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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K/A(Amendment No. 2)

[   ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

OR

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

For the transition period from November 1, 2009 to March
31, 2010

Commission File Number: 000-23806

YAYI INTERNATIONAL INC.(Exact name of registrant as specified in its charter)

|Delaware                        | 87-0046720                             
|------------------------------- | ---------------------------------------
|(State or other jurisdiction of | (I.R.S. Employer Identification Number)
|incorporation or organization)  |                                        

No. 9 Xingguang Road,Northern Industrial Park of
Zhongbei Town,Xiqing District, Tianjin 300384, China(Address of principal executive office and zip code)

(86)22-2798-4033(Registrants telephone
number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
None.

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes
[   ]     No [X]

Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act.

Yes [  
]     No [X]

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X]     No
[   ]

---

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).

Yes [   ]     No [   ]

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]

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

Large accelerated filer [  
]       Accelerated filer [ 
 ]       Non-accelerated filer [ 
 ]      Smaller reporting company [X ]

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act).

Yes [   ]   
 No [ X ]

As of September 30, 2009 (the last business of the second
quarter), the aggregate market value of the shares of the Registrants common
stock held by non-affiliates (based upon the closing price of such shares as
reported on the Over-the-Counter Bulletin Board) was approximately $7.18
million. Shares of the Registrants common stock held by each executive officer
and director and each by each person who owns 10 percent or more of the
outstanding common stock have been excluded in that such persons may be deemed
to be affiliates of the Registrant. This determination of affiliate status is
not necessarily a conclusive determination for other purposes.

As of June 26, 2010, there were 26,428,099 shares of the
Registrants common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

None.

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EXPLANATORY NOTE

This Amendment No. 2 on Form 10-K/A (this "Amendment") hereby
amends our Transition Report on Form 10-K for the five months ended March 31,
2010, previously filed with the Securities and Exchange Commission (the
"Commission) on June 29, 2010, as amended by Amendment No.1 on Form 10-K/A
filed with the Commission on January 28, 2011 (the "Original Filing"). Among
others, this Amendment is being filed mainly to:

1) correct an error in the financial statements for the five
months ended March 31, 2010 due to the incorrect application of generally
accepted accounting principles related to the classification of the slotting
fees incurred by us in 2010. The slotting fees were originally recorded as one
year amortizable assets instead of a one-time offset to revenue as they are
incurred.

2) restate certain disclosure included in our consolidated
financial statements related to slotting fee offset to sales and income tax
expenses for the five months ended March 31, 2010; and

3) restate the disclosure under the heading "Results of
Operations" related to slotting fee offset to sales and income tax expenses
during each of the periods presented in this Amendment.

This Amendment does not reflect events occurring after the
filing of the Original Filing or modify or update those disclosures, including
the exhibits to the Original Filing affected by subsequent events.

In addition, as required by Rule 12b-15 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), this Amendment contains
new certifications pursuant to Rules 13a-14 and 15d-14 under the Exchange Act
and Section 302 of the Sarbanes-Oxley Act of 2002.

i

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Certain Terms

In this report, unless indicated otherwise:

- BVI refers to the British Virgin Islands;
- China, Chinese and PRC, refer to the Peoples Republic of China;
- Exchange Act refers to the Securities Exchange Act of 1934, as amended
- Fuping Milkgoat refers to Fuping Milkgoat Dairy Co., Ltd., a company
  organized under the laws of the Peoples Republic of China;
- Renminbi and RMB refer to the legal currency of China;
- SEC refers to the United States Securities and Exchange Commission;
- Securities Act refers to the Securities Act of 1933, as amended;
- Tianjin Yayi refers to Tianjin Yayi Industrial Co., Ltd., a company
  organized under the laws of the Peoples Republic of China;
- U.S. dollars, dollars and $ refer to the legal currency of the United
  States;
- we, us, our company, our and Yayi refer to the combined business
  of Yayi International Inc. and/or its consolidated subsidiaries, as the case
  may be; and
- Weinan Milkgoat refers to Weinan Milkgoat Production Co., Limited, a
  company organized under the laws of the Peoples Republic of China;

Special Note Regarding Forward Looking
Statements

This transition report on Form 10-K contains forward-looking
statements that are based on the beliefs of our management, and involve risks
and uncertainties, as well as assumptions, that, if they ever materialize or
prove incorrect, could cause actual results to differ materially from those
expressed or implied by such forward-looking statements. The words believe,
expect, anticipate, project, targets, optimistic, intend, aim, or
similar expressions are intended to identify forward-looking statements. All
statements, other than statements of historical fact, are statements that could
be deemed forward-looking statements, including statements regarding new and
existing products, technologies and opportunities; statements regarding market
and industry segment growth and demand and acceptance of new and existing
products; any projections of sales, earnings, revenue, margins or other
financial items; any statements of the plans, strategies and objectives of
management for future operations; any statements regarding future economic
conditions or performance; uncertainties related to conducting business in
China; and any statements of belief or intention. As such, they are subject to
risks and uncertainties that could cause our results to differ materially from
those expressed or implied by such forward looking statements. Such risks and
uncertainties include any of the factors and risks mentioned in the Risk
Factors sections of this transition report on Form 10-K for the five months
ended March 31, 2010, and any statements of assumptions underlying any of the
foregoing. All forward-looking statements included in this report are based on
information available to us on the date of this report. We assume no obligation
and do not intend to update these forward-looking statements, except as required
by law.

-1-

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PART II

ITEM
7.              MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

Change in Fiscal Year

On March 26, 2010, our board of directors approved a change in
our fiscal year end from October 31 to March 31, effective immediately. The
fiscal year end change resulted in a five month reporting period from November
1, 2009 to March 31, 2010. As a result, this Form 10-K is a transition report
and includes financial information for the transition period from November 1,
2009 to March 31, 2010.

The comparative financial information provided for the five
months ended March 31, 2009 is unaudited, since it represented an interim period
of the fiscal year ended October 31, 2009. The unaudited financial information
for the five months ended March 31, 2009 includes all normal recurring
adjustments necessary for the fair statement of the results for that period. The
audited financial statements and results of operations for the years ended
October 31, 2009 and 2008 were previously reported in the Form 10-K filed on
February 16, 2010. The data of results of operations for the fiscal years ended
March 31, 2010 and 2009 were not audited or reviewed and were included in this
report for the sole purpose to provide additional information to the
readers.

Overview

We are the first mover and a leading producer and distributor
of premium goat milk formula products for infants, toddlers, young children, and
adults in China. Our current formula product lines are targeted at the premium
segment of the dairy market and health-conscious consumers. Headquartered in
Tianjin, we sell and distribute our products through a nationwide network of
retail points across China in 23 provinces and municipalities including
supermarkets (including multinational chains), infant-maternity chain stores and
drug stores, as well as catalogue sales and a dedicated online store at
Taobao.com. We are vertically integrated and source raw goat milk from our
proprietary dairy farms as well as neighboring goat dairy farmers on a long-term
contract basis in milk collection centers, which helps us maintain quality
control.

Recent Development

In January 2010, as part of our efforts to raise awareness of
goat milk among the Chinese consumers and to build our brand, we started
launching a 15-second advertisement campaign on China Central Television Channel
1 (CCTV-1) right before the start of the channel's flagship national news
program (XinWenLianBo). The advertisement time is considered as one of the most
valuable prime-time by Chinese advertisers. In addition to advertising before
the national evening news program, we have also launched commercials on other
television programs of several CCTV channels.

We also co-hosted the "China Goat Milk Industry Development
Summit", or the Summit, together with the National Development and Reform
Commission, or NDRC, and the China Dairy Association in the Great Hall of the
People in Beijing on January 22, 2010. Attended by top goat milk industry
experts and professionals as well as key government officials from NDRC and
China Dairy Association, the Summit aimed to initiate discussions regarding
scaling up China's goat milk industry and increasing the market recognition of
the benefits and nutritional value of goat milk. We presented our "Milk Goat"
branded products and market development strategy.

In conjunction with the Summit and with the intention to
broaden our distribution network, we held a nationwide goat milk distributor
conference in order to secure distribution agreements and provide distributors
with marketing strategy and action plan that support our Milk Goat brand. We
selectively invited over 240 distributors across China, including multinational
players such as Carrefour and Wal-Mart, to attend the conference. Roughly 70% of
those distributors attending the conference were new, as we hope to broaden our
distribution network, and the remaining 30% represented existing distributors
who have made contributions to expand our sales.

-2-

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During the first five months of 2010, we have added 1,080
retail points, including more Wal-Mart and Carrefour stores, Lotus, Shiji
Lianhua, Shiji Hualian, Trust Mart and Ren Ren Le as well as other hypermarkets,
local supermarket chains, infant-maternity stores, drug stores and convenience
stores. The expansion of our distribution network has helped deepen our market
penetration throughout China, with additions of 430 stores in North China, 333
stores in Central China, 208 stores in South China and 109 stores in East China.
We have been restructuring our nationwide distribution network since the
beginning of this year with more emphasis on developing our product coverage in
the hypermarkets and supermarket chains while streamlining the smaller stores
established in the past. As of the date of this report, we have approximately
3,800 retail points throughout China.

On April 30, 2010, we entered into a loan agreement, or the
Loan, pursuant to which the Company borrowed $3 million from SAIF. SAIF
currently owns 1,530,612 shares of the Companys Series A Preferred Stock, which
constitute all of the issued and outstanding Series A Preferred Stock of the
Company. The Loan has an interest rate of twelve percent (12%) per annum,
calculated on the basis of the actual number of days elapsed during the relevant
period and a 360-day year. In addition, the entire principal amount of the Loan
and any accrued interest on the Loan shall become fully due and payable on the
date that is the earlier to occur of (i) the date that is six (6) months after
the release of the principal of the Loan, unless extended in the sole discretion
of the Lender; and (ii) the acceleration of the maturity of the Loan upon the
occurrence of an Event of Default (as defined in the Loan Agreement), without
further action on the part of the Lender. The Company can repay the entire
principal and the accrued interest before the maturity of the Loan without any
prepayment penalty.

On the same day, to secure repayment by the Company of the
Loan, the Companys major shareholder, Global Rock executed in favor of SAIF
Partners a stock pledge agreement, pursuant to which Global Rock pledged
13,024,725 shares of common stock of the Company as security for the obligations
of the Company under the Loan Agreement.

On May 31, 2010, the Board of Directors of the Company adopted
the Plan. Up to 2,359,974 shares of common stock of the Company (subject to
adjustment as described in the Plan) may be issued under the Plan. The Plan
permits the grant of Nonqualified Stock Options, Restricted Stock, and Incentive
Stock to employees, officers, directors, and consultants of the Company and its
subsidiaries. As of the date of this report, the Company has granted options to
its directors, executive officers and non-executive employees under the Plan to
purchase an aggregate of 1,906,392 shares of common stock of the Company.

Taxation

United States

Yayi International Inc. is subject to United States tax at a
tax rate of 41%. No provision for income taxes in the United States has been
made as Yayi International Inc. had no income taxable in the United States.

British Virgin Islands

Charleston was incorporated in the BVI and under the current
laws of the BVI, is not subject to income taxes.

PRC

In 2007, the PRC government promulgated the new Enterprise
Income Tax Law, or EIT Law, and the relevant implementation rules, which became
effective on January 1, 2008. Under the EIT Law and its implementation rules,
all domestic and foreign investment companies will be subject to a uniform
enterprise income tax at the rate of 25% and dividends from PRC subsidiaries to
their non-PRC shareholders will be subject to a withholding tax at a rate of
20%, which is further reduced to 10% by the implementation rules, if the non-PRC
shareholder is considered to be a non-PRC tax resident enterprise without any
establishment or place within China or if the dividends payable has no
connection with the non-PRC shareholders establishment or place within China,
unless any such non-PRC shareholders jurisdiction of incorporation has a tax
treaty with China that provides for a different withholding arrangement. In
addition, pursuant to the EIT Law, enterprises established under the laws of
non-PRC jurisdictions, but whose de facto management body is located in the
PRC, should be treated as resident enterprises for PRC tax purposes However, it
is currently uncertain whether we may be deemed a resident enterprise, or how to
interpret whether any income or gain is derived from sources within China. See
Risk Factors - Under the New EIT Law, we may be classified as a resident enterprise of China. Such
classification will likely result in unfavorable tax consequences to our non-PRC
shareholders and us. If we, as a Delaware company with substantially all of our
management located in China, were treated as a resident enterprise for PRC tax
purposes, we will be subject to PRC tax on our worldwide income at the 25%
uniform tax rate, which would have an impact on our effective tax rate.

-3-

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The EIT Law and the Implementing Rules also imposes a unified
EIT of 25% on both foreign invested enterprises and domestic enterprises,
effective January 1, 2008. As a result, each of our PRC subsidiaries, Tianjin
Yayi, Weinan Milkgoat, Fuping Milkgoat, and Shaanxi Milkgoat have been subject
to a 25% income tax rate in calendar year 2008, 2009 and 2010.

Results of Operations

Five Months Ended March 31, 2010 Compared to Five Months
Ended March 31, 2009

The following table sets forth a summary of certain key
components of our results of operations for periods indicated, in dollars and
the percentage of change from the prior period.

|                                                    |   | Five months ended March 31 |   |   |             |   |   |            |  
|--------------------------------------------------- | - | -------------------------- | - | - | ----------- | - | - | ---------- | -
|                                                    |   | 2010                       |   |   | 2009        |   |   |            |  
|                                                    |   | (audited)                  |   |   | (unaudited) |   |   | change     |  
|                                                    |   |                            |   |   |             |   |   |            |  
|Net Sales                                           | $ | 6,085,193                  |   | $ | 9,283,420   |   | $ | (3,198,227 | )
|Cost of goods sold                                  |   | 2,369,642                  |   |   | 2,892,709   |   |   | (523,067   | )
|Gross profit                                        |   | 3,715,551                  |   |   | 6,390,711   |   |   | (2,675,160 | )
|Operating expenses:                                 |   |                            |   |   |             |   |   |            |  
|Sales and marketing expenses                        |   | 3,908,573                  |   |   | 1,973,212   |   |   | 1,935,361  |  
|General and administrative expenses                 |   | 1,318,077                  |   |   | 685,843     |   |   | 632,234    |  
|Income from continuing operations                   |   | (1,511,099                 | ) |   | 3,731,656   |   |   | (5,242,755 | )
|Other income (expenses), net                        |   | (380,789                   | ) |   | (686,878    | ) |   | 306,089    |  
|Income tax benefit (expense)                        |   | 289,093                    |   |   | (869,614    | ) |   | 1,158,707  |  
|Net income from discontinued operations, net of tax |   |                            |   |   |             |   |   |            |  
|Foreign currency translation adjustment             |   | 6,039                      |   |   | (44,791     | ) |   | 50,830     |  
|Net income attributable to Yayi International Inc.  |   | (1,596,756                 | ) |   | 2,130,373   |   |   | (3,727,129 | )

Net Sales.Net sales for the five months ended March 31,
2010 were approximately $6.1 million, a decrease of 34.5% from the five months
ended March 31, 2009. This decrease was primarily due to the restructuring of
our product portfolio. From the end of 2009, we worked together with Trout &
Partners to streamline our product portfolio and refine our brand image in order
to position and strengthen our "Milk Goat" brand as the premium goat milk brand throughout China. Thereafter, we have restructured
our original product portfolio of dozens of products and specifications and
refined our marketing strategy during the three months ended October 31, 2009.
As a result, we gradually reduced the production of original products from the
end of 2009 in anticipation of the introduction of our new products in January
2010. Our new product portfolio consists of only ten formula products under the
"Milk Goat" brand with only one product specification of 600 grams. We suspended
our sales efforts in supermarkets during these few months as we transitioned
from our original product portfolio to the new one with new packaging,
stock-keeping units (SKUs), and new (higher) pricing. Our new product portfolio
has only been launched in the market since January 2010.

-4-

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The following table sets forth the information relating to the
quantity and sales price of goat milk powder we sold during the periods
indicated:

|                                |   | Five months |  |   | Five months | 
|------------------------------- | - | ----------- |  | - | ----------- | 
|Product Name                    |   | ended       |  |   | ended       | 
|                                |   | March       |  |   | March       | 
|                                |   | 31, 2010    |  |   | 31, 2009    | 
|                                |   |             |  |   |             | 
|Goat Milk Powder Quantity (ton) |   | 351         |  |   | 510         | 
|Unit price                      | $ | 17,337      |  | $ | 18,203      | 

Cost of goods sold.Cost of goods sold for the five
months ended March 31, 2010 was approximately $2.4 million, a decrease of 18.1%
from the five months ended March 31, 2009, primarily due to the decrease in our
net sales. However, the unit cost increased by 19.0% from $5,672.0 per ton to
$6,751.1 per ton, primarily attributable to giveaways distributed to purchasers
of our new products. To a lesser extent, increased prices of main raw materials
also contributed to the increase in our unit cost.

Gross Profit.Gross profit for the five months ended
March 31, 2010 was approximately $3.7 million, a decrease of 41.9% from the five
months ended March 31, 2009. Our gross margin for the five months ended March
31, 2010 decreased to 61.1% compared to 68.8% for the five months ended March
31, 2009. This decrease was primarily attributable to promotional products
distributed to purchasers of our new products and slotting fees paid to
supermarkets. However, the gross margin of our new product portfolio is higher
than original product portfolio which partially offset the decrease caused by
promotional products and slotting fees paid to supermarkets.

Operating and administrative expenses. Our total
operating and administrative expenses consist primarily of sales and marketing
expenses and general and administrative expenses. Our total operating and
administrative expenses increased by approximately $2.6 million, or 96.6 % from
the five months ended March 31, 2009.

Sales and marketing expenses.For the five months ended
March 31, 2010, sales and marketing expenses increased approximately 98.1% to
$3.9 million from $2.0 million for the five months ended March 31, 2009. The
increase was primarily attributable to the large increase in advertising and
promotion expenses. Advertising and promotional expenses for the five months
ended March 31, 2010 was approximately $2.7 million, an increase of 160.5% from
the five months ended March 31, 2009. Advertising expenses were approximately
$2.0 million for the five months ended March 31, 2010, an increase of 586.5%
compared with $0.3 million for the five months ended March 31, 2009. The primary
reason for the increase was that we launched our new television advertisement
campaign to promote the new product portfolio nationwide. The television
commercials started airing on January 1, 2010 on China Central Television
Channel 1 (CCTV-1) right before the channel's flagship national news program
(XinWenLianBo) at 7pm, which is generally considered one of the most valuable
prime-time advertising time slots in China.

General and administrative expenses.General and
administrative expenses for the five months ended March 31, 2010 increased by
92.2% to $1.3 million from $0.7 million for the five months ended March 31,
2009. It was primarily attributable to labor cost increase for recruiting senior
managers and professionals such as CFO, Director of Production and compensation
increase for CEO and director, professional fees increase for engaging Earnest
&Young as our SOX consultant and IT expenditures as a result of the
expansion of our business.

-5-

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Other income (expenses).Our other income (expenses)
consists primarily of interest and finance cost. Other expenses decrease by
approximately $ 0.3 million, or 44.6%, primarily attributable to the repayment
of commercial loans of approximately US$ 2.7 million and decreased deferred debt
issuance cost amortization.

Income Tax.Our income tax in the five months ended
March 31, 2010 decreased by 133.2%, from an expense of approximately $0.9
million in the five months ended March 31, 2009 to a benefit of approximately
$0.3 million in the five months ended March 31, 2010. The decrease was primarily
attributable to losses experienced in the five months ended March 31, 2010.

Net Income(loss).As a result of the foregoing, net income attributable
to Yayi International Inc. decreased by 175.0% in the five months ended March
31, 2010 as compared to the five months ended March 31, 2009.

Twelve Months Ended March 31, 2010 Compared to Twelve Months
Ended March 31, 2009 (Unaudited and Unreviewed)

The following table sets forth a summary of certain key
components of our results of operations for periods indicated, in dollars and
the percentage of change from the prior period.

|                                                         |   | Years ended March 31 (Unaudited) |   |   |            |   |   |            |  
|-------------------------------------------------------- | - | -------------------------------- | - | - | ---------- | - | - | ---------- | -
|                                                         |   | 2010                             |   |   | 2009       |   |   | change     |  
|                                                         |   |                                  |   |   |            |   |   |            |  
|Net Sales                                                | $ | 21,362,733                       |   | $ | 24,697,548 |   | $ | (3,334,815 | )
|Cost of goods sold                                       |   | 7,267,807                        |   |   | 8,274,455  |   |   | (1,006,648 | )
|Gross profit                                             |   | 14,094,926                       |   |   | 16,423,093 |   |   | (2,328,167 | )
|Operating expenses:                                      |   |                                  |   |   |            |   |   |            |  
|Sales and marketing expenses                             |   | 7,689,499                        |   |   | 5,399,221  |   |   | 2,290,278  |  
|General and administrative expenses                      |   | 2,726,964                        |   |   | 1,753,174  |   |   | 973,790    |  
|Income from continuing operations                        |   | 3,678,463                        |   |   | 9,270,698  |   |   | (5,592,235 | )
|Other income(expense), net                               |   | (1,219,092                       | ) |   | (4,959,780 | ) |   | 3,740,688  |  
|Income tax benefit(expense )                             |   | (953,071                         | ) |   | (2,225,028 | ) |   | (1,271,957 | )
|Net income from discontinued operations, net of tax      |   |                                  |   |   |            |   |   |            |  
|Foreign currency translation adjustment                  |   | (113                             | ) |   | (101,337   | ) |   | 101,224    |  
|Net income attributable to Yayi International
      Inc. |   | 1,506,187                        |   |   | 1,984,553  |   |   | (478,366   | )

Net Sales.Net sales for the year ended March 31, 2010
were approximately $21.4 million, a decrease of 13.5% from the prior year. As
described above, we gradually reduced the production of original products from
the end of 2009 in anticipation of the introduction of our new products in
January 2010. We suspended our sales efforts in supermarkets when we
transitioned from our original product portfolio to the new one with new
packaging, stock-keeping units (SKUs), and new (higher) pricing. Our new product
portfolio has only been launched in the market since January 2010, and the new
products portfolio has varieties and package specifications than the original
products portfolio. As a result, our net sales reduced for the year ended March
31, 2010 as compared with the prior year.

-6-

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The following table sets forth the information relating to the
quantity and sales price of goat milk powder we sold during the periods
indicated:

Product Name Twelve Twelve

|                                |   | months   |  |   | months   | 
|------------------------------- | - | -------- |  | - | -------- | 
|                                |   | ended    |  |   | ended    | 
|                                |   | March    |  |   | March    | 
|                                |   | 31, 2010 |  |   | 31, 2009 | 
|                                |   |          |  |   |          | 
|Goat Milk Powder Quantity (ton) |   | 1,131    |  |   | 1,239    | 
|Unit price                      | $ | 18,897   |  | $ | 19,933   | 

Cost of goods sold.Cost of goods sold for the year
ended March 31, 2010 was approximately $7.3 million, a decrease of 12.2% from
prior year, mainly due to reduced production costs as a result of our
acquisition of a supplier of raw goat milk, Fuping Milkgoat in August, 2008.

Gross Profit.Gross profit for the year ended March 31
2010 was approximately $14.1 million, a decrease of 14.2% from prior year. This
decrease was primarily attributable to our lower net sales of new products
portfolio and slotting fees paid to supermarkets, partially offset by the
decrease in our cost of goods sold primarily as a result of our acquisition of
Fuping Milkgoat in August, 2008.

Operating Expenses. Our total operating expenses
consist primarily of sales and marketing expenses and general and administrative
expenses. Total operating expenses increased approximately 45.6% to $10.4
million for the year ended March 31,2010 from $ 7.2 million for the year ended
March 31, 2009.

Sales and marketing expenses.For the year ended March
31, 2010, the sales and marketing expense increased approximately 42.4% to $7.7
million from $5.4 million for the year ended March 31, 2009. The increase was
primarily attributable to the large increase in advertising and promotion
expenses. Advertising and promotion expenses were approximately $4.5 million for
the year ended March 31, 2010, an increase of 102.0% compared with $2.2 million
for the year ended March 31, 2009. The primary reason for the increase was that
we launched our new television advertisement campaign to promote the new product
portfolio nationwide. The television commercials started airing on January 1,
2010 on China Central Television Channel 1 (CCTV-1) right before the channel's
flagship national news program (XinWenLianBo) at 7pm, which is generally
considered one of the most valuable prime-time advertising time slots in
China.

General and administrative expenses.For the year ended
March 31, 2010, the general and administrative expenses increased by 55.5% to
$2.7 million from $1.8 million for the year ended March 31, 2009. The increase
was primarily attributable to the increase in professional fees paid to
professional firms for legal service, audit service and SOX compliance from
$0.34 million to $0.84 million which accounted for 50.6% of the total variance.
In addition, $0.18 million increase was due to the increase of compensation of
our CEO and director since June 2009.

Other income (Expenses).Our other income (expenses)
consists primarily of merger cost, interest and finance cost. Other expense for
the year ended March 31, 2010 decreased by 75.4% from the prior year mainly due
to $3.5 million of merger cost occurred in June 2008. The interest expense
decreased mainly because the repayment of commercial loans for the year ended
March 31, 2010.

Income Tax.Income tax for the year ended March 31, 2010
decreased by approximately 57.2% from $2.2 million to $1.0 million compared to
prior year. The decrease is primarily attributable to the decrease in sales and
taxable income for the year ended March 31, 2010.

Net Income(loss). As a result of the foregoing, net
income attributable to Yayi International Inc. decreased by 24.1% for the year
ended March 31, 2010 as compared to prior year.

Fiscal Year Ended October 31, 2009 Compared to Fiscal Year
Ended October 31, 2008

The following table sets forth a summary of certain key
components of our results of operations for periods indicated, in dollars and
the percentage of change from the prior period.

-7-

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|                                                         |   | Fiscal
      Years ended October 31 (Audited) |  |   |            |   |   |            |  
|-------------------------------------------------------- | - | --------------------------------------------- |  | - | ---------- | - | - | ---------- | -
|                                                         |   | 2009                                          |  |   | 2008       |   |   | change     |  
|                                                         |   |                                               |  |   |            |   |   |            |  
|Net Sales                                                | $ | 24,845,685                                    |  | $ | 21,791,268 |   | $ | 3,054,417  |  
|Cost of goods sold                                       |   | 8,025,009                                     |  |   | 7,600,454  |   |   | 424,555    |  
|Gross profit                                             |   | 16,820,676                                    |  |   | 14,190,814 |   |   | 2,629,862  |  
|Operating expenses:                                      |   |                                               |  |   |            |   |   |            |  
|Sales and marketing expenses                             |   | 5,760,446                                     |  |   | 5,201,779  |   |   | 558,667    |  
|General and administrative expenses                      |   | 1,972,190                                     |  |   | 1,107,333  |   |   | 864,857    |  
|Income from continuing operations                        |   | 9,088,040                                     |  |   | 7,881,702  |   |   | 1,206,338  |  
|Other income (expense), net                              |   | 1,491,027                                     |  |   | (4,422,539 | ) |   | (5,913,566 | )
|Income tax expense                                       |   | 2,201,032                                     |  |   | 1,633,946  |   |   | 567,086    |  
|Net income attributable to Yayi International
      Inc. |   | 5,395,981                                     |  |   | 1,825,217  |   |   | 3,570,764  |  

Net Sales.Net sales for fiscal 2009 were approximately
$24.8 million, an increase of 14% from the prior year. The increase is mainly
attributable to the increase in the volume of products sold which was partially
offset by a decrease of approximately 1% in the weighted average price at which
products were sold. The volume of products sold increased because of the
improvement of incentives for sales team that resulted in better sales efforts
coupled with better advertisement and promotion. The weighted average price
decreased because of difference in portfolio mix of products between the two
years. Changes in the currency exchange rate and the weakening of the U.S.
dollar also contribute to 18% of the increase in net sales.

The following table sets forth the information relating to the
quantity and sales price of goat milk powder we sold during the periods
indicated:

|                                |   | Fiscal year |  |   | Fiscal year | 
|------------------------------- | - | ----------- |  | - | ----------- | 
|Product Name                    |   | ended       |  |   | ended       | 
|                                |   | October     |  |   | October     | 
|                                |   | 31, 2009    |  |   | 31, 2008    | 
|                                |   |             |  |   |             | 
|Goat Milk Powder Quantity (ton) |   | 1,259       |  |   | 1,023       | 
|Unit price                      | $ | 19,683      |  | $ | 20,078      | 

Gross Profit.Gross profit for fiscal 2009 was
approximately $16.82 million, an increase of 19% from the prior year. Our gross
margin for 2009 was 68% compared to 65% for 2008. Approximately 19% of the
increase in gross profit is attributable to changes in the currency exchange
rate; the balance of the increase is primarily attributable to the increase in
net sales (excluding the currency effects) coupled with reduced material costs
as a result of our acquisition in August, 2008 of a supplier of raw goat milk,
Fuping Milkgoat. Such vertical integration of our operations allows us to
benefit from a higher profit margin for our products.

