2009, we adopted the provisions of FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815") (previously ElTF 07-5, "Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entity's Own Stock"). As a result of adopting ASC 815, warrants to purchase the Company's common stock previously treated as equity pursuant to the derivative treatment exemption were no longer afforded equity treatment as there was a down-round protection (full-ratchet down round protection). As a result, the warrants are not considered indexed to the Company's own stock, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings until such time as the warrants are exercised or expire.

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

On January 1, 2009, the Company recorded as a cumulative effect adjustment by decreasing additional paid-in capital by $15,003,941 and decreasing the beginning balance of retained earnings by $72,047,158, and recording $87,051,099 as a warrant liability to recognize the fair value of such warrants on January 1, 2009. The fair value of the warrants was $27,573,698 on December 31, 2009 and $54,326,566 on September 30, 2009. The Company recognized $3,167,950and $32,724,533 as non-cash income from the change in fair value of warrants for the three and nine months ended September 30, 2009.

10

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

2. GENERAL (Continued)

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

	As of September 30, 2009
Consolidated Balance Sheet	As previously reported		As restated
Warrant liability	$	-	$	54,326,566
Additional paid-in capital		38,389,635		27,888,632
Retained earnings (accumulated deficit)		8,769,210		(35,056,353	)

	For the  Three Months Ended September 30,  2009						For the Nine Months Ended September 30,  2009
Consolidated Statement of Operations and Other Comprehensive Income	As previously reported			As restated			As previously reported			As restated
General and administrative expenses	$	(668,239	)	$	(679,885	)	$	(2,018,987	)	$	(2,041,925	)
Total operating expenses		(1,279,702	)		(1,291,348	)		(2,990,028	)		(3,012,966	)
(Loss) income from operations		(5,624,558	)		(5,636,204	)		(12,690,650	)		(12,713,588	)
Changes in fair value of warrants		-			3,167,950			-			32,724,533
oss) income from operations before income taxes		(5,701,986	)		(2,545,682	)		(12,895,314	)		19,806,281
Net (loss) income		(5,701,986	)		(2,545,682	)		(12,895,314	)		19,806,281
Other comprehensive (loss) income		(5,635,917	)		(2,479,613	)		(12,728,187	)		19,973,408
(Loss) earnings per share:
Basic	$	(0.29	)	$	(0.13	)	$	(0.64	)	$	0.99
Diluted	$	(0.29	)	$	(0.13	)	$	(0.64	)	$	0.62

11

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

2. GENERAL (Continued)

	For the Nine Months Ended September 30, 2009
Consolidated Statement of Cash Flows	As previously reported				As restated
Net (loss)/income		$	(12,895,314	)		$	19,806,281
Change in fair value of warrants			-				(32,724,533	)
share-based compensation expense			-				22,938

	As of and For the Nine Months Ended September 30, 2009
Consolidated Statement of Changes in Stockholders’ Equity	As previously reported			As restated
Net (loss) income	$	(12,895,314	)	$	19,806,281
share-based compensation expense		-			22,938
Additional paid-in capital		38,389,635			27,888,632
Retained earnings (accumulated deficit)		8,769,210		$	(35,056,353	)

(b) Accounting hierarchy

On September 30, 2009, the Company adopted changes issued by the Financial Accounting Standards Board (“FASB”) to the authoritative hierarchy of GAAP. These changes establish the FASB Accounting Standards Codification (“ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP.  Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants.  The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions (“FSP”), or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates (“ASUs”).  ASUs will not be authoritative in their own right as they will only serve to update the ASC.  These changes and the ASC itself do not change GAAP.  Other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on the Company’s consolidated financial statements.

12

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

2. GENERAL (Continued)

(c) Principles of consolidation

The share exchange transaction as disclosed in Note 1 has been accounted for as a recapitalization of Yanglin Soybean Inc. where the Company (the legal acquirer) is considered the accounting acquiree and Faith Winner (BVI) (the legal acquiree) is considered the accounting acquirer. As a result of this transaction, the Company is deemed to be a continuation of the business of Faith Winner (BVI).  The historical stockholders’ equity of the accounting acquirer prior to the share exchange has been retroactively restated as if the share exchange transaction occurred as of the beginning of the first period presented.

The unaudited consolidated financial statements include the accounts of the Company and the following subsidiaries, as well as Yanglin, a variable interest entity of which WFOE is the primary beneficiary as defined by ASC 810 “Consolidation of Variable Interest Entities” All intercompany transactions and accounts have been eliminated in consolidation.

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

*Deemed variable interest entity

13

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

2. GENERAL (Continued)

(d) Use of estimates

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

(e) 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.

14

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

2. GENERAL (Continued)

(f) Intangible assets

Intangible assets include land use rights and railway use rights.

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

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

(g) Property, plant and equipment

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

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

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

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

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

15

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

2. GENERAL (Continued)

(i) Inventories

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

(j) Trade receivables

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

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

(k) Customer Deposits

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

16

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

2. GENERAL (Continued)

(l) Foreign currency translation

The accompanying unaudited 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:

	September 30,  2010		December 31,  2009		September 30, 2009
The closing rate at RMB : USD exchange rate		6.6981		6.8372		6.8376
Average nine-months ended RMB : USD exchange rate		6.8164		-		6.8425
Average three-months ended RMB : USD exchange rate		6.7803		-		6.8411

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

17

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

2. GENERAL (Continued)

(m) Revenue recognition

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

(n) Costs of sales

Cost of sales consists primarily of direct material costs, direct labor cost, and applicable overhead costs attributable to the production of products.  Permanent write-down of inventory to the lower of cost or market value is also reflected in the cost of revenues. For the nine and three months ended September 30, 2010 and 2009, there were no write-downs of inventories.

(o) Advertising

The Group expenses all advertising expenses as incurred.  Advertising expenses included in selling expenses were $211 and $146 for the nine months ended September 30, 2010 and 2009 respectively. Advertising expenses for the three months ended September 30, 2010 and 2009 were $0 and $146, respectively.

(p) Shipping and handling

All shipping and handling costs are expensed as incurred and included in selling expense.  Total shipping and handling expenses were $59,375 and $62,195 for the nine months ended September 30, 2010 and 2009 respectively. The Shipping and handling costs for the three months ended September 30, 2010 and 2009 were $18,311 and $19,465 respectively.

(q) 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.

18

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

2. GENERAL (Continued)

(r) 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 $115,218 and $99,194 for the nine months ended September 30, 2010 and 2009 respectively. The total provisions for employee pension for the three months ended September 30, 2010, and 2009 were $45,163 and $33,072, respectively.

(s) Income taxes

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

The Group applied the provisions of ASC 740.10, 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. ASC 740.10 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. ASC 740.10 also provides guidance related to, among other things, classification, accounting for interest and penalties associated with tax positions, and disclosure requirements

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

19

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

2. GENERAL (Continued)

(t) 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; and

(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 September 30, 2010 and December 31, 2009, respectively.

20

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

2. GENERAL (Continued)

(u) Other comprehensive income

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

(v) Earnings  per share

The Company reports earnings per share in accordance with the provisions of FASB ASC 260.10, "Earnings Per Share” FASB ASC 260.10 requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock using the treasury method.

(w) Value-added tax (“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.  Prepaid VAT will only be offset against future VAT payable resulting from sales.

21

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

2. GENERAL (Continued)

(x) Warrant Liability 

Effective January 1, 2009, we adopted the provisions of FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815") (previously ElTF 07-5, "Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entity's Own Stock"). As a result of adopting ASC 815, warrants to purchase the Company's common stock previously treated as equity pursuant to the derivative treatment exemption were no longer afforded equity treatment as there was a down-round protection (full-ratchet down round protection). As a result, the warrants are not considered indexed to the Company's own stock, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings until such time as the warrants are exercised or expire.

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

 (y) Recent accounting pronouncements

In June 2009, the FASB issued ASC810.10, guidance to change financial reporting by enterprises involved with variable interest entities (“VIEs”) 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. This pronouncement 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. The guidance requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity. This guidance also requires additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. This guidance is effective for fiscal years beginning after November 15, 2009. This ASC was adopted on January 1, 2010 and had no material impact on the Company’s unaudited consolidated financial statements.

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.

22

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

3. FAIR VALUE

The Company has categorized its assets and liabilities, which are 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 September 30, 2010, 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.

23

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

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 September 30, 2010 and December 31, 2009. 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 September 30, 2010 and December 31, 2009, respectively, the Group’s restricted cash of $247,961 and $278,018 was kept in bank accounts 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 September 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.

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

As of September 30, 2010 and December 31, 2009, 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 nine months ended September 30, 2010 and 2009 respectively, all of the Group’s sales were generated within the PRC. In addition, all accounts receivable as of September 30, 2010 and December 31, 2009 are from entities within the PRC.

For the three months ended September 30, 2010 and 2009 respectively, no customer accounted for 10% or more of the Group’s revenue.

For the three months ended September 30, 2010 and 2009 respectively, no vendor accounted for 10% or more of the Group’s purchases.

