Roth China Tour- Sanya
Investor Presentation
May 23, 2008
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looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements relate to future events or to our future financial performance, and involve
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control and which could materially affect actual results, levels of activity, performance o
r achievements.
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Disclosure Statement
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Symbol: OTCBB: YGYB
Price (5/10/08): $3.25
Basic Shares Outstanding: 20MM
Fully Diluted Shares Outstanding: 22.2MM
Market Cap: $65MM
Enterprise Value: $-
TTM Revenues: $-
TTM EBITDA: $-
TTM Net Income: $-
EPS $-
P/E $-
Notes:
1.
Outstanding Warrants- 2,273,467 at $1.848 each.
2.
Make Good Shares- 2,000,000 shares held in Escrow for 2008 ATNI Guarantee
3.
First 10Q will cover Q2 – Filing Deadline August 14, 2008
Equity Snapshot
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Yongye Biotechnology
Company Overview
The predecessor company, Inner Mongolia Yongye Biotechnology Company, Ltd. was
founded in 2003 by Mr. Wu with the vision to commercialize 40 years of independent
laboratory research on the application of fulvic acid in agriculture
Inner Mongolia Yongye has invested heavily in developing the current processing technology
which allows the production of a cost effective commercial product
This company has become an innovative, well recognized leader in plant nutrition and is
under contract to transfer all business to Yongye Biotechnology International, Inc. via the
CJV set up in China
Innovative sales and marketing program to target direct buyers
Yongye Biotechnology’s Headquarters is in Beijing with contracted manufacturing site in
inner Mongolia
Key facts for Inner Mongolia Yongye:
2007A Revenue: $13.1 million
2007A Comprehensive Income: $5 million
Total Employees: Approximately 200
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Structure
CJV controls Yongye operations, IP,
sales income and future business
Contract
manufacturer for
CJV with option to
buy at minimum
PRC valued
purchase price
Inner Mongolia
Yongye
Biotechnology Co.
10%
Full Alliance (BVI)
Yongye
Management
Fullmax Pacific Ltd (BVI)
Asia Standard Oil (HK)
Yongye Nongfeng CJV
30.3%
Yongye Biotechnology Intl.
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2007
2004
2003
Yong Ye Group
founded by Mr. Wu
1994
Key Events Timeline
2003
2 patents
pending
$13.1M
revenue
2001
2005
2006
$3 million
revenue
First
product
sale
Inner
Mongolia
Yongye
Factory
opened
Established
Inner
Mongolia
Yongye
company
Founders
Conceptualize
nutritional
product lines
2005
2008
April 17th
$10M
PIPE/
RTO
Transaction
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Plant Products
Plant nutrient which contains its own nutrients and
supplements the absorption of fertilizer and soil minerals
Produces reliable, predictable results both in quality and
quantity
Enhances plant’s natural resistance against disease and pests
Increases the quantity of yields 10 to 50% and the quality of
yields in appearance and nutritional value
Increased water and nutrient holding capacity – especially in
adverse soil and weather conditions
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Product Differentiation
Plant Nutrient
Targets the seed
Crossbreeding, hybridization and genetic
modification techniques
Limited by soil condition
Limited by farming practices
Targets the plant - best via Foliar (direct) application
& known to correct micronutrient deficiencies
Immediate effect on plant- within 8 hrs
Increases Uptake of Soil Nutrients
Adds own Macro & Micro Nutrients
Very effective in China’s harsh soil conditions
Targets the soil
Slow uptake of nutrients – over days
Poor use damages the soil
Poor soil condition limits plants ability to uptake
nutrients 20-30%
Organic fertilizer has slow uptake (time released)
Biotechnology
Yongye Products
Fertilizer
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Product Differentiation
Yongye does not directly compete with fertilizer companies as it actually compliments
them
Farmers use our product along with traditional fertilizer products
Returns 10 RMB for every 1 RMB spent based on internal studies
Fertilizers alone lose 30 to 70% effectiveness due to poor soil conditions
Using our product:
Increases the fertilizer’s effectiveness 10 to 50%
Shortens harvest time 15 to 20 days
Enhances crop’s taste
Extends the life cycle from 20 to 30 days