Operating Expenses. Our total operating expenses
consist primarily of sales and marketing expenses and general and administrative
expenses. Total operating expenses increased approximately 23% to $7.7 million
from $ 6.3 million for the year ended October 31, 2008.

Sales and marketing expenses.For the year ended October
31, 2009, the sales and marketing expense increased approximately 10.7% to $5.7
million from $5.2 million for the year ended October 31, 2008. The increase is
primarily attributable to (i) marketing strategy consulting fee, which increased
by about $512,000 because the Company has engaged Trout & Partners China to
assist in streamlining its product portfolio and refining its brand image in
order to position and strengthen its Milk Goat brand as the premium goat milk
brand throughout China; (ii) freight costs, which increased because of the
volume of product delivered; (iii) Labor cost increased due to the rise in the
average sales pay rate and commission paid to our sales representatives along
with the sales revenue increase. The increase of selling and marketing expenses is
partially offset by the decrease of charges by retail stores, because the
Company has been in the process of streamlining its products. The Company
consciously restrained its marketing activities in the fourth quarter.

-8-

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General and administrative expenses.For the year ended
March 31, 2009, the general and administrative expenses increased by 78.1% to
$2.0 million from $1.1 million for the year ended October 31, 2008. It was
primarily attributable to labor cost increase for recruiting senior managers and
professionals such as CFO, Director of Production and pay increase for CEO and
executive director, professional fees increase for engaging E&Y as our SOX
Consultant and IT expenditures due to as a result of the expansion of our
business.

Other income (Expenses).Our other income (expenses)
consists primarily of interest and finance cost. Interest expense in fiscal 2009
increased by 19% from the prior year mainly because of our increased net
borrowings although rates of interest on such borrowings is slightly lower than
that of the corresponding period in the prior year. Changes in currency exchange
rates had only a minimal impact on changes in interest expense. See notes 9 and
11 of our consolidated financial statements. Accretion of debt discount and
deferred financing cost increased by 649% from prior year which is mainly due to
the fact that the convertible notes beneficial period is from June 2008 to
December 2009.

Income Tax.Income tax in fiscal 2009 increased by
approximately 35% from the corresponding period in the prior year. The increase
is primarily attributable to the increased in sales and taxable income in fiscal
2009.

Net Income(loss). Net income increased by approximately
$3.57 million to approximately $5.4 million in fiscal 2009. After excluding
merger costs in the prior year, accretion of debt discount and deferred
financing cost of convertible notes and liquidated damage of convertible notes
accrued this year , net income increased by approximately $750,000, or 14%, as a
result of the factors described above.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2010, we had cash and cash equivalents of
approximately $4.7 million and working capital of approximately $3.0
million.

We intend to, and are in the process of, expanding our
administrative and production facilities to meet our current needs and
anticipated increased demand for our products. In connection therewith, we plan
to spend approximately $18.7 million during the fiscal years ending March 31,
2011 through 2012 ($11.9 million during the fiscal year ending March 31, 2011
and $6.8 million during the fiscal year ended March 31, 2012). The aggregate
amount of $18.7 million in capital expenditure is mainly used for the following
items: the purchase of machinery and equipment for the new powder processing
plant in Weinan, Shaanxi and machinery and equipment in Fuping, Shaanxi with the
capital expenditure of $10.0million; the purchase of livestock, the construction
of goat farms and goat milk collection stations in an amount of $3.6million; the
packing equipment purchase and renovation of the office and staff apartment
building in Jinghai, Tianjin in an amount of $2.7 million; the purchase of IT
equipment and system including computers and computer servers in an amount of
$0.35million, and User Friendly version U9 accounting software in an amount of
$0.18million.

On June 3, 2010, the Company renewed its loans from Tianjin
Rural Cooperative Bank, Kexin Branch, or Rural Bank by entering into four
separate short-term loan agreements with Rural Bank. Pursuant to the loan
agreements, Rural Bank agreed to loan to the Company an aggregate RMB 30,000,000
(approximately $4,400,000) for the use as working capital. The loan has a
monthly interest rate of 0.48675% and the interests must be paid on a quarterly
basis on the 20 thof the last month of each quarter. The loan
expires on June 2, 2011 but can be renewed upon the written consent by Rural
Bank. Under the terms of the loan agreements, the Company is subject to
customary affirmative and negative covenants. The loan may be accelerated and
Rural Bank may demand immediate payment of the principal and accrued interests
upon the occurrence of an event of default which includes, among other things, a
failure to make principal or interest payments, a failure to comply with other
covenants and certain events of liquidation or bankruptcy.

We believe that our currently available working capital should
be adequate to sustain our operations at our current levels through at least the
next twelve months. However, depending on our future needs, changes and trends
in the capital markets affecting our shares and the Company, we may
determine to seek additional debt financing from commercial bank or equity
financing in the private or public markets.

-9-

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The following table summarizes information about our net cash
flows for the following periods.

|                                                    |   | Five Months Ended |   |   | Years Ended       |  
|--------------------------------------------------- | - | ----------------- | - | - | ----------------- | -
|                                                    |   | March
      31,   |   |   | October
      31, |  
|                                                    |   | 2010              |   |   | 2009              |  
|                                                    |   | (Audited)         |   |   | (Unaudited)       |  
|Net cash provided by (used in) operating activities | $ | (3,896,858        | ) | $ | 3,285,902         |  
|Net cash used in investing activities               |   | (1,980,422        | ) |   | (4,192,349        | )
|Net cash provided by financing activities           |   | 235,867           |   |   | 1,648,847         |  
|Net increase (decrease) in cash and cash equivalent |   | (5,640,536        | ) |   | 740,289           |  

Operating Activities:

Net cash used in operating activities was approximately $3.9
million for the five months ended March 31, 2010, as compared to net cash
provided by operating activities of approximately $3.3 million for the five
months ended March 31, 2009. Net cash used in operating activities for the five
months ended March 31, 2010 was mainly due to net loss of 1.6 million, non-cash
items not affecting transition period cash flows of $0.3 million and a $2,6
million increase in working capital. The changes in working capital for the five
months ended March 31, 2010 were primarily related to a $0.9 million increase in
advance due to prepayment for raw goat milk powder and other materials, a $0.5
million increase in accounts receivable due to our extended credit term for new
products promotion, a $0.5 million increase in deferred tax assets due to
taxable temporary difference such as advertice expenses and allowance for bad
debt, a $0.6 million decrease in accounts payable due to the shorten payment
term of main materials.

Net cash provided by operating activities was approximately
$6.53 million and $3.82 million for fiscal 2009 and 2008, respectively.
Approximately 9% of the increase in the net cash provided by operating
activities is attributable to the change in currency exchange rates; the balance
of the increase is attributable primarily to the increase of net income and to a
lesser extent attribute to the decrease in inventory. Inventory decreased due to
increased sales coupled with more judicious efforts in replenishing our
inventory. The increase in the net cash provided by operating activities was
partially offset by increases in accounts receivable. Accounts receivable
increase as a result of the increase in sales.

Investing Activities:

Net cash used in investing activities for the five months ended
March 31, 2010 was approximately $2.0 million, a decrease of approximately $2.5
million from the five months ended March 31, 2009. This decrease in net cash
used in investing activities is primarily because we prepaid $ 3.8 million for
the construction of Jing Hai factory and warehouse during the five months ended
March 31, 2009, but did not make any same kind of payment during the five months
ended March 31, 2010. During the five months ended March 31, 2010, there was
also an increase in capital spending of approximately $2.0 million, among which
$0.4 million was for purchasing equipment, $0.6 million was for purchasing
livestock and $0.80 million was for acquisition of land-use rights from Shaanxi
Province. See note 5 of our consolidated financial statements.

Net cash used in investing activities for fiscal 2009 was
approximately $12.40 million, an increase of approximately $6.74 million from
2008. Approximately 12% of the increase is attributable to the change in
currency exchange rates while the balance is attributable primarily to advances
to Tianjin Mengyang for the construction and development of certain facilities.
In addition, the increase came from our construction of farm facilities located
in Weinan, Shaanxi and to a lesser extent attribute to the purchase of equipment
for enhancing our production capacity in Weinan and Tianjin in fiscal 2010.

-10-

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Financing Activities:

Net cash provided by financing activities for the five months
ended March 31, 2010 was approximately $0.2 million compared to approximately
$1.6 million of net cash provided by these activities during the corresponding
period in the prior year. The change is primarily attributable to the repayment
of approximately $2.7 million of bank loan, which is $2.0 million more than the
corresponding period in the prior year, partially offset by the borrowings of
approximately $3.0 million of bank loan that is $0.6 million more than the
corresponding period in the prior year. See note 9 of our consolidated financial
statements.

Net cash provided by financing activities for the fiscal year
ended October 31, 2009 was approximately $15.4 million compared to approximately
$2.4 million of net cash provided by these activities in the fiscal year 2008.
The change is primarily attributable to issuing and selling to the investor,
SAIF 1,530,612 shares of the Companys Series A Preferred Stock at a price per
share of $9.80 for an aggregate purchase price of $15.0 million.

Critical Accounting Policies

The consolidated financial statements include the financial
statements of us and our subsidiaries. All transactions and balances among us
and our subsidiaries have been eliminated upon consolidation. Certain amounts
included in or affecting our consolidated financial statements and related
disclosures must be estimated, requiring us to make certain assumptions with
respect to values or conditions that cannot be known with certainty at the time
the financial statements are prepared. These estimates and assumptions affect
the amounts we report for assets and liabilities, our disclosure of contingent
assets and liabilities at the date of our financial statements, and the reported
amounts of revenues and expenses during the reported periods. We routinely
evaluate these estimates, utilizing historical experience, consulting with
experts and utilizing other methods we consider reasonable in the particular
circumstances. Nevertheless, actual results may differ significantly from our
estimates. Any effects on our business, financial position or results of
operations resulting from revisions to these estimates are recorded in the
period in which the facts that give rise to the revision become known.

Estimates of allowances for bad debts We must
periodically review our trade and other receivables to determine if all are
collectible or whether an allowance is required for possible uncollectible
balances. When determining the allowances, a number of factors are considered,
including the length of time the receivable is past due, past loss history, the
counter partys current ability to pay and the general condition of the economy
and industry. Accounts receivable are written off if reasonable collection
efforts are not successful.

Estimate of the useful lives of property and equipment and
biological assets We must estimate the useful lives and residual values of
our property and equipment and biological assets. We must also review property
and equipment and biological assets for possible impairment whenever events and
circumstances indicate that the carrying value of those assets may not be
recovered from the estimated future cash flows expected to result from their use
and eventual disposition.

Inventory We value inventories at the lower of cost or
market value. We determine the cost of inventories using the weighted average
cost method and include any related production overhead costs incurred in
bringing the inventories to their present location and condition. We must
determine whether we have any excessive, slow moving, obsolete or impaired
inventory. We perform this review quarterly, which requires management to
estimate the future demand of our products and market conditions. We make
provisions on the value of inventories at period end equal to the difference
between the cost and the estimated market value. If actual market conditions
change, additional provisions may be required. In addition, we may write off
some provisions if we later sell some of the subject inventory.

Goodwill We must test goodwill annually for impairment
or more frequently if events or changes in circumstances indicate that it might
be impaired. We perform impairment tests at the reporting unit level to identify
potential goodwill impairment. We recognize a goodwill impairment loss in our
statements of operations and comprehensive income when the carrying amount of
goodwill exceeds its implied fair value. We perform the impairment test at the
end of the fourth quarter each year.

Land use rights Land use rights are stated at cost
less accumulated amortization. Amortization is charged using the straight-line
method over the period of lease term.

-11-

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Revenue recognition Revenue from the sale of goods is
recognized on the transfer of risks and rewards of ownership, which generally
coincides with the time when the goods are delivered to customers and the title
has passed. Net sales of products represent the invoiced value of goods, net of
value added taxes ("VAT"), sales returns, trade discounts and allowances.

Prior to January 1, 2009, the Company allows for exchange of
goods that are near expiration. The Company provided for an allowance for return
products since the Company has experienced returns in the normal course of
business. Subsequent to January 1, 2009, the Company revised its sales contracts
to disallow returns for sales made after January 1, 2009.

The Company treats temporary price reduction programs,
merchandising fees, co-operative advertising and slotting expenses as a
reduction in gross sales. The Company records the liability when pervasive
evidence exists that the Company and the customer or distributor have reached
agreement and that an advertising action will result in an expense to the
company in the near future. The liability is maintained until the customer takes
the deduction against payments due. In addition, in accordance with ASC 605-50
in accounting for customer payments and incentives, if the temporary price
reduction recorded is in excess of gross sale for any retailer, the amount in
excess will be recorded as selling expense.

Slotting fees -The Company accounts for slotting fees
in accordance with ASC 605-50. ASC 605-50 requires that cash considerations,
including sales incentives, given by a vendor to a customer is presumed to be a
reduction of the selling price, and therefore, should be characterized as a
reduction to gross sales. This presumption is overcome and the consideration
would be characterized as an expense incurred if the vendor receives an
identifiable benefit in exchange for the consideration and the fair value of
that identifiable benefit can be reasonably estimated. Furthermore, if the
consideration recorded is in excess of gross sale of any retailer, the amount in
excess will be recorded as selling expense.

The Company treats one-time slotting fees paid to retails shops
who are direct customers of the Companys distributors as a reduction in gross
sales.

Slotting fees of $1.345,838 and $0 were recorded as a reduction
of sales revenue for the five months ended March 31, 2010 and 2009.

Effects of Inflation

Inflation and changing prices have not had a material effect on
our business and we do not expect that inflation or changing prices will
materially affect our business in the foreseeable future. However, our
management will closely monitor the price change and continually maintain
effective cost control in operations.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or
are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity or capital expenditures or capital resources that is
material to an investor in our securities.

Recent Accounting Pronouncements

Accounting Standards Codification

In June 2009, the Financial Accounting Standards Board ("FASB")
issued a standard that established the FASB Accounting Standards Codification
(the "ASC"), which effectively amended the hierarchy of U.S. generally accepted
accounting principles ("GAAP") and established only two levels of GAAP,
authoritative and nonauthoritative. All previously existing accounting standard
documents were superseded, and the ASC became the single source of
authoritative, nongovernmental GAAP, except for rules and interpretive releases
of the Securities and Exchange Commission ("SEC"), which are sources of
authoritative GAAP for SEC registrants. All other non-grandfathered, non-SEC
accounting literature not included in the ASC became non-authoritative. The ASC
was intended to provide access to the authoritative guidance
related to a particular topic in one place. New guidance issued subsequent to
June 30, 2009 will be communicated by the FASB through Accounting Standards
Updates. The ASC was effective for financial statements for interim or annual
reporting periods ending after September 15, 2009. We adopted and applied the
provisions of the ASC for the Companys fiscal year ended October 31, 2009, and
have eliminated references to pre-ASC accounting standards throughout the
consolidated financial statements. The adoption of the ASC did not have a
material impact on the Companys consolidated financial statements.

-12-

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Fair Value Measurement

In January 2010, the FASB issued authoritative guidance to
improve disclosures about fair value measurements. This guidance amends previous
guidance on fair value measurements to add new requirements for disclosures
about transfers into and out of Levels 1 and 2 and separate disclosures about
purchases, sales, issuances, and settlements relating to Level 3 measurement on
a gross basis rather than on a net basis as currently required. This guidance
also clarifies existing fair value disclosures about the level of disaggregation
and about inputs and valuation techniques used to measure fair value. This
guidance is effective for annual and interim periods beginning after December
15, 2009, except for the requirement to provide the Level 3 activities of
purchases, sales, issuances, and settlements on a gross basis, which will be
effective for annual and interim periods beginning after December 15, 2010.
Early application is permitted and, in the period of initial adoption, entities
are not required to provide the amended disclosures for any previous periods
presented for comparative purposes. The adoption of this pronouncement did not
have a significant impact on the Companys financial statements.

Decreases in Ownership of a Subsidiary  a Scope
Clarification

In January 2010, the FASB issued Accounting Standards Update
(ASU) No. 2010-02 update to address the accounting and reporting for Decreases
in ownership of a subsidiary. This amendment to Topic 810 clarifies, but does
not change, the scope of current US GAAP. It clarifies the decrease in ownership
provisions of Subtopic 810-10 and removes the potential conflict between
guidance in that Subtopic and asset derecognition and gain or loss recognition
guidance that may exist in other US GAAP. An entity will be required to follow
the amended guidance beginning in the period that it first adopts FASB ASC 810
(now included in Subtopic 810-10). For those entities that have already adopted
FASB ASC 810, the amendments are effective at the beginning of the first interim
or annual reporting period ending on or after December 15, 2009. The amendments
should be applied retrospectively to the first period that an entity adopted
FASB ASC 810. The adoption of this standard did not have a material effect on
the financial position, results of operations, or cash flows of the Company.

Distributions to Shareholders with Components of Stock and
Cash

In January 2010, the FASB issued Accounting Standards Update
(ASU) No. 2010-01 update to address the accounting for distributions to
shareholders with components of stock and cash (A Consensus of the FASB Emerging
Issues Task Force). This amendment to Topic 505 clarifies the stock portion of a
distribution to shareholders that allows them to elect to receive cash or stock
with a limit on the amount of cash that will be distributed is not a stock
dividend for purposes of applying Topics 505 and 260 for interim and annual
periods ending on or after December 15, 2009, and should be applied on a
retrospective basis. The adoption of this standard did not have a material
effect on the financial position, results of operations, or cash flows of the
Company.

Measuring Liabilities at Fair Value

In August 2009, the FASB issued Accounting Standards Update
(ASU) No. 2009-05 update that amended the accounting standard for fair value
measurements. Specifically, Accounting Standards Update (ASU) No. 2009-05 update
provides clarification that in circumstances in which a quoted price in an
active market for the identical liability is not available, a reporting entity
is required to measure fair value using one or more of the following methods: 1)
a valuation technique that uses a) the quoted price of the identical liability
when traded as an asset or b) quoted prices for similar liabilities or similar
liabilities when traded as assets and/or 2) a valuation technique that is
consistent with the principles of the accounting standard on fair value
measurements (e.g. an income approach or market approach). Accounting Standards
Update (ASU) No. 2009-05 also clarifies that when estimating the fair value of a
liability, a reporting entity is not required to adjust to include inputs
relating to the existence of transfer restrictions on that liability. This standard will be effective
for the first interim period beginning November 1, 2009. The adoption of this
standard did not have a material impact on its consolidated financial
statements.

-13-

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Convertible Debt Instruments

In May 2008, the FASB issued FASB ASC 470-20 related to
convertible debt instruments. FASB ASC 470-20 requires the issuer of certain
convertible debt instruments that may be settled in cash (or other assets) on
conversion, including partial cash settlement, to separately account for the
liability (debt) and equity (conversion option) components of the instrument in
a manner that reflects the issuer's non-convertible debt borrowing rate. FASB
ASC 470-20 is effective for the Companys fiscal year beginning November 1,
2009, and retrospective application is required for all periods presented. The
adoption of this standard did not have a material impact on its consolidated
financial statements.

Business Combination

In December 2007, the FASB issued FASB ASC 805 which related to
business combinations. FASB ASC 805 expands the definition of a business and a
business combination; requires recognition of assets acquired, liabilities
assumed, and contingent consideration at their fair value on the acquisition
date with subsequent changes recognized in earnings; requires
acquisition-related expenses and restructuring costs to be recognized separately
from the business combination and expensed as incurred; requires in-process
research and development to be capitalized at fair value as an indefinite-lived
intangible asset; and requires that changes in accounting for deferred tax asset
valuation allowances and acquired income tax uncertainties after the measurement
period be recognized as a component of provision for taxes. FASB ASC 805 also
establishes disclosure requirements to enable the evaluation of the nature and
financial effects of the business combination. In April 2009, the FASB issued
FASB ASC 805 which clarified the accounting for pre-acquisition contingencies.
This standard is effective for the Company beginning November 1, 2009 and will
change the accounting for business combinations on a prospective basis. The
Company did not have any business combination during the year ended March 31,
2010; therefore the adoption of this standard had no impact on the Companys
consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

Own-Share Lending Arrangements in Contemplation of
Convertible Debt issuance or Other Financing

In October 2009, the FASB issued FASB ASC 470-20 update to
address equity-classified share lending arrangements on an entitys own shares,
when executed in contemplation of a convertible debt offering or other
financing. This accounting update addresses how to account for the share-lending
arrangement and the effect, if any, that the loaned shares have on
earnings-per-share calculations. The share lending arrangement is required to be
measured at fair value and recognized as an issuance cost associated with the
convertible debt offering or other financing. Earnings-per-share calculations
would not be affected by the loaned shares unless the share borrower defaults on
the arrangement and does not return the shares. If counterparty default is
probable, the share lender is required to recognize an expense equal to the then
fair value of the unreturned shares, net of the fair value of probable
recoveries. FASB ASC 470-20 is effective for share lending agreements entered
into after June 15, 2009, and effective for fiscal years and interim periods
within those years beginning on or after December 15, 2009 for all other
outstanding arrangements, with retrospective application to those arrangements
on the effective date. The Company is currently evaluating the impact of this
standard upon its adoption on the Companys consolidated financial
statements.

Embedded credit derivative

On March 5, 2010, the FASB issued authoritative guidance to
clarify the type of embedded credit derivative that is exempt from embedded
derivative bifurcation requirements. Specifically, only one form of embedded
credit derivative qualifies for the exemption  one that is related only to the
subordination of one financial instrument to another. As a result, entities that
have contracts containing an embedded credit derivative feature in a form other
than such subordination may need to separately account for the embedded credit
derivative feature. This guidance also has transition provisions, which permit
entities to make a special one-time election to apply the fair value option to
any investment in a beneficial interest in securitized financial assets,
regardless of whether such investments contain embedded derivative features. This guidance is
effective on the first day of the first fiscal quarter beginning after June 15,
2010. Early adoption is permitted at the beginning of any fiscal quarter
beginning after March 5, 2010. This amendment is not expected to have a material
impact on the Companys financial statements.

-14-

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Share-based payment awards

In March 2010, FASB issued an authoritative pronouncement
regarding the effect of denominating the exercise price of a share-based payment
awards in the currency of the market in which the underlying equity securities
trades and that currency is different from (1) entitys functional currency, (2)
functional currency of the foreign operation for which the employee provides
services, and (3) payroll currency of the employee. The guidance clarifies that
an employee share-based payment award with an exercise price denominated in the
currency of a market in which a substantial portion of the entitys equity
securities trades should be considered an equity award assuming all other
criteria for equity classification are met. The pronouncement will be effective
for interim and annual periods beginning on or after December 15, 2010, and will
be applied prospectively. Affected entities will be required to record a
cumulative catch-up adjustment for all awards outstanding as of the beginning of
the annual period in which the guidance is adopted. This amendment is not
expected to have a material impact on the Companys financial statements.

The milestone method of revenue recognition

In April 2010, the FASB issued an authoritative pronouncement
regarding the milestone method of revenue recognition. The scope of this
pronouncement is limited to arrangements that include milestones relating to
research or development deliverables. The pronouncement specifies criteria that
must be met for a vendor to recognize consideration that is contingent upon
achievement of a substantive milestone in its entirety in the period in which
the milestone is achieved. The criteria apply to milestones in arrangements
within the scope of this pronouncement regardless of whether the arrangement is
determined to have single or multiple deliverables or units of accounting. The
pronouncement will be effective for fiscal years, and interim periods within
those years, beginning on or after June 15, 2010. Early application is
permitted. Companies can apply this guidance prospectively to milestones
achieved after adoption. However, retrospective application to all prior periods
is also permitted. This amendment is not expected to have a material impact on
the Companys 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.

ITEM
8.              FINANCIAL
STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA

The Companys consolidated audited financial statements for the
five months ended March 31, 2010 and years ended October 31, 2009 and 2008,
together with the report of the independent certified public accounting firm
thereon and the notes thereto, are presented beginning at page F-1 of this
report.

ITEM 9A(T).      CONTROLS AND
PROCEDURES.

(a) Evaluation of Disclosure Controls and
Procedures.

Our management, with the participation of our chief executive
officer and chief financial officer, Ms. Li Liu and Ms. Veronica Jing Chen,
respectively, evaluated the effectiveness of our disclosure controls and
procedures. The term disclosure controls and procedures, as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other
procedures of a company that are designed to ensure that information required to
be disclosed by a company in the reports, such as this report, that it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the SECs rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by a company in the
reports that it files or submits under the Exchange Act is accumulated and
communicated to the company's management, including its principal executive and
principal financial officers, as appropriate to allow timely decisions regarding
required disclosure. Management recognizes that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving their objectives and management necessarily applies its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
Based on that evaluation, Ms. Li Liu and Ms. Veronica Jing Chen concluded that
as of March 31, 2010, our disclosure controls and procedures were not effective
due to the significant deficiencies in our internal control over financial
reporting for the period as disclosed below.

-15-

---

(b) Managements annual report on internal control over
financial reporting

Management is responsible for establishing and maintaining
adequate internal control over financial reporting for the Company. Internal
control over financial reporting refers to the process designed by, or under the
supervision of, our chief executive officer and chief financial officer, and
effected by our Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of our financial reporting and
the preparation of financial statements for external purposes in accordance with
U.S. GAAP, and includes those policies and procedures that:

|1) | pertain to the maintenance of records that in reasonable
      detail accurately and fairly reflect the transactions and dispositions of
      our assets;                                                                                                                                                       
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                  
|2) | provide reasonable assurance that transactions are
      recorded as necessary to permit preparation of financial statements in
      accordance with U.S. GAAP, and that our receipts and expenditures are
      being made only in accordance with the authorization of our management and
      directors; and
|   |                                                                                                                                                                                                                                                                                                                  
|3) | provide reasonable assurance regarding prevention or
      timely detection of unauthorized acquisition, use or disposition of our
      assets that could have a material effect on the financial
    statements.                                                                                               

Management assessed our internal control over financial
reporting as of March 31, 2010. Management's assessment of internal control over
financial reporting was conducted using the criteria in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Based on that evaluation, our management concluded
that our internal controls over financial reporting as of March 31, 2010 were
not effective due to the following significant deficiencies:

|1) | Our internal audit function is significantly deficient
      due to insufficient qualified resources and appropriate system to perform
      such function. Therefore, our ability to prevent and control lapses and
      errors in our accounting function could not be rendered
  effectively.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                  
|2) | Our current accounting staff is relatively inexperienced
      with respect to U.S. GAAP and needs substantial training to meet the
      higher demands of being a U.S. public company.                                                                                                         

In order to correct the foregoing significant deficiencies,
during the five months ended March 31, 2010, we have taken and are taking the
following remediation measures that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting:

|1) | We have engaged a third party professional consultant, as
      announced on November 17, 2009, to assist us in assessing, improving and
      monitoring our internal control over financial reporting. We have been
      actively working with the external consultant to assess our data
      collection, financial reporting, and control procedures and to strengthen
      our internal controls over financial reporting.                                                                                                                                                                                                           
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|2) | We are committed to develop a comprehensive and
      risk-based internal audit function within the Company. Due to the scarcity
      of qualified candidates with extensive experience in U.S. GAAP reporting
      and accounting in the region, we have engaged an external professional
      consultancy firm to assist the management in developing the internal audit
      system. At the same time, we have employed experienced staff with respect
      to U.S. GAAP-based reporting. We have enhanced our efforts to hire
      sufficient internal audit resources with assistance from recruiters and
      through referrals.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|3) | Ms. Veronica Jing Chen was appointed as our new Chief
      Financial Officer, effective February 24, 2010, who is a seasoned
      executive with more than 20 years of experience in accounting, financial
      management, and general management of several U.S.-listed Chinese
      companies.                                                                                                                                                                                                                                                                                                                                        

-16-

---

|4) | Ms. Ping An was appointed as our senior finance manager,
      effective April 19, 2010, who has more than five years experience in a
      Big Four Accounting firm - Deloitte & Touch
  Tianjin.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In connection with the above remediation measures, we agreed to
pay the third party professional consultant a service fee of approximately RMB
0.7 million (approximately $0.11 million) for their assistance in the
improvement of our internal control over financial reporting. In addition, we
hired five more staff to work in our SOX compliance department with an aggregate
monthly salary of RMB17, 980 (approximately $2,700).