24

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

5. CASH-RESTRICTED

Cash-restricted consists of the following at:

	September 30, 2010		December 31, 2009
	(unaudited)
Bank deposits held as collateral for bank loan – PRC	$	-	$	1,462,587
Bank deposits held in trust account – U.S.		247,961		278,018
Balance at the end of period	$	247,961	$	1,740,605

Cash-restricted maintained in a trust account in the United States is held for the purpose of payment for investor and public relations costs. 

6. INVENTORIES

Inventories consist of the following:

	September 30, 2010		December 31,  2009
	(unaudited)
Finished goods	$	697,117	$	2,560,585
Raw materials		605,934		5,795,760
Balance at the end of period	$	1,303,051	$	8,356,345

25

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

7. OTHER RECEIVABLES AND PREPAID EXPENSES

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

	September 30, 2010		December 31, 2009
	(unaudited)
Advances for materials	$	3,738	$	3,101
Prepayment for customers’ transportation costs		4,518		56,229
Advances for travel		22,809		28,152
Prepaid service fee		29,859		14,626
Other		4,099		6,092
Balance at the end of period	$	65,023	$	108,200

8. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

	September 30, 2010			December 31, 2009
	(unaudited)
Building	$	9,359,495		$	9,169,080
Machinery and equipment		26,244,831			25,710,890
Office equipment		130,854			128,192
Motor vehicles		1,228,388			1,168,308
		36,963,568			36,176,470
Less: accumulated depreciation		(11,245,972	)		(8,879,105	)
Balance at the end of period	$	25,717,596		$	27,297,365

As of September 30, 2010, building with net book value of $1,504,654 and machinery and equipment with net book value of $9,104,679 were pledged as collateral under certain loan arrangements. These loans were primarily obtained for general working capital.

26

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

8. PROPERTY, PLANT AND EQUIPMENT (Continued)

Temporarily Idle Assets

Included in the above balances of property, plant and equipment are assets deemed as temporarily idle by the management comprised of the following:

	September 30,  2010			December 31, 2009
	(unaudited)
Buildings	$	901,105		$	882,772
Machinery and equipment		3,911,557			3,831,978
		4,812,662			4,714,750
Less: accumulated depreciation		(606,038	)		(393,173	)
Net book value	$	4,206,624		$	4,321,577

 These assets belong to the powdered oil production line. They are temporarily idle because of technical issues in the formula. We are adjusting the formula and techniques used for powdered oil and expect to start formal production within a few months. If the production can’t be started as expected, we will consider disposal of these assets.

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

	Three months ended September 30,				Nine months ended September 30,
	2010		2009		2010		2009
			(as restated)				(as restated)
Cost of sales and inventory	$	531,730	$	790,223	$	1,234,026	$	1,908,398
General and administrative expenses		184,343		82,700		910,570		555,573
Total depreciation expenses	$	716,073	$	872,923	$	2,144,596	$	2,463,971

27

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

9. ASSETS HELD FOR SALE

Yanglin has classified certain manufacturing facilities as held for sale. Assets held for sale consists of the following:

	September 30,  2010		December 31, 2009
	(unaudited)
Building	$	-	$	1,339
Machinery and equipment		-		569,070
Balance	$	-	$	570,409

Management plans to seek a buyer of these assets on the open market. The assets are expected to be sold in 2010.

Impairment Loss of Assets held for sale

The Group analyzes the assets for impairment when events or circumstances occur that indicate the carrying value may not be recoverable. The Group considers a property to be impaired when the sum of future undiscounted cash flows during its remaining estimated holding period is less than the carrying value of the asset. For impaired assets, the Group records an impairment charge equal to the excess of the property’s carrying value over its estimated fair value.

During the quarter ended September 30, 2010, the Group reviewed the idle production facility, which had been identified as being impaired and reclassified to assets held for sale in the third quarter of 2009. The review found that these assets had been further impaired, by measuring the fair value using the fair value hierarchy using primary level 2 inputs in a market approach utilizing quoted market price for similar building and equipment adjusted for the condition and location of the assets.

There were $220,403 and $570,409 additional impairment charges recorded during the three and nine months ended September 30, 2010, respectively. There were $584,699 and $584,699 additional impairment charges recorded during the three and nine months ended September 30, 2009. As a result, these assets have been fully impaired and their net book value has been fully written off.

28

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

10. INTANGIBLE ASSETS

Intangible assets consist of the following:

Amortized intangible assets	January 1,  2010		Accumulated amortization			Foreign currency translation difference		September 30,  2010 (unaudited)
Land use rights	$	4,004,529		(567,247	)		83,163	$	3,520,445
Railway use rights		1,199,321		(401,882	)		24,906		822,345
Total amortized intangible assets	$	5,203,850		(969,129	)		108,069	$	4,342,790

As of September 30, 2010, land use rights with net book value of $1,269,258 were pledged as collateral for certain loans.

There were no additions or disposals during the nine months ended September 30, 2010.

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

	Three months ended September 30,				Nine months ended September 30,
	2010		2009		2010		2009
			(as restated)				(as restated)
Selling expenses	$	32,934	$	31,970	$	98,279	$	97,232
General and administrative expenses		21,341		21,823		63,684		64,113
Total amortization expense	$	54,275	$	53,793	$	161,963	$	161,345

29

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

10. INTANGIBLE ASSETS (Continued)

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

September 30,
2011	$	219,765
2012		219,765
2013		219,765
2014		219,765
2015		219,765
thereafter		3,243,965
	$	4,342,790

30

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

11. SHORT-TERM BANK LOANS

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

	September 30,  2010		December 31, 2009		Collateral
	(unaudited)
Loans from Agricultural Development Bank of China, interest rates at 5.31% per annum, due August 30, 2010	$	-	$	7,312,935
Loans from Agricultural Development Bank of China, interest rates at 5.31% per annum, due November 5, 2010		-		5,850,348	Building, machinery and equipment and land use rights
Loans from Agricultural Development Bank of China, interest rates at 5.31% per annum, due July 30, 2010 (Such amount had been fully repaid by July 30, 2010)		-		7,312,935	Restricted cash
Loans from Agricultural Development Bank of China, interest rates at 5.31% per annum, due August 26, 2011		7,464,803		–
Balance at the end of period	$	7,464,803	$	20,476,218

These loans were obtained and used by Yanglin for working capital. Interest expense for the nine months ended September 30, 2010 and 2009 were $563,507 and $228,165, respectively. Interest expense for the three months ended September 30, 2010 and 2009 were $291,634 and $143,506, respectively.

(B) Credit lines

The Group has a credit line facility with the availability to borrow up to $73.6 million (equivalent to RMB 492.9 million) with Agricultural Development Bank of China (the “Bank”). 

31

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

12. OTHER PAYABLES

Other payables consist of the following:

	September 30,  2010		December 31, 2009
	(unaudited)
Due for construction	$	-	$	824,424
Others		34		-
Balance at the end of period	$	34	$	824,424

13. LONG-TERM BANK LOAN

Long-term bank loansconsist of the following:

	September 30,  2010			December 31, 2009		Collateral
	(unaudited)		��
Loans from Agricultural Development Bank of China, interest rates at 5.76% per annum, due August 26, 2014	$	5,225,363		$	-	Building, machinery and equipment and land use rights
Balance at the end of period	$	5,225,363		$	-

These loans were obtained and used by Yanglin for upgrading its products and expanding storage facilities. Interest expense for the nine months ended September 30, 2010 and 2009 was $24,778 and $0, respectively. Interest expense for the three months ended September 30, 2010 and 2009 was $24,778 and $0, respectively.

32

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

13. LONG-TERM BANK LOAN(Continued)

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

For the twelve months ended September 30,
2011	$	-
2012		1,194,368
2013		1,343,665
2014		1,343,665
2015		1,343,665
Total	$	5,225,363

14. RELATED PARTIES TRANSACTIONS

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

	September 30,  2010			December 31,  2009
	(unaudited)
Loans from certain employees, interest rates at 7.722% and 9.405% per annum respectively, with various installments, due October 28, 2016	$	321,703		$	367,867
Current portion due within one year		(56,073	)		(53,676	)
	$	265,630		$	314,191

These loans were obtained and used by Yanglin for working capital. Interest expense for the nine months ended September 30, 2010 and 2009 was $19,391 and $25,235, respectively, and interest paid for the three months ended September 30, 2010 and 2009 was $6,228 and $7,883, respectively.

33

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

14. RELATED PARTIES TRANSACTIONS (Continued)

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

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

For the twelve months ended September 30,
2011	$	56,073
2012		45,634
2013		47,829
2014		51,600
2015		55,670
Thereafter		64,897
Total	$	321,703

(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, the Company’s 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, and 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 as of September 30, 2010 and for the nine months ended September 30, 2010 and 2009, respectively.

34

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

14. RELATED PARTIES TRANSACTIONS (Continued)

(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 based on the closing market price of $4.48 per share on December 31, 2008. This charge was the same as the restatement of beginning retained earnings as of January 1, 2009. These shares have not been transferred as of September 30, 2010, as the Company is now negotiating with the Series A Preferred Investors as to whether the transfer of these shares will be made or waived.