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Competitive Advantages
Unique formula for both plants and animals
Strong endorsement from local governments where we sell product
Recognized and certified product offerings
Provide direct technical and support services to farmers who purchase products
Cost effective extraction of fulvic acid
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The Results for Plants
Stronger and larger roots in all plants
Shorter maturity time and higher yield
Fresher and healthier for consumers
Helps farmers increase their incomes
Grapes - increases weight of individual
grape 0.4g, 18.2%, increases sugar
content 37.5%
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Fulvic Acid
Humic acid is a natural compound consisting of black, brown and yellow components
Humic acid comes from Leonardite coal and China has 12% of the world’s reserves
Fulvic acid is extracted from Humic acid. Fulvic acid is a light weight molecule which
provides effective chelation of metal ions for uptake into cells
Fulvic acid is used in many high-end pharmaceutical, cosmetic, agricultural and food
products
The technology required for fulvic acid extraction is expensive and
creates a high barrier of entry for competitors in our industry
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Our Technology
2 pending invention patents covering 2
proprietary technologies
Our technology gives us an efficient way to
extract fulvic acid from humic acid on an
industrial scale
Our extraction process creates fulvic acid with
the smallest average molecular weight and
the highest bio-activity coefficient
We developed a proprietary method of mixing
micro-nutrient and stabilizing formula
Approved and certified by PRC Agricultural
Authority and National Scientific Institute
Yong Ye Products
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Fulvic acid for animals
Maximizes digestion for better health
Provides natural antibiotic
Product
Nutrients to mix with animal feed
Tested and approved for rollout
Cows
Increased milk production
Reduces mastitis in dairy cows
Hogs
Animals on the supplement experienced
better digestion
Increases weight for market sale
Poultry
Pullets on supplement experienced more
complete digestion
Pullets on supplement produced
superior eggs
New Animal Products
Future Products
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Contracted Facilities
Inner Mongolia Yongye Plant opened in 2004
Cost efficient production and assembly
process
Increasing from 2,000 TPA to 10,000 TPA
RMB 350 per unit flat fee cost for production
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Distribution Network
Using a community-direct sales model
with service and support
Separation of logistics and financing
from technical support and marketing
Independent, branded distributors
responsible for inventory, collection and
sales
Company centralized technical support,
marketing and service
Closely work with government agencies
to promote product and provide
financial guarantee for sales
Anticipated expansion from 200 branded
stores in 2007 to 650 in 2008
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Sales and Support Network
All of our distributors, branded stores and banner stores make use of our sales and
support network
In each province, we build up our sales and support functions which complement our
corporate marketing services
2007 sales staff of 80 and support staff of 11
2008 projections of 100 sales and 20 support staff
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Growth Campaign ‘08
Expansion of branded stores
Targeting 10 provinces which meet our criteria for
arable land for cash crops
Staged sales development process
Demonstration process creates awareness and
sales generation follows
Concentrating on 4 existing provinces with
projected expansion to 650 branded stores
Demonstration process starting in 6 new provinces
which includes small amount of sales
Production facility
Anticipated expansion of capacity at main contract
manufacturer
Sales and marketing
Infomercial campaign on local channels to educate
farmers and to help them alter usage patterns
Adding industry recognized staff to increase sales
capacity
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Land
Production
Capacity
Farmer
Welfare
Market Opportunity
Only 10% of China’s land is suitable for cultivation
Each hectare of land must feed 10 people vs. 4.4 world average
China is among the world's leading agricultural producers already