Our management is committed to improving our internal controls.
We believe that the foregoing steps will remediate the significant deficiencies
identified above, and we will continue to monitor the effectiveness of these
steps and make any changes that our management deems appropriate to put
effective controls in place.

This transition report on Form 10-K does not include an
attestation report of the company's registered public accounting firm regarding
internal control over financial reporting. Management's report was not subject
to attestation by the company's registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit the
company to provide only management's report in this transition report on Form
10-K.

(c) Changes in internal control over financial
reporting

We will regularly review our system of internal control over
financial reporting and make changes to our processes and systems to improve
controls and increase efficiency, while ensuring that we maintain an effective
internal control environment. Changes may include such activities as
implementing new and more efficient systems, consolidating activities, and
migrating processes.

Except as described above, during the five months ended March
31, 2010, there were no changes in our internal controls over financial
reporting that have materially affected, or are reasonably likely to affect
materially, our internal control over financial reporting.

-17-

---

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES.

(a) The following documents are filed
as part of this report:

|(1) | Financial Statement are set forth beginning on page F-1
      of the Report
|--- | ---------------------------------------------------------------------------

| | Report of
      Independent Registered Public Accounting Firm   
| | ----------------------------------------------------------------
| |                                                                 
| | Consolidated Balance Sheets                                     
| |                                                                 
| | Consolidated Statements of Income and Comprehensive
      Income
| |                                                                 
| | Consolidated Statements of Stockholders Equity                 
| |                                                                 
| | Consolidated Statements of Cash Flows                           
| |                                                                 
| | Notes to
      Consolidated Financial Statements                

|(2) | Financial Statement Schedules: All Schedules are omitted
      because the information called for is not applicable, is not required, or
      because the financial information is set forth in the financial statements
      or notes thereto.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                  
|(3) | Exhibits                                                                                                                                                                                                                                         

Exhibits (including those incorporated by reference)

|Exhibit No. |  | Description                                                                                                                                                                                                                                                          
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                                                                                                                                      
|2.1         |  | Agreement and Plan of Merger by and among Ardmore,
      Ardmore Acquisition Corp, Tryant LLC and Charleston Industrial Ltd.
      [incorporated by reference to Exhibit 2.1 to the Companys Current Report
      on Form 8-K filed on June 12, 2008].              
|            |  |                                                                                                                                                                                                                                                                      
|3.1         |  | Amended and Restated Certificate of Incorporation
      [incorporated by reference to Exhibit 3.1 to the Companys Quarterly
      Report on Form 10-Q filed on September 22, 2008].                                                                                 
|            |  |                                                                                                                                                                                                                                                                      
|3.2         |  | Bylaws of the Company adopted on February 21, 2008
      [incorporated by reference to Exhibit 99.2 to the Companys Current Report
      on Form 8-K/A-2 filed on April 10, 2008].                                                                                  
|            |  |                                                                                                                                                                                                                                                                      
|3.3         |  | Certificate of Designation of Series A Preferred Stock,
      as filed with the Secretary of State of the State of Delaware, June 16,
      2009 [incorporated by reference to Exhibit 3.1 to the Companys Current
      Report on Form 8-K filed on June 19, 2009].
|            |  |                                                                                                                                                                                                                                                                      
|4.1         |  | Form of 8% Convertible Promissory Note [incorporated by
      reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed
      on June 12, 2008].                                                                                                    
|            |  |                                                                                                                                                                                                                                                                      
|4.2         |  | Form of Series A Warrant [incorporated by reference to
      Exhibit 4.2 to the Companys Current Report on Form 8-K filed on June 12,
      2008].                                                                                                                  
|            |  |                                                                                                                                                                                                                                                                      
|4.3         |  | Form of Series B Warrant [incorporated by reference to
      Exhibit 4.3 to the Companys Current Report on Form 8-K filed on June 12,
      2008].                                                                                                                  
|            |  |                                                                                                                                                                                                                                                                      
|4.4         |  | Form of Series C Warrant [incorporated by reference to
      Exhibit 4.4 to the Companys Current Report on Form 8-K filed on June 12,
      2008].                                                                                                                  

-18-

---

|4.5   | Form of Series D Warrant [incorporated by reference to
      Exhibit 4.5 to the Companys Quarterly Report on Form 10-Q filed on
      September 22, 2008].                                                                                                                                                                           
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                       
|4.6   | Form of Series E Warrant [incorporated by reference to
      Exhibit 4.6 to the Companys Quarterly Report on Form 10-Q filed on
      September 22, 2008].                                                                                                                                                                           
|      |                                                                                                                                                                                                                                                                                                                                       
|4.7   | Investor and Registration Rights Agreement, by and among
      Yayi International Inc., Global Rock Stone Industrial Ltd, Li Liu, Fung
      Shek and SAIF Partners III L.P., dated June 18, 2009 [incorporated by
      reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed
      on June 19, 2009].          
|      |                                                                                                                                                                                                                                                                                                                                       
|10.1  | Form of Amended and Restated Securities Purchase
      Agreement dated as of May 12, 2008, by and among Ardmore and the investors
      signatories thereto [incorporated by reference to Exhibit 10.1 to the
      Companys Current Report on Form 8-K filed on June 12, 2008].                                                     
|      |                                                                                                                                                                                                                                                                                                                                       
|10.2  | Form of Registration Rights Agreement dated as of May 12,
      2008 [incorporated by reference to Exhibit 10.2 to the Companys Current
      Report on Form 8-K filed on June 12, 2008].                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                                       
|10.3  | Lease Contract of Premises between Tianjin Milk Goat
      Dairy Co., Ltd. and Tianjin Yayi Industrial Co., Ltd. (Translation)
      [incorporated by reference to Exhibit 10.3 to the Companys Current Report
      on Form 8-K filed on June 12, 2008].                                                                            
|      |                                                                                                                                                                                                                                                                                                                                       
|10.4  | Building Property Transfer Agreement between Tianjin Milk
      Goat Dairy Co., Ltd. and Tianjin Yayi Industrial Co, Ltd. (Translation)
      [incorporated by reference to Exhibit 10.4 to the Companys Current Report
      on Form 8-K filed on June 12, 2008].                                                                   
|      |                                                                                                                                                                                                                                                                                                                                       
|10.5  | Project Construction Contract between Tainjin Yayi
      Industrial Co., Ltd. and the Peoples Government of Linwei District,
      Weinan City [incorporated by reference to Exhibit 10.5 to the Companys
      Quarterly Report on Form 10-Q filed on September 22, 2008].                                                         
|      |                                                                                                                                                                                                                                                                                                                                       
|10.6  | Supplementary Agreement to the Project Construction
      Contract dated July 25, 2008 between Tianjin Yayi Industrial Co., Ltd. and
      the Peoples Government of Linwei District, Weinan City [incorporated by
      reference to Exhibit 10.6 to the Companys Quarterly Report on Form 10-Q
      filed on September 22, 2008].
|      |                                                                                                                                                                                                                                                                                                                                       
|10.7  | Plant Transfer Contract dated September 26, 2008 between
      Tianjin Yayi and Tianjin Mengyang Biotechnology Co., Ltd. [incorporated by
      reference to Exhibit 10.7 to the Companys Annual Report on Form 10-K
      filed on February 13, 2009].                                                                              
|      |                                                                                                                                                                                                                                                                                                                                       
|10.8  | Supplementary Agreement dated October 12, 2008 between
      Tianjin Yayi and Tianjin Mengyang Biotechnology Co., Ltd. to the House
      Property Transfer Contract dated January 15, 2007 [incorporated by
      reference to Exhibit 10.8 to the Companys Annual Report on Form 10-K
      filed on February 13, 2009].           
|      |                                                                                                                                                                                                                                                                                                                                       
|10.9  | Supplementary Agreement dated January 20, 2009 between
      Tianjin Yayi and Tianjin Mengyang Biotechnology Co., Ltd. to the Plant
      Transfer Contract dated September 26, 2008 [incorporated by reference to
      Exhibit 10.9 to the Companys Annual Report on Form 10-K filed on February
      13, 2009].                  
|      |                                                                                                                                                                                                                                                                                                                                       
|10.10 | Short Term Loan Agreement for RMB 10 million with
      Shanghai Pudong Development Bank SPDB [incorporated by reference to
      Exhibit 10.10 to the Companys Quarterly Report on Form 10-Q filed on
      March 23, 2009].                                                                                                      
|      |                                                                                                                                                                                                                                                                                                                                       
|10.11 | Entrusted Loan Contract by and among SPDB, Tianjin Yayi
      Industrial Co., Ltd. and Tianjin Haitai Investment Guarantee Co., Ltd.
      [incorporated by reference to Exhibit 10.11 to the
  Companys                                                                                                                             

-19-

---

|      | Quarterly Report on Form 10-Q filed on March 23,
    2009]                                                                                                                                                                                                                                                                                                                                        
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.12 | Loan Contract between Tianjin Yayi Industrial Co., Ltd.
      and Tianjin Rural Cooperative Bank. [incorporated by reference to Exhibit
      10.12 to the Companys Quarterly Report on Form 10-Q filed on March 23,
      2009]                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.13 | Loan Contract for Operating Fund between Tianjin Yayi
      Industrial Co., Ltd. and Industrial & Commercial Bank of China.
      [incorporated by reference to Exhibit 10.13 to the Companys Quarterly
      Report on Form 10-Q filed on March 23, 2009]                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.14 | Short Term Loan Agreement for RMB 10 million with
      Shanghai Pudong Development Bank [incorporated by reference to Exhibit
      10.10 to the Companys Current Report on Form 8-K filed on April 8,
      2009].                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.15 | Series A Preferred Stock Purchase Agreement, by and among
      Yayi International Inc., Global Rock Stone Industrial Ltd, Charleston
      Industrial Ltd, Tianjin Yayi Industrial Co., Ltd., Li Liu, Fung Shek and
      SAIF Partners III L.P., dated June 18, 2009 [incorporated by reference to
      Exhibit 10.1 to the Companys Current Report on Form 8-K filed on June 19,
      2009].
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.16 | Voting Agreement, by and among Yayi International Inc.,
      Global Rock Stone Industrial Ltd, Li Liu, Fung Shek and SAIF Partners III
      L.P., dated June 18, 2009 [incorporated by reference to Exhibit 10.2 to
      the Companys Current Report on Form 8-K filed on June 19,
2009].                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.17 | Management Rights Agreement, by and between Yayi
      International Inc. and SAIF Partners III L.P., dated June 18, 2009
      [incorporated by reference to Exhibit 10.3 to the Companys Current Report
      on Form 8-K filed on June 19, 2009].                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.18 | Form of Indemnification Agreement [incorporated by
      reference to Exhibit 10.4 to the Companys Current Report on Form 8-K
      filed on June 19, 2009].                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.19 | Termination and Release Agreement, by and among the
      Company, Global Rock and Allied Merit, dated July 8, 2009 [incorporated by
      reference to Exhibit 10.1 to the Companys Current Report on Form 8-K
      filed on July 14, 2009].                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.20 | English Summary of Loan Agreement, by and between Tianjin
      Yayi and Rural Corporative Bank of Tianjin, dated May 22, 2009
      [incorporated by reference to Exhibit 10.1 to the Companys Quarterly
      Report on Form 10-Q filed on September 14, 2009].                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.21 | English Summary of Comprehensive Credit Agreement, by and
      between Tianjin Yayi and Rural Corporative Bank of Tianjin, dated July 3,
      2009 [incorporated by reference to Exhibit 10.2 to the Companys Quarterly
      Report on Form 10-Q filed on September 14, 2009].                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.22 | English Translation of Zhuangli Construction Agreement,
      by and between Weinan Milkgoat and Zhuangli Construction Team, dated June
      10, 2009 [incorporated by reference to Exhibit 10.3 to the Companys
      Quarterly Report on Form 10-Q filed on September 14, 2009].                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.23 | English Translation of Qinzheng Construction Agreement,
      by and between Weinan Milkgoat and Fuping County Qinzheng Construction
      Engineering Corporation, dated July 2, 2009 [incorporated by reference to
      Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q filed on
      September 14, 2009].                                                                        
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.24 | Project Installation Agreement, by and between Shaanxi
      Milkgoat and Heilongjiang Tianhong, dated October 28, 2009 [incorporated
      by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K
      filed on November 3, 2009].                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.25 | Form of Settlement Agreement, by and among the Company
      and the Investors, dated November                                                                                                                                                                                                                                                                                                    

-20-

---

|      | 24, 2009 [incorporated by
        reference to Exhibit 10.1 to the Companys Current Report on Form
        8-K filed on December 1, 2009].                                                                                                                                      
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                  
|10.26 | English Translation of Employment
        Agreement, dated February 24, 2010, by and between Tianjin Yayi Industrial
        Co. Ltd. and Veronica Chen [incorporated by reference to Exhibit 10.1
        to the Companys Current Report on Form 8-K filed on March 2, 2010].**
|      |                                                                                                                                                                                                                                                                                  
|10.27 | Loan Agreement, by and between
        the Company and SAIF Partners III L.P., dated April 30, 2010 [incorporated
        by reference to Exhibit 10.1 to the Companys Current Report on Form
        8-K filed on May 6, 2010].                                                
|      |                                                                                                                                                                                                                                                                                  
|10.28 | Yayi International Inc.
        2010 Employee Stock Option and Stock Award Plan [incorporated by reference
        to Exhibit 10.1 to the Companys Current Report on Form 8-K filed
        on May 31, 2010].                                                                   
|      |                                                                                                                                                                                                                                                                                  
|10.29 | Form of Yayi International
        Inc. 2010 Employee Stock Option and Stock Award Plan Award Agreement [incorporated
        by reference to Exhibit 10.2 to the Companys Current Report on Form
        8-K filed on May 31, 2010].**                                         
|      |                                                                                                                                                                                                                                                                                  
|10.30 | English Translation of Employment
        Agreement, dated June 1, 2010, by and between Tianjin Yay iIndustrial
        Co. Ltd. and Li Liu [incorporated by reference to Exhibit 10.3 to the
        Companys Current Report on Form 8-K filed on May 31, 2010].**             
|      |                                                                                                                                                                                                                                                                                  
|10.31 | English Translation of Licensing
        Agreement, dated April 10, 2001, by and among Tianjin Yayi and Taiwan
        Richlink.***                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                  
|10.32 | English Translation of
    Supplemental Agreement, dated June 12, 2009, by and among Tianjin Yayi, Taiwan Richlink Enterprise
        Company Ltd. and Li Liu.***                                                                                                                
|      |                                                                                                                                                                                                                                                                                  
|10.33 | English Translation of Supplemental
        Agreement, dated June 12, 2009, by and between Tianjin Yayi and Tianjin
        Mengyang.***                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                  
|10.34 | English Translation of Form
        of Loan Agreement, dated June 3, 2010, by and between Tianjin Yayi Industrial
        Co. Ltd. and Tianjin Rural Cooperative Bank, Kexin Branch.***                                                                                          
|      |                                                                                                                                                                                                                                                                                  
|14    | Code of Ethics and Business
        Conduct for Officers, Directors and Employees of the Company [incorporated
        by reference to Exhibit 14 to the Companys Annual Report on Form
        10-KSB filed on March 31, 2008]                                                 
|      |                                                                                                                                                                                                                                                                                  
|21    | Subsidiaries of the Company***                                                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                  
|23.1  | Consent
        of Morison Cogen LLP, Independent Registered Public Accounting Firm.*                                                                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                  
|31.1  | Certification
        of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002.*                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                  
|31.2  | Certification
        of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002.*                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                  
|32.1  | Certifications
        of Principal Executive Officer furnished pursuant to 18 U.S.C. Section
        1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
        2002.*                                                                                       
|      |                                                                                                                                                                                                                                                                                  
|32.2  | Certifications
        of Principal Financial Officer furnished pursuant to 18 U.S.C. Section
        1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
        2002.*                                                                                       

*     Filed herewith.**  
Represents management contract or compensatory plan or arrangement.
*** Filed with the Original Filing

-21-

---

SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

| |     | YAYI INTERNATIONAL INC.                                   
| | --- | ----------------------------------------------------------
| |     |                                                           
| | By: | /s/ Li Liu                                                
| |     | Li Liu                                                    
| |     | Chief Executive Officer                                   
| |     |                                                           
| |     | Date: June 28, 2011                                       
| |     |                                                           
| |     |                                                           
| |     | /s/ Veronica Jing Chen                                    
| |     | Veronica Jing Chen                                        
| |     | Chief Financial Officer                                   
| |     | (Principal Financial Officer and
      Accounting Officer)
| |     |                                                           
| |     | Date: June 28, 2011                                       

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Company in the capacities
and on the dates indicated.

|Signature                     |  | Capacity                                           | Date         
|----------------------------- |  | -------------------------------------------------- | -------------
|                              |  |                                                    |              
|/s/ Li Liu                    |  | President and Chief Executive
      Officer        | June 28, 2011
|Li Liu                        |  | (Principal Executive Officer)                      |              
|                              |  |                                                    |              
|/s/ Veronica Jing
      Cheng |  | Chief Financial Officer
      (Principal Financial | June 28, 2011
|Veronica Jing Chen            |  | Officer and Principal Accounting
      Officer)    |              
|                              |  |                                                    |              
|*                             |  | Vice President and Director                        |              
|Fung Shek                     |  |                                                    |              
|                              |  |                                                    |              
|*                             |  | Director                                           |              
|Cili Yan                      |  |                                                    |              
|                              |  |                                                    |              
|*                             |  | Director                                           |              
|Kenneth Jue Lee               |  |                                                    |              
|                              |  |                                                    |              
|*                             |  | Director                                           |              
|Gang Sheng                    |  |                                                    |              
|                              |  |                                                    |              
|*By : /s/ Li Liu              |  |                                                    | June 28, 2011
|Li Liu, Attorney -in-Fact     |  |                                                    |              

-22-

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIES

FOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                            | Page
|--------------------------------------------------------------------------- | ----
|Report
      of Independent Registered Public Accounting Firm               | F-2 
|Consolidated
      Balance Sheets                                           | F-3 
|Consolidated
      Statements of Operations and Comprehensive Income (Loss) | F-5 
|Consolidated
      Statements of Stockholders Equity                       | F-6 
|Consolidated
      Statements of Cash Flows                                 | F-9 
|Notes
      to Consolidated Financial Statements                            | F-12

F-1

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YAYI INTERNATIONAL INC. AND SUBSIDIARIES
  Report of Independent Registered Public Accounting Firm

To the Board of Directors and
  Stockholders of Yayi International Inc.

We have audited the accompanying consolidated balance sheets of
Yayi International Inc. (the Company) as of March 31, 2010, October 31, 2009
and 2008, and the related consolidated statements of operations and
comprehensive income (loss), stockholders' equity and cash flows for the five
months ended March 31, 2010 and for each of the two years in the period ended
October 31, 2009. The Companys management is responsible for these financial
statements. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of March 31, 2010, October 31, 2009 and 2008, and the
consolidated results of their operations and their cash flows for the five
months ended March 31, 2010 and for each of the two years in the period ended
October 31, 2009, in conformity with accounting principles generally accepted in
the United States of America.

As discussed in Note 2 to the consolidated financial
statements, the accompanying 2010 financial statements have been restated in
relation to the accounting for slotting fees incurred during the five months
ended March 31, 2010.

/s/Morison Cogen LLP

Bala Cynwyd, Pennsylvania June 29, 2010, except for Note 2,

  to which the date is June 28, 2011

F-2

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YAYI INTERNATIONAL INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS

|                                                                     |   | March 31   |  |   | October 31 |  |   | October 31 | 
|-------------------------------------------------------------------- | - | ---------- |  | - | ---------- |  | - | ---------- | 
|                                                                     |   | 2010       |  |   | 2009       |  |   | 2008       | 
|                                                                     |   | (audited)  |  |   | (audited)  |  |   | (audited)  | 
|                                                                     |   | (restated) |  |   |            |  |   |            | 
|ASSETS                                                               |   |            |  |   |            |  |   |            | 
|Current assets:                                                      |   |            |  |   |            |  |   |            | 
|Cash and cash equivalents                                            | $ | 4,727,677  |  | $ | 10,368,213 |  | $ | 891,278    | 
|Restricted cash                                                      |   | 28,314     |  |   | -          |  |   | -          | 
|Accounts receivables, net of allowances of
      $53,771 and $46,259 |   | 3,530,937  |  |   | 3,037,667  |  |   | 2,603,078  | 
|Other receivable, net of allowances of $22,833 and $9,146            |   | 598,170    |  |   | 751,775    |  |   | 122,732    | 
|Inventories                                                          |   | 2,561,265  |  |   | 2,506,310  |  |   | 3,329,776  | 
|Prepaid expenses                                                     |   | 121,523    |  |   | 83,912     |  |   | 39,702     | 
|Land use rights, current portion                                     |   | 18,847     |  |   | -          |  |   | -          | 
|Advances                                                             |   | 1,560,743  |  |   | 1,105,089  |  |   | 229,185    | 
|Deferred financing cost                                              |   | -          |  |   | 18,686     |  |   | 184,846    | 
|Total current assets                                                 |   | 13,147,476 |  |   | 17,871,652 |  |   | 7,400,597  | 
|                                                                     |   |            |  |   |            |  |   |            | 
|Property, plant and equipment, net                                   |   | 6,505,130  |  |   | 5,794,885  |  |   | 2,580,385  | 
|Livestock                                                            |   | 659,584    |  |   | 107,441    |  |   | -          | 
|Goodwill                                                             |   | 278,372    |  |   | 278,291    |  |   | 278,787    | 
|Land use rights                                                      |   | 923,525    |  |   | -          |  |   | -          | 
|Deferred financing cost                                              |   | -          |  |   | -          |  |   | 18,686     | 
|Advances                                                             |   | 17,816,135 |  |   | 17,796,873 |  |   | 9,250,886  | 
|Deferred tax asset                                                   |   | 472,889    |  |   | -          |  |   | 9,402      | 
|Other assets                                                         |   | -          |  |   | -          |  |   | 5,627      | 
|                                                                     |   |            |  |   |            |  |   |            | 
|Total assets                                                         | $ | 39,803,111 |  | $ | 41,849,142 |  | $ | 19,544,370 | 
|                                                                     |   |            |  |   |            |  |   |            | 
|LIABILITIES AND STOCKHOLDERS EQUITY                                 |   |            |  |   |            |  |   |            | 
|Current liabilities:                                                 |   |            |  |   |            |  |   |            | 
|Short term loans                                                     | $ | 6,704,406  |  | $ | 6,468,497  |  | $ | 5,274,996  | 
|Accounts payable                                                     |   | 662,120    |  |   | 1,268,253  |  |   | 1,466,745  | 
|Other payable and accrued expenses                                   |   | 1,257,185  |  |   | 1,387,105  |  |   | 212,922    | 
|Dividend payable                                                     |   | -          |  |   | -          |  |   | 4,468,250  | 
|Advance from customers                                               |   | 141,136    |  |   | 56,350     |  |   | 3,589      | 
|Income and other tax payable                                         |   | 1,338,194  |  |   | 1,568,916  |  |   | 1,246,211  | 
|Accrued sales return                                                 |   | 45,503     |  |   | 166,476    |  |   | 243,774    | 
|Deferred tax liability                                               |   | -          |  |   | 2,424      |  |   | -          | 
|Long term loans - current portion                                    |   | 40,823     |  |   | 1,227,459  |  |   | 34,089     | 
|                                                                     |   |            |  |   |            |  |   |            | 
|Total current liabilities                                            |   | 10,189,367 |  |   | 12,145,480 |  |   | 12,950,576 | 
|                                                                     |   |            |  |   |            |  |   |            | 
|Long-term liabilities:                                               |   |            |  |   |            |  |   |            | 
|Due to related parties                                               |   | 5,312,801  |  |   | 5,311,472  |  |   | 977,950    | 
|Long-term loans                                                      |   | 17,009     |  |   | -          |  |   | 839,558    | 
|                                                                     |   | 5,329,810  |  |   | 5,311,472  |  |   | 1,817,508  | 
|                                                                     |   |            |  |   |            |  |   |            | 
|Total liabilities                                                    |   | 15,519,177 |  |   | 17,456,952 |  |   | 14,768,084 | 
|                                                                     |   |            |  |   |            |  |   |            | 
|Commitments and contingencies (Note 15)                              |   | -          |  |   | -          |  |   | -          | 

F-3

---

|PREFERRED STOCK,par value $0.001,
      10,000,000 shares authorized, Series A 10% non-cumulative redeemable
      convertible preferred stock, redemption $9.80 per share plus 25% interest
      from date of issuance to date of redemption, 1,530,612 shares issued and
      outstanding |   | 14,264,871 |  |   | 14,264,871 |  |   | -          | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---------- |  | - | ---------- |  | - | ---------- | 
|                                                                                                                                                                                                                                                                                              |   |            |  |   |            |  |   |            | 
|STOCKHOLDERS' EQUITY                                                                                                                                                                                                                                                                          |   |            |  |   |            |  |   |            | 
|                                                                                                                                                                                                                                                                                              |   |            |  |   |            |  |   |            | 
|Common stock, par value $0.001, 100,000,000
      shares authorized, 26,387,728 and 25,000,000 shares issued and
      outstanding, respectively                                                                                                                                              |   | 26,387     |  |   | 25,000     |  |   | 25,000     | 
|Additional paid in capital                                                                                                                                                                                                                                                                    |   | 4,721,337  |  |   | 3,234,224  |  |   | 3,228,244  | 
|Statutory surplus reserve fund                                                                                                                                                                                                                                                                |   | 1,142,397  |  |   | 1,142,397  |  |   | 502,438    | 
|Retained earning                                                                                                                                                                                                                                                                              |   | 3,821,100  |  |   | 5,423,895  |  |   | 667,873    | 
|Accumulated other comprehensive income                                                                                                                                                                                                                                                        |   | 307,842    |  |   | 301,803    |  |   | 352,731    | 
|                                                                                                                                                                                                                                                                                              |   |            |  |   |            |  |   |            | 
|Total stockholders equity                                                                                                                                                                                                                                                                    |   | 10,019,063 |  |   | 10,127,319 |  |   | 4,776,286  | 
|                                                                                                                                                                                                                                                                                              |   |            |  |   |            |  |   |            | 
|Total liabilities and stockholders' equity                                                                                                                                                                                                                                                    | $ | 39,803,111 |  | $ | 41,849,142 |  | $ | 19,544,370 | 

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

F-4

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YAYI INTERNATIONAL INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

|                                                               |   | Five months ended |   |   | Years ended |  
|-------------------------------------------------------------- | - | ----------------- | - | - | ----------- | -
|                                                               |   | March 31,         |   |   | October 31, |  
|                                                               |   | 2010              |   |   | 2009        |  
|                                                               |   | (audited)         |   |   | (unaudited) |  
|                                                               |   | (restated)        |   |   |             |  
|Sales                                                          | $ | 6,085,193         |   | $ | 9,283,420   |  
|                                                               |   |                   |   |   |             |  
|Cost of goods sold                                             |   | (2,369,642        | ) |   | (2,892,709  | )
|                                                               |   |                   |   |   |             |  
|Gross profit                                                   |   | 3,715,551         |   |   | 6,390,711   |  
|                                                               |   |                   |   |   |             |  
|Operating expenses:                                            |   |                   |   |   |             |  
|Sales and marketing expenses                                   |   | (3,908,573        | ) |   | (1,973,212  | )
|General and administrative expenses                            |   | (1,318,077        | ) |   | (685,843    | )
|                                                               |   |                   |   |   |             |  
|Total operating expenses                                       |   | (5,226,650        | ) |   | (2,659,055  | )
|                                                               |   |                   |   |   |             |  
|Income from continuing operations                              |   | (1,511,099        | ) |   | 3,731,656   |  
|                                                               |   |                   |   |   |             |  
|Other income (expenses):                                       |   |                   |   |   |             |  
|Interest income                                                |   | 8,250             |   |   | 2,902       |  
|Interest expenses                                              |   | (221,549          | ) |   | (359,014    | )
|Amortization of deferred debt issuance cost                    |   | (91,227           | ) |   | (333,160    | )
|Warrant modification expense                                   |   | (88,500           | ) |   | -           |  
|Accretion of debt discount and deferred financing cost         |   | -                 |   |   | -           |  
|Liquidated damages                                             |   | -                 |   |   | -           |  
|Merger costs                                                   |   | -                 |   |   | -           |  
|Other income (expenses), net                                   |   | 12,237            |   |   | 2,394       |  
|                                                               |   |                   |   |   |             |  
|Income before income tax                                       |   | (1,891,888        | ) |   | 3,044,778   |  
|                                                               |   |                   |   |   |             |  
|Income tax benefit (expense)                                   |   | 289,093           |   |   | (869,614    | )
|                                                               |   |                   |   |   |             |  
|Net (loss) income from continuing operations,
      net of tax |   | (1,602,795        | ) |   | 2,175,164   |  
|                                                               |   |                   |   |   |             |  
|Other comprehensive income                                     |   |                   |   |   |             |  
|Foreign currency translation adjustment                        |   | 6,039             |   |   | (44,791     | )
|                                                               |   |                   |   |   |             |  
|Comprehensive (loss) income                                    | $ | (1,596,756        | ) | $ | 2,130,373   |  
|                                                               |   |                   |   |   |             |  
|Earnings per share of common stock                             |   |                   |   |   |             |  
|- Basic                                                        |   | (0.06             | ) |   | 0.09        |  
|- Diluted                                                      |   | (0.06             | ) |   | 0.09        |  
|Weighted average shares of common stock outstanding            |   |                   |   |   |             |  
|- Basic                                                        |   | 26,017,835        |   |   | 25,000,000  |  
|- Diluted                                                      |   | 26,017,835        |   |   | 25,000,000  |  