15. 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:

	Number of warrants
Series of warrant	9/30/2010		12/31/2009		9/30/2009		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 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		16,500,000		16,500,000

35

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

15. CONVERTIBLE PREFERRED STOCK AND WARRANTS (Continued)

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

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

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

36

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

16. CONVERTIBLE PREFERRED STOCK AND WARRANTS

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

During the year ended December 31, 2009, 465,116 shares of Series A Convertible Preferred Stock were converted into 465,116 shares of common stock.

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

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

37

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

16. CONVERTIBLE PREFERRED STOCK AND WARRANTS (Continued)

In connection with the sale of the Series A Convertible Preferred Stock and Series E and F warrants, the Company agreed that if the Company does not file, or if the registration statements aren’t declared effective throughout the required period, or if the Company ceases to trade on certain exchanges as defined, the Company shall pay damages equal to 1.5% of the amount invested for each calendar month capped at a cumulative damage payment amount of 15%. In connection with the sale of the Series A Convertible Preferred Stock during October 2007, the Company committed to apply to list and have its shares of common stock traded on the Nasdaq Capital Market, the Nasdaq Global Select Market or the Nasdaq Global Market or any successor market thereto (collectively, “Nasdaq”), or the New York Stock Exchange or any successor market thereto (together with Nasdaq, each a “National Stock Exchange”), no later than December 31, 2008. As a result of failing to achieve such listing, the Company’s majority shareholder, Winner State Investments Limited, committed to transfer 1,000,000 shares of common stock in the Company to the purchasers of shares of Series A Convertible Preferred Stock of the Company. The Company has accounted for this as a contribution of capital by its majority stockholder and recorded a charge to operations in the amount of $4,480,000 for the year ended December 31, 2008. Such shares were valued based on the closing market price of $4.48 per share on December 31, 2008.

Pursuant to the Registration Rights Agreement dated as of October 3, 2007 by and among the Company and certain holders (the Holders), the Company agreed to have a registration statement registering certain of the securities of the Holders declared effective with the Securities and Exchange Commission (“SEC”) on or prior to the Effectiveness Date defined in the Registration Rights Agreement, which was December 31, 2008, or pay the liquidated damages.

Although the registration statement was not declared effective as of December 31, 2008 (the Effectiveness Date), pursuant to a Waiver and Release dated December 31, 2008, the Holders have waived their right to the liquidated damages for the Company’s failure to have the registration statement declared effective on or prior to the Effectiveness Date under Registration Rights Agreement.

38

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

16. 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 engaged UHY LLP, Inc. as its independent audit firm starting with the quarter ended June 30, 2009. On October 5, 2010, the Company dismissed its UHY from its engagement with the Company, which dismissal was effective immediately.  On October 5, 2010, the Company appointed Albert Wong & Co. as its new independent registered public accounting firm.

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.

39

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

16. CONVERTIBLE PREFERRED STOCK AND WARRANTS (Continued)

Effective January 1, 2009, the Company reclassified the fair value of these warrants from equity to liability, as if these warrants were treated as a derivative liability since their issuance in October 2007. On January 1, 2009, the Company recorded as a cumulative effect adjustment by decreasing additional paid-in capital by the amount of $15,003,941 and decreasing the beginning balance of retained earnings by the amount of $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 $54,326,566, $3,790,921 and $27,573,698 on September 30, 2009 and 2010 and December 31, 2009, respectively. The Company recognized $23,782,777 and $32,724,533 as income from the change in fair value of warrants for the nine months ended September 30, 2010, and 2009, respectively. The Company recognized $11,962,404 and $3,167,950 as income from the change in fair value of warrants for the three months ended September 30, 2010, and 2009, respectively.

The fair value was calculated using the Black-Scholes option pricing model. The assumptions that were used to calculate fair value of the warrants were as follows:

Investor Warrants:	September 30, 2010			September 30, 2009			December 31, 2009
Expected volatility		95.9	%		108.1	%		105	%
Risk free rate		0.64	%		1.45	%		1.7	%
Expected terms		2.01			3.01			2.76
Expected dividend yield		-			-			-

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.

40

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

16. CONVERTIBLE PREFERRED STOCK AND WARRANTS (Continued)

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.

After the expiration of the Series J Warrants on April 3, 2009, all of the unissued Series B convertible Preferred Shares were cancelled and reverted to the status of authorized but unissued preferred stock, undesignated as to series and subject to reissuance as shares of preferred stock of any one or more series as permitted by the Articles of Incorporation. There were no issued and outstanding shares of Series B Convertible Preferred Shares as of September 30, 2010 and December 31, 2009.

The following table summarizes warrant activity for the nine months ended September 30, 2010 and the year ended December 31, 2009:

	Warrants		Weighted- average exercise price		Aggregate  Intrinsic Value
Outstanding at December 31, 2009		16,500,000		2.97		2,370,000
Issued		-		-
Exercised		-		-
Expired		-		-
Outstanding at September 30, 2010		16,500,000	$	2.97	$	2,370,000

The terms of outstanding warrants as of September 30, 2010 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		2.01	$	2.97		16,500,000	$	2.97

41

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

17. 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 September 30, 2010, the Company granted 5,000 options to the independent director in connection with his service in the third quarter of 2010. The options have an exercise price of $1.01 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		99.65	%		0	%		1.27	%	$	3,761

The following is a summary of the option activity:

	Options		Weighted-average exercise price		Aggregate Intrinsic Value
Outstanding at December 31, 2009		15,000		3.02		-
Issued		15,000		2.00		-
Exercised		-		-		-
Expired		-		-		-
Outstanding at September 30, 2010		30,000	$	2.51	$	-

42

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

17. STOCK OPTIONS (Continued)

Following is a summary of the status of options outstanding at September 30, 2010:

		Options outstanding						Options exercisable
Range of exercise prices		Number outstanding		Weighted average remaining contractual life  (years)		Weighted average exercise price		Number exercisable		Weighted average exercise price
$	1.01-$3.10		30,000		4.25	$	2.51		30,000	$	2.51

For the nine months ended September 30, 2010 and 2009, the Company recognized $22,489 and $22,938 as compensation expense for the stock options granted to the independent director, respectively. For the three months ended September 30, 2010 and 2009, the Company recognized $3,761 and $11,646 as compensation expense for the stock options granted to the independent director, respectively.

43

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

18. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share attributable to the common stockholders is based on the following data for the three and nine months ended September 30 (unaudited):

	Three months ended September 30					Nine months ended  September 30
	2010		2009			2010			2009
			(as restated)						(as restated)
Numerator
Earnings:
Earnings (loss) for the purpose of basic earnings per share	$	9,485,584	$	(2,545,682	)		$	16,031,156		$	19,806,281
Effect of dilutive potential common stock		-									-
Earnings (loss) for the purpose of dilutive earnings per share	$	9,485,584	$	(2,545,682	)		$	16,031,156		$	19,806,281
Denominator
Number of shares:
Weighted average number of common stock for the purpose of basic earnings per share		20,465,119		20,270,478				20,465,119			20,091,152
Effect of dilutive potential common stock - conversion of convertible preferred stock		9,534,883						9,534,883			9,651,162
Effect of dilutive potential common stock - conversion of warrants and stock options		-						-			2,291,754
Weighted average number of common stock for the purpose of dilutive earnings per share		30,000,002		20,270,478				30,000,002			32,034,068

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

44

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

19. INCOME TAXES

As of September 30, 2010, the Group had net operating tax losses carried forward of $21,664,444, which includes $574,577 and $21,089,867 in the US and PRC, respectively. Those losses carried forward in the US and PRC will expire between years 2013 and 2029. The Group has established a full valuation allowance against its net deferred tax assets due to the Group’s history of pre-tax losses and the resulting likelihood that the deferred tax assets are not realizable.

The Group has not recorded any income tax provision for the three and nine months ended September 30, 2010, since the Group has estimated that its estimated annual effective income tax rate will be zero.

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 September 30, 2010 and December 31, 2009.

45

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

20. VARIABLE INTEREST ENTITY

The Company, as a primary beneficiary of Yanglin, consolidates Yanglin, as a Variable Interest Entity (“VIE”), of which we are the primary beneficiary. The liabilities recognized as a result of consolidating a VIE do not represent additional claims on our general assets; rather, they represent claims against the specific assets of the consolidated VIE. Conversely, assets recognized as a result of consolidating a VIE do not represent additional assets that could be used to satisfy claims against our general assets. Reflected in the September 30, 2010 and December 31, 2009 balance sheets are consolidated VIE assets of $66.15 and $81.9 million, respectively, which are comprised mainly of cash, inventory and property and equipment. VIE liabilities mainly consist of short term bank loans and payables for working capital.  

21. 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 VIE. These agreements may have restrictions on the ability of Yanglin to transfer funds to the Company through inter-company loans, advances and cash dividends which consist of additional paid in capital, statutory reserves and retained earnings of $44,187,226 and $51,548,050 respectively as at September 30, 2010 and December 31, 2009.