Further growth in production capacity is based on new technologies
USDA studies show farmers spend 20% of annual income on fertilizer
Fertilizers applied at 200% levels in an attempt to “double” overall yield
Consumer
Demand
Fast growing economy and food expenditures rising rapidly
China’s increase in calorie intake has closely followed US trends
Human
Health
Food security is an issue in China
Nutrient deficiencies lead to diminished physical development
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Competition
fulvic acid fertilizers
164 Products
Combination of
nitrogen,
phosphorus
and potassium
16 Products
Combination of
mineral ions
1 Product
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Products
We believe Yongye has developed the highest quality of fulvic acid and most
complete combination of nutritional elements
We believe Yongye has developed the most cost effective method of fulvic acid
extraction and purification
Innovative community-direct sales model
Tremendous market potential for agricultural nutritional supplement products
Source: Ministry of Agriculture
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Market Entry Case Study
Gansu province in 2007 and 2008
Wu Wei County
Media event held at the Great Hall of the People
Secured government endorsement
Initial injection of $140,000 in 2007 to change government stores to Yongye
branded stations
Set up distribution agreements with initial orders totaling approximately 70,000 units – we
are well under way in meeting these orders
Additional capital injection of $560,000 in 2008 to expand additional sales in county
Effective strategy for entry into new provinces
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Income Statement
2006A*
2007A*
2008E
2009E
Revenue
$3,722,640
$13,137,406
$44,018,532
$66,185,540
% increase
253%
235%
54%
Gross profit / (loss)
1,011,800
5,862,696
Gross margin
27%
45%
Operating expenses
484,796
925,996
% of revenue
13%
7%
Operating profit / (loss)
527,004
4,936,700
% of revenue
14%
38%
Net income / (loss)
447,739
5,081,852
10,263,919
15,811,560
% of revenue
12%
39%
23%
22%
YoY growth
NM
102%
53%
Derived from predecessor financial statements prior to set up of CJV
and contract manufacturing arrangements. See 8-K pro forma for more detail
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Management Team
Wu Zishen: Chairman and CEO
GM and Chair of large SOE conglomerates and started 13 companies
Managed approximately $1.4 billion of investments in state planed economy
Vini Dharmawan: CFO
Former CFO of Meng Niu Austasia Joint Venture Company (Mengniu Dairy (Group) was Morgan Stanley
invested company)
Gao Jing: Chief Scientist
Renowned professor with 40 years of research, development and industry experience
Sun Tao Ran: Co-Founder & Director
Built approximately $27.8 million media business and guru of PDA marketing in China
Zhao Qiang: VP Sales & Marketing
Led marketing for several large companies and awarded Top Ten in Marketing in China and written up in
Harvard Business Case
Larry Gilmore: VP Corporate Strategy
Consulted, managed and led strategic corporate initiatives for Fortune 500 companies in USA such as
Deloitte & Touche, Alcatel, Nokia and HP. Last 3 years, raised foreign PE for small companies in China.
Independent directors
Dr. Guo Xiao Chuan: Advisor for Provincial Government; Dean & professor of School of Economics and
Management at Inner Mongolia University
Dr. Zhang Hai Ming: Professor at Beijing University of Agriculture; Renowned expert on plant nutrition in
China
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Investment Summary
Patented and proven processing technology built on over 40 years of independant
industrial research
Market recognition based on over 5 years of field testing, certification, demonstration,
promotion and sales success
Innovative sales and distribution model capable of supporting explosive growth
Pipeline of new products ready to launch
Strong management team with proven ability to manage large scale business
Large number of sales agreements in the pipeline over the next two years
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Thank You!
Yong Ye Biotechnology Co.
Suite 608, Xueyuan International Tower
No. 1 Zhichun Road
Haidian District, Beijing, China
Phone: 86.10.8231.8626
Fax: 86.10.8231.1797
Loeb & Loeb LLP
Company Counsel
345 Park Avenue
New York, NY 10154
Phone: 212.407.4000
Fax: 212.407.4990
Patrizio & Zhao, LLC
Company Auditor
332 Route 46 West, Suite L100
Parsippany, NJ 07054
Phone: 973.882.8810
Fax: 973.882.0788