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

F-5

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YAYI INTERNATIONAL INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

|                                                                     |  |              |   |   |            |   |   |            |   |   | Statutory |  |   |            |   |   | Accumulated         |   |   | Total      |  
|-------------------------------------------------------------------- |  | ------------ | - | - | ---------- | - | - | ---------- | - | - | --------- |  | - | ---------- | - | - | ------------------- | - | - | ---------- | -
|                                                                     |  | Common stock |   |   | Additional |   |   | Surplus    |   |   | Retained  |  |   | Other      |   |   | Stockholders       |  
|                                                                     |  | Number of    |   |   |            |   |   | paid in    |   |   | Reserve   |  |   | Earnings / |   |   | Comprehensive       |   |   | Equity     |  
|                                                                     |  | shares       |   |   | Amount     |   |   | capital    |   |   | Fund      |  |   | (Deficit)  |   |   | Income
      (Loss) |   |   | (Deficit)  |  
|Balance at October 31, 2007                                          |  | 22,325,000   |   | $ | 22,325     |   | $ | 3,684,764  |   | $ | -         |  | $ | (654,906   | ) | $ | (89,397             | ) | $ | 2,962,786  |  
|                                                                     |  |              |   |   |            |   |   |            |   |   |           |  |   |            |   |   |                     |   |   |            |  
|Issue of common stock at merger                                      |  | 1,000,198    |   |   | 1,000      |   |   | (977       | ) |   | -         |  |   | -          |   |   | -                   |   |   | 23         |  
|                                                                     |  |              |   |   |            |   |   |            |   |   |           |  |   |            |   |   |                     |   |   |            |  
|Cancellation of common stock                                         |  | (325,198     | ) |   | (325       | ) |   | (536,042   | ) |   | -         |  |   | -          |   |   | -                   |   |   | (536,367   | )
|                                                                     |  |              |   |   |            |   |   |            |   |   |           |  |   |            |   |   |                     |   |   |            |  
|Issuance of common stock for finder's fee as
      offering costs    |  | 2,000,000    |   |   | 2,000      |   |   | 2,198,000  |   |   | -         |  |   | -          |   |   | -                   |   |   | 2,200,000  |  
|                                                                     |  |              |   |   |            |   |   |            |   |   |           |  |   |            |   |   |                     |   |   |            |  
|Issuance of Series A warrants with convertible
      notes           |  | -            |   |   | -          |   |   | 280,726    |   |   | -         |  |   | -          |   |   | -                   |   |   | 280,726    |  
|                                                                     |  |              |   |   |            |   |   |            |   |   |           |  |   |            |   |   |                     |   |   |            |  
|Issuance of Series B warrants for finder's
      fee                 |  | -            |   |   | -          |   |   | 1,144,743  |   |   | -         |  |   | -          |   |   | -                   |   |   | 1,144,743  |  
|                                                                     |  |              |   |   |            |   |   |            |   |   |           |  |   |            |   |   |                     |   |   |            |  
|Issuance of Series C warrants for cancellation
      of common stock |  | -            |   |   | -          |   |   | 86,367     |   |   | -         |  |   | -          |   |   | -                   |   |   | 86,367     |  
|                                                                     |  |              |   |   |            |   |   |            |   |   |           |  |   |            |   |   |                     |   |   |            |  
|Issuance of Series D warrants for placement
      agent              |  | -            |   |   | -          |   |   | 67,368     |   |   | -         |  |   | -          |   |   | -                   |   |   | 67,368     |  
|                                                                     |  |              |   |   |            |   |   |            |   |   |           |  |   |            |   |   |                     |   |   |            |  
|Issuance of Series E warrants for extension
      of note payable    |  | -            |   |   | -          |   |   | 233,547    |   |   | -         |  |   | -          |   |   | -                   |   |   | 233,547    |  
|                                                                     |  |              |   |   |            |   |   |            |   |   |           |  |   |            |   |   |                     |   |   |            |  
|Beneficial conversion feature on convertible
      note              |  | -            |   |   | -          |   |   | 304,800    |   |   | -         |  |   | -          |   |   | -                   |   |   | 304,800    |  
|                                                                     |  |              |   |   |            |   |   |            |   |   |           |  |   |            |   |   |                     |   |   |            |  
|Dividend declared                                                    |  | -            |   |   | -          |   |   | (4,235,052 | ) |   | -         |  |   | -          |   |   | -                   |   |   | (4,235,052 | )

F-6

---

|Net income for the year ended October 31,
      2008                                             |  | -          |  |   | -      |  |   | -         |   |   | -         |  |   | 1,825,217 |   |   | -       |   |   | 1,825,217  |  
|------------------------------------------------------------------------------------------------ |  | ---------- |  | - | ------ |  | - | --------- | - | - | --------- |  | - | --------- | - | - | ------- | - | - | ---------- | -
|                                                                                                 |  |            |  |   |        |  |   |           |   |   |           |  |   |           |   |   |         |   |   |            |  
|Transfer to statutory surplus reserve fund                                                       |  | -          |  |   | -      |  |   | -         |   |   | 502,438   |  |   | (502,438  | ) |   | -       |   |   | -          |  
|                                                                                                 |  |            |  |   |        |  |   |           |   |   |           |  |   |           |   |   |         |   |   |            |  
|Foreign currency translation                                                                     |  | -          |  |   | -      |  |   | -         |   |   | -         |  |   | -         |   |   | 442,128 |   |   | 442,128    |  
|                                                                                                 |  |            |  |   |        |  |   |           |   |   |           |  |   |           |   |   |         |   |   |            |  
|Balance at October 31, 2008                                                                      |  | 25,000,000 |  | $ | 25,000 |  | $ | 3,228,244 |   | $ | 502,438   |  | $ | 667,873   |   | $ | 352,731 |   | $ | 4,776,286  |  
|                                                                                                 |  |            |  |   |        |  |   |           |   |   |           |  |   |           |   |   |         |   |   |            |  
|Capital contribution from shareholder                                                            |  | -          |  |   | -      |  |   | 5,980     |   |   | -         |  |   | -         |   |   | -       |   |   | 5,980      |  
|                                                                                                 |  |            |  |   |        |  |   |           |   |   |           |  |   |           |   |   |         |   |   |            |  
|Net income for the year ended October 31,
      2009                                             |  | -          |  |   | -      |  |   | -         |   |   | -         |  |   | 5,395,981 |   |   | -       |   |   | 5,395,981  |  
|                                                                                                 |  |            |  |   |        |  |   |           |   |   |           |  |   |           |   |   |         |   |   |            |  
|Transfer to statutory surplus reserve fund                                                       |  | -          |  |   | -      |  |   | -         |   |   | 639,959   |  |   | (639,959  | ) |   | -       |   |   | -          |  
|                                                                                                 |  |            |  |   |        |  |   |           |   |   |           |  |   |           |   |   |         |   |   |            |  
|Foreign currency translation                                                                     |  | -          |  |   | -      |  |   | -         |   |   | -         |  |   | -         |   |   | (50,928 | ) |   | (50,928    | )
|                                                                                                 |  |            |  |   |        |  |   |           |   |   |           |  |   |           |   |   |         |   |   |            |  
|Balance at October 31, 2009                                                                      |  | 25,000,000 |  | $ | 25,000 |  | $ | 3,234,224 |   | $ | 1,142,397 |  | $ | 5,423,895 |   | $ | 301,803 |   | $ | 10,127,319 |  
|                                                                                                 |  |            |  |   |        |  |   |           |   |   |           |  |   |           |   |   |         |   |   |            |  
|Conversion of convertible notes and accrued
      interest into 1,296,274 shares of common stock |  | 1,296,274  |  |   | 1,296  |  |   | 1,398,704 |   |   | -         |  |   | -         |   |   | -       |   |   | 1,400,000  |  
|                                                                                                 |  |            |  |   |        |  |   |           |   |   |           |  |   |           |   |   |         |   |   |            |  
|Warrant modification expense                                                                     |  | -          |  |   | -      |  |   | 88,500    |   |   | -         |  |   | -         |   |   | -       |   |   | 88,500     |  
|                                                                                                 |  |            |  |   |        |  |   |           |   |   |           |  |   |           |   |   |         |   |   |            |  
|Cashless exercise of 110,000 Series D
      Warrants into 78,432 shares of common stock          |  | 78,432     |  |   | 78     |  |   | (78       | ) |   | -         |  |   | -         |   |   | -       |   |   | -          |  

F-7

---

|Cashless exercise of 17,363 Series A warrants into
      13,022 shares of common stock |  | 13,022     |  |   | 13     |  |   | (13       | ) |   | -         |  |   | -          |   |   | -       |  |   | -          |  
|-------------------------------------------------------------------------------------- |  | ---------- |  | - | ------ |  | - | --------- | - | - | --------- |  | - | ---------- | - | - | ------- |  | - | ---------- | -
|                                                                                       |  |            |  |   |        |  |   |           |   |   |           |  |   |            |   |   |         |  |   |            |  
|Net income for the five months ended March
      31, 2010                              |  | -          |  |   | -      |  |   | -         |   |   | -         |  |   | (1,602,795 | ) |   | -       |  |   | (1,602,794 | )
|                                                                                       |  |            |  |   |        |  |   |           |   |   |           |  |   |            |   |   |         |  |   |            |  
|Foreign currency translation                                                           |  | -          |  |   | -      |  |   | -         |   |   | -         |  |   | -          |   |   | 6,039   |  |   | 6,039      |  
|                                                                                       |  |            |  |   |        |  |   |           |   |   |           |  |   |            |   |   |         |  |   |            |  
|Balance at March 31, 2010 (restated)                                                   |  | 26,387,728 |  | $ | 26,387 |  | $ | 4,721,337 |   | $ | 1,142,397 |  | $ | 3,821,100  |   | $ | 307,842 |  | $ | 10,019,063 |  

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

F-8

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                        |   | Five Months Ended |   |   | Years Ended |  
|--------------------------------------------------------------------------------------- | - | ----------------- | - | - | ----------- | -
|                                                                                        |   | March 31,         |   |   | October 31, |  
|                                                                                        |   | 2010              |   |   | 2009        |  
|                                                                                        |   | (audited)         |   |   | (unaudited) |  
|                                                                                        |   | (restated)        |   |   |             |  
|Cash flow from operating activities                                                     |   |                   |   |   |             |  
|Net (loss) income                                                                       | $ | (1,602,795        | ) | $ | 2,175,164   |  
|Adjustments to reconcile net income to net cash provided by
      operating activities: |   |                   |   |   |             |  
|Net foreign currency transaction loss                                                   |   | 337               |   |   | -           |  
|Depreciation of property, plant and equipment                                           |   | 195,151           |   |   | 143,189     |  
|Depreciation of livestock                                                               |   | 11,600            |   |   | 1,449       |  
|Amortization of deferred financing cost                                                 |   | 18,686            |   |   | -           |  
|Disposal of property, plant and equipment                                               |   | 6,144             |   |   | -           |  
|Allowance of bad debts-Accounts receivable                                              |   | 7,498             |   |   | -           |  
|Allowance of bad debts-Other receivable                                                 |   | 13,684            |   |   | -           |  
|Sales return allowance                                                                  |   | (121,025          | ) |   | 107,544     |  
|Warrant modification expense                                                            |   | 88,500            |   |   | -           |  
|                                                                                        |   |                   |   |   |             |  
|Merger costs from issuance of warrants and
      common stock                           |   | -                 |   |   | -           |  
|Minority interests                                                                      |   |                   |   |   |             |  
|Accretion of debt discount                                                              |   | 72,541            |   |   | -           |  
|                                                                                        |   |                   |   |   |             |  
|(Increase) decrease in operating assets, net
      of effect of                         |   |                   |   |   |             |  
|acquisition:                                                                            |   |                   |   |   |             |  
|Restricted cash                                                                         |   | (28,314           | ) |   | -           |  
|Accounts receivables                                                                    |   | (499,891          | ) |   | (632,746    | )
|Other receivables                                                                       |   | 110,629           |   |   | (332,944    | )
|Inventories                                                                             |   | (54,224           | ) |   | 554,803     |  
|Prepaid expenses                                                                        |   | (37,588           | ) |   | (3,394      | )
|Advances                                                                                |   | (875,434          | ) |   | 387,347     |  
|Other assets                                                                            |   | -                 |   |   | -           |  
|Deferred tax asset and current assets                                                   |   | (475,320          | ) |   | 176,258     |  
|                                                                                        |   |                   |   |   |             |  
|Increase (decrease) in operating liability, net of effect of
      acquisition:         |   |                   |   |   |             |  
|Accounts payable                                                                        |   | (606,517          | ) |   | (288,104    | )
|Bills payable                                                                           |   | -                 |   |   | -           |  
|Advance from customers                                                                  |   | 84,769            |   |   | (3,576      | )
|Income and other tax payable                                                            |   | (231,178          | ) |   | 230,797     |  
|Other payable and accrued expenses                                                      |   | 25,889            |   |   | 770,114     |  
|Net cash (used in) provided by operating activities                                     |   | (3,896,858        | ) |   | 3,285,902   |  
|                                                                                        |   |                   |   |   |             |  
|Cash flows from investing activities                                                    |   |                   |   |   |             |  
|Purchase of equipment                                                                   |   | (235,785          | ) |   | (180,776    | )
|Advance for construction of office building                                             |   | -                 |   |   | -           |  
|Advance for construction of factory and warehouse                                       |   | -                 |   |   | (3,795,704  | )
|Advance for acquisition of land use rights                                              |   | -                 |   |   | (145,989    | )
|Advance for purchase of equipment                                                       |   | (208,980          | ) |   | -           |  
|Construction in progress                                                                |   | (175,828          | ) |   | 5,607       |  
|Cash acquired from Ardmore                                                              |   | -                 |   |   | -           |  
|Cash acquired in subsidiary                                                             |   | -                 |   |   | -           |  
|Purchase and breeding of livestock                                                      |   | (563,723          | ) |   | (75,487     | )
|Purchase of subsidiary                                                                  |   | -                 |   |   | -           |  
|Acquisition of land use right                                                           |   | (796,106          | ) |   | -           |  

F-9

---

|Net cash used in investing activities                                            |   | (1,980,422 | ) |   | (4,192,349 | ) |   | (12,400,482 | ) |   | (5,658,527 | )
|-------------------------------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ----------- | - | - | ---------- | -
|                                                                                 |   |            |   |   |            |   |   |             |   |   |            |  
|Cash flows from financing activities                                             |   |            |   |   |            |   |   |             |   |   |            |  
|Proceeds from short term loans                                                   |   | 2,925,705  |   |   | 2,232,020  |   |   | 6,681,198   |   |   | 5,440,619  |  
|Repayment of short term loans                                                    |   | (2,691,648 | ) |   | (729,943   | ) |   | (5,433,460  | ) |   | (3,619,991 | )
|Proceeds from long term loans                                                    |   | 61,235     |   |   | 167,579    |   |   | -           |   |   | -          |  
|Repayment of long term loans                                                     |   | (3,402     | ) |   | (14,473    | ) |   | (33,999     | ) |   | (33,141    | )
|Repayment of convertible debt and accrued interest                               |   | (56,000    | ) |   | -          |   |   | -           |   |   | -          |  
|Repayment to minority stockholders                                               |   | -          |   |   | -          |   |   | -           |   |   | (1,257     | )
|Net proceeds from private placement                                              |   | -          |   |   | -          |   |   | -           |   |   | 1,001,993  |  
|Net proceeds from issuance of Series A
      preferred stock                     |   | -          |   |   | -          |   |   | 14,264,871  |   |   | -          |  
|Dividend paid to previous stockholders of Tianjin Yayi                           |   | -          |   |   | -          |   |   | (2,550,504  | ) |   | -          |  
|Capital contribution from shareholders                                           |   | -          |   |   | -          |   |   | 5,979       |   |   | -          |  
|Due (from) to related parties                                                    |   | (23        | ) |   | (6,336     | ) |   | 2,426,005   |   |   | (400,850   | )
|Net cash provided by financing activities                                        |   | 235,867    |   |   | 1,648,847  |   |   | 15,360,090  |   |   | 2,387,373  |  
|                                                                                 |   |            |   |   |            |   |   |             |   |   |            |  
|Effect of exchange rate changes in cash                                          |   | 877        |   |   | (2,110     | ) |   | (17,516     | ) |   | 89,561     |  
|                                                                                 |   |            |   |   |            |   |   |             |   |   |            |  
|Net (decrease) increase in cash and cash
      equivalents                       |   | (5,640,536 | ) |   | 740,289    |   |   | 9,476,935   |   |   | 634,961    |  
|                                                                                 |   |            |   |   |            |   |   |             |   |   |            |  
|Cash and cash equivalents, beginning of
      period                             |   | 10,368,213 |   |   | 891,278    |   |   | 891,278     |   |   | 256,317    |  
|                                                                                 |   |            |   |   |            |   |   |             |   |   |            |  
|Cash and cash equivalents, end of period                                         | $ | 4,727,677  |   | $ | 1,631,567  |   | $ | 10,368,213  |   | $ | 891,278    |  
|                                                                                 |   |            |   |   |            |   |   |             |   |   |            |  
|Supplemental disclosure of cash flow
      information                           |   |            |   |   |            |   |   |             |   |   |            |  
|Cash paid during the period                                                      |   |            |   |   |            |   |   |             |   |   |            |  
|                                                                                 |   |            |   |   |            |   |   |             |   |   |            |  
|Interest paid                                                                    | $ | 242,458    |   | $ | 316,883    |   | $ | 604,633     |   | $ | 310,926    |  
|                                                                                 |   |            |   |   |            |   |   |             |   |   |            |  
|Income tax paid                                                                  | $ | 372,528    |   | $ | 421,461    |   | $ | 2,050,646   |   | $ | 1,586,394  |  
|                                                                                 |   |            |   |   |            |   |   |             |   |   |            |  
|Supplemental disclosure of non-cash financing and investing
      activities;    |   |            |   |   |            |   |   |             |   |   |            |  
|Repayment of short-term loan from Tianjin
      Mengyang offset against advances | $ | -          |   | $ | -          |   | $ | 877,508     |   | $ | -          |  
|Dividend payable                                                                 | $ | -          |   | $ | -          |   | $ | -           |   | $ | 4,235,052  |  
|Settlement of dividend payable                                                   | $ | -          |   | $ | -          |   | $ | 1,916,669   |   | $ | -          |  
|Rental deposit applied as advance to construction of
      factory and warehouse | $ | -          |   | $ | -          |   | $ | -           |   | $ | 644,790    |  
|                                                                                 |   |            |   |   |            |   |   |             |   |   |            |  
|Note payable to Tryant for cancellation of common stock                          | $ | -          |   | $ | -          |   | $ | -           |   | $ | 250,000    |  
|                                                                                 |   |            |   |   |            |   |   |             |   |   |            |  
|Non-cash exercise of 10,000 warrants into common stock                           | $ | 91         |   | $ | -          |   | $ | -           |   | $ | -          |  
|                                                                                 |   |            |   |   |            |   |   |             |   |   |            |  
|Conversion of convertible note plus accrued interest into
      common stock     | $ | 1,400,000  |   | $ | -          |   | $ | -           |   | $ | -          |  
|                                                                                 |   |            |   |   |            |   |   |             |   |   |            |  
|Issuance of Series C warrants for cancellation of common
      stock             | $ | -          |   | $ | -          |   | $ | -           |   | $ | 86,367     |  
|                                                                                 |   |            |   |   |            |   |   |             |   |   |            |  
|Issuance of Series A warrants with convertible notes                             | $ | -          |   | $ | -          |   | $ | -           |   | $ | 280,726    |  
|                                                                                 |   |            |   |   |            |   |   |             |   |   |            |  
|Issuance of common stock and Series B warrants for finder's
      fee            | $ | -          |   | $ | -          |   | $ | -           |   | $ | 3,344,743  |  

F-10

---

|Beneficial conversion feature of
      convertible notes                                                        | $ | -       |  | $ | - |  | $ | - |  | $ | 304,800 | 
|--------------------------------------------------------------------------------------------------------------- | - | ------- |  | - | - |  | - | - |  | - | ------- | 
|                                                                                                                |   |         |  |   |   |  |   |   |  |   |         | 
|Deferred financing cost from issuance of
      Series D warrants                                                | $ | -       |  | $ | - |  | $ | - |  | $ | 52,820  | 
|                                                                                                                |   |         |  |   |   |  |   |   |  |   |         | 
|Proceeds from convertible note applied to
      deferred financing cost                                         | $ | -       |  | $ | - |  | $ | - |  | $ | 98,007  | 
|                                                                                                                |   |         |  |   |   |  |   |   |  |   |         | 
|Deferred financing costs from issuance of
      Series E warrants to Allied Merit for extension of note payable | $ | -       |  | $ | - |  | $ | - |  | $ | 233,547 | 
|                                                                                                                |   |         |  |   |   |  |   |   |  |   |         | 
|Transfer from advances to land use rights                                                                       | $ | 146,285 |  | $ | - |  | $ | - |  | $ | -       | 
|                                                                                                                |   |         |  |   |   |  |   |   |  |   |         | 
|Transfer from advances to construction in
      progress                                                        | $ | 269,124 |  | $ | - |  | $ | - |  | $ | -       | 

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

F-11

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

1. Organization and Nature of Business

Yayi International, Inc (Yayi International), formerly known
as Ardmore Holding Corporation or Ardmore, was originally organized under the
laws of the state of Delaware in 1986 under the name of a predecessor
corporation which engaged in a software development and consulting service
business. During 2007 and 2006, Ardmore sold 875,000 post-stock split adjusted
shares to Tryant, LLC, a then unrelated party, which represented over 85% of
Ardmores outstanding shares. Subsequently, Ardmore's management decided to wind
up all business operations related to the former products sold by the
predecessor corporation. On April 16, 2007, the name of the predecessor
corporation was changed to Ardmore Holding Corporation. From April 16, 2007
until June 6, 2008 when the Company completed a reverse acquisition transaction
with Charleston Industrial Limited (Charleston), the Company was a blank check
company and did not engage in active business operations other than its search
for, and evaluation of, potential business opportunities for acquisition or
participation. The Company changed its fiscal year from December 31 to October
31. The Company amended its articles of incorporation on September 12, 2008 and
changed its name to Yayi International Inc.

On June 6, 2008, Ardmore, its wholly owned subsidiary, Ardmore
Acquisition Corp. (Ardmore Acquisition), Charleston Industrial Ltd.,
(Charleston) and Tryant LLC, a Delaware limited liability company and at such
time the holder of a majority of Ardmores outstanding shares of common stock,
consummated a merger pursuant to which Ardmore Acquisition was merged into
Charleston and Charleston became Ardmores wholly owned subsidiary. Charleston
is the owner of Tianjin Yayi Industrial Co., Ltd. (Tianjin Yayi), an entity
organized under the laws of the Peoples Republic of China and as a result of
this merger, Ardmore became the owner of Tianjin Yayi. Pursuant to the merger,
all 50,000 shares of Charlestons stock were exchanged for 22,325,000 shares
newly issued common stock of Ardmore. Accordingly, all references to shares of
Charlestons common stock and per share amounts have been retroactively restated
to reflect the equivalent numbers of Ardmore shares. Charleston thereby became
the Companys wholly owned subsidiary and the former stockholders of Charleston
became the Companys controlling stockholders.

Under accounting principles generally accepted in the United
States, the merger is considered to be a capital transaction in substance,
rather than a business combination. That is, the merger is equivalent to the
issuance of stock by Charleston for the net monetary assets of Ardmore,
accompanied by a recapitalization, and is accounted for as a change in capital
structure. Accordingly, the accounting for the merger will be identical to that
resulting from a reverse acquisition, except that no goodwill will be recorded.
Under reverse takeover accounting, the post reverse acquisition comparative
historical financial statements of the legal acquirer, Ardmore, are those of the
legal acquiree, Charleston and subsidiary, which are considered to be the
accounting acquirer.

Charleston Industrial Limited

Charleston is a limited liability company organized under the
laws of British Virgin Islands on October 31, 2007 in anticipation of a business
combination with a U.S. reporting company.

On January 15, 2008, Charleston acquired Tianjin Yayi and its
wholly-owned subsidiary, Weinan Milkgoat Production Co., Limited (Weinan
Milkgoat). Under the terms of the merger agreement, all stockholders of Tianjin
Yayi are entitled to receive a dividend from Charleston in the amount of
RMB30,500,000 (equivalent to $4,461,608) for all of the shares of Tianjin Yayi.
Since the ownership of Charleston and Tianjin Yayi are substantially the same,
the merger was accounted for as a transaction between entities under common
control, whereby Charleston recognized the assets and liabilities of Tianjin
Yayi transferred at their carrying amounts.

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

1. Organization and Nature of Business - Continued

Tianjin Yayi Industrial Co., Limited

Tianjin Yayi is a Chinese enterprise organized in the Peoples
Republic of China (PRC) in May 1994 in accordance with the Laws of the
Peoples Republic of China. Tianjin Yayi currently engages in the processing,
commercialization and distribution of a series of goat milk powder, goat milk
tablets, liquid goat milk as well as other goat milk drinks in the PRC.

On August 18, 2009, Tianjin Yayi was granted approval from
Tianjin Municipal Peoples Government to increase its registered capital by
$8,792,000 (RMB 60,000,000), from RMB30,000,000 to RMB 90,000,000. The capital
verification process has been completed. Tianjin Yayi was granted approval from
Tianjin Municipal Government to increase its registered capital by $1,170,258
(RMB8,000,000) to $14,335,659 (RMB98,000,000), which amount was injected in
February, 2010.

Weinan Milkgoat Production Co., Limited

Weinan Milkgoat was established on December 8, 2006. Tianjin
Yayi invested $292,564(equivalent to RMB 2,000,000) in Weinan Milkgoat and owned
a 99.5% interest in Weinan Milkgoat. Liu Li, a major shareholder of Tianjin Yayi
owned the remaining interest of 0.5% amounting to $1,463 (equivalent to RMB
10,000). Weinan Milkgoat engages in processing and distribution of goat milk.

On December 6, 2007, Tianjin Yayi increased its investment in
Weinan Milkgoat amounting to $437,384 (RMB 2,990,000) while Liu Li transferred
her 0.5% interest in Weinan Milkgoat to Tianjin Yayi. As a result, Tianjin Yayi
owns 100% shares of Weinan Milkgoat with a registered capital of $731,411(RMB
5,000,000).

Fuping Milkgoat Dairy Co., Ltd. (formerly Fuping Dongyuang
Dairy Co., Ltd.)

On August 8, 2008, Tianjin Yayi acquired Fuping Milkgoat Dairy
Co., Ltd. ("Fuping Milkgoat") for $620,360 (RMB 4,240,846). As a result, Tianjin
Yayi owns 100% shares of Fuping Dongyuan with a registered capital of $731,411
(RMB 5,000,000). Fuping Milkgoats principal activity is to purchase raw liquid
goat milk and process it into raw goat milk powder. Fuping Milkgoat is formerly
known as Fuping Dongyuan Dairy Co., Ltd, which used to be our major supplier.

The acquisition of Fuping Milkgoat was accounted for under the
purchase method of accounting. In accordance with this method, the results of
Fuping Milkgoat have been included in the Companys consolidated financial
statements from the date of acquisition, August 8, 2008.