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

Balance Sheets as of September 30, 2010 and December 31, 2009

	2010		2009
	(unaudited)
Cash – restricted	$	247,961	$	278,018
Other prepayment				1,216
Investments in subsidiaries		51,941,347		58,363,646
Total assets	$	52,189,308	$	58,642,880
Other current liabilities	$	168,282	$	132,777
Warrant liabilities		3,790,921		27,573,698
Total liabilities		3,959,203		27,706,475
Total shareholders’ equity		48,230,105		30,936,405
Total liabilities and shareholders’ equity	$	52,189,308	$	58,642,880

46

YANGLIN SOYBEAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (AS RESTATED)

(UNAUDITED) (Stated in US Dollars)

21. PARENT-ONLY FINANCIAL STATEMENTS (Continued)

Statements of Operations and Other Comprehensive Income for the nine months ended September 30, 2010 and 2009 (unaudited)

	2010			2009
				(as restated)
Investment loss - equity method	$	(6,282,298	)	$	(12,478,817	)
General and administrative expenses		(229,268	)		(272,308	)
Loss from operations before income taxes		(6,511,566	)		(12,751,125	)
Change in fair value of warrants		23,782,777			32,724,533
Income before income taxes		17,271,211			19,973,408
Income taxes		-			-
Net income	$	17,271,211		$	19,973,408

47

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 our 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, 2009.

CAUTIONARY STATEMENT REGARDING FUTURE RESULTS,

FORWARD-LOOKING INFORMATION AND CERTAIN IMPORTANT FACTORS

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

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

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

Company Overview

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

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

The manufacturing process includes sifting, crushing, heating and pressing soybeans, extracting and separating oil from crushed soybeans, cleansing, hydrating and packaging of oil as well as drying and packaging soybean meal. Our main products include Grade IV soybean oil, salad oil and soybean meal. We broadened our product line to include value-added products such as squeezed oil, low temperature soybean meal and concentrated soy protein, and we plan to produce powdered oil, textured protein and defatted soybean powder in the future. Formal production of squeezed oil has already begun. We are now adjusting the formula and techniques used for powdered oil and we expect to start the formal production of this product within a few months. We are producing concentrated soy protein in small quantities of commercial grade product and making efforts to develop the market for this product. Defatted soy powder and textured protein may be launched at a later date, depending on trends in the market and the specific product economics.

We sell our products under the “Yanglin” brand name to various regions of the PRC through our many distribution channels. In the three months ended September 30, 2010, we generated total revenue of approximately $37.4 million with a net loss of $2.5 million, exclusive of a non-cash income of approximately $12.0 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 we 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 and market share, but 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. Our management has been conducting self assessment of the effectiveness of our internal control systems since 2008, and is continuously rectifying the weaknesses and deficiencies found in the process. We also hired outside financial consultants in 2009 to enhance our financial reporting capability.

Current Business Environment and Future Outlook

We believe that the PRC government still supports the development of the domestic non-GM soybean industry. At the end of November 2009, the government announced that it would grant domestic soybean processors a subsidy of approximately $23 per ton for soybeans purchased from farmers before April 30, 2010 at a government guided price. The subsidy may help to reduce the effective cost of sales of soybean processors. We have filed our application for the subsidy and it is currently being reviewed by several government agencies. Currently no decision has been made on our application. As of September 30, 2010, we have not accrued any such subsidy income since the approval and amount remain uncertain.

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It should be noted that, though the price of soybean is usually determined by market mechanisms, government policy may have a significant impact. Government influence over pricing is also a factor that materially influences our business environment. 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 that was about 10% higher than normal market prices to farmers. As mentioned above, the government only granted domestic soybean processors a subsidy for the soybeans they purchased if the purchase price was at or above a government guided price; this measure influenced the market price of soybeans.

There are several factors that may have adverse impact on our future, including:

● The harvest of genetically modified soybeans in US and South America may cause an increase in the volume of soybeans imported to the PRC at lower prices.

● Possible further appreciation of Renminbi (RMB) against USD in the future may also reduce the import price of genetically modified soybeans.

● The uncertainties in the subsidy and supporting policies of the PRC government regarding the domestic soybean industry.

We will continue to lobby the PRC government to grant us subsidies and issue new supporting policies. Meanwhile, we will continue to take strict cost saving measures and maintain our production at a suitable level. By actively observing the trends in our industry and in the general economy, we are positioned to exploit any opportunity for our products. Over the long-term, we believe that we are well positioned to benefit from the growth opportunities in the PRC and throughout the world.

Major Performance Factors

Revenue

We derive most of our revenue from the sales of the main products: soybean oil (4th grade), salad oil and soybean meal, and a small portion of our revenue is created by the sales of other products, including concentrated soybean protein, squeezed oil and low temperature 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 357,400 metric tons in 2009, 66,022 metric tons in the first quarter of 2010, 107,275 metric tons in the second quarter of 2010 and 80,777 metric tons in the third quarter of 2010, respectively. Based on these figures, it can be estimated that the current production capacity is sufficient for current demand. Since October 2009, Factory No. 2 has stopped the production of low temperature soybean meal due to the low protein content of the soybeans purchasedwhich was caused by unfavorable weather in 2009. Factory No. 2 represents 120,000  of the Company’s 520,000 tons in total annual processing capacity. The production volume of low temperature soybean meal occupied about a 4% share of the total annual production volume in 2009.  In the second quarter of 2010 we reinitiated the production of low temperature soybean meal, therefore we do not expect a significant impact on our total processing and production capacity.

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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, 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 refer mainly to soybeans and accounts for over 90% of the cost of sales (COS). Labor cost are relatively low and comprise a very small portion of COS. Production overhead includes auxiliary materials, utility expenses, machinery maintenance costs, inspection costs and other related expenses. Depreciation costs are applied to manufacturing facilities and equipment, such as production lines, steam generators, factory buildings, etc.

Cost of sales is 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.

Availability and price of raw materials, especially soybeans. Raw materials costs account for over 90% of cost of sales. 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 on national and international scale, weather, government policies and soybean transactions on commodity markets. Meanwhile, if there is a shortage in the supply of raw materials, our production facilities will have to operate at less than maximum efficiency. Our processing volume represents a relatively small portion of the total soybean supply of Heilongjiang Province; generally speaking the availability of raw materials is always high. Soybean price has a significant impact on our cost of sales.

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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 labor, production overhead and manufacturing related depreciation expenses are mostly fixed, generally speaking, the more we produce, the lower the unit cost. Our output ratio and operating efficiency are continuously improving, 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 mechanisms; however, government policy may have a significant impact. 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 that was about 10% higher than normal market prices to farmers. At the end of November 2009, the government decided to grant domestic soybean processors a subsidy of approximately $23 per ton if they purchase soybeans from farmers at a government guided price before a certain date. If the subsidy is received, it may help to reduce the effective cost of soybean processors. We have filed our application for the subsidy, and it is currently being reviewed by several government agencies. As of September 30, 2010, we have not accrued any such subsidy income since the actual approval and amount remains uncertain.

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. 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 of 7% to 9%, based on previous experience until 2008.

If exceptional circumstances exist, gross margin may be negatively affected. As mentioned above, a basic requirement for the domestic soybean processors to be entitled to the government subsidy announced in the end of 2009 is the purchase of soybeans from farmers at a government guided, higher than normal market price; the policy in effect made soybean prices increase from the end of 2009. Supported by the trend of increasing soybean futures prices on global commodity markets, the increased expectation of Chinese farmers on soybean prices helped maintain high price levels. However, prices of soybean products didn’t increase in line with that of soybeans. As a result, we suffered a gross loss in the third quarter of 2010.

Over the past few years, though especially in 2009, the profitability of our products has been greatly influenced by a combination of the following factors: the large and cheaper imports of genetically-modified (GM) soybeans which offered a low cost alternative to soybean processors and suppressed the prices of soybean products in China’s market.  At the same time the cost of our major raw material, domestic soybeans, was usually higher than that of imported ones. Unfavorable weather conditions, especially excessive rain, caused the production volume of soybean to decrease and its price to increase; the Chinese government conducted a national purchase of soybean and issued other policies to support the price of domestic soybeans at a relatively high level. In the near future, we expect our profitability to be significantly influenced by, in addition to the above-mentioned factors, the following, including but not limited to: the expected increase in soybean output of the United States and South America which may result in additional soybean imports to the PRC; the possible appreciation of the RMB against the USD, which may cause imported soybean to be cheaper; and uncertainties in the policies of the Chinese government.

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Operating Expenses

Operating expenses consist of selling expenses and general & administrative expenses. Operating expenses represent only a small portion of total costs and expenses.

Selling expenses generally include business development expenses, sales meeting expenses, loading and handling, advertising, sales-related staff salaries and welfare expenses, and travel expenses. They are usually relative to sales volume.

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

Income Tax

We are incorporated in the State of Nevada and Faith Winner (BVI) is incorporated under the laws of the British Virgin Islands.  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 a 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 tax regulations. In accordance with Income Tax Law applicable to domestic companies, we are generally subject to an enterprise income tax rate of 25%.

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However, as Yanglin has been recognized as a Key Leading Enterprise in the Industrialization of Agriculture Industry by the PRC’s central government, Yanglin enjoyed a complete exemption from income taxes until 2009. Our status is reviewed every two years. The latest review of Yanglin’s status of National Key Leading Enterprise in Agriculture was finished by the government in March 2010, and the status was granted to the Company for the period from January 2010 to June 2012. The Company received this government approval on May 7, 2010. Other than the PRC's central government's award, a review by the local tax authority is also required in order to enjoy a 2010 tax exemption.

Warrant Liability

Effective January 1, 2009, we adopted the provisions of FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815") (previously ElTF 07-5, "Determining Whether an Instrument (or an Embedded Feature) is Indexed to an Entity's Own Stock"). As a result of adopting ASC 815, warrants to purchase the Company's common stock previously treated as equity pursuant to the derivative treatment exemption were no longer afforded equity treatment as there was a down-round protection (full-ratchet down round protection). As a result, the warrants are not considered indexed to the Company's own stock, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings until such time as the warrants are exercised or expire.

Results of Operations

The Three Months Ended September 30, 2010 Compared with the Three Months Ended September 30, 2009

	The three months		The three months
Consolidated Statement of Operations and	Ended  September 30, 2010		Ended  September 30, 2009
Comprehensive (Loss) Income	($)		($)
			(as restated)
Net Sales	$	37,420,188	$	39,570,374
Cost of sales		(38,977,219)		(43,915,230)
Gross loss		(1,557,031)		(4,344,856)
Selling expenses		(61,496)		(26,764)
General and administrative expenses		(506,551)		(679,885)
Impairment loss of assets held for sale		(220,403)		(584,699)
Loss from operations		(2,345,481)		(5,636,204)
Interest income		18,256		18,676
Interest expense		(149,595)		(95,900)
Other expense		-		(204)
Changes in fair value of warrants		11,962,404		3,167,950
Income from operations before income tax		9,648,584		(2,545,682)
Income tax		-		-
Net income		9,648,584		(2,545,682)
Foreign currency translation adjustment		215,605		66,069
Comprehensive income (loss)	$	9,701,189	$	(2,479,613)

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Net Sales

	For The Three Months  Ended September 30,				Period to Period Change
	2010		2009
			(as restated)
Item	Amount ($)		Amount ($)		Amount ($)		%
Soybean meal	$	19,898,365	$	22,283,057	$	(2,384,692)		-10.7%
Soybean oil		10,433,779		10,374,699		59,080		0.6%
Salad oil		2,349,406		1,901,192		448,214		23.6%
Squeezed oil		357,674		320,953		36,721		11.4%
Soy protein concentrates		703,084		1,047,108		(344,024)		-32.9%
Low temperature soy meal		3,677,881		3,643,364		34,517		0.9%
Total Net Sales	$	37,420,188	$	39,570,374	$	(2,150,185)		-5.4%

Our net sales for the three months ended September 30, 2010 decreased by $2,150,185 or 5.4% over the three months ended September 30, 2009. The slight decrease in sales revenue was mainly the result of adjustment of operation levels due to reduced supply of raw material caused mainly by farmers’ high price expectation.

In the third quarter of 2010, as in the first two quarters of 2010 and the 4th quarter of 2009, we were using soybeans harvested in October 2009 as raw materials. In the first quarter of 2010, the local farmers were eager to sell the soybeans because the soybean processors must purchase them at a government guided price, which was higher than normal market price, if they wanted to qualify for the subsidy announced by the government in the end of 2009. The guided price expired at the end of April 2010, so the price of soybeans went down in the second quarter, and we purchased soybeans at a volume much higher than that of the same period in 2009. When the third quarter began, there was greatly reduced quantity of soybean available on the market, and the farmers were reluctant to sell these remaining stocks because they expected an increase in future soybean prices, based on the previous price-supporting policies of the Chinese government and the rising trend of soybean prices in the international futures market. As a result, we had to reduce our purchase volume and hence production and sales volume.

In the three months ended September 30, 2010, we purchased 70,549 tons of soybean and produced 54,746 tons of soybean meal, 10,810 tons of soybean oil, 2,320 tons of salad oil, 296 tons of squeezed oil, 784 tons of soy protein concentrates and 7,560 tons of low-temperature soybean meal, as compared to 76,820 tons of soybean purchased, and 60,320 tons of soybean meal, 12,142 tons of soybean oil, 2,320 tons of salad oil, 295 tons of squeezed oil, 979 tons of soy protein concentrates and 8,151 tons of low-temperature soybean meal produced respectively, in the three months ended September 30, 2009. Consequently, in the third quarter of 2010, we sold 55,033 tons of soybean meal, 10,949 tons of soybean oil, 2,384 tons of salad oil, 311 tons of squeezed oil, 605 tons of soy protein concentrates, and 6,446 tons of low-temperature soy meal, representing growth rates of -5.9%, -7.7%, 14.6%, 5.5%, -41.6% and -8.5%, respectively over the third quarter of 2009, when we sold 58,509 tons of soybean meal, 11,860 tons of soybean oil, 2,080 tons of salad oil, 295 tons of squeezed oil, 1,035 tons of soy protein concentrates, and 7,043 tons of low-temperature soy meal. Though the average sales prices of the products, namely soybean meal, soybean oil, salad oil, squeezed oil, soy protein concentrates, and low-temperature soy meal, experienced growth rates of -5.9%, 8.0%, 6.9%, 4.7%, 13.9% and 9.3% in the third quarter of 2010 over those in the third quarter of 2009, such increases couldn’t fully compensate for the decrease in sales volume, resulting in a decline in total sales revenue.

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Cost of Sales and Gross (Loss) Profit

	For The Three Months Ended September 30,								Period to Period Change
					2009		%
	2010		% of Sales		(as restated)		of Sales
Cost of Sales:	Amount ($)		Revenue		Amount ($)		Revenue		Amount ($)		%
Soybean meal	$	(21,206,098)		106.6%	$	(24,775,695)		111.2%	$	3,569,597		-14.4%
Soybean oil		(10,632,299)		101.9%		(11,438,024)		110.2%		805,725		-7.0%
Salad oil		(2,461,947)		104.8%		(2,097,343)		110.3%		(364,604)		17.4%
Squeezed oil		(376,750)		105.3%		(359,683)		112.1%		(17,067)		4.7%
Soy protein concentrates		(698,101)		99.3%		(1,190,794)		113.7%		492,693		-41.4%
Low-temp soy meal		(3,602,023)		97.9%		(4,053,692)		111.3%		451,669		-11.1%
Total Cost of Sales	$	(38,977,219)		104.2%	$	(43,915,230)		111.0%	$	4,938,012		-11.2%
Gross (Loss) Profit:
Soybean meal	$	(1,307,733)		-6.6%	$	(2,492,638)		-11.2%	$	1,184,905		47.5%
Soybean oil		(198,521)		-1.9%		(1,063,325)		-10.2%		864,804		81.3%
Salad Oil		(112,541)		-4.8%		(196,151)		-10.3%		83,610		42.6%
Squeezed oil		(19,076)		-5.3%		(38,730)		-12.1%		19,654		50.7%
Soy protein concentrates		4,983		0.7%		(143,686)		-13.7%		148,669		103.5%
Low-temp soy meal		75,857		2.1%		(410,328)		-11.3%		486,185		118.5%
Total Gross  Profit (Loss)	$	(1,557,031)		-4.2%	$	(4,344,856)		-11.0%	$	2,787,825		64.2%

Our cost of sales for the three months ended September 30, 2010 decreased by $4,938,012 or 11.2% over the three months ended September 30, 2009, as restated, while the ratio of cost as a percentage to net sales value decreased from 111.0% to 104.2% over the period. The decrease in cost of sales was mainly caused by the decrease in purchasing and sales volume as well as the decrease in average purchase price of soybeans. We recorded a gross loss of $1,557,031 in the three months ended September 30, 2010, in comparison to a gross loss of $4,344,856 in the three months ended September 30, 2009. Our gross profit margin improved from negative 11.0% to negative 4.2% over the same period. The main reasons for the gross loss in the second quarter of 2010 were the impact of the large imports of soybeans and the high price levels of soybeans.

As mentioned in the section “net sales” above, when the third quarter began, there was a greatly reduced quantity of soybean supply available on the market, and the farmers were reluctant to sell these remaining stocks because they expected an increase in future soybean prices, based on the previous price-supporting policies of Chinese government and the rising trend of soybean prices in international futures markets. As a result, we had to reduce our purchase volume and hence production and sales volume. In the third quarter of 2010, we purchased 70,549 tons of soybean, a decrease of 8.2% from 76,820 tons of soybean in the same period a year ago. Consequently, the sales volume of most of our products experienced declines over the period (please refer to the section “net sales” above).