The following unaudited pro forma financial information
presents the consolidated results of the Company as though the acquisition of
Fuping Milkgoat was completed as at the beginning of year ended October 31,
2008:

|                             | 2008      
|---------------------------- | ----------
|Net sales                    | 21,791,268
|Net income                   | 1,806,575 
|Earnings per share - basic   | 0.08      
|Earnings per share - diluted | 0.05      

Shaanxi Milkgoat Dairy Co., Ltd

On September 9, 2009, Tianjin Yayi formed a wholly-owned
subsidiary company, Shaanxi Milkgoat Dairy Co., Ltd (Shaanxi Milkgoat), and
has obtained the business license from the Industrial and Commercial Bureau of
Weinan City, Shaanxi Province with a registered capital of $731,411
(RMB5,000,000). Shaanxi Milkgoats principal activity is to purchase raw liquid
goat milk and processing it into raw goat milk powder. Shaanxi Milkgoat
increased its registered capital by $3,657,056 (RMB25,000,000) to $4,388,467
(RMB30,000,000) in 2010. 50% of it, $1,828,528 (RMB12,500,000) has been injected
in February, 2010 and the balance of it $1,828,528 (RMB12,500,000) has been
injected in March, 2010.

Change in Fiscal Year End

In March 2010, the Company has changed its fiscal year from
October 31 to March 31.

F-13

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

2. Restatement of Previously Issued Financial Statements

On June 1, 2011, the Company filed with the Securities and
Exchange Commission (SEC) a Current Report on Form 8-K, to report managements
determination that the Companys financial statements for the five months ended
March 31, 2010, included in its Amended Annual Report on Form 10-K filed with
the SEC on January 28, 2011 (the 2010 Form 10-K/A), should no longer be relied
upon. The error in such financial statements is primarily due to the incorrect
application of generally accepted accounting principles related to the
classification of the slotting fees incurred by the Company in 2010 as one-year
amortizable assets instead of a one time offset to revenue as they are incurred.
According to the distribution agreements the Company entered into with its
distributors, the Company is responsible for the payment of slotting fees
charged by the retail outlets to sell its products. Slotting fee for each
product was paid in one lump sum to the retailers before the product is placed
in the shelves of the stores for selling to end consumers. The Company had
previously believed that this upfront payment of slotting fees fit the
definition of an asset in accordance with FASB Concept No.6 and accordingly
recorded the slotting fees in prepaid expenses and amortized the slotting fees
paid upfront over a one-year period, which is the standard term of the
distribution agreements. The Company determined that the historical financial
statements for the five months ended March 31, 2010 included in the Companys
2010 Form 10-K/A require restatement to properly record the slotting fees as a
one time fee offset with revenue as they are incurred.

The Current Report on Form 8-K which the Company filed with the
SEC on June 1, 2011 also reported managements determination that the Companys
following financial statements should no longer be relied upon due to an error
in such financial statements with respect to the accounting for the slotting
fees:

|(i)   | for the fiscal quarter ended June 30, 2010, included in
      its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
      2010, filed with the SEC on August 16, 2010 (the June 2010 Form
      10-Q);                                                                                                                   
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                              
|(ii)  | for the fiscal quarter ended September 30, 2010, included
      in its Amended Quarterly Report on Form 10-Q for the fiscal quarter ended
      September 30, 2010, filed with the SEC on January 28, 2011 (the September
      2010 Form 10- Q/A);                                                                                        
|      |                                                                                                                                                                                                                                                                                                                                              
|(iii) | for the fiscal quarter ended December 31, 2010, included
      in its Quarterly Report on Form 10-Q for the fiscal quarter ended December
      31, 2010, filed with the SEC on January 28, 2011 (the December 2010 Form
      10-Q and, collectively with the June 2010 Form 10-Q and September 2010
      Form 10-Q/A, the Form 10-Qs).

The Company is in the process of preparing amendments to the
Form 10-Qs for the prior periods noted above reflecting the restatement of the
financial statements for such prior periods and plans to file those amendments
with the SEC shortly after the filing of this amended Annual Report on Form
10-K.

This amended Annual Report on Form 10-K for the five months
ended March 31, 2010 incorporates corrections made in response to the accounting
errors described above by restating the Companys financial statements presented
herein for the five months ended March 31, 2010.

The effect of the restatements on the financial statements as
of March 31, 2010 and for the five months then ended is set forth below:

|Consolidated Balance Sheet:            |   | As of
      March 31, 2010 | 
|-------------------------------------- | - | -------------------------- | 
|                                       |   | As reported                | 
|ASSETS                                 |   |                            | 
|Prepaid expenses                       | $ | 1,002,494                  | 
|Total current assets                   |   | 14,028,447                 | 
|                                       |   |                            | 
|Deferred tax asset                     |   | 252,646                    | 
|TOTAL ASSETS                           |   | 40,463,839                 | 
|                                       |   |                            | 
|STOCKHOLDERS EQUITY                   |   |                            | 
|Retained earning                       |   | 4,481,843                  | 
|Accumulated other comprehensive income |   | 307,827                    | 
|TOTAL STOCKHOLDERS EQUITY             |   | 10,679,791                 | 

F-14

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

|Consolidated Statements of Operations and Comprehensive |   | For the Five Months Ended March 31, 2010 |  
|------------------------------------------------------- | - | ---------------------------------------- | -
|Income (Loss):                                          |   |                                          |  
|                                                        |   | As reported                              |  
|Net sales                                               | $ | 6,966,183                                |  
|Gross profit                                            |   | 4,596,541                                |  
|Provision of income taxes                               |   | 68,846                                   |  
|Net loss from continuing operations, net of tax         |   | (942,052                                 | )
|Foreign currency translation adjustment                 |   | 6,024                                    |  
|Comprehensive loss                                      |   | (936,028                                 | )
|                                                        |   |                                          |  
|Loss per share - Basic                                  | $ | (0.04                                    | )
|Loss per share - Diluted                                | $ | (0.04                                    | )

|Consolidated Statements of Cash Flows:   |   | For the
      Five Months Ended March 31, 2010 |  
|---------------------------------------- | - | ---------------------------------------------- | -
|                                         |   | As reported                                    |  
|Net (loss)                               | $ | (942,052                                       | )
|(Increase) decrease in operating assets: |   |                                                |  
|Prepaid expenses                         |   | (918,577                                       | )
|Deferred tax asset and current assets    |   | (255,075                                       | )
|Net cash used in operating activities    |   | (3,896,858                                     | )

F-15

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

3. Summary of Significant Accounting Policies

The principal activities of Yayi International and all of its
subsidiaries (collectively, the Company) consist of manufacturing and selling
of goat milk powder. All activities of the Company are conducted principally by
its subsidiaries Tianjin Yayi, Weinan Milkgoat, Fuping Milkgoat and Shaanxi
Milkgoat operating in the PRC.

Basis of Consolidation - The consolidated financial
statements include the accounts of Yayi International Inc. and its wholly-owned
subsidiary, Charleston together with its wholly-owned subsidiaries, Tianjin
Yayi, Weinan Milkgoat Fuping Milkgoat and Shaanxi Milkgoat. All material
intercompany transactions have been eliminated in consolidation.

Credit risk - The Company may be exposed to credit risk
from its cash at bank, fixed deposits, and bills and accounts receivable. Bills
and accounts receivable are subjected to credit evaluations. An allowance has
been made for estimated irrecoverable amounts determined by reference to past
default experience and the current economic environment.

Cash and cash equivalents - Cash and cash equivalents
include cash on hand, cash accounts, interest bearing savings accounts and time
certificates of deposit with a maturity of three months or less when purchased.

Inventory - Inventory is stated at the lower of cost or
market, determined by the weighted average method. Work-in-progress and finished
goods inventories consist of raw materials, direct labor and overhead associated
with the manufacturing process.

Trade accounts receivable - Trade accounts receivable
are stated at the amount management expects to collect from balances outstanding
at the period end.

Outstanding account balances are reviewed individually for
collectability. Account balances are charged off against the allowance after all
means of collection have been exhausted and the potential for recovery is
considered remote.

Allowances for doubtful accounts receivable balances are
recorded when circumstances indicate that collection is doubtful for particular
accounts receivable or as a general reserve for all accounts receivable.
Management estimates such allowances based on historical evidence such as
amounts that are subject to risk. Accounts receivable are written off if
reasonable collection efforts are not successful.

Based on managements evaluation of historical experience, the
following policy for allowance of doubtful accounts is established:

|Trade and other receivables due: | % of Balance
|-------------------------------- | ------------
|Within 90 days:                  | 1.5%        
|Between 91 and 180 days:         | 5.0%        
|Between 181 and 360 days:        | 20.0%       
|Between 361 and 720 days:        | 50.0%       
|Over 721 days:                   | 100.0%      

Livestock  Livestock consists of goats for milk
production and for breeding purposes. The livestock is depreciated according to
its estimated useful lives, which is 5 years for male goats and 7 years for
female goats. The cost of raising the young goat is allocated to livestock and
depreciation starts upon reaching maturity 13 months from date of birth. Not all
young goats survive to maturity or disposition. Normal losses of young goats are
not expensed directly but allocated to the surviving young goats. When abnormal
losses of young goats occur, the accumulated costs of young goats lost are
written off in the period in which the abnormal losses occur.

F-16

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

3. Summary of Significant Accounting Policies - Continued

Fair Value of Financial Instruments  FASB ASC 820-10
requires disclosing fair value to the extent practicable for financial
instruments that are recognized or unrecognized in the balance sheet. The fair
value of the financial instruments disclosed herein is not necessarily
representative of the amount that could be realized or settled, nor does the
fair value amount consider the tax consequences of realization or settlement.

For certain financial instruments, including cash, accounts and
other receivables, accounts payable, short-term loans, accruals and other
payables, it was assumed that the carrying amounts approximate fair value
because of the near term maturities of such obligations. The carrying amounts of
long-term loans payable approximate fair value since the interest rate
associated with the debt approximates the current market interest rate.

Property, plant and equipment-Property, plant and
equipment are stated at cost including the cost of improvements. Maintenance and
repairs are charged to expense as incurred. Assets under construction are not
depreciated until construction is completed and the assets are ready for their
intended use. Depreciation and amortization are provided on the straight-line
method based on the shorter of the estimated useful lives of the assets or lease
term as follows:

|Leasehold improvement             | Lesser of term of the lease or
      the estimated useful lives of the assets
|--------------------------------- | -----------------------------------------------------------------------------
|Plant and machinery               | 10 years                                                                     
|Furniture, fixtures and equipment | 5 years                                                                      
|Motor vehicles                    | 5 years                                                                      

Recoverability of Long Lived Assets -The Company follows
FASB ASC 360. Long-lived assets to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the related carrying
amount may not be recoverable. The Company is not aware of any events or
circumstances that indicate the existence of impairment, which would be material
to the Companys financial statements.

Goodwill - Goodwill represents the excess of the
purchase price over the fair value of the net tangible and identifiable
intangible assets acquired in a business combination, In accordance with FASB
ASC 350-30, goodwill is no longer subject to amortization. Rather, goodwill will
be subject to at least an annual assessment for impairment, applying a
fair-value based test fair value is generally determined using a discounted cash
flow analysis.

Land use rights Land use rights are stated at cost less
accumulated amortization. Amortization is charged using the straight-line method
over the period of lease term.

Revenue recognition - The Company recognizes revenue on
product sales when products are delivered and the customer takes ownership and
assumes risk of loss, collection of the relevant receivable is probable,
persuasive evidence of an arrangement exists and the sales price is fixed or
determinable. Net sales of products represent the invoiced value of goods, net
of value added taxes (VAT), sales returns, trade discounts and allowances. The
Company is subject to VAT which is levied on majority of the Companys products
at the rate of 17% on the invoiced value of sales. Output VAT is borne by
customers in addition to the invoiced value of sales and input VAT is borne by
the Company in addition to the invoiced value of purchases to the extent not
refunded for export sales. Input VAT paid is recoverable from output VAT charged
to customers.

Prior to January 1, 2009, the Company allows for exchange of
goods that are near expiration. The Company provided for an allowance for return
products since the Company has experienced returns in the normal course of
business. Subsequent to January 1, 2009, the Company revised its sales contracts
to disallow returns for sales made after January 1, 2009.

The Company treats temporary price reduction programs,
merchandising fees, co-operative advertising and slotting expenses as a
reduction in gross sales. The Company records the liability when pervasive
evidence exists that the Company and the customer or distributor have reached
agreement and that an advertising action will result in an expense to the
company in the near future. The liability is maintained until the customer takes
the deduction against payments due. In addition, in accordance with ASC 605-50
in accounting for customer payments and incentives, if the temporary price
reduction recorded is in excess of gross sale for any retailer, the amount in
excess will be recorded as selling expense.

F-17

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

3. Summary of Significant Accounting Policies - Continued

Research and development - Research and development
costs are expensed as incurred. Research and development expenses amounted to
$40,898 and $57,558 for the five months ended March 31, 2010 and 2009,
respectively,$150,101 and $111,309 for the year ended October 31, 2009 and 2008,
respectively.

Advertising and promotion costs - Costs incurred in
direct-response advertising are capitalized and amortized on a straight-line
basis over the duration of the advertising campaign. As of March 31, 2010, there
was no capitalized direct-response advertising. All other advertising costs are
expensed as incurred. Advertising and promotion costs amounted to $2,727,631 and
$1,046,940 for the five months ended March 31, 2010 and 2009, respectively. As
of October 31, 2009, there was no capitalized direct-response advertising. All
other advertising costs are expensed as incurred. Advertising and promotion
costs amounted to $1,956,512 and $1,723,569 for the year ended October 31, 2009
and 2008, respectively.

Comprehensive income - The Company follows FASB ASC
220-10 in reporting comprehensive income. Comprehensive income is defined as the
change in equity of a company during a period from transactions and other events
and circumstances excluding transactions resulting from investments from owners
and distributions to owners. For the Company, comprehensive income for the
periods presented includes net (loss) income and foreign currency translation
adjustments.

Income taxes  The Company follows FASB ASC 740 when
accounting for income taxes. Income taxes are provided on an asset and liability
approach for financial accounting and reporting of income taxes. Current tax is
based on the profit or loss from ordinary activities adjusted for items that are
non-assessable or disallowable for income tax purpose and is calculated using
tax rates that have been enacted or substantively enacted at the balance sheet
date. Deferred income tax liabilities or assets are recorded to reflect the tax
consequences in future differences between the tax basis of assets and
liabilities and the financial reporting amounts at each year end. A valuation
allowance is recognized if it is more likely than not that some portion, or all,
of a deferred tax asset will not be realized.

The Company adopted the provisions of Financial Accounting
Standards Board (FASB) Interpretation No. 48(FIN 48), Accounting for
Uncertainty in Income Taxes, (codified in FASB Accounting Standards
Codification (ASC) 740), as of January 1, 2007. As a result of the
implementation of FIN 48, the Company made a comprehensive review of its
portfolio of tax positions in accordance with the recognition standards
established by FIN 48. As a result of the implementation of FIN 48, the Company
recognized no material adjustments to liabilities or stockholders equity. The
Company did not recognize any interest or penalties related to unrecognized tax
benefits for 5 months ended March 31, 2010 and 2009, and year ended October 31,
2009 and 2008. The Company had no uncertain positions that would necessitate
recording of tax related liability. The Company is subject to examination by the
respective tax authorities.

Foreign currency translation and transactions  The
accompanying consolidated financial statements are presented in United States
Dollars (US$). The Companys functional currency is the US$, while the
Charlestons functional currency is its local currency and the wholly-owned
Chinese subsidiaries functional currency is the Renminbi (RMB). The
functional currencies of the Companys foreign operations are translated into
US$ for balance sheet accounts using the current exchange rates in effect as of
the balance sheet date and for revenue and expense accounts using the
weighted-average exchange rate during the fiscal year. The translation
adjustments are recorded as a separate component of stockholders equity,
captioned accumulated other comprehensive income (loss). Gains and losses
resulting from transactions denominated in foreign currencies are included in
other income (expense) in the consolidated statements of operations.

Post-retirement and post-employment benefits - The
Companys subsidiaries contribute to a state pension plan in respect of its PRC
employees. Other than the above, neither the Company nor its subsidiary provides
any other post-retirement or post-employment benefits.

Earnings Per Common Share - The Company follows FASB ASC
260-10, resulting in the presentation of basic and diluted earnings per share.
Diluted earnings per common share assumes that outstanding common shares were
increased by shares issuable upon exercise of those stock warrants for which
market price exceeds the exercise price, less shares that could have been
purchased by the Company with related proceeds.

F-18

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

3. Summary of Significant Accounting Policies - Continued

Use of estimates - The preparation of the Companys
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect reported
amounts in the financial statements and related disclosure in the accompanying
notes. Actual results could differ from those estimates. The financial
statements include some amounts that are based on managements best estimates
and judgments. The most significant estimates relate to warrants valuation,
discount on convertible notes, debts issuance cost, allowance for uncollectible
accounts receivable, work in process inventory valuation, inventory
obsolescence, depreciation, useful lives of property, plant and equipment,
taxes, contingencies and employee benefit plans. These estimates may be adjusted
as more current information becomes available and any adjustment could be
significant. Estimates and assumptions are periodically reviewed and the effects
of revisions are reflected in the consolidated financial statements in the
period they are determined to be necessary.

Cost of goods sold - Cost of goods sold consists
primarily of costs of raw materials, direct labor, depreciation of plant and
machinery, and overhead associated with the manufacturing process.

Shipping and handling cost - Shipping and handling costs
related to delivery of finished goods are included in other selling, general and
administrative expenses. During the five months ended March 31, 2010 and 2009,
shipping and handling costs were $137,942 and $89,011, respectively. During the
year ended October 31, 2009 and 2008, shipping and handling costs were $504,353
and $346,796, respectively.

Slotting fees - The Company accounts for slotting fees
in accordance with ASC 605-50. ASC 605-50 requires that cash considerations,
including sales incentives, given by a vendor to a customer is presumed to be a
reduction of the selling price, and therefore, should be characterized as a
reduction to gross sales. This presumption is overcome and the consideration
would be characterized as an expense incurred if the vendor receives an
identifiable benefit in exchange for the consideration and the fair value of
that identifiable benefit can be reasonably estimated. Furthermore, if the
consideration recorded is in excess of gross sale of any retailer, the amount in
excess will be recorded as selling expense.

The Company treats one-time slotting fees paid to retails shops
who are direct customers of the Companys distributors and the fees pays to
distributors upon signing of contract as a reduction in gross sales.

Slotting fees of $1,032,609 and $0 were recorded as a reduction
of sales revenue for the five months ended March 31, 2010 and 2009. During the
year ended October 31, 2009 and 2008, there were no slotting fees incurred.

Retained earnings-appropriated - In accordance with the
relevant PRC regulations and the Companys PRC subsidiaries articles of
association, Tianjin Yayi, Weinan Milkgoat and Fuping Milkgoat are required to
allocate their respective net income to statutory surplus reserve.

Statutory surplus reserve - In accordance with the
relevant laws and regulations of the PRC and the articles of associations of the
Companys PRC subsidiaries, Tianjin Yayi, Weinan Milkgoat and Fuping Milkgoat
are required to allocate 10% of their net income reported in the PRC statutory
accounts, after offsetting any prior years losses, to the statutory surplus
reserve, on an annual basis. When the balance of such reserve reaches 50% of the
respective registered capital of the subsidiaries, any further allocation is
optional.

The statutory surplus reserves can be used to offset prior
years losses, if any, and may be converted into registered capital, provided
that the remaining balances of the reserve after such conversion is not less
than 25% of registered capital. The statutory surplus reserve is
non-distributable.

F-19

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

3. Summary of Significant Accounting Policies - Continued

Recently Adopted Accounting Pronouncements

Subsequent Events

In May 2009, the FASB issued FASB ASC 855-10 on the treatment
of subsequent events which is intended to establish general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued or are available to be issued.
Specifically, management of a reporting entity is required to evaluate
subsequent events through the date that financial statements are issued. FASB
ASC 855-10 was effective for fiscal years and interim periods ended after June
15, 2009, and must be applied prospectively. The Company adopted this standard
in the quarter ended July 31, 2009. Subsequent events have been evaluated
through the date the consolidated financial statements were issued.

Fair Value Measurement

In September 2006, the FASB issued FASB ASC 820 related to fair
value measurements. FASB ASC 820 defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value measurements. In
February 2008, the FASB issued FASB ASC 820-10 which delayed the effective date
of the fair value measurements and disclosures for all nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually). In
August 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-05,
"Measuring Liabilities at Fair Value" in relation to the fair value measurement
of liabilities. The Company adopted the applicable portions of the provisions of
the new standards as of November 1, 2008, and adopted the provision related to
the nonfinancial assets and nonfinancial liabilities on November 1, 2009. The
adoption of this standard for financial and nonfinancial assets and financial
and nonfinancial liabilities did not have a material impact on its consolidated
financial statements.

Decreases in Ownership of a Subsidiary  a Scope Clarification

In January 2010, the FASB issued Accounting Standards Update
(ASU) No. 2010-02 update to address the accounting and reporting for Decreases
in ownership of a subsidiary. This amendment to Topic 810 clarifies, but does
not change, the scope of current US GAAP. It clarifies the decrease in ownership
provisions of Subtopic 810-10 and removes the potential conflict between
guidance in that Subtopic and asset derecognition and gain or loss recognition
guidance that may exist in other US GAAP. An entity will be required to follow
the amended guidance beginning in the period that it first adopts FASB ASC 810
(now included in Subtopic 810-10). For those entities that have already adopted
FASB ASC 810, the amendments are effective at the beginning of the first interim
or annual reporting period ending on or after December 15, 2009. The amendments
should be applied retrospectively to the first period that an entity adopted
FASB ASC 810. The adoption of this standard did not have a material effect on
the financial position, results of operations, or cash flows of the Company.

Distributions to Shareholders with Components of Stock
  and Cash

In January 2010, the FASB issued Accounting Standards Update
(ASU) No. 2010-01 update to address the accounting for distributions to
shareholders with components of stock and cash (A Consensus of the FASB Emerging
Issues Task Force). This amendment to Topic 505 clarifies the stock portion of a
distribution to shareholders that allows them to elect to receive cash or stock
with a limit on the amount of cash that will be distributed is not a stock
dividend for purposes of applying Topics 505 and 260 for interim and annual
periods ending on or after December 15, 2009, and should be applied on a
retrospective basis. The adoption of this standard did not have a material
effect on the financial position, results of operations, or cash flows of the
Company.

F-20

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

3. Summary of Significant Accounting Policies - Continued

Measuring Liabilities at Fair Value

In August 2009, the FASB issued Accounting Standards Update
(ASU) No. 2009-05 update that amended the accounting standard for fair value
measurements. Specifically, Accounting Standards Update (ASU) No. 2009-05 update
provides clarification that in circumstances in which a quoted price in an
active market for the identical liability is not available, a reporting entity
is required to measure fair value using one or more of the following methods: 1)
a valuation technique that uses a) the quoted price of the identical liability
when traded as an asset or b) quoted prices for similar liabilities or similar
liabilities when traded as assets and/or 2) a valuation technique that is
consistent with the principles of the accounting standard on fair value
measurements (e.g. an income approach or market approach). Accounting Standards
Update (ASU) No. 2009-05 also clarifies that when estimating the fair value of a
liability, a reporting entity is not required to adjust to include inputs
relating to the existence of transfer restrictions on that liability. This
standard will be effective for the first interim period beginning November 1,
2009. The adoption of this standard did not have a material impact on its
consolidated financial statements.

Convertible Debt Instruments

In May 2008, the FASB issued FASB ASC 470-20 related to
convertible debt instruments. FASB ASC 470-20 requires the issuer of certain
convertible debt instruments that may be settled in cash (or other assets) on
conversion, including partial cash settlement, to separately account for the
liability (debt) and equity (conversion option) components of the instrument in
a manner that reflects the issuer's non-convertible debt borrowing rate. FASB
ASC 470-20 is effective for the Companys fiscal year beginning November 1,
2009, and retrospective application is required for all periods presented. The
adoption of this standard did not have a material impact on its consolidated
financial statements.

Useful Life of Intangible Asset

In April 2008, the FASB issued FASB ASC 350-30 which amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset. FASB ASC
350-30 is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and interim periods within those fiscal years. Early
adoption is prohibited. Application of this standard is not currently applicable
to the Company.

Business Combination

In December 2007, the FASB issued FASB ASC 805 which related to
business combinations. FASB ASC 805 expands the definition of a business and a
business combination; requires recognition of assets acquired, liabilities
assumed, and contingent consideration at their fair value on the acquisition
date with subsequent changes recognized in earnings; requires
acquisition-related expenses and restructuring costs to be recognized separately
from the business combination and expensed as incurred; requires in-process
research and development to be capitalized at fair value as an indefinite-lived
intangible asset; and requires that changes in accounting for deferred tax asset
valuation allowances and acquired income tax uncertainties after the measurement
period be recognized as a component of provision for taxes. FASB ASC 805 also
establishes disclosure requirements to enable the evaluation of the nature and
financial effects of the business combination. In April 2009, the FASB issued
FASB ASC 805 which clarified the accounting for pre-acquisition contingencies.
This standard is effective for the Company beginning November 1, 2009 and will
change the accounting for business combinations on a prospective basis. The
Company did not have any business combination during the period ended March 31,
2010; therefore the adoption of this standard had no impact on the Companys
consolidated financial statements.

F-21

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

3. Summary of Significant Accounting Policies  Continued

Recently Issued Accounting Pronouncements Not Yet Adopted

Own-Share Lending Arrangements in Contemplation of
Convertible Debt issuance or Other Financing

In October 2009, the FASB issued FASB ASC 470-20 update to
address equity-classified share lending arrangements on an entitys own shares,
when executed in contemplation of a convertible debt offering or other
financing. This accounting update addresses how to account for the share-lending
arrangement and the effect, if any, that the loaned shares have on
earnings-per-share calculations. The share lending arrangement is required to be
measured at fair value and recognized as an issuance cost associated with the
convertible debt offering or other financing. Earnings-per-share calculations
would not be affected by the loaned shares unless the share borrower defaults on
the arrangement and does not return the shares. If counterparty default is
probable, the share lender is required to recognize an expense equal to the then
fair value of the unreturned shares, net of the fair value of probable
recoveries. FASB ASC 470-20 is effective for share lending agreements entered
into after June 15, 2009, and effective for fiscal years and interim periods
within those years beginning on or after December 15, 2009 for all other
outstanding arrangements, with retrospective application to those arrangements
on the effective date. This standard was adopted on February 1, 2010 and did not
have a material impact on the Companys 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.

F-22

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

4. Other Receivables

|                              |   | March 31, |   |   | October 31, |   |   | October 31, |  
|----------------------------- | - | --------- | - | - | ----------- | - | - | ----------- | -
|                              |   | 2010      |   |   | 2009        |   |   | 2008        |  
|                              |   |           |   |   |             |   |   |             |  
|Advance to staff              | $ | 28,542    |   | $ | 79,097      |   | $ | 42,196      |  
|Due from a unrelated party    |   | 585,130   |   |   | -           |   |   | 37,940      |  
|Prepayment                    |   | -         |   |   | 660,970     |   |   | 71,803      |  
|Sundry                        |   | 7,331     |   |   | 20,854      |   |   | -           |  
|                              |   |           |   |   |             |   |   |             |  
|                              |   | 621,003   |   |   | 760,921     |   |   | 151,939     |  
|Less: allowance for bad debts |   | (22,833   | ) |   | (9,146      | ) |   | (29,207     | )
|                              | $ | 598,170   |   | $ | 751,775     |   | $ | 122,732     |  

The amount due from unrelated parties is interest-free,
unsecured and has no stated terms of repayment.

5. Inventories

Inventories consist of:

|                |   | March 31, |  |   | October 31, |   |   | October 31, | 
|--------------- | - | --------- |  | - | ----------- | - | - | ----------- | 
|                |   | 2010      |  |   | 2009        |   |   | 2008        | 
|                |   |           |  |   |             |   |   |             | 
|Raw materials   | $ | 1,678,207 |  | $ | 1,795,275   |   | $ | 1,852,213   | 
|Packaging       |   | 289,188   |  |   | 370,920     |   |   | 446,031     | 
|Finished goods  |   | 593,870   |  |   | 381,885     |   |   | 1,031,532   | 
|                |   | 2,561,265 |  |   | 2,548,080   |   |   | 3,329,776   | 
|Less: allowance |   | -         |  |   | (41,770     | ) |   | -           | 
|                | $ | 2,561,265 |  | $ | 2,506,310 $ |   | $ | 3,329,776   | 

As of March 31, 2010 and October 31, 2008, there was no
allowance made for obsolete or slow moving inventory.

There was allowance made for obsolete or slow moving inventory
of $41,770 as of October 31, 2009.