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Meanwhile, the average purchase price of soybeans in the third quarter of 2010, RMB 3,065 per ton, was much lower than that in the same period of 2009 when it was RMB 3,234. In the third quarter of 2009, the soybeans available on the market were harvested in October 2008, so their price was supported by the Chinese government’s national strategic purchase which began in the end of 2008. While in the third quarter of 2010 the prices of soybeans were still high, the average purchase price wasn’t as high as that in the third quarter of 2009, as the national purchase ended in June 2009. The aforementioned two factors helped to reduce the total cost of sales in the third quarter of 2010, as compared to the same period of 2009.

The PRC has long imported large volumes of genetically-modified (GM) soybeans from the U.S. and South America. The aggregate import volume reached 42.55 million tons in 2009, an increase of 13.7% over that of 2008, while the average monthly volume was 3.55 million tons. It is estimated that China’s import volume in 2010 may reach 47 million tons. The imported soybeans were usually sold at prices lower than that of domestically produced soybeans, representing a low cost alternative for domestic processors, which previously used domestic soybeans as raw materials. Importation of GM soybeans significantly influenced price levels in the PRC’s domestic market for soybean products, and hence their profitability. Such negative influence was aggravated by the high prices of domestic non-GM soybeans. As a result, we suffered a gross loss in the third quarter of 2010, though the negative gross margin was improved as compared to the same period of 2009 because the strong demand for soybean products in 2010 helped to raise the prices of soybean products.

Operating Expenses

	For The Three Months Ended September 30,
					2009				Period to Period
	2010		% of Sales		(as restated)		% of Sales		Change
	Amount ($)		Revenue		Amount ($)		Revenue		Amount ($)		%
Selling Expenses	$	(61,496)		0.2%	$	(26,764)		0.1%	$	(34,732)		129.8%
General & Administrative Expenses		(506,551)		1.4%		(679,885)		1.7%		173,334		-25.5%
Impairment loss of long-lived assets		(220,403)		0.6%		(584,699)		1.5%		(364,296)		-62.3%
Total Operating Expenses	$	(788,450)		2.1%	$	(1,291,348)		3.3%	$	502,898		-38.9%

Selling expenses for the three months ended September 30, 2010 increased by 129.8% as compared to the three months ended September 30, 2009, as restated. In the third quarter of 2009, we reclassified the amortization expense of a railway for transporting finished goods into cost of sales. In the third quarter of 2010, we decided not to reclassify this item, as the nature of the usage of this railway is more related to selling activities than production. As a percentage of net sales, selling expenses increased from 0.1% to 0.2% over the period.

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General and administrative expenses for the three months ended September 30, 2010 decreased by 25.5% over the three months ended September 30, 2009, as restated. This was mainly caused by the material reduction in the expenses related to public company affairs, including professional fees paid to legal counsel. As a percentage of net sales, general and administrative expenses decreased from 1.7% for the third quarter of 2009 to 1.4% for the third quarter of 2010.

During the quarter ended September 30, 2010, the Group reviewed the idle production facility, which had been identified as impaired and was reclassified to assets held for sale in the third quarter of 2009. The Group found that these assets had been further impaired, because the market value for such assets decreased and there was currently no market for these assets. Therefore we took an impairment charge on these assets and wrote them off in our accounts.

As compared to the third quarter of 2009, total operating expenses decreased by 38.9% in the third quarter of 2010, and the percentage of net sales decreased from 3.3% to 2.1%.

Net Income

	For The Three Months Ended September 30,
				2009			Period to Period
	2010		% of Sales	(as restated)		%of Sales	Change
	Amount ($)		Revenue	Amount ($)		Revenue	Amount ($)		%
Loss from operations	$	(2,345,481)	-6.3%	$	(5,636,204)	-14.2%	$	3,290,723		-58.4%
Interest expenses		(149,595)	0.4%		(95,900)	0.2%		(53,695)		56.0%
Interest income		18,256	0.0%		18,676	0.0%		(420)		-2.2%
Other (expense) income		0	0.0%		(204)	0.0%		204		-100.0%
Changes in fair value of warrants		11,962,404	32.0%		3,167,950	8.0%		8,794,454		277.6%
Income tax		-	-		-	-		-		-
Net income	$	9,485,584	25.3%	$	(2,545,682)	-6.4%	$	12,031,266		472.6%

Loss from operations was primarily due to aforementioned reasons in the sections “Net Sales” and “Cost of Sales and Gross Profit” above. For the third quarter of 2010, we generated a gross loss and a loss after deducting selling and general and administrative expenses. Operating margin improved from negative 14.2% to negative 6.3% from the third quarter of 2009 to the third quarter of 2010.

Interest expenses increased by 56.0% from the three months ended September 30, 2009, as restated, to the three months ended September 30, 2010. As a percentage of net sales, interest expense was 0.4% for the third quarter of 2010, as compared to 0.2% for the same period in 2009. The changes were mainly caused by increased bank borrowing amounts. This was used to satisfy increased working capital needs. Interest income decreased by 2.2% over the same period.

Effective January 1, 2009, we adopted the provisions of FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815"). As a result of adopting ASC 815, we recorded non-cash income of $3,167,950 for the third quarter of 2009, as restated, and $11,962,404 for the third quarter of 2010, 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.

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Since Yanglin has been recognized as a “Key Leading Enterprise” in the industrialization of the agriculture industry by the Chinese government, Yanglin has qualified for a complete exemption from income taxes through 2009. This status is usually reviewed every two years, according to a government order. The latest review of Yanglin’s status of National Key Leading Enterprise in Agriculture was finished by the government in March 2010, and the status was granted to the Company for the period from January 2010 to June 2012. The Company received government approval on May 7, 2010. Other than the PRC's central government's award, a review by the local tax authority is also required in order to enjoy a 2010 tax exemption.

Net income, after including the abovementioned non-cash income from the change in fair value of warrants, increased by 472.6% from the three months ended September 30, 2009, as restated, to the three months ended September 30, 2010. During the same period, net profit margin improved from a negative 6.4% to a positive 25.3%.

Earnings Per Share

	For The Three Months Ended September 30,
	2010		2009
	Unaudited		Unaudited As restated
Net Income (Loss) for Basic Earnings Per Share	$	9,485,584	$	(2,545,682)
Basic Weighted Average Number of Shares		20,465,119		20,270,478
Net Income (Loss) per Share – Basic	$	0.46	$	(0.13)
Net Income (Loss) for Diluted Earnings Per Share	$	9,485,584	$	(2,545,682)
Diluted Weighted Average Number of Shares		30,000,002		20,270,478
Net Income (Loss) per Share – Diluted	$	0.32	$	(0.13)

Basic and diluted earnings per share (EPS) for the quarter ended September 30, 2010, were $0.46 and $0.32, compared to $(0.13) and $(0.13) for the same quarter last year, as restated.

The Nine Months Ended September 30, 2010 Compared with the Nine Months Ended September 30, 2009

	The nine months			The nine months
Consolidated Statement of Operations and	Ended  September 30, 2010			Ended  September 30, 2009
Comprehensive (Loss) Income	($)			($)
				(as restated)
Net Sales	$	121,444,716		$	122,358,237
Cost of sales		(125,607,377	)		(132,058,859	)
Gross profit (loss)		(4,162,661	)		(9,700,622	)
Selling expenses		(193,411	)		(156,317	)
General and administrative expenses		(2,165,724	)		(2,041,925	)
Impairment loss of assets held for sale		(572,150	)		(584,699	)
Loss on disposal of property, plant and equipment		-			(230,025	)
Loss from operations		(7,093,946	)		(12,713,588	)
Interest income		(727,072	)		(341,417	)
Interest expense		69,748			137,988
Other (expenses) income		(351	)		(1,235	)
Changes in fair value of warrants		23,782,777			32,724,533
Income from operations before income tax		16,031,156			19,806,281
Income tax		-			-
Net income		16,031,156			19,806,281
Foreign currency translation adjustment		1,075,030			167,127
Comprehensive income	$	17,106,186		$	19,973,408

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Net Sales

	For The Nine Months Ended September 30,				Period to Period Change
			2009
	2010		(as restated)
Item	Amount ($)		Amount ($)		Amount ($)		%
Soybean meal	$	74,245,942		76,056,195		(1,810,253)		-2.4%
Soybean oil		33,989,793		32,297,294		1,692,499		5.2%
Salad Oil		6,295,113		5,621,162		673,951		12.0%
Squeezed oil		931,845		764,432		167,413		21.9%
Soy protein concentrates		1,115,631		1,402,052		(286,421)		-20.4%
Low temperature soy meal		4,866,392		6,217,102		(1,350,710)		-21.7%
Total Net Sales	$	121,444,716		122,358,237		(913,521)		-0.7%

Net sales for the nine months ended September 30, 2010 decreased by $913,521 or 0.7% over the nine months ended September 30, 2009. The slight decrease in sales revenue was mainly the result of the adjustment of operating levels due to reduced supply of raw material caused by farmers’ high price expectations.