F-23

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

6. Advances

Advances consist of:

|                                                                        |   | March 31,  |  |   | October 31, |  |   | October 31, | 
|----------------------------------------------------------------------- | - | ---------- |  | - | ----------- |  | - | ----------- | 
|                                                                        |   | 2010       |  |   | 2009        |  |   | 2008        | 
|Advances to Tianjin Mengyang Biological
      Development Co., Ltd      |   |            |  |   |             |  |   |             | 
|("Tianjin Menyang"), formerly Tianjin Milkgoat Dairy Co.,
      Ltd.    |   |            |  |   |             |  |   |             | 
|- purchase of office building
      (Note 15)                           | $ | 4,179,284  |  | $ | 4,178,061   |  | $ | 4,185,505   | 
|- purchase of factory and warehouse (Note 15)                           |   | 11,042,041 |  |   | 11,038,812  |  |   | 3,575,186   | 
|- advances for renovation of
      office building (Note 15)            |   | 342,300    |  |   | 342,200     |  |   | 342,810     | 
|-short term loan                                                        |   | -          |  |   | -           |  |   | 1,001,185   | 
|Advanced payment to other suppliers                                     |   | 1,165,620  |  |   | 739,587     |  |   | 229,185     | 
|Advanced payment for construction in progress (Note 15)                 |   | 331,696    |  |   | 350,975     |  |   | -           | 
|                                                                        |   |            |  |   |             |  |   |             | 
|Advanced payment for purchasing machinery and equipment
      (Note 15) |   | 1,920,814  |  |   | 1,740,586   |  |   | -           | 
|Advance to branch manager                                               |   | 395,123    |  |   | 365,502     |  |   | -           | 
|Advanced payment for acquisition of land use rights                     |   | -          |  |   | 146,239     |  |   | 146,200     | 
|                                                                        | $ | 19,376,878 |  | $ | 18,901,962  |  | $ | 9,480,071   | 
|                                                                        |   |            |  |   |             |  |   |             | 
|Less: Long-term portion - purchase of
      factory and warehouse       |   | 17,816,135 |  |   | 17,796,873  |  |   | 9,250,886   | 
|                                                                        |   |            |  |   |             |  |   |             | 
|                                                                        | $ | 1,560,743  |  | $ | 1,105,089   |  | $ | 229,185     | 

The construction of office building was postponed from the
original estimated completion date of December 31, 2009 to September 2010 (Note
15). According to the contract between the company and Tianjin Mengyang, if
these projects continue to be delayed , the company has the right to terminate
the contract and is entitled to receive a full refund of the paid advances plus
accrued interests from Tianjin Mengyang.

The construction of factory and warehouse is estimated to be
completed on September 2010 and trial production will commence thereafter (Note
15). According to the contract between the company and Tianjin Mengyang, if
these projects continue to be delayed , the company has the right to terminate
the contract and is entitled to receive a full refund of the paid advances plus
accrued interests from Tianjin Mengyang.

The construction in progress related to the construction and
installation of central system pipelines is estimated to be completed in August
2010 (Note 15).

At March 31, 2010 and October 31, 2009, advance to branch
manager is the operating and marketing fund for sales offices.

F-24

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31,
2010 AND 2009

7. Property, Plant and Equipment, net

Property, plant and equipment consist of the following:

|                                     |   | March 31,  |   |   | October 31, |   |   | October 31, |  
|------------------------------------ | - | ---------- | - | - | ----------- | - | - | ----------- | -
|                                     |   | 2010       |   |   | 2009        |   |   | 2008        |  
|At cost:                             |   |            |   |   |             |   |   |             |  
|Leasehold improvement                | $ | 68,924     |   | $ | 68,903      |   | $ | 69,026      |  
|                                     |   |            |   |   |             |   |   | 378,346     |  
|Plant and buildings                  |   | 1,708,463  |   |   | 1,702,435   |   |   |             |  
|                                     |   |            |   |   |             |   |   | 2,303,599   |  
|Machinery                            |   | 2,525,876  |   |   | 2,439,042   |   |   |             |  
|Furniture, fixtures and equipment    |   | 202,581    |   |   | 192,243     |   |   | 184,829     |  
|Motor vehicles                       |   | 324,936    |   |   | 197,175     |   |   | 197,526     |  
|                                     |   |            |   |   |             |   |   |             |  
|                                     |   | 4,830,780  |   |   | 4,599,798   |   |   | 3,133,326   |  
|                                     |   |            |   |   |             |   |   |             |  
|Less: accumulated
      depreciation |   | (1,096,228 | ) |   | (900,817    | ) |   | (552,941    | )
|                                     |   |            |   |   |             |   |   |             |  
|                                     |   | 3,734,552  |   |   | 3,698,981   |   |   | 2,580,385   |  
|                                     |   |            |   |   |             |   |   |             |  
|Construction in progress             |   | 2,770,578  |   |   | 2,095,904   |   |   | -           |  
|                                     |   |            |   |   |             |   |   |             |  
|                                     | $ | 6,505,130  |   | $ | 5,794,885   |   | $ | 2,580,385   |  

During the five months ended March 31, 2010, depreciation
expenses amounted to $195,151, of which $165,485 and $29,666 was recorded as
cost of sales and other selling, general and administrative expense,
respectively.

During the five months ended March 31, 2009, depreciation
expenses amounted to $143,189, of which $111,087 and $32,102 was recorded as
cost of sales and other selling, general and administrative expense,
respectively.

During the year ended October 31, 2009, depreciation expenses
amounted to $348,561, of which $275,487 and $73,074 was recorded as cost of
sales and other selling, general and administrative expense, respectively.

During the year ended October 31, 2008, depreciation expenses
amounted to $271,000, of which $91,980 and $179,020 was recorded as cost of
sales and other selling, general and administrative expense, respectively.

F-25

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

8. Land use rights

Land use rights consist of:

|                                        |   | March 31, |  |   | October 31, |  |   | October 31, | 
|--------------------------------------- | - | --------- |  | - | ----------- |  | - | ----------- | 
|                                        |   | 2010      |  |   | 2009        |  |   | 2008        | 
|Land use rights                         | $ | 942,372   |  | $ | -           |  | $ | -           | 
|Less: accumulated amortization          |   | -         |  |   | -           |  |   | -           | 
|                                        |   | 942,372   |  |   | -           |  |   | -           | 
|Less: current portion                   |   | 18,847    |  |   | -           |  |   | -           | 
|Land use rights, net of current portion | $ | 923,525   |  | $ | -           |  | $ | -           | 

The estimated aggregate amortization expenses for land use
rights for the five succeeding years are as follows:

Year2010
    $
    18,8472011
    
    18,8472012
    
    18,8472013
    
    18,8472014
    
    18,847Thereafter
    
    848,137$
    942,372


F-26

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

9. Short Term Loans

Short-term loans due within one year as of March 31, 2010 and
October 31, 2009, 2008 consist of the following:

|                  |  |                          |  |  | Collateral /           |  |  | Interest Rate |  |   | March 31, |  |   | October 31, |  |   | October 31, | 
|----------------- |  | ------------------------ |  |  | ---------------------- |  |  | ------------- |  | - | --------- |  | - | ----------- |  | - | ----------- | 
|Lender            |  | Loan Period              |  |  | Guarantee              |  |  | per annum     |  |   | 2010      |  |   | 2009        |  |   | 2008        | 
|                  |  |                          |  |  |                        |  |  |               |  |   |           |  |   |             |  |   |             | 
|Industrial &      |  |                          |  |  |                        |  |  |               |  |   |           |  |   |             |  |   |             | 
|Commercial Bank   |  | November 26, 2007 to     |  |  |                        |  |  |               |  |   |           |  |   |             |  |   |             | 
|of China          |  | November 12, 2008        |  |  | -                      |  |  | 8.0%          |  | $ | -         |  | $ | -           |  | $ | 586,000     | 
|Rural Cooperative |  | December 29, 2007 to     |  |  |                        |  |  |               |  |   |           |  |   |             |  |   |             | 
|Bank of Tianjin   |  | December 27, 2008        |  |  | -                      |  |  | 9.0%          |  |   | -         |  |   | -           |  |   | 937,600     | 
|Tianjin Yinna     |  |                          |  |  |                        |  |  |               |  |   |           |  |   |             |  |   |             | 
|Gonggong Hangdao  |  |                          |  |  |                        |  |  |               |  |   |           |  |   |             |  |   |             | 
|Shujun Company    |  | September 24, 2008 to    |  |  |                        |  |  |               |  |   |           |  |   |             |  |   |             | 
|Limited           |  | December 24, 2008        |  |  | -                      |  |  | -             |  |   | -         |  |   | -           |  |   | 439,501     | 
|                  |  |                          |  |  | Guaranteed by the      |  |  |               |  |   |           |  |   |             |  |   |             | 
|                  |  |                          |  |  | Tianjin Haitai         |  |  |               |  |   |           |  |   |             |  |   |             | 
|Tianjin City      |  | July 25, 2008 to July    |  |  | Investment Guarantee   |  |  |               |  |   |           |  |   |             |  |   |             | 
|Commercial Bank   |  | 24, 2009                 |  |  | Co., Ltd.              |  |  | 9.7%          |  |   | -         |  |   | -           |  |   | 2,197,500   | 
|Allied Merit      |  |                          |  |  | Secured against        |  |  |               |  |   |           |  |   |             |  |   |             | 
|International     |  |                          |  |  | 2,000,000 shares       |  |  |               |  |   |           |  |   |             |  |   |             | 
|Investment, Inc.  |  | April 12, 2008 to July   |  |  | owned by Global Rock   |  |  |               |  |   |           |  |   |             |  |   |             | 
|(Note 14)         |  | 31, 2009                 |  |  | Stone Industrial Ltd.  |  |  | 8.0%          |  |   | -         |  |   | -           |  |   | 1,000,000   | 
|                  |  |                          |  |  | Guaranteed by the      |  |  |               |  |   |           |  |   |             |  |   |             | 
|                  |  |                          |  |  | Medium and Small-      |  |  |               |  |   |           |  |   |             |  |   |             | 
|Industrial &      |  |                          |  |  | Size Enterprise Credit |  |  |               |  |   |           |  |   |             |  |   |             | 
|Commercial Bank   |  | November 14, 2008 to     |  |  | Guarantee Center of    |  |  |               |  |   |           |  |   |             |  |   |             | 
|of China          |  | November 11, 2009        |  |  | Tianjin                |  |  | 8.0%          |  |   | -         |  |   | 584,958     |  |   | -           | 
|                  |  |                          |  |  | Guaranteed by the      |  |  |               |  |   |           |  |   |             |  |   |             | 
|                  |  |                          |  |  | Tianjin Haitai         |  |  |               |  |   |           |  |   |             |  |   |             | 
|Rural Cooperative |  | January 20, 2009 to      |  |  | Investment Guarantee   |  |  |               |  |   |           |  |   |             |  |   |             | 
|Bank of Tianjin   |  | January 19, 2010         |  |  | Co., Ltd.              |  |  | 6.4%          |  |   | -         |  |   | 643,454     |  |   | -           | 
|                  |  | November 5, 2007 to      |  |  |                        |  |  |               |  |   |           |  |   |             |  |   |             | 
|Allied Merit      |  | the completion of first  |  |  |                        |  |  |               |  |   |           |  |   |             |  |   |             | 
|International     |  | round of fund raising    |  |  |                        |  |  |               |  |   |           |  |   |             |  |   |             | 
|Investment, Inc.  |  | after the reverse merger |  |  | -                      |  |  | -             |  |   | 121,705   |  |   | 121,705     |  |   | 114,395     | 
|                  |  | November 28, 2008 to     |  |  |                        |  |  |               |  |   |           |  |   |             |  |   |             | 
|                  |  | November 28, 2009, it    |  |  | Guaranteed by the      |  |  |               |  |   |           |  |   |             |  |   |             | 
|                  |  | has been renewed and     |  |  | Tianjin Haitai         |  |  |               |  |   |           |  |   |             |  |   |             | 
|Shanghai Pudong   |  | extended to December     |  |  | Investment Guarantee   |  |  |               |  |   |           |  |   |             |  |   |             | 
|Development Bank  |  | 14, 2010                 |  |  | Co., Ltd.              |  |  | 7.3%          |  |   | -         |  |   | 1,462,394   |  |   |             | 
|                  |  |                          |  |  | Guaranteed by the      |  |  |               |  |   |           |  |   |             |  |   |             | 
|                  |  |                          |  |  | Tianjin Haitai         |  |  |               |  |   |           |  |   |             |  |   |             | 
|Rural Cooperative |  | May 22, 2009 to May      |  |  | Investment Guarantee   |  |  |               |  |   |           |  |   |             |  |   |             | 
|Bank of Tianjin   |  | 21, 2010                 |  |  | Co., Ltd.              |  |  | 6.4%          |  |   | 1,462,822 |  |   | 1,462,394   |  |   | -           | 
|                  |  |                          |  |  | Guaranteed by the      |  |  |               |  |   |           |  |   |             |  |   |             | 
|                  |  |                          |  |  | Tianjin Haitai         |  |  |               |  |   |           |  |   |             |  |   |             | 
|Rural Cooperative |  | July 3, 2009 to May 21,  |  |  | Investment Guarantee   |  |  |               |  |   |           |  |   |             |  |   |             | 
|Bank of Tianjin   |  | 2010                     |  |  | Co., Ltd.              |  |  | 6.4%          |  |   | 2,194,234 |  |   | 2,193,592   |  |   | -           | 
|                  |  |                          |  |  | Guaranteed by the      |  |  |               |  |   |           |  |   |             |  |   |             | 
|                  |  |                          |  |  | Tianjin Haitai         |  |  |               |  |   |           |  |   |             |  |   |             | 
|Shanghai Pudong   |  | December 14, 2009 to     |  |  | Investment Guarantee   |  |  |               |  |   |           |  |   |             |  |   |             | 
|Development Bank  |  | December 14, 2010        |  |  | Co., Ltd.              |  |  | 6.4%          |  |   | 292,565   |  |   | -           |  |   | -           | 
|                  |  |                          |  |  | Guaranteed by the      |  |  |               |  |   |           |  |   |             |  |   |             | 
|                  |  |                          |  |  | Tianjin Haitai         |  |  |               |  |   |           |  |   |             |  |   |             | 
|Shanghai Pudong   |  | December 14, 2009 to     |  |  | Investment Guarantee   |  |  |               |  |   |           |  |   |             |  |   |             | 
|Development Bank  |  | December 14, 2010        |  |  | Co., Ltd.              |  |  | 6.4%          |  |   | 1,170,258 |  |   | -           |  |   | -           | 

F-27

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31,
2010 AND 2009

|                  |  |                      |  |  | Guaranteed by the    |  |  |      |  |   |           |  |   |           |  |   |           | 
|----------------- |  | -------------------- |  |  | -------------------- |  |  | ---- |  | - | --------- |  | - | --------- |  | - | --------- | 
|                  |  |                      |  |  | Tianjin Haitai       |  |  |      |  |   |           |  |   |           |  |   |           | 
|China Development |  | December 25, 2009 to |  |  | Investment Guarantee |  |  |      |  |   |           |  |   |           |  |   |           | 
|Bank Co., Ltd.    |  | December 24, 2010    |  |  | Co., Ltd.            |  |  | 5.8% |  |   | 1,462,822 |  |   | -         |  |   | -         | 
|                  |  |                      |  |  |                      |  |  |      |  |   |           |  |   |           |  |   |           | 
|                  |  |                      |  |  |                      |  |  |      |  | $ | 6,704,406 |  | $ | 6,468,497 |  | $ | 5,274,996 | 

F-28

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

9. Short Term Loans - Continued

Short-term loans from Industrial & Commercial Bank of China
and Rural Cooperative Bank of Tianjin are guaranteed by third parties in which
the Company paid a one-time guarantee fee based on 1.0% to 1.5% of the
guaranteed amount. The guarantee fee was amortized in 12 months and included in
other expense for the five months ended March 31, 2010 and 2009 was $29,861 and
$28,431, for the years ended October 31, 2009 and 2008 was $72,621 and $30,154.

On November 14, 2008, the Company entered into a loan agreement
with Industrial & Commercial Bank of China, for $584,958 (RMB4,000,000). The
annual interest rate is 8.0% and was due on and paid off on November 11, 2009.
The loan is guaranteed by the Medium and Small-Size Enterprise Credit Guarantee
Center of Tianjin with a guarantee fee of 1% of the original loan amount and was
amortized in 12 months.

On January 20, 2009, the Company entered into a loan agreement
with Rural Cooperative Bank of Tianjin for $643,454 (RMB4,400,000). The annual
interest rate is 6.4% and was due on and paid off on January 19, 2010.

On November 5, 2007, Charleston entered into a loan agreement
with Allied Merit International Investment, Inc. (Allied Merit) for $114,395.
The loan represents various professional expenses related to the merger paid by
Allied Merit on behalf of Charleston, including the $50,000 paid to Tryant in
January 2008 as discussed in Note 13. The loan incurs interest at 8% per annum
and is due upon the first round of funds raised subsequent to the $1,300,000
fund raised upon listing on the U.S Over the Counter (OTC) market. Pursuant to
the agreement, Allied Merit agreed to convert accrued interest into the
Companys common stock conversion rate of $2.00 per share. As of March 31, 2010,
there was no conversion of accrued interest into the Companys common stock.
Pursuant to an agreement dated June 15, 2009, signed between Charleston and
Allied Merit, Allied Merit agreed to waive the previously accrued interest on
the loan. During the year ended October 31, 2009, Allied Merit lent an
additional $78,877 to Charleston. As of March 31, 2010, the total amount owed to
Allied Merit is $121,705.

On November 28, 2008, the Company entered into a loan agreement
with Shanghai Pudong Development Bank for $1,462,394 (RMB10,000,000). The annual
interest rate is 7.3% and is due on and paid off on November 28, 2009. The loan
is guaranteed by the Tianjin Haitai Investment Guarantee Co., Ltd. with a
guarantee fee amortized in 12 months.

On May 22, 2009, the Company entered into a loan agreement with
Rural Corporative Bank of Tianjin for $1,462,822 (RMB10,000,000). The annual
interest rate is 6.4% and is due on May 21, 2010. The loan is guaranteed by the
Tianjin Haitai Investment Guarantee Co., Ltd. with a guarantee fee of $21,942
(RMB150,000) and was amortized in 12 months.

On July 3, 2009, the Company entered into two loan agreements
with Rural Corporative Bank of Tianjin for $1,097,117 (RMB7,500,000) each with a
total of $2,194,234 (RMB15,000,000). The annual interest rate is 6.4% and was
due and repaid on May 21, 2010. The loan is guaranteed by the Tianjin Haitai
Investment Guarantee Co., Ltd with a guarantee fee of $21,942 (RMB150,000) and
was amortized in 12 months.

On December 14, 2009, the Company entered into two loan
agreements with Shanghai Pudong Development Bank for $292,565 (RMB2,000,000) and
$1,170,258 (RMB8,000,000) with a total of $1,462,823 (RMB10,000,000). The annual
interest rate is 6.4% and is due on December 14, 2010. The loan is guaranteed by
the Tianjin Haitai Investment Guarantee Co., Ltd. with a guarantee fee of
$14,570 (RMB99,600) and was amortized in 12 months.

On December 25, 2009, the Company entered into a loan agreement
with China Development Bank for $1,462,822 (RMB10,000,000). The annual interest
rate is 5.8% and is due on December 24, 2010. The loan is guaranteed by the
Tianjin Haitai Investment Guarantee Co., Ltd.

F-29

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

10. Due to Related Parties

|                                                                           |   | March 31, |  |   | October 31, |  |   | October 31, | 
|-------------------------------------------------------------------------- | - | --------- |  | - | ----------- |  | - | ----------- | 
|                                                                           |   | 2010      |  |   | 2009        |  |   | 2008        | 
|                                                                           |   |           |  |   |             |  |   |             | 
|                                                                           |   |           |  |   |             |  |   |             | 
|Li Liu, a director of the Company, officer
      and principal shareholder | $ | 3,394,534 |  | $ | 3,393,542   |  | $ | 977,950     | 
|Other shareholders                                                         |   | 1,918,267 |  |   | 1,917,930   |  |   | -           | 
|                                                                           |   |           |  |   |             |  |   |             | 
|                                                                           | $ | 5,312,801 |  | $ | 5,311,472   |  | $ | 977,950     | 

The amount due to Li Liu and other shareholders are unsecured
with no stated interest or repayment terms.

11. Long-Term Loans

As of March 31, 2010 and October 31, 2009, the Company has the
following long-term loans:

|                                                                                                                                                                                                                                                |   | March 31, |   |   | October 31, |   |   | October 31, |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --------- | - | - | ----------- | - | - | ----------- | -
|                                                                                                                                                                                                                                                |   | 2010      |   |   | 2009        |   |   | 2008        |  
|                                                                                                                                                                                                                                                |   |           |   |   |             |   |   |             |  
|                                                                                                                                                                                                                                                |   |           |   |   |             |   |   |             |  
|Installment loan GMAC-SAIC Automotive
      Finance Company Limited, interest at 7.33% per annum, monthly principal
      and interest payment of $322 from July 15, 2005 to June 17, 2009                                                      | $ | -         |   | $ | -           |   |   | 2,295       |  
|Installment loan from Daimler-Chrysler Automotive Finance
      Ltd, interest at 7.83% per annum, monthly principal and interest payment
      of $2,484 from September 30, 2007 to September 30, 2009                                          | $ | -         |   | $ | -           |   |   | 31,794      |  
|Convertible notes in principal amounts of
      $1,300,000, less debt discount of $365,886, interest at 8% per annum, due
      December 2009. These notes were either paid off or converted into common
      stock in December 2009 (Note 14) | $ | -         |   | $ | 1,227,459   |   |   | 839,558     |  
|                                                                                                                                                                                                                                                |   |           |   |   |             |   |   |             |  
|Installment loan from Daimler-Chrysler
      Automotive Finance Ltd, interest free, monthly principal and interest
      payment of $3,402 from February 5, 2010 to August 5, 2011                                                              |   | 57,832    |   |   | -           |   |   | -           |  
|                                                                                                                                                                                                                                                |   | 57,832    |   |   | 1,227,459   |   |   | 873,647     |  
|Less: current portion                                                                                                                                                                                                                           |   | (40,823   | ) |   | (1,227,459  | ) |   | (34,089     | )
|                                                                                                                                                                                                                                                |   |           |   |   |             |   |   |             |  
|Long-term loans, net of current portion                                                                                                                                                                                                         | $ | 17,009    |   | $ | -           |   | $ | 839,558     |  

F-30

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

11. Long-Term Loans - Continued

The convertible notes payable, net of debt discount consists of
the following as of March 31, 2010 and October 31, 2009:

|                                                           |   | March 31, |  |   | October 31, |   |   | October 31, |  
|---------------------------------------------------------- | - | --------- |  | - | ----------- | - | - | ----------- | -
|                                                           |   | 2010      |  |   | 2009        |   |   | 2008        |  
|                                                           |   |           |  |   |             |   |   |             |  
|Convertible notes payable                                  | $ | -         |  | $ | 1,300,000   |   | $ | 1,300,000   |  
|Less: Debt discount - Series A Warrants                    |   | -         |  |   | (280,726    | ) |   | (280,726    | )
|Less: Debt discount -
      beneficial conversion feature  |   | -         |  |   | (304,800    | ) |   | (304,800    | )
|Accretion of debt discount - warrants and
      beneficial |   | -         |  |   | 512,985     |   |   | 125,084     |  
|conversion feature                                         |   |           |  |   |             |   |   |             |  
|Convertible notes payable, net                             | $ | -         |  | $ | 1,227,459   |   | $ | 839,558     |  

Accrued interest on the convertible notes payable as of March
31, 2010 was $0 and interest expense on the convertible notes for the five
months ended March 31, 2010 was $9,829. These notes have been converted into
common shares on December 6, 2009 (Note 14).

Accrued interest on the convertible notes payable as of October
31, 2009 was $146,170 and interest expense on the convertible notes for the year
ended October 31, 2009 was $104,001

Accrued interest on the convertible notes payable as of October
31, 2008 and interest expense for the year ended October 31, 2008 was $42,179.

12. Income and Other Tax Payables

Income and other tax payables consist of the following:

|                                          |   | March 31, |  |   | October 31, |  |   | October 31, | 
|----------------------------------------- | - | --------- |  | - | ----------- |  | - | ----------- | 
|                                          |   | 2010      |  |   | 2009        |  |   | 2008        | 
|                                          |   |           |  |   |             |  |   |             | 
|Income tax payable                        | $ | 17,585    |  | $ | 207,510     |  | $ | 65,075      | 
|Value added tax payable                   |   | 1,295,321 |  |   | 1,320,149   |  |   | 1,157,293   | 
|Individual income withholding tax payable |   | 316       |  |   | 680         |  |   | -           | 
|Other tax payables                        |   | 24,972    |  |   | 40,577      |  |   | 23,843      | 
|                                          | $ | 1,338,194 |  | $ | 1,568,916   |  | $ | 1,246,211   | 

F-31

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

13. Income Tax

The enterprise income tax is reported on a separate entity
basis.

United States

The Company was incorporated in Delaware and is subject to
United States of America tax law. No provisions for income taxes have been made
as the Company has a taxable loss for the five months ended March 31, 2010. No
tax benefit has been realized since a valuation allowance has offset the
deferred tax asset.

BVI

Charleston was organized in the British Virgin Islands and is
not subject to income taxes under the current laws of the British Virgin
Islands.

PRC

Tianjin Yayi, Weinan Milkgoat, Fuping Milkgoat and Shaanxi
Milkgoat are subject to PRC income tax. Income tax (benefit) expense for the
five months ended March 31, 2010 and 2009 were ($289,093) and $869,614,
respectively. Income tax expense for the year ended October 31, 2009 and 2008
were $2,201,032 and $1,633,946, respectively.

Effective January 1, 2008, the statutory PRC tax rate is 25%.
Therefore, the statutory PRC rate for the five months ended March 31, 2010 and
2009 was 25% for the year ended October 31, 2009 was 25%, and for the year ended
October 31, 2008 was 26.3% .

The income tax provision consists of the following:

|                              |   | Five months ended March 31, |   |   | Year ended March 31, |  
|----------------------------- | - | --------------------------- | - | - | -------------------- | -
|                              |   | 2010                        |   |   | 2009                 |  
|                              |   |                             |   |   |                      |  
|Current                       | $ | (155,700                    | ) | $ | 1,090,628            |  
|Deferred                      |   | (472,893                    |   |   | (17,514              | )
|Change in valuation allowance |   | 339,500                     |   |   | (203,500             | )
|                              | $ | (289,093                    | ) | $ | 869,614              |  

F-32

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

13. Income Tax - Continued

The following is a reconciliation of the tax derived by
applying the PRC Statutory Rate to the earnings before income taxes, and
comparing that to the recorded income tax provision (benefit):

|                                                       |  | Five months ended |   |  | Year ended  | 
|------------------------------------------------------ |  | ----------------- | - |  | ----------- | 
|                                                       |  | March 31          |   |  | October 31, | 
|                                                       |  | 2010              |   |  | 2009        | 
|                                                       |  |                   |   |  |             | 
|Tax provision (benefit) at PRC statutory rate          |  | (25.0%            | ) |  | 25.0%       | 
|Tax exemption                                          |  | -                 |   |  | -           | 
|Permanent differences                                  |  | -                 |   |  | 0.1%        | 
|Unrecognized tax benefit of current year losses        |  | 0.6%              |   |  | -           | 
|Parent company's expenses not subject to PRC
      tax |  | 9.1%              |   |  | 3.5%        | 
|                                                       |  |                   |   |  |             | 
|Effective tax rate                                     |  | (15.3%            | ) |  | 28.6%       | 

The components of the deferred tax assets and deferred tax
liability are as follows:

|                                                                           |  | March 31,  |   |  | October 31, |   |  | October 31    |  
|-------------------------------------------------------------------------- |  | ---------- | - |  | ----------- | - |  | ------------- | -
|                                                                           |  | 2010       |   |  | 2009        |   |  | 2008          |  
|Deferred tax asset for NOL carryforwards -
      China                     |  | 173,000    |   |  | 99,700      |   |  | 55,700        |  
|Deferred tax asset for NOL carryforwards - US                              |  | 1,618,300  |   |  | 1,374,000   |   |  | 1,104,000     |  
|Warrant expense                                                            |  | 743,200    |   |  | 721,300     |   |  | 568,000       |  
|Temporary difference from advertisement                                    |  | 232,236    |   |  | -           |   |  | -             |  
|Temporary difference from intercompany
      sales profit                  |  | 1,259      |   |  | 1,258       |   |  | -             |  
|Temporary difference from allowance for doubtful accounts
      receivable |  | 19,151     |   |  | -           |   |  | 9,402         |  
|Temporary difference from slotting fee                                     |  | 220,243    |   |  | -           |   |  | -             |  
|                                                                           |  | 3,007,389  |   |  | 2,196,258   |   |  | 1,737,102     |  
|                                                                           |  | -          |   |  |             |   |  |               |  
|Valuation allowance                                                        |  | (2,534,500 | ) |  | (2,195,000  | ) |  | (1,727,700    | )
|Total deferred tax assets                                                  |  | 472,889    |   |  | 1,258       |   |  | 9,402         |  
|Allowance for doubtful accounts receivable                                 |  | -          |   |  | 3,682       |   |  | -             |  
|Total deferred tax liability                                               |  | -          |   |  | 3,682       |   |  | -             |  
|Net deferred tax assets (liability)                                        |  | 472,889    |   |  | (2,424      |   |  | )
      9,402 |  

F-33

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

13. Income Tax  Continued

Deferred income taxes have been classified in the consolidated
balance sheets as of March 31, 2010 and October 31, 2009 as follows:

|                                    |   | March 31, |  |   | October 31, |   |  | October 31, | 
|----------------------------------- | - | --------- |  | - | ----------- | - |  | ----------- | 
|                                    |   | 2010      |  |   | 2009        |   |  | 2008        | 
|Current assets                      | $ | -         |  | $ | -           |   |  |             | 
|Current liability                   |   | -         |  |   | (2,424      | ) |  |             | 
|Noncurrent assets                   |   | 472,889   |  |   | -           |   |  | 9,402       | 
|Net deferred tax assets (liability) | $ | 472,889   |  | $ | (2,424      | ) |  | 9,402       | 

The valuation allowance for deferred tax assets as of March 31,
2010 and October 31, 2009 and 2008 was $2,534,500, $2,195,000 and $1,727,700.
The change in total allowance for the five months ended March 31, 2010 and
during the years ended October 31, 2009 and 2008 was an increase of $339,500,an
increase of $467,300 and an increase of $1,719,100 respectively.

In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income
during the periods in which the net operating losses and temporary differences
become deductible. Management considered projected future taxable income and tax
planning strategies in making this assessment. At March 31, 2010, the Company
had net operating loss carry forwards for United States Federal and State income
tax purposes of approximately $3,946,670 (the NOL carry forwards-US), which
were available to offset future US taxable income, if any, through 2029. At
March 31, 2010, the Company had net operating loss carry forwards, associated
with its subsidiaries Weinan Milkgoat, Fuping Milkgoat and Shaanxi Milkgoat, for
PRC income tax purposes of approximately $173,040 (the NOL carry forwards 
China), which are available to offset future PRC taxable income, if any, until
it is fully offset against future taxable income subject to the approval of the
Chinese tax authority. Based upon the uncertainty of future US taxable income,
the limited operating histories of its subsidiaries, Weinan Milkgoat, Fuping
Milkgoat, and Shaanxi Milkgoat, and these subsidiaries losses incurred to date,
management has fully reserved the deferred tax asset associated with the warrant
expense and NOL carry forwards for US and PRC income tax purposes.

The company adopted the provisions of Financial Accounting
Standards Board (FASB) Interpretation No. 48(FIN 48), Accounting for
Uncertainty in Income Taxes, (codified in FASB) Accounting Standards
Codification (ASC) 740), as of January 1, 2007. As a result of the
implementation of FIN 48, the Company made a comprehensive review of its
portfolio of tax positions in accordance with the recognition standards
established by FIN 48. As a result of the implementation of FIN 48, the Company
recognized no material adjustments to liabilities or stockholders equity. The
company did not recognize any interest or penalties related to unrecognized tax
benefits in year March 31, 2010 and October 31, 2009. The company had no
uncertain positions that would necessitate recording of tax related liability.
The company is subject to examination by the respective tax authorities.

F-34

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

14. Merger and Offering

Series B Warrants

On June 6, 2008, in consideration for introducing Ardmore to
Tianjin Yayi, Ardmore issued to Grand Orient Fortune Investment Ltd., a British
Virgin Islands limited liability company and its designees (collectively, Grand
Orient) an aggregate of 2,000,000 shares of the Company common stock, valued at
$2,200,000 (based on the stock price on June 6, 2008, the date of issuance) and
Series B Warrants to acquire 2,148,148 shares of Ardmores common stock at an
exercise price of $1.08 per share, valued at $1,144,743, fair value. The Company
used the Black-Scholes option pricing model to calculate the grant-date fair
value of the warrant with the following assumptions: no dividend yield, expected
volatility of 70.31%, and a risk-free interest rate of 2.73% . In determining
volatility of the Companys warrant, the Company used the average volatility of
the Companys stock. These warrants are considered to be indexed to the
Companys own stock accordance with Emerging Issue Task Force (EITF) No. 01-6.
These warrants are exercisable on a cashless basis and may be exercised through
June 2011. The exercise price of these warrants and the number of shares
issuable upon their exercise is subject to adjustment upon the occurrence of
specified events. Grand Orient was granted piggyback registration rights with
respect to these shares and the shares of common stock issuable upon exercise of
the Series B Warrants. The fair value of the common stock and Series B Warrants
was expensed as merger costs.

Cancellation of shares and Issuance of Series C Warrants

In connection with this merger, on June 6, 2008, Ardmore
entered into an indemnification agreement with Tryant, LLC, pursuant to which
Tryant agreed to the cancellation of 325,198 shares of common stock it owned and
agreed to, among other things, indemnify Ardmore for one year for breaches of
representations and warranties in the merger agreement. In exchange, Ardmore (i)
paid Tryant an aggregate of $200,000 (excluding $50,000 that had been previously
paid by Charleston and expensed in merger costs), (ii) issued Tryant a note in
principal amount of $250,000 (which matured and was paid in August 2008), and
(iii) issued Tryant and its designees, Series C Warrants, exercisable on a
cashless basis to acquire through June 2011, an aggregate of 185,185 shares of
Ardmore common stock at an exercise price of $1.35 per share, valued at $86,367,
fair value. The exercise price and number of shares issuable upon exercise of
these warrants is subject to specified anti-dilution adjustments. Tryant and its
designees were granted piggyback rights with respect to the shares of the
Companys common stock it owned prior to these transactions and the shares
issuable upon exercise of these Series C Warrants. This transaction in the total
amount of $536,367 is reflected as cancellation of common stock.

F-35

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

14. Merger and Offering  Continued

Convertible Promissory Note and Issuance of Series A
Warrants

Contemporaneously with, and as a condition to, the completion
of the merger, Ardmore issued 52 units for an aggregate purchase price of
$1,300,000. Each unit consisted of: (i) an 8% convertible promissory note in
principal amount of $25,000 and (ii) Ardmores Series A Warrants. Interest on
these notes is payable at maturity, the notes mature in December 2009, are
unsecured and are convertible, at the holders option, into the Company common
stock at a conversion price of $1.08. The Series A Warrants included in each
unit are exercisable (under specified circumstances, on a cashless basis)
through June 2011 (subject to extension if, under specified circumstances, the
underlying shares are not registered for resale) to acquire 11,575 shares of
Ardmores common stock at an exercise price equal to the lesser of $1.35 and the
Next Round Value. The term Next Round Value means the per share dollar value
of the securities issued by Ardmore in the first private placement that is
effected after the merger, such dollar value to be equal to a fraction, the
numerator of which is the aggregate purchase price of the securities sold in
such private placement and the denominator of which is the number of shares of
common stock (including and after giving effect to the shares of common stock
issuable upon exercise or conversion of the securities issued or issuable in
such private placement, determined as of the date of the first closing of such
private placement), issued in such private placement. The convertible notes and
Series A Warrants provide for anti-dilution adjustments upon the occurrence of
specified events.

The Series A Warrants that were issued with the convertible
notes gave the holders the right to purchase an aggregate of 601,900 shares of
Ardmores common stock. These warrants were valued at $280,726, fair value, and
in accordance with EITF No. 00-19, the warrants were classified as equity. The
fair value was based on the Black Scholes. In determining volatility of the
Companys warrant, the Company used the average volatility of the Companys
stock. The value of these warrants was recorded as a discount on the convertible
notes. The conversion option is deemed to be an embedded derivative which is
classified as equity under EITF 00-19. The intrinsic value of this embedded
derivative is $304,800 and is recorded as a discount on the convertible notes.
The original face amount of the convertible notes of $1,300,000 was reduced by
the value of the warrants issued ($280,726) and the intrinsic value of the
embedded derivative ($304,800), resulting in an initial carrying value of
$714,474.

The convertible notes are being accreted to their maturity
value of $1,300,000 using the interest method and an effective monthly rate of
5.22% . The discount on the convertible notes was fully accreted on December 6,
2009.

On December 6, 2009, $1,250,000 of the convertible notes plus
accrued interest of $150,000 were converted to 1,296,274 shares of common stock.
$50,000 of the convertible notes plus accrued interest of $6,000 were paid off
in cash on maturity date. (Note11)

Pursuant to a registration rights agreement with the purchasers
of these units, Ardmore agreed to register the resale of the shares of common
stock underlying the notes and Series A Warrants. Generally, if Ardmore fails,
subject to specified exceptions, to comply with certain of its obligations under
this agreement, Ardmore may be required to pay the investors, as of the date of
such failure and each monthly anniversary of such failure, partial liquidated
damages equal to 1.5% of the purchase price paid by them for any unregistered
securities held by them that are required to be registered; provided, however, that (i) Ardmore will not be liable for liquidated damages in excess of
1.5% of the aggregate purchase price in any 30 day period and (ii) the maximum
amount payable to each purchaser shall not exceed 20% of their purchase price.
Ardmore did not file a registration statement by July 21, 2008, as required by
the agreement. On November 24, 2009, the Company and Investors entered into a
Settlement Agreement (the "Settlement Agreement") to settle the Companys
obligations under the promissory notes, the Series A Warrants and the
Registration Rights Agreement.

As of March 31, 2010, cashless exercise of 17,363 of series A
Warrants were converted to 13,022 shares of common stock.

F-36

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

14. Merger and Offering  Continued

Settlement of Registration Rights Agreement

On November 24, 2009, the Company and Investors entered into a
Settlement Agreement (the "Settlement Agreement") to settle the Companys
obligations under the aforementioned Registration Rights Agreement for failure
to file a registration statement in accordance with the terms of the
Registration Rights Agreement. Pursuant to the Settlement Agreement, each
Investor is entitled to convert the entire principal amount of and accrued
interest on all of the Notes it holds into the Companys common stock at a
conversion price of $1.08 per share. In addition, the Company adjusted the
Series A and Series D warrant exercise price to $0.98 per share. In December
2009, the Company paid to the Investors liquidated damages in the aggregate
amount equal to $140,000, which was accrued as of October 31, 2009, through
Wellfleet Partners, Inc., the representative of the Investors for pro rata
distribution to the Investors. The fair value of the reduction in Series A and
Series D warrant exercise price totaled $88,500 was recorded as a penalty for
the five months ended March 31, 2010.

Upon making such payment, the Registration Rights Agreement, as
between the Company and each Investor, terminated and all obligations of the
Company thereunder are discharged and all claims against the Company arising
there from are released.

Series D Warrants and Placement Agent Fee

Ardmore paid the placement agent an aggregate of approximately
$104,000 in commissions and approximately $21,000 for expenses for its services
in the offering. Ardmore also issued the placement agent and its designees
Series D Warrants (which generally have the same terms as the Series A Warrants)
to acquire an aggregate of 144,448 shares of common stock. The Series D Warrants
were valued at $67,368, fair value. Of the total placement agent expense of
$192,368, $150,082 was allocated to debt issuance costs and the remaining
$41,540 of advisory cost was recorded as an expense. The debt issuance costs are
amortized by the interest method over the term of the convertible notes.

For the five months ended March 31, 2010 and 2009, amortization
of debt issuance costs and accretion of debt discount from the warrants and
embedded derivatives issued in respect of the merger on June 6, 2008 (merger)
totaled $91,227 and $118,913, respectively.

For the years ended October 31, 2009 and 2008, amortization of
debt issuance costs and accretion of debt discount from the warrants and
embedded derivatives issued in respect of the merger on June 6, 2008 (merger)
totaled $487,821 and $157,304, respectively.

Each series of warrants issued in respect of the merger were
valued using a Black-Scholes model. The following assumptions were used to
calculate the fair value of Series B,C,E warrants: dividend yield of 0%,
expected volatility of 70.31%, risk-free interest rate of 2.73%, expected life
of 3 years, and stock price of $1.10 per share with exercise price of $1.08
-$1.35 per share. Assumptions were used to calculate the fair value of Series A
and D warrants: dividend yield of 0%, expected volatility of 100%, risk-free
interest rate of 0.73%, expected life of 1.5 years, and stock price of $1.4 per
share with exercise price of $0.98 per share.

The Company modified the Series A and Series D warrant exercise
price to $0.98 per share as a result of the aforementioned settlement of the
registration rights agreement. Additional expenses of $71,400 and $17,100,
respectively, were recorded as a result of the reduction in Series A and Series
D warrant exercise price.

As of March 31, 2010, cashless exercise of 110,000 warrants
were converted to 78,432 shares of common stock.

F-37

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

14. Merger and Offering  Continued

The following table summarizes all of the Companys warrant
outstanding as of March 31, 2010.

|                                                                                     |  | Shares      |  |  | Fair Value | 
|------------------------------------------------------------------------------------ |  | ----------- |  |  | ---------- | 
|                                                                                     |  | outstanding |  |  |            | 
|                                                                                     |  |             |  |  |            | 
|Warrants outstanding respect of the merger:                                          |  |             |  |  |            | 
|Series A Warrants                                                                    |  | 584,537     |  |  | 459,388    | 
|Series B Warrants                                                                    |  | 2,148,148   |  |  | 1,144,743  | 
|Series C Warrants                                                                    |  | 185,185     |  |  | 86,367     | 
|Series D Warrants                                                                    |  | 34,448      |  |  | 27,073     | 
|                                                                                     |  | 2,952,318   |  |  | 1,717,571  | 
|Warrants outstanding for extension of
      maturity date of loan from Allied Merit: |  |             |  |  |            | 
|Series E Warrants                                                                    |  | 250,000     |  |  | 233,547    | 
|                                                                                     |  | 3,202,318   |  |  | 1,951,118  | 

|                                                           |  |           |   |  |           |   |   | Exercise Price    | 
|---------------------------------------------------------- |  | --------- | - |  | --------- | - | - | ----------------- | 
|                                                           |  | Option    |   |  | Vested    |   |   | per Common        | 
|                                                           |  | Shares    |   |  | Shares    |   |   | Stock
      Range | 
|                                                           |  |           |   |  |           |   |   |                   | 
|Balance, October 31, 2007                                  |  | -         |   |  | -         |   |   | -                 | 
|Granted or vested during the year ended October 31, 2008   |  | 3,329,681 |   |  | 3,329,681 |   | $ | 1.08 - $1.15      | 
|Balance October 31, 2008                                   |  | 3,329,681 |   |  | 3,329,681 |   | $ | 1.08 - $1.15      | 
|Granted or vested during the year ended October 31, 2009   |  | -         |   |  | -         |   |   | -                 | 
|Balance, October 31, 2009                                  |  | 3,329,681 |   |  | 3,329,681 |   | $ | 1.08-$1.35        | 
|Granted or vested during the 5 months ended March 31, 2010 |  | -         |   |  | -         |   |   | -                 | 
|Exercised during the 5 months ended March
      31, 2010   |  | (127,363  | ) |  | (127,363  | ) | $ | 0.98              | 
|Expired during the 5 months ended March 31, 2010           |  | -         |   |  | -         |   |   | -                 | 
|Balance, March 31, 2010                                    |  | 3,202,318 |   |  | 3,202,318 |   | $ | 0.98-$1.35        | 

The following table summarizes the weighted average remaining
contractual life and exercise price of the Companys outstanding warrants.

|Warrants
      Outstanding |                         |                          |                           
|-------------------------- | ----------------------- | ------------------------ | --------------------------
|                           | Number Outstanding      | Weighted Average         | Weighted Average          
|Range of                   | Currently Exercisable   | Remaining                | Exercise Price of Warrants
|Exercise Prices            | at
      March 31, 2010 | Contractual Life (Years) | Currently Exercisable     
|                           |                         |                          |                           
|$0.98-1.35                 | 3,202,318               | 1.19                     | $1.08                     

F-38

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

15. Commitments and Contingencies

Operating Leases

In the normal course of business, the Company leases office
space and factory under operating leases agreements, which expire through 2029.
The Company rents office space, primarily for regional sales administration
offices, in commercial office complexes that are conducive to administrative
operations. The operating leases agreements generally contain renewal options
that may be exercised in the Company's discretion after the completion of the
base rental terms. In addition, many of the leases provide for regular increases
to the base rental rate at specified intervals, which usually occur on an annual
basis.

As of March 31, 2010, the Company was obligated under operating
leases requiring minimum rentals as follows:

|2011       |   | 81,918  | 
|---------- | - | ------- | 
|2012       |   | 81,918  | 
|2013       |   | 84,356  | 
|2014       |   | 84,844  | 
|2015       |   | 84,844  | 
|Thereafter |   | 98,984  | 
|           | $ | 516,864 | 

For the five months ended March 31, 2010 and 2009, rent expense
amounted to $111,058 and $80,056 respectively.

For the years ended October 31, 2009 and 2008, rent expense
amounted to $213,914 and $221,989 respectively.

Purchase of Office Building

On January 15, 2007, the Company signed a sales and purchase
agreement with Tianjin Mengyang to buy a four-story office building of an
approximate construction area of 7,800 square meters situated at Jinghai
Industrial Park for a total consideration of $ 4,335,806 (equivalent to
RMB29,640,000). Tianjin Mengyang is responsible for renovation of the building.
As of July 31, 2009, the Company had advanced a total of $4,179,284 (equivalent
to RMB 28,570,000) to Tianjin Mengyang in connection with this agreement. There
is a 3% penalty payable to Tianjin Mengyang for funds not paid by the Company
according to schedule and a 3% penalty payable to the Company by Tianjin
Mengyang on the uncompleted portion of the total consideration if the project is
not completed and handed over to the Company for use by September 30, 2008. Due
to the 2008 Beijing Olympics, the Tianjin city government temporarily
discontinued all existing construction projects; therefore, the estimated
completion date of project has been postponed to December 31, 2009. It was
agreed between both parties in a supplementary agreement signed on October 12,
2008 that no penalty would be charged to each other for this delay. Due to the
freezing weather, the estimated completion date is further delayed to September
2010. 50% of the remaining balance, $78,261 (RMB535,000) is due upon receiving
the certificate of house property.

The Company also advanced $342,300 (equivalent to RMB2,340,000)
to Tianjin Mengyang for interior renovation of the building. The remaining
$342,300 is to be paid upon inspection of the completed renovation project. If
the remaining balance is not paid upon completion of the project, Tianjin
Mengyang will accrue interest on the remaining balance at the PRC prime
interbank rate of 6.03% per annum for a 3 month loan.

F-39

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

15. Commitments and Contingencies  Continued

Purchase of Factory & Warehouse

On January 15, 2007, the Company signed a factory and warehouse
leasing agreement with Tianjin Mengyang to rent a total gross area of 30,165
square meters for an annual rent of $1,288,480 (RMB8,808,180) for 21 years from
September 1, 2008 to August 31, 2029. A half-year deposit of $644,227
(RMB4,404,000) was paid as of April 30, 2008. The property is to be located in
Jinghai Industrial Park and Tianjin Mengyang is responsible for its
construction.

On September 26, 2008, the Company signed a new factory
transfer agreement with Tianjin Mengyang that cancelled the factory and
warehouse leasing agreement signed on January 15, 2007. The new agreement is to
purchase three warehouses and a factory of an approximate construction area of
30,165 square meters situated at Jinghai Economic Park for a total consideration
of $13,237,811 (RMB90,495,000). The rental deposit of $644,227 (RMB4,404,000),
paid with respect to the factory and warehouse leasing agreement signed on
January 15, 2007, was used to partially offset the total consideration. As of
December 31, 2008, the Company paid a total of $6,495,516 (RMB44,404,000) after
including the amount of $644,227 (RMB4,404,000) paid originally as deposit for
lease.

On January 20, 2009, the Company signed a supplemental
agreement with Tianjin Mengyang to postpone the construction completion date to
December 31, 2009. Under this supplement agreement, a monthly payment of
$438,847 (RMB3,000,000) is due at the end of each month from January 2009 to
November 2009, totaling $4,827,314 (RMB33,000,000). Total payment made as of
March 31, 2010 totaled $11,042,042 (RMB75,484,500). $877,694 (RMB6,000,000) of
the payment was paid via an offset with the short term loan due from Tianjin
Mengyang. The remaining balance of $2,195,770 (RMB15,010,500) is scheduled to be
paid progressively from July 2010.

On June 12, 2009, the Company signed a supplemental agreement
with Tianjin Mengyang which the remaining balance for purchase of office
building, factory and warehouse is $4,704,584 (RMB32,161,000). As of March 31,
2010, 50% of this remaining balance, $2,352,292 (RMB16,080,500) has been paid on
the completion of the main framework of the construction. 25% of the remaining
balance, $1,176,146 (RMB8,040,250) is due upon satisfactory inspection of the
construction and transfer of title (on or before July 31, 2010). The remaining
25% of the balance, $1,176,146 (RMB8,040,250) is due upon receiving the
certificate of ownership (on or before September 2010).

The Company received the main body construction verification
report. The total verified area of the office building, factory and warehouse is
39,142 square meters which is 1,177 square meters more than the area stated in
the supplemental agreement (37,965 square meters). According to the supplemental
agreement, the Company committed to pay more on the additional area built. This
resulted in an increase in the costs by $419,486 (RMB2,867,650).

Purchase of Machinery & Equipment

During the year ended March 31, 2010, the Company signed two
contracts for purchasing machinery and equipment to expand its goat milk powder
production lines and liquid goat milk production line, with the total amount of
$3,415,544 (RMB23,349,000). $1,858,121 (RMB12,702,300) has been paid as of March
31, 2010. The remaining balance of $1,557,423 (RMB10,646,700) will be paid
progressively. The machinery and equipment is expected to be delivered and
inspected by August 2010 and final payment of 5% is to be paid within 6 months
after approval of final inspection of equipment received.

Since the period ended March 31, 2010, the Company has adopted
a new marketing strategy and will not produce the liquid goat milk within three
years. Now the Company is negotiating with one of its liquid goat milk equipment
suppliers to terminate one of the contracts for purchasing machinery and
equipment. As of March 31, 2010, this equipment supplier has delivered machinery
and equipment to the Company amounting to $248,680 (RMB1,700,000), and the
Company has advanced $770,834 (RMB5,269,500) to the supplier for equipment
purchase. The Company has negotiated with this supplier regarding termination of
the contract and transferring the $770,834 to the Companys other construction
project. The Company is still in negotiation stage with the supplier for the
potential compensation with approximately 1% of the $770,834 (RMB5,269,500)
advance to the supplier, which is approximately $7,708 (RMB52,695).

F-40

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

15. Commitments and Contingencies  Continued

Construction in progress of goat farm facilities

As of March 31, 2010 the Company has agreements with two
construction companies, Zhuangli Construction Team (Zhuangli) and Fupin County
Qinzheng Construction Engineering Corporation (Qinzheng) for the construction
of farm facilities with the total amount of $2,524,831 (RMB17,260,000). On
September 2009, the company signed an supplementary agreement with Qinzheng for
reducing the total amount of costs by $277,936 (RMB1,900,000) due to the changes
of construction location. As of March 31, 2010, Qinzheng refunded $277,936
(RMB1,900,000) to the Company, and the Company has paid $1,749,828
(RMB11,962,000) to these two construction. The remaining balance of $497,067
(RMB3,398,000) will be paid progressively from September 2010. The final payment
of 25% of Zhuangli is due one year after the construction is approved and
accepted. The remaining balance for the construction by Qinzheng will be paid
progressively and final payment of 10% is due one year after the construction is
approved and accepted. Due to the changes of some construction location, the
completion date was postponed to October 2010.

The Company signed an agreement with Zhuangli for the
construction of goat milking stations with the total amount of $482,731
(RMB3,300,000). $459,326 (RMB3,140,000) has been paid as of March 31, 2010. The
remaining balance of $23,405 (RMB160,000) is due one year after the construction
is approved and accepted. Due to the low milk production season, the Company
decided to postpone the date for installing equipment to October 2010.

Purchase of Raw Material

The Company has written agreements with 18 village committees
for the purchase of goat milk and goat placenta to ensure the steady supply of
its raw material.

The details of agreements are listed as follows and the Company
is obligated under the purchase agreement requiring minimum purchases as
follows:

Tons2010
    
    1,4562011
    
    2,1842012
    
    3,2802013
    
    3,6082014
    
    3,969Thereafter
    
    -14,497


The price for the goat milk and goat placenta is determined by
the market. As of March 31, 2010, the market price for the goat milk and goat
placenta is $483 per ton (equivalent to RMB3,300 per ton).

Purchase of Goat Milk Powder

In August 2009, the Company entered into contracts with 3
suppliers for purchase of a total of 420 ton goat milk powder. Total purchase
commitment is $1,437,662 (RMB9,828,000). As of March 31, 2010, the Company has
prepaid $575,065 (RMB3,931,200) of the contract amount in which $308,070
(RMB2,106,000) of powder was received during the 5 months ended March 31, 2010;
the remaining contract amount of $862,597 (RMB5,896,800) will be paid upon
delivery of the goat milk powder.

F-41

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

15. Commitments and Contingencies  Continued

Land Use Rights Agreement

On July 25, 2008, the Company entered into an agreement with
the Government of the Linwei District of Weinan City (Government) pursuant to
which the Company is to build a 30,000 square meter goat milk processing
facility in one of the Governments industrial parks. The construction project
is estimated to cost approximately $19,016,691 (RMB130,000,000), which includes
fixed assets investment of approximately $11,702,579 (RMB80,000,000) and working
capital of approximately $7,314,112 (RMB50,000,000). In connection with this
agreement, the Government will transfer land use rights of approximately 67,000
square meter to the Company for 50 years for approximately $994,719
(RMB6,800,000). Pursuant to a supplemental agreement entered into on September
16, 2008 with the Government, the Company is required to commence construction
within six months of the date of the supplemental agreement. Subsequent to
January 31, 2009, the Company reached an oral agreement with the Government to
extend the commencement date of the construction to no later than May 31, 2009.
As of October 31, 2009, the Company has obtained the related approval documents
from the Government to begin construction. In accordance with the supplemental
agreement, the Company paid $146,282 (RMB1,000,000) for part of the
consideration of the land use rights. According to the land surveying from
Government, the remaining balance has been revised from $848,437 (RMB5,800,000)
to $796,090 (RMB5,442,150) and the remaining balance has been paid on November
24, 2009. The Company has received the certificate on land use right from the
local government and the construction has commenced in March 2010. Amortization
is provided over estimated useful live of 50 years.

Installation of central system pipelines

On October 28, 2009, Shaanxi Milkgoat entered into a Project
Installation Agreement ("Installation Agreement") with Heilongjiang Tianhong
Food Equipment Co., Ltd. ("Heilongjiang Tianhong"), which provided for, among
others, and install all the process pipelines and the central system pipelines
at Shaanxi Milkgoats new joint production facility. Pursuant to the
Installation Agreement, Shaanxi Milkgoat agreed to pay Heilongjiang Tianhong an
aggregate of $1,833,647 (RMB 12,535,000) in five installments for the service
that Heilongjiang Tianhong will provide. According to the agreement, 30% of it,
$550,094 (RMB3,760,500) is the first installment. $351,077 (RMB2,400,000) has
been paid as of October 31, 2009 and the rest of the first installment, $199,017
(RMB1,360,500) was paid on November 30, 2009. 30% of it, $550,094 (RMB3,760,500)
is expected to be paid within seven days after the beginning of installation,
10% of it, $183,365 (RMB1,253,500) is expected to be paid within ten days after
completion of installation, 25% of it $458,412 (RMB3,133,750) is expected to be
paid in within ten days after inspection of installation and the rest of 5%,
$91,682 (RMB626,750) is expected to be paid one year after the inspection of
installation. Heilongjiang Tianhong agreed to complete the installation within
90 days after Shaanxi Milkgoat provides to Heilongjiang Tianhong an appropriate
construction site for the installation according to the Installation Agreement.
The installation is estimated to be completed on August 2010.

F-42

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

16. Concentrations, Risks, and Uncertainties

The Company did not have any customer constituting greater than
10% of net sales for the five months ended March 31, 2010 and 2009.

The Company has not experienced any significant difficulty in
collecting its accounts receivable in the past and is not aware of any financial
difficulties being experienced by its major customers.