In the first three quarters of 2010, as in the 4th quarter of 2009, we used soybeans harvested in October 2009 as raw materials. In the first quarter of 2010, local farmers were eager to sell the 2009 soybeans because processors were required to purchase soybeans at a government guided, higher than normal, market price if they wanted to qualify for the subsidy announced by the government in the end of 2009. The guided price expired at the end of April 2010, so the price of soybeans went down in the second quarter and we purchased soybeans at a volume much higher than that of the same period in 2009. When the third quarter began, there was a greatly reduced quantity of soybean supply available on the market, and the farmers were reluctant to sell their remaining stocks because they expected future price increases for soybean, based on the previous price-supporting policies of the Chinese government and the rising trend of soybean prices in international futures markets. As a result, we had to reduce our purchase volume and hence production and sales volume. In total, the purchase volume of soybeans and hence the production and sales volume in the first three quarters of 2010 were lower than those in the first three quarters of 2009.

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In the nine months ended September 30, 2010, we purchased 243,561 tons of soybeans and produced 189,072 tons of soybean meal, 35,439 tons of soybean oil, 6,184 tons of salad oil, 787 tons of squeezed oil, 1,045 tons of soy protein concentrates and 10,075 tons of low-temperature soybean meal, as compared to 269,118 tons of soybean purchased, and 201,189 tons of soybean meal, 39,012 tons of soybean oil, 6,269 tons of salad oil, 699 tons of squeezed oil, 1,655 tons of soy protein concentrates and 14,892 tons of low-temperature soybean meal produced respectively, in the three months ended September 30, 2009. Consequently, in the first three quarters of 2010, we sold 192,893 tons of soybean meal, 35,635 tons of soybean oil, 6,354 tons of salad oil, 800 tons of squeezed oil, 966 tons of soy protein concentrates, and 8,516 tons of low-temperature soy meal, representing growth rates of -3.5%, -7.3%, 0.6%, 14.5%, -30.3% and - -29.5%, respectively over the first three quarters of 2009, when we sold 199,888 tons of soybean meal, 38,458 tons of soybean oil, 6,313 tons of salad oil, 699 tons of squeezed oil, 1,385 tons of soy protein concentrates, and 12,085 tons of low-temperature soy meal. Though the average sales prices of the products, namely soybean meal, soybean oil, salad oil, squeezed oil, soy protein concentrates, and low-temperature soy meal, experienced growth rates of 0.8%, 13.1%, 10.9%, 6.1%, 13.7% and 10.7% in the third quarter of 2010 over those in the third quarter of 2009, the increases couldn’t fully compensate for the decrease in sales volume, resulting in a decline in total sales revenue.

Cost of Sales and Gross (Loss) Profit

	For The Nine Months  Ended September 30,								Period to Period Change
					2009		%
	2010		% of Sales		(as restated)		of Sales
Cost of Sales:	Amount ($)		Revenue		Amount ($)		Revenue		Amount ($)		%
Soybean meal	$	(77,772,014)		104.7%	$	(81,997,732)		107.8%	$	4,225,718		-5.2%
Soybean oil		(34,535,077)		101.6%		(34,654,692)		107.3%		119,615		-0.3%
Salad oil		(6,469,295)		102.8%		(6,000,401)		106.7%		(468,894)		7.8%
Squeezed oil		(961,307)		103.2%		(853,165)		111.6%		(108,142)		12.7%
Soy protein concentrates		(1,113,903)		99.8%		(1,610,849)		114.9%		496,946		30.8%
Low-temp soy meal		(4,755,781)		97.7%		(6,942,020)		111.7%		2,186,239		31.5%
Total Cost of Sales		(125,607,377)		103.4%		(132,058,859)		107.9%		6,451,482		4.9%
Gross (Loss) Profit:
Soybean meal	$	(3,526,071)		-4.7%	$	(5,941,537)		-7.8%	$	2,415,466		40.7%
Soybean oil		(545,284)		-1.6%		(2,357,398)		-7.3%		1,812,113		76.9%
Salad Oil		(174,181)		-2.8%		(379,239)		-6.7%		205,058		54.1%
Squeezed oil		(29,462)		-3.2%		(88,733)		-11.6%		59,271		66.8%
Soy protein concentrates		1,727		0.2%		(208,797)		-14.9%		210,524		100.8%
Low-temp soy meal		110,611		2.3%		(724,918)		-11.7%		835,530		115.3%
Total Gross  Profit (Loss)	$	(4,162,661)		-3.4%	$	(9,700,622)		-7.9%	$	5,537,961		57.1%

Our cost of sales for the nine months ended September 30, 2010 decreased by $6,451,482 or 7.3% over the nine months ended September 30, 2009, as restated, while the ratio of cost as a percentage to net sales value decreased from 107.9% to 103.4% over the period. The decrease in cost of sales was mainly caused by the decrease in processing and sales volume in the first three quarters of 2010 from the first three quarters of 2009. We recorded a gross loss of $4,162,661 in the nine months ended September 30, 2010, in comparison to a gross loss of $9,700,622 in the nine months ended September 30, 2009. Our gross profit margin improved from negative 7.9% to negative 3.4% over the same period. The main reasons for the gross loss for the nine months ended September 30, 2010 were the impact of the large imports of soybeans and the high price levels of soybeans.

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As mentioned in the section “net sales” above, after the guided price expired at the end of April 2010, there was a greatly reduced quantity of soybean supply available on the market. Farmers were reluctant to sell their remaining stocks because they expected future increases in soybean prices, based on the previous price-supporting policies of the Chinese government and the rising trend of soybean prices in international futures markets. As a result, we had to reduce our purchase volume and hence production and sales volume. In the first three quarters of 2010, we purchased 243,561 tons of soybeans, a decrease of 9.5% from 269,118 tons of soybean in the same period a year ago. Consequently, the sales volume of most of our products experienced declines over the period (please refer to the section “net sales” above).

Meanwhile, the average purchase price of soybeans in the first three quarters of 2010, RMB 3,159 per ton, was about 0.3% higher than that in the same period of 2009, RMB 3,148. However, this slight increase could not fully compensate for the decrease in the sales volumes of our products. As a result, the total cost of sales in the first three quarters of 2010 was lower than that in the same period of 2009.

The PRC has long imported large volumes of genetically-modified (GM) soybeans from the U.S. and South America. The aggregate import volume reached 42.55 million tons in 2009, an increase of 13.7% over that of 2008, while the average monthly volume was 3.55 million tons. It’s estimated that China’s import volume in 2010 may reach 47 million tons. The imported soybeans were usually sold at prices lower than that of domestically produced soybeans, representing a low cost alternative for domestic processors, which previously used domestic soybeans as raw materials. Importation of GM soybeans significantly influenced price levels in the PRC’s domestic market for soybean products, and hence their profitability. Such negative influence was aggravated by the high prices of domestic non-GM soybeans. As a result, we suffered a gross loss in the first three quarters of 2010, though the negative gross margin was improved as compared to the same period one year ago, because the strong demand for soybean products in 2010 helped to raise the prices of these products.

Operating Expenses

	For The Nine Months Ended September 30,
							2009						Period to Period
	2010			% of Sales			(as restated)			% of Sales			Change
	Amount ($)			Revenue			Amount ($)			Revenue			Amount ($)			%
Selling Expenses	$	(193,411	)		0.2	%	$	(156,317	)		0.1	%	$	(37,094	)		23.7	%
General & Administrative Expenses		(2,165,724	)		1.8	%		(2,041,925	)		1.7	%		(123,799	)		6.1	%
Impairment loss of long-lived assets		(572,150	)		0.5	%		(584,699	)		0.5	%		12,549			-2.1	%
(Loss) gain on disposal of property, plant and equipment		-			-			(230,025	)		0.2	%		230,025			-
Total Operating Expenses	$	(2,931,285	)		2.4	%	$	(3,012,966	)		2.5	%	$	81,681			-2.7	%

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Selling expenses for the nine months ended September 30, 2010 increased by 23.7% as compared to the six months ended June 30, 2009, as restated. This increase was mainly due to the reclassification of the amortization expense of a railway for transporting finished goods into cost of sales in the third quarter of 2009. In the third quarter of 2010, we thought it would be more appropriate not to reclassify this item, as the nature of the usage of this railway is more related to selling activities than to production. As a percentage of net sales, selling expenses increased from 0.1% to 0.2% over the period.

General and administrative expenses for the nine months ended September 30, 2010 increased by 6.1% over the nine months ended September 30, 2009, as restated. Though there was a material reduction in the expenses related to public company affairs, including professional fees paid to legal counsel, the depreciation expenses included in general and administrative expenses increased materially as the depreciation on the idle salad production facility, which was considered impaired since the third quarter of 2009, and the temporarily idle powdered oil production facility were included in general and administrative expenses while they were included in cost of sales previously. As a percentage of net sales, general and administrative expenses increased from 1.7% for the first three quarters of 2009 to 1.8% for the first three quarters of 2010.

During the nine months ended September 30, 2010, the Group reviewed the idle production facility, which had been identified as impaired and was reclassified to assets held for sale in the third quarter of 2009. The Group found that these assets had been further impaired, because the market value for such assets decreased and there was currently no market for these assets. Therefore we took an impairment charge on these assets and wrote them off in our accounts.