The Company has the following concentrations of business with
suppliers constituting greater than 10% of the Companys purchasing volume for
the five months ended March 31, 2010 and 2009:

|                                               | Five months ended
|---------------------------------------------- | -----------------
|                                               | March 31,        
|                                               | 2010             
|                                               |                  
|Lintong Hongxing Dairy Co., Ltd.               | *                
|CPMC Holding (Tianjin) Limited                 | 15.4%            
|Pacific Dairy Ingredients (Shanghai) Co., Ltd. | *                

* Constitute less than 10% of the Company's purchasing
volume.

As at March 31, 2010, amount due to CPMC Holding (Tianjin)
Limited included in accounts payable was approximately $16,122.

17. Operating Risk

Interest rate risk

The interest rates and terms of repayment of bank and other
borrowings are disclosed in Note 8 and Note 10. Other financial assets and
liabilities do not have material interest rate risk.

Foreign currency risk

Most of the transactions of the Company were settled in
Renminbi and U.S. dollars. In the opinion of the directors, the Company does not
have significant foreign currency risk exposure.

Companys operations are substantially in foreign countries

Substantially all of the Companys products are processed in
China. The Companys operations are subject to various political, economic, and
other risks and uncertainties inherent in China. Among other risks, the
Companys operations are subject to the risks of restrictions on transfer of
funds; export duties, quotas, and embargoes; domestic and international customs
and tariffs; changing taxation policies; foreign exchange restrictions; and
political conditions and governmental regulations.

F-43

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

18. Earnings Per Share

Basic earnings per share are computed on the basis of the
weighted average number of shares of common stock outstanding during the period.
Diluted earnings per share is computed on the basis of the weighted average
number of shares of common stock plus the effect of dilutive potential common
shares outstanding during the period using the if-converted method for the
convertible notes and the treasury stock method for warrants. The following
table sets forth the computation of basic and diluted net income per share:

|                                                                                                                                                     |   | Five months ended |   |   | Years ended |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------------- | - | - | ----------- | -
|                                                                                                                                                     |   | March 31,         |   |   | October 31, |  
|                                                                                                                                                     |   | 2010              |   |   | 2009        |  
|Net (loss) income available for common shareholders
      - basic                                                                                    | $ | (1,602,795        | ) | $ | 2,175,164   |  
|Less: write-off of total debt discount on convertible debt
      since unamortized debt discount is written-off upon conversion                      |   | -                 |   |   | (167,578    | )
|Less: write-off of total deferred financing
      costs on convertible debt since unamortized financing costs are written-
      off upon conversion |   | -                 |   |   | (43,167     | )
|Add: Interest expense on convertible note                                                                                                            |   | -                 |   |   | 43,025      |  
|Net (loss) income available for common shareholders
      - diluted                                                                                  | $ | (1,602,795        | ) | $ | 2,007,444   |  
|                                                                                                                                                     |   |                   |   |   |             |  
|Weighted average outstanding shares of common
      stock                                                                                            |   | 26,017,835        |   |   | 25,000,000  |  
|Dilutive effect of warrants                                                                                                                          |   | -                 |   |   | -           |  
|Dilutive effect of convertible notes                                                                                                                 |   | -                 |   |   | -           |  
|Diluted weighted average outstanding shares                                                                                                          |   | 26,017,835        |   |   | 25,000,000  |  
|                                                                                                                                                     |   |                   |   |   |             |  
|Earnings per share:                                                                                                                                  |   |                   |   |   |             |  
|Basic                                                                                                                                                |   | (0.06             | ) |   | 0.09        |  
|                                                                                                                                                     |   |                   |   |   |             |  
|Diluted                                                                                                                                              |   | (0.06             | ) |   | 0.09        |  

The Company reported a net loss for the five months ended March
31, 2010, common stock equivalents including convertible preferred stock and
warrants were anti-dilutive; therefore, the amounts reported for basic and
diluted loss per share are the same.

For the five months ended March 31, 2009, common stock
equivalents including convertible preferred stock, convertible notes and
warrants were anti-dilutive; therefore the amounts reported for basic and
dilutive earning per share were the same.

For the year ended October 31, 2009, common stock equivalents
including convertible preferred stock, convertible notes and warrants were
anti-dilutive; therefore the amounts reported for basic and dilutive earning per
share were the same.

F-44

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

19. Series A Redeemable Preferred Stock

Series A Redeemable Convertible Preferred
Stock

On June 18, 2009, the Company entered into a series A preferred
stock purchase agreement (the Stock Purchase Agreement) where it issued and
sold to an accredited investor, SAIF Partners III L.P. (SAIF) 1,530,612 shares
of the Companys Series A Preferred Stock, par value $0.001 per share (the
Series A Redeemable Convertible Preferred Stock) at a price per share of $9.80
for an aggregate purchase price of $15.0 million (the Private Placement). The
Series A Redeemable Convertible Preferred Stock is convertible into the
Companys common stock, at the option of the holder at any time, at an initial
conversion price at $0.98 per share, which conversion price is subject to stock
split, recapitalization and other anti-dilution protection, as well as
adjustments based on the Companys financial performance.

In connection with the Private Placement, the Company filed a
Certificate of Designation of Series A Redeemable Convertible Preferred Stock
with the Secretary of State of the State of Delaware (the Certificate) on June
16, 2009, which became effective upon filing. Pursuant to the Certificate, there
are 1,530,612 shares of Series A Redeemable Convertible Preferred Stock
authorized.

Dividends and Liquidation Rights

The holders of the Series A Redeemable Convertible Preferred
Stock are entitled to receive non-cumulative dividends prior and in preference
to any declaration or payment of dividend on the Companys common stock, at the
rate of 10% of US$9.80 per share per annum, when, as and if declared by the
Board. In the event of the Companys Liquidation Event, as defined in the
Certificate, the holders of the Series A Redeemable Convertible Preferred Stock
will be entitled to receive, prior to any distribution to holders of the common
stock, an amount per share equal to the sum of (i) $9.80 plus an annualized
internal rate of return of 15% for the period from the issuance date of the
Series A Redeemable Convertible Preferred Stock to the date when the full
payment is made and (ii) an amount equal to all declared but unpaid dividends
for each outstanding share of Series A Redeemable Convertible Preferred Stock,
subject to stock split, stock dividend, recapitalization or other similar events
as provided for in the Certificate.

Voting Rights

The holders of Series A Redeemable Convertible Preferred Stock
have the right to one vote for each share of the Companys common stock into
which a share of Series A Redeemable Convertible Preferred Stock could then be
converted. The holders of Series A Redeemable Convertible Preferred Stock have
full voting rights and powers equal to the voting rights and powers of the
holders of the Companys common stock, and are entitled to notice of any
stockholders meeting in accordance with the Bylaws of the Company and to vote,
together with the holders of the Companys common stock as a single class, with
respect to any matter upon which holders of the Companys common stock have the
right to vote. In addition, as long as there are at least 15,306 shares of
Series A Redeemable Convertible Preferred Stock outstanding, the Company may
not, without the approval of the holders of at least two-thirds of the then
outstanding shares of Series A Redeemable Convertible Preferred Stock voting
together as a single class or the approval from at least one director elected by
the holders of shares of Series A Redeemable Convertible Preferred Stock, take
certain material corporate actions as provided for in the Certificate.

F-45

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

19. Series A Redeemable Preferred Stock - Continued

Redemption

At any time and from time to time after June 30, 2012, the
holders of not less than a majority of the then outstanding Series A Redeemable
Convertible Preferred Stock have the right to request the Company to redeem all
of the then outstanding shares of Series A Redeemable Convertible Preferred
Stock in cash, if the following qualified events has not occurred: (i) the
Companys shares of common stock or American Depository Shares representing
shares of the common stock are listed on the New York Stock Exchange or the
NASDAQ Global Market, and (ii) the closing market price of such listing
securities represents a price of no less than $4.25 per share of common stock,
subject to adjustment, in any consecutive 30-trading-day period. The per share
redemption amount is equal to the sum of (i) the purchase price of $9.8 per
share plus an internal rate of return of 25% for the period from the issuance
date of the Series A Redeemable Convertible Preferred Stock to the redemption
date, and (ii) an amount equal to all declared but unpaid dividends for each
outstanding share of Series A Redeemable Convertible Preferred Stock. As of
March 31, 2010, the aggregate redemption amount is $17,938,353 (1,530,612 shares
x $9.8 x (1+25% / 365 days x 286 days)).

The Series A Redeemable Convertible Preferred Stock is not
redeemable currently and it is not probable that it will become redeemable;
therefore subsequent adjustment to the Series A Redeemable Convertible Preferred
Stocks redemption amount is not necessary until it is probable that the Series
A Redeemable Convertible Preferred Stock will become redeemable. Based on
managements future projection of earnings per share and considering P/E ratio
of similar companies in the dairy industry, management believes it is probable
that the Company will be able to maintain a closing market price of no less than
$4.25 per share of common stock for 30 consecutive trading days. In addition,
the Company is currently working on complying with the NASDAQ listing
requirements. The Company believes it is probable that the qualified events, as
defined above, will occur. As such, it is not probable that the Series A
Redeemable Convertible Preferred Stock will become redeemable and hence no
accretion to redemption value was made.

In accordance with FASBs accounting standard, the Series A
Redeemable Convertible Preferred Stock is classified outside of permanent equity
because the occurrence of the qualified events are not solely within the control
of the Company. In accordance with FASBs accounting standard, the issuance
costs of $735,129 are netted against the Private Placement of the Series A
Redeemable Convertible Preferred Stock.

20. Dividend Payable

On June 12, 2009, the former natural shareholders of Tianjin
Yayi before Charleston acquired their interests on January 15, 2008 (natural
shareholders), entered into a restructuring agreement whereby the natural
shareholders, upon receipt of $4,461,608 (RMB30,500,000) of dividend payable
from Charleston, will give an interest-free loan of the same amount to Tianjin
Yayi.

The entire amount of dividend has been paid and lent to Tianjin
Yayi by the natural shareholders. The amount owing to the natural shareholders
who are also shareholders of the Company is included in due to related parties
in the balance sheet (Note 10).

In connection with the restructuring agreement, the natural
shareholders also agree to reinvest the money received of $4,461,608
(RMB30,500,000) in a subsidiary of Yayi International which will be confirmed as
the Company works through relevant regulatory approval process.

As the first private placement subsequent to the date of the
restructuring agreement has occurred, as of March 31, 2010, the restructuring
process has been initiated.

F-46

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

21. Subsequent Event

Entry into a material definitive agreement

On April 30, 2010, the Company entered into a loan agreement
with SAIF Partners III L.P. (SAIF Partners), pursuant to which the Company
borrowed $3 million from SAIF Partners with an interest rate of twelve percent
(12%) per annum. SAIF Partners currently owns 1,530,612 shares of the Companys
Series A Preferred Stock with par value $0.001 per share (the Series A
Preferred Stock), which constitute all of the issued and outstanding Series A
Preferred Stock of the Company. To secure repayment by the Company of the Loan,
the Companys major shareholder, Global Rock Stone Industrial Ltd (Global
Rock) executed in favor of SAIF Partners a stock pledge agreement, pursuant to
which Global Rock pledged 13,024,725 shares of common stock of the Company as
security for the obligations of the Company under the Loan Agreement.

Adoption of Employee Stock Ownership Plan

On May 31, 2010, the Company adopted 2010 Employee Stock Option
and Stock Award Plan (the Plan). Up to 2,359,974 shares of common stock of the
Company, par value $0.001 per share may be issued under the Plan. This permits
the grant of Nonqualified Stock Options, Restricted Stock, and Incentive Stock
to employees, officers, directors, and consultants of the Company and its
subsidiaries. The Plan became effective on May 31, 2010 when it was adopted by
the Board of Directors but is subject to approval by the stockholders of the
Company within twelve months after it.

The Company also entered into separate Yayi International Inc.
2010 Employee Stock Option and Stock Award Plan Award Agreements (the Option
Agreements) with each of Ms. Jing Chen, the Company's Chief Financial Officer
and Mr. Fung Shek, the Company's Vice President and Director. Under the terms of
the Option Agreements, the Company agreed to grant a stock option, at an
exercise price at $2.25 per share, to each of Ms. Chen and Mr. Shek for the
purchase of 250,000 shares of Common Stock and 106,000 shares of Common Stock,
respectively. According to the Option Agreements, 25% of the option granted to
each of Ms. Chen and Mr. Shek will vest on the first anniversary of the grant
date, and the balance will vest in equal quarterly installments over the next
three years on the last day of each quarter, subject to Ms. Chen's and Mr.
Shek's continuing employment with the Company through these dates.

On May 31, 2010, the company also entered into separate option
agreements under the plan with certain non-executive employees, pursuant to
which the company granted to these employees options to purchase an aggregate of
842,400 shares of common stock, at an exercise price of $2.25 per share. These
options vest in tranches based on the vesting schedule but are contingent upon
the performance goals established by the department manager.

These options have been valued at $1,918,059. The company uses
the black-scholes option pricing model to calculate the grant-date fair value of
the options, with the following assumptions: no dividend yield, expected
volatility of 90%, risk free interest rate of 3.31% and expected option life of
ten years. The options expire ten years from the date of issuance.

On June 11, 2010, the Company entered into an Option Agreement
under the Companys Plan with Mr. Kenneth Lee. Under the terms of the Option
Agreement, the Company granted a stock option, at an exercise price at $0.98 per
share, to Mr. Lee for the purchase of 707,992 shares of common stock of the
Company. According to the Option Agreement, the Option will fully vest after six
months from the grant date. Pursuant to the employment arrangement between Mr.
Lee and SAIF, Mr. Lee is deemed to hold such option for the benefit of SAIF.

Employment Agreement with CEO

On June 1, 2010, the Company's indirect, wholly-owned
subsidiary, Tianjin Yayi Industrial Co. Ltd. entered into a supplemental
employment agreement (the Employment Agreement) with Ms. Li Liu, the Company's
CEO. The Employment Agreement provides that Ms. Liu's annual compensation will
be $75,000 (RMB 510,000). The annual compensation will be paid pro rata monthly.

F-47

---

YAYI INTERNATIONAL INC. AND SUBSIDIARIESNOTES TO
CONSOLIDATED FINANCIAL STATEMENTSFOR THE FIVE MONTHS ENDED MARCH 31, 2010 AND 2009

Entry into 4 loan agreements

On June 3, 2010, the Company entered into 3 loan agreements
with Rural Cooperative Bank of Tianjin for $1,170,258 (RMB8,000,000) each. The
annual interest rate is 5.8% and is due on June 2, 2011.

On June 3, 2010, the Company entered into a loan agreement with
Rural Cooperative Bank of Tianjin for $877,693 (RMB6,000,000) each. The annual
interest rate is 5.8% and is due on June 2, 2011.

F-48

---

EXHIBITS

|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                 
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                                                                                                                                                                                             
|2.1         |  | Agreement and Plan of Merger by and among Ardmore,
      Ardmore Acquisition Corp, Tryant LLC and Charleston Industrial Ltd.
      [incorporated by reference to Exhibit 2.1 to the Companys Current Report
      on Form 8-K filed on June 12, 2008].                                                                     
|            |  |                                                                                                                                                                                                                                                                                                                             
|3.1         |  | Amended and Restated Certificate of Incorporation
      [incorporated by reference to Exhibit 3.1 to the Companys Quarterly
      Report on Form 10-Q filed on September 22, 2008].                                                                                                                                        
|            |  |                                                                                                                                                                                                                                                                                                                             
|3.2         |  | Bylaws of the Company adopted on February 21, 2008
      [incorporated by reference to Exhibit 99.2 to the Companys Current Report
      on Form 8-K/A-2 filed on April 10, 2008].                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                                                                             
|3.3         |  | Certificate of Designation of Series A Preferred Stock,
      as filed with the Secretary of State of the State of Delaware, June 16,
      2009 [incorporated by reference to Exhibit 3.1 to the Companys Current
      Report on Form 8-K filed on June 19, 2009].                                                       
|            |  |                                                                                                                                                                                                                                                                                                                             
|4.1         |  | Form of 8% Convertible Promissory Note [incorporated by
      reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed
      on June 12, 2008].                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                                                                             
|4.2         |  | Form of Series A Warrant [incorporated by reference to
      Exhibit 4.2 to the Companys Current Report on Form 8-K filed on June 12,
      2008].                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                                                                             
|4.3         |  | Form of Series B Warrant [incorporated by reference to
      Exhibit 4.3 to the Companys Current Report on Form 8-K filed on June 12,
      2008].                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                                                                             
|4.4         |  | Form of Series C Warrant [incorporated by reference to
      Exhibit 4.4 to the Companys Current Report on Form 8-K filed on June 12,
      2008].                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                                                                             
|4.5         |  | Form of Series D Warrant [incorporated by reference to
      Exhibit 4.5 to the Companys Quarterly Report on Form 10-Q filed on
      September 22, 2008].                                                                                                                                                                 
|            |  |                                                                                                                                                                                                                                                                                                                             
|4.6         |  | Form of Series E Warrant [incorporated by reference to
      Exhibit 4.6 to the Companys Quarterly Report on Form 10-Q filed on
      September 22, 2008].                                                                                                                                                                 
|            |  |                                                                                                                                                                                                                                                                                                                             
|4.7         |  | Investor and Registration Rights Agreement, by and among
      Yayi International Inc., Global Rock Stone Industrial Ltd, Li Liu, Fung
      Shek and SAIF Partners III L.P., dated June 18, 2009 [incorporated by
      reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed
      on June 19, 2009].
|            |  |                                                                                                                                                                                                                                                                                                                             
|10.1        |  | Form of Amended and Restated Securities Purchase
      Agreement dated as of May 12, 2008, by and among Ardmore and the investors
      signatories thereto [incorporated by reference to Exhibit 10.1 to the
      Companys Current Report on Form 8-K filed on June 12, 2008].                                           
|            |  |                                                                                                                                                                                                                                                                                                                             
|10.2        |  | Form of Registration Rights Agreement dated as of May 12,
      2008 [incorporated by reference to Exhibit 10.2 to the Companys Current
      Report on Form 8-K filed on June 12, 2008].                                                                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                                             
|10.3        |  | Lease Contract of Premises between Tianjin Milk Goat
      Dairy Co., Ltd. and Tianjin Yayi Industrial Co., Ltd. (Translation)
      [incorporated by reference to Exhibit 10.3 to the Companys Current Report
      on Form 8-K filed on June 12, 2008].                                                                  
|            |  |                                                                                                                                                                                                                                                                                                                             
|10.4        |  | Building Property Transfer Agreement between Tianjin Milk
      Goat Dairy Co., Ltd. and Tianjin Yayi Industrial Co, Ltd. (Translation)
      [incorporated by reference to Exhibit 10.4 to the Companys Current Report on Form 8-K filed on June 12,
  2008].                                                             

-23-

---

|10.5  | Project Construction Contract between Tainjin Yayi
      Industrial Co., Ltd. and the Peoples Government of Linwei District,
      Weinan City [incorporated by reference to Exhibit 10.5 to the Companys
      Quarterly Report on Form 10-Q filed on September 22, 2008].                                                                                                                     
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.6  | Supplementary Agreement to the Project Construction
      Contract dated July 25, 2008 between Tianjin Yayi Industrial Co., Ltd. and
      the Peoples Government of Linwei District, Weinan City [incorporated by
      reference to Exhibit 10.6 to the Companys Quarterly Report on Form 10-Q
      filed on September 22, 2008].                                                            
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.7  | Plant Transfer Contract dated September 26, 2008 between
      Tianjin Yayi and Tianjin Mengyang Biotechnology Co., Ltd. [incorporated by
      reference to Exhibit 10.7 to the Companys Annual Report on Form 10-K
      filed on February 13, 2009].                                                                                                                                          
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.8  | Supplementary Agreement dated October 12, 2008 between
      Tianjin Yayi and Tianjin Mengyang Biotechnology Co., Ltd. to the House
      Property Transfer Contract dated January 15, 2007 [incorporated by
      reference to Exhibit 10.8 to the Companys Annual Report on Form 10-K
      filed on February 13, 2009].                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.9  | Supplementary Agreement dated January 20, 2009 between
      Tianjin Yayi and Tianjin Mengyang Biotechnology Co., Ltd. to the Plant
      Transfer Contract dated September 26, 2008 [incorporated by reference to
      Exhibit 10.9 to the Companys Annual Report on Form 10-K filed on February
      13, 2009].                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.10 | Short Term Loan Agreement for RMB 10 million with
      Shanghai Pudong Development Bank SPDB [incorporated by reference to
      Exhibit 10.10 to the Companys Quarterly Report on Form 10-Q filed on
      March 23, 2009].                                                                                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.11 | Entrusted Loan Contract by and among SPDB, Tianjin Yayi
      Industrial Co., Ltd. and Tianjin Haitai Investment Guarantee Co., Ltd.
      [incorporated by reference to Exhibit 10.11 to the Companys Quarterly
      Report on Form 10-Q filed on March 23, 2009]                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.12 | Loan Contract between Tianjin Yayi Industrial Co., Ltd.
      and Tianjin Rural Cooperative Bank. [incorporated by reference to Exhibit
      10.12 to the Companys Quarterly Report on Form 10-Q filed on March 23,
      2009]                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.13 | Loan Contract for Operating Fund between Tianjin Yayi
      Industrial Co., Ltd. and Industrial & Commercial Bank of China.
      [incorporated by reference to Exhibit 10.13 to the Companys Quarterly
      Report on Form 10-Q filed on March 23, 2009]                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.14 | Short Term Loan Agreement for RMB 10 million with
      Shanghai Pudong Development Bank [incorporated by reference to Exhibit
      10.10 to the Companys Current Report on Form 8-K filed on April 8,
      2009].                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.15 | Series A Preferred Stock Purchase Agreement, by and among
      Yayi International Inc., Global Rock Stone Industrial Ltd, Charleston
      Industrial Ltd, Tianjin Yayi Industrial Co., Ltd., Li Liu, Fung Shek and
      SAIF Partners III L.P., dated June 18, 2009 [incorporated by reference to
      Exhibit 10.1 to the Companys Current Report on Form 8-K filed on June 19,
      2009].
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.16 | Voting Agreement, by and among Yayi International Inc.,
      Global Rock Stone Industrial Ltd, Li Liu, Fung Shek and SAIF Partners III
      L.P., dated June 18, 2009 [incorporated by reference to Exhibit 10.2 to
      the Companys Current Report on Form 8-K filed on June 19,
2009].                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.17 | Management Rights Agreement, by and between Yayi
      International Inc. and SAIF Partners III L.P., dated June 18, 2009
      [incorporated by reference to Exhibit 10.3 to the Companys
  CurrentReport on Form 8-K filed on June 19, 2009].                                                                                                                                                  

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---

|10.18 | Form of Indemnification Agreement [incorporated by
      reference to Exhibit 10.4 to the Companys Current Report on Form 8-K
      filed on June 19, 2009].                                                                                                                                                             
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                           
|10.19 | Termination and Release Agreement, by and among the
      Company, Global Rock and Allied Merit, dated July 8, 2009 [incorporated by
      reference to Exhibit 10.1 to the Companys Current Report on Form 8-K
      filed on July 14, 2009].                                                                           
|      |                                                                                                                                                                                                                                                                                                                           
|10.20 | English Summary of Loan Agreement, by and between Tianjin
      Yayi and Rural Corporative Bank of Tianjin, dated May 22, 2009
      [incorporated by reference to Exhibit 10.1 to the Companys Quarterly
      Report on Form 10-Q filed on September 14, 2009].                                                        
|      |                                                                                                                                                                                                                                                                                                                           
|10.21 | English Summary of Comprehensive Credit Agreement, by and
      between Tianjin Yayi and Rural Corporative Bank of Tianjin, dated July 3,
      2009 [incorporated by reference to Exhibit 10.2 to the Companys Quarterly
      Report on Form 10-Q filed on September 14, 2009].                                        
|      |                                                                                                                                                                                                                                                                                                                           
|10.22 | English Translation of Zhuangli Construction Agreement,
      by and between Weinan Milkgoat and Zhuangli Construction Team, dated June
      10, 2009 [incorporated by reference to Exhibit 10.3 to the Companys
      Quarterly Report on Form 10-Q filed on September 14, 2009].                                      
|      |                                                                                                                                                                                                                                                                                                                           
|10.23 | English Translation of Qinzheng Construction Agreement,
      by and between Weinan Milkgoat and Fuping County Qinzheng Construction
      Engineering Corporation, dated July 2, 2009 [incorporated by reference to
      Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q filed on
      September 14, 2009].
|      |                                                                                                                                                                                                                                                                                                                           
|10.24 | Project Installation Agreement, by and between Shaanxi
      Milkgoat and Heilongjiang Tianhong, dated October 28, 2009 [incorporated
      by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K
      filed on November 3, 2009].                                                                    
|      |                                                                                                                                                                                                                                                                                                                           
|10.25 | Form of Settlement Agreement, by and among the Company
      and the Investors, dated November 24, 2009 [incorporated by reference to
      Exhibit 10.1 to the Companys Current Report on Form 8-K filed on December
      1, 2009].                                                                                    
|      |                                                                                                                                                                                                                                                                                                                           
|10.26 | English Translation of Employment Agreement, dated
      February 24, 2010, by and between Tianjin Yayi Industrial Co. Ltd. and
      Veronica Chen [incorporated by reference to Exhibit 10.1 to the Companys
      Current Report on Form 8-K filed on March 2, 2010].**                                               
|      |                                                                                                                                                                                                                                                                                                                           
|10.27 | Loan Agreement, by and between the Company and SAIF
      Partners III L.P., dated April 30, 2010 [incorporated by reference to
      Exhibit 10.1 to the Companys Current Report on Form 8-K filed on May 6,
      2010].                                                                                               
|      |                                                                                                                                                                                                                                                                                                                           
|10.28 | Yayi International Inc. 2010 Employee Stock Option and
      Stock Award Plan [incorporated by reference to Exhibit 10.1 to the
      Companys Current Report on Form 8-K filed on May 31, 2010].                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                           
|10.29 | Form of Yayi International Inc. 2010 Employee Stock
      Option and Stock Award Plan Award Agreement [incorporated by reference to
      Exhibit 10.2 to the Companys Current Report on Form 8-K filed on May 31,
      2010].**                                                                                        
|      |                                                                                                                                                                                                                                                                                                                           
|10.30 | English Translation of Employment Agreement, dated June
      1, 2010, by and between Tianjin Yayi Industrial Co. Ltd. and Li Liu
      [incorporated by reference to Exhibit 10.3 to the Companys Current Report
      on Form 8-K filed on May 31, 2010].**                                                            
|      |                                                                                                                                                                                                                                                                                                                           
|10.31 | English Translation of Licensing Agreement, dated April
      10, 2001, by and among Tianjin Yayi and Taiwan
  Richlink.***                                                                                                                                                                                               

-25-

---

|10.32 | English Translation of Supplemental
        Agreement, dated June 12, 2009, by and among Tianjin Yayi, Taiwan Richlink
        Enterprise Company Ltd. and Li Liu.***                                                           
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                 
|10.33 | English Translation of Supplemental
        Agreement, dated June 12, 2009, by and between Tianjin Yayi and Tianjin
        Mengyang.***                                                                                        
|      |                                                                                                                                                                                                                                 
|10.34 | English Translation of Form
        of Loan Agreement, dated June 3, 2010, by and between Tianjin Yayi Industrial
        Co. Ltd. and Tianjin Rural Cooperative Bank, Kexin Branch.***                                         
|      |                                                                                                                                                                                                                                 
|14    | Code of Ethics and Business
        Conduct for Officers, Directors and Employees of the Company [incorporated
        by reference to Exhibit 14 to the Companys Annual Report on Form
        10-KSB filed on March 31, 2008]
|      |                                                                                                                                                                                                                                 
|21    | Subsidiaries of the Company***                                                                                                                                                                                                  
|      |                                                                                                                                                                                                                                 
|23.1  | Consent
        of Morison Cogen LLP, Independent Registered Public Accounting Firm.*                                                                                                                                           
|      |                                                                                                                                                                                                                                 
|31.1  | Certification
        of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002.*                                                                                                  
|      |                                                                                                                                                                                                                                 
|31.2  | Certification
        of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002.*                                                                                                  
|      |                                                                                                                                                                                                                                 
|32.1  | Certifications
        of Principal Executive Officer furnished pursuant to 18 U.S.C. Section
        1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
        2002.*                                      
|      |                                                                                                                                                                                                                                 
|32.2  | Certifications
        of Principal Financial Officer furnished pursuant to 18 U.S.C. Section
        1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
        2002.*                                      

*      Filed
herewith**   Represents management contract or compensatory plan
or arrangement.
  *** Filed with the Original Filing

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