As compared to the first three quarters of 2009, total operating expenses decreased by 2.7% in the first three quarters of 2010, and the percentage of net sales decreased from 2.5% to 2.4%.

Net Income

	For The Nine Months Ended September 30,
								2009							Period to Period
	2010				% of Sales			(as restated)				%of Sales			Change
	Amount ($)				Revenue			Amount ($)				Revenue			Amount ($)				%
Loss from operations		$	(7,093,946	)		-5.8	%		$	(12,713,588	)		-10.4	%		$	5,619,642			-44.2	%
Interest expenses			(727,072	)		0.6	%			(341,417	)		0.3	%			(385,655	)		113.0	%
Interest income			69,748			0.1	%			137,988			0.1	%			(68,240	)		-49.5	%
Other (expense) income			(351	)		0.0	%			(1,235	)		0.0	%			884			-71.6	%
Changes in fair value of warrants			23,782,777			19.6	%			32,724,533			26.7	%			(8,941,756	)		-27.3	%
Income tax			-							-							-			-
Net income		$	16,031,156			13.2	%		$	19,806,281			16.2	%		$	(3,775,125	)		-19.1	%

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Loss from operations was primarily due to the aforementioned reasons in the sections “Net Sales” and “Cost of Sales and Gross Profit” above. For the nine months ended September 30, 2010, we generated a gross loss and a loss after deducting selling and general and administrative expenses. Operating margin improved from negative 10.4% to negative 5.8%.

Interest expenses increased by 113.0% from the nine months ended September 30, 2009, as restated, to the nine months ended September 30, 2010. As a percentage of net sales, interest expense was 0.6% for the nine months ended September 30, 2010, as compared to 0.3% for the same period in 2009. The changes were mainly caused by a material increase in bank borrowing amounts. This was used to satisfy increased working capital needs. Interest income fell by 49.5% over the same period.

Effective January 1, 2009, we adopted the provisions of FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815"). As a result of adopting ASC 815, we recorded non-cash income of $32,724,533 for the nine months ended September 30, 2009, as restated, and $23,782,777 for the nine months ended September 30, 2010, 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 Yanglin has been recognized as a “Key Leading Enterprise” in the industrialization of the agriculture industry by the Chinese government, Yanglin qualified for a complete exemption from income taxes through 2009. This status is usually reviewed every two years, according to a government order. The latest review of Yanglin’s status of National Key Leading Enterprise in Agriculture was finished by the government in March 2010, and the status was granted to the Company for the period from January 2010 to June 2012. The Company received government approval on May 7, 2010. Other than the PRC's central government's award, a review by the local tax authority is also required in order to enjoy a 2010 tax exemption.

Net income, after including the abovementioned non-cash income from the change in fair value of warrants, decreased by 19.1% from a net income of $19,806,281 in the nine months ended September 30, 2009, as restated, to a net income of $16,031,156 in the nine months ended September 30, 2010. During the same period, net profit margin decreased from 16.2% to 13.2%.

Earnings Per Share

	For The Nine Months  Ended September 30,
	2010		2009
	Unaudited		Unaudited As restated
Net Income for Basic Earnings Per Share	$	16,031,156	$	19,806,281
Basic Weighted Average Number of Shares		20,465,119		20,091,152
Net Income per Share – Basic	$	0.78	$	0.99
Net Income for Diluted Earnings Per Share	$	16,031,156	$	19,806,281
Diluted Weighted Average Number of Shares		30,000,002		32,034,068
Net Income per Share – Diluted	$	0.53	$	0.62

Basic and diluted earnings per share (EPS) for the nine months ended September 30, 2010, were $0.78 and $0.53, compared to $0.99 and $0.62 for the same period last year, as restated.

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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 higher than normal need for cash around harvest season. Under normal circumstances, our pattern of operations is as follows: (i) we will keep a large cash reserve until early October, the 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 through the end of the year and for the following quarter or even the following half year, we will have sufficient raw materials to maintain operations and convert finished products to cash, and (iii) we will repay the short-term loans by the end of June or July the following year.

The Group had a credit line facility with the ability to borrow up to $73.6 million (equivalent to RMB 492.9 million), with Agricultural Development Bank of China (the “Bank”). 

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 reserve, within the next twelve months.

Cash Flows for the Nine Months Ended September 30, 2010 Compared with the Nine Months Ended September 30, 2009

Operating Activities

Cash provided by operating activities for the nine months ended September 30, 2010 was $723,548, while cash provided by operating activities for the nine months ended September 30, 2009, as restated, was $604,292. The difference was primarily due to the reduction in the balance of our inventories by $7,101,408 in the nine months ended September 30, 2010, while in comparison we increased the balance of our inventories by $1,481,436 in the same period of 2009.

Our cash flows are stable, as we sell primarily on a cash basis, with negligible trade receivables. We usually sell our products a few days after they are produced.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2010 was $862,103, compared to net cash used in investing activities of $87,400 for the nine months ended September 30, 2009. The net cash used was mainly repayment for construction for the non-current assets we purchased or built.

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Financing Activities

Net cash used in financing activities was $6,624,536 for the nine months ended September 30, 2010, compared to net cash used in financing activities of $6,808,754 for the nine months ended September 30, 2009, as restated. Net cash used in the nine months ended September 30, 2010 included the release of certain restricted cash, which was previously used as collateral for certain bank loan and wasn’t required to be restricted cash after the specific loan was repaid, and the repayment of the principals of both the short-term loan from banks and the long-term loans from related parties. During the nine months ended September 30, 2010, we made principal payments for short-term bank loans of $8,068,775, and principal payments for loans from related parties amounted to $52,868. In the nine months ended September 30, 2009, we received cash of $6,575,842 from new bank loans and paid $13,301,136 and $110,322 of the principals of the short-term loans and the long-term loans from related parties, respectively.

Loans

We had short-term bank loans of $7,464,803 on September 30, 2010, as compared to $20,476,218 on December 31, 2009. These loans are used to satisfy working capital needs. We have fully repaid all due loans on time. The loan outstanding as at September 30, 2010 is due on June 27, 2011.

We had long-term bank loans of $5,225,363 on September 30, 2010, as compared to nil on December 31, 2009. These loans are used to upgrade our oil products and expand our storage facility. The loan outstanding as at September 30, 2010 is due on August 26, 2014.

The balance of our long-term bank loan from related parties, including the portion payable within one year, was approximately $321,703 on September 30, 2010, compared to $367,867 on December 31, 2009. The change was caused by repayment of the principal, and we did not borrow any additional funds during the nine months ended September 30, 2010.

Commitments and Contingencies

We have no future cash commitments or contingent liabilities as of September 30, 2010.

Critical Accounting Policies and Estimates

There have been no material changes to the Company’s Critical Accounting Policies and Assumption filed in the Company’s 2009 Annual Report on Form 10-K.

Economic and Political Risks

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

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Recent Accounting Pronouncements

In June 2009, the FASB issued ASC810.10, guidance to change financial reporting by enterprises involved with variable interest entities (“VIEs”) 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. This pronouncement 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. The guidance requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity. This guidance also requires additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. This guidance is effective for fiscal years beginning after November 15, 2009. This ASC was adopted on January 1, 2010 and had no material impact on the Company’s unaudited consolidated financial statements.

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.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

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

The following tables summarize our contractual obligations as of September 30, 2010, and the effect these obligations are expected to have on our liquidity and cash flows in future periods.

	Payments due by period
Contractual obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-Term Debt Obligations	$	321,703	$	56,073	$	93,463	$	107,270	$	64,897
Capital Lease Obligations		-		-		-		-		-
Operating Lease Obligations		-		-		-		-		-
Purchase Obligations		-		-		-		-		-

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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. Evaluation of 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, 2010.

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

Management conducted its evaluation of disclosure controls and procedures under the supervision of our chief executive officer and our chief financial officer. Based upon, and as of the date of this evaluation, our chief executive officer and chief financial officer concluded that, as of September 30, 2010, 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.

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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:

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

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

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

Remediation Initiative and Progress

We have engaged an accounting consulting firm to help with the preparation of the Company’s consolidated financial statements and deliver training to our own accounting staff on the selection and application of US GAAP and related SEC disclosure requirements. In addition, we have engaged a consulting firm to draft the accounting manual based on US GAAP. The draft has been prepared and is currently being reviewed by the management, and it will be released upon approval of the management and the audit committee.

b. Changes in Internal Controls over Financial Reporting

During the quarter ended September 30, 2010, 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.

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None 

ITEM 1A—RISK FACTORS

As a smaller reporting company, we are not required to provide the information required by this item.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. (REMOVED AND RESERVED)

None.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS

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

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

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

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SIGNATURES

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

	Yanglin Soybean, Inc.
Date: November 15, 2010	By:	/s/ SHULIN LIU
		Shulin Liu
		Chief Executive Officer (Principal Executive Officer)

	Yanglin Soybean, Inc.
Date: November 15, 2010	By:	/s/ SHAOCHENG XU
		Shaocheng Xu
		Chief Financial Officer (Principal Financial and Accounting Officer)

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