UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM 10-K


Amendment
No. 1




(Mark
One)




x
              ANNUAL REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For the
fiscal year ended December 31, 2008
  or
   ̈
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934




For the
transition period from __________ to __________




Commission file number:
01-31937





YANGLIN
SOYBEAN, INC.


(Exact
name of registrant as specified in its charter)




Nevada
              
              20-4136884(State or other jurisdiction
              
              (I.R.S. Employerof incorporation or organization)
              
              Identification No.)





NO.
99 FANRONG STREET, JIXIAN COUNTY


SHUANG
YA SHAN CITY


HEILONGJIANG
PROVINCE


CHINA,
155900


(Address
of Principal Executive Offices)




86-469-469300


(Registrant’s
Telephone Number, Including Area Code)




VICTORY
DIVIDE MINING COMPANY


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





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




Securities registered pursuant to
Section 12(g) of the Act:





Title of Each Class:
              
              Name of Each Exchange on Which RegisteredCommon Stock, par value $0.001
              
              None




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


Yes  ̈No
þ





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
þ





Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Sections 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 þ 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. Yes  ̈ No þ




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





Large accelerated filer  ̈
              Accelerated filer oNon-accelerated filer  ̈
              Smaller
      Reporting Company þ(Do
      not check if a Smaller
                Reporting
      Company)




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


Yes  ̈No þ





The
aggregate market value of the 1,700,003 shares of voting and non-voting common
equity stock held by non-affiliates of the registrant was $9,350,016.5 as of
June 30, 2008, the last business day of the registrant’s most recently completed
second fiscal quarter, based on the last sale price of the registrant’s common
stock on such date of $5.5   per share, as reported by The
Over-The-Counter Bulletin Board.





As
of April 10, 2009, there are 20,000,003 shares of common stock
outstanding.





EXPLANATORY
NOTE





This
amendment no. 1 to our annual report on Form 10-K initially filed with the
Securities and Exchange Commission (“Commission”) on April 13, 2009 is being
filed in response to Commission’s comment letter dated April 21,
2009.












YANGLIN
SOYBEAN, INC.


(A
Nevada Corporation)





TABLE
OF CONTENTS




PagePART
      IItem 1
                                                        Business
                                                        
                                                        
                                                        3Item 1A
                                                        Risk
      Factors
                                                        
                                                        
                                                        18Item 1B
                                                        Unresolved
      Staff CommentsItem 2
                                                        Properties
                                                        
                                                        
                                                        31Item 3
                                                        Legal
      Proceedings
                                                        
                                                        
                                                        34Item 4
                                                        Submission
      of Matters to a Vote of Security Holders
                                                        
                                                        
                                                        34PART IIItem 5
                                                        Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                                                        
                                                        
                                                        34Item 6
                                                        Selected
      Financial Data
                                                        
                                                        
                                                        35Item 7
                                                        Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
                                                        
                                                        
                                                        36Item 7A
                                                        Quantitative
      and Qualitative Disclosures About Market Risk
                                                        
                                                        
                                                        54Item 8
                                                        Financial
      Statements and Supplementary Data
                                                        
                                                        
                                                        55Item 9
                                                        Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
                                                        
                                                        
                                                        56Item 9A
                                                        Controls
      and Procedures
                                                        
                                                        
                                                        56Item 9B
                                                        Other
      Information
                                                        
                                                        
                                                        58PART IIIItem 10
                                                        Directors,
      Executive Officers and Corporate Governance
                                                        
                                                        
                                                        58Item 11
                                                        Executive
      Compensation
                                                        
                                                        
                                                        61Item 12
                                                        Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                                                        
                                                        
                                                        63Item 13
                                                        Certain
      Relationships and Related Transactions, and Director
      Independence
                                                        
                                                        
                                                        66Item 14
                                                        Principal
      Accounting Fees and Services
                                                        
                                                        
                                                        66PART IVItem 15
                                                        Exhibits
      and Financial Statement Schedules
                                                        
                                                        
                                                        67




-2-





PART I





Item 1.
Business




Organizational
History





Yanglin Soybean, Inc. (formerly known
as Victory Divide Mining Company, the “Company”) was incorporated in the state
of Nevada on May 26, 1921. Our original Articles of Incorporation were oriented
toward mining operations. Our Common Stock traded on the San Francisco Mining
Exchange and on the OTCBB. We operated a number of mining properties and in
1980, we became inactive and trading in our Common Stock ceased. We have had no
operations, assets or liabilities since 1980 and accordingly, were deemed to be
a "blank check" or shell company, that is, a development stage company that has
no specific business plan or purpose or has indicated that its business plan is
to engage in a merger or other acquisition with an unidentified company or
companies, or other entity or person. Our Articles of Incorporation were
restated and amended on June 29, 2006 to reflect our objective of finding a
merger partner.





On
October 3, 2007, the Company executed a reverse-merger with Faith Winner
Investments Limited (“Faith Winner (BVI)”) by an exchange of shares whereby the
Company issued 18,500,000 common shares at $0.001 par value in exchange for all
Faith Winner (BVI) shares.





Faith
Winner (BVI) formed Faith Winner (Jixian) Agriculture Development Company
(“Faith Winner (Jixian)” or “WFOE”), which entered into a series of agreements
with Heilongjiang Yanglin Soybean Group Co., Ltd. (“Yanglin”). As a result of
entering the agreements, WFOE gained control of all of Yanglin’s assets,
management and business as if Yanglin were a wholly-owned subsidiary of WFOE.
However, the shareholders of Yanglin, Mr. Shulin Liu with his wife, Mrs. Huanqin
Ding, also have effective control over Faith Winner (BVI) and WFOE as our
subsidiaries, because they beneficially own approximately 91% of our common
stock through their 100% holding in Winner State (BVI) and thus have a
controlling interest in us. These contractual arrangements included a loan
agreement, a consigned management agreement, two consignment agreements of
equity interests, an exclusive purchase option agreement, a registered trademark
transfer contract and a trademark licensing agreement. The Consignment Agreement
was entered into on September 1, 2007, and the other agreements were all signed
on September 24, 2007.





-3-





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




Under the
Registered Trademark Transfer Agreement, Yanglin agreed to transfer to WFOE all
of its rights in connection with the two trademarks, including without
limitation the title of the trademarks and right to license ( the “Transferred
Trademark”) for a purchase price of $1,000,000, which is subject to a purchase
price adjustment based on the minimum appraised value on intellectual property
(“IP”) rights allowed under PRC laws and regulations for such transfer. Under
the Trademark Licensing Agreement, WFOE agreed to grant an exclusive license to
Yanglin, for a term of 10 years, to use the Transferred Trademark for an annual
licensing fee equal to 1% of Yanglin’s revenue of that year. The license fee and
the management fee aforesaid – total of 6% of the revenue of Yanglin- entitled
to WFOE are approximately the whole net profit before  tax of Yanglin. Any
excess profit in Yanglin will not be distributed as dividend according to the
contractual arrangements until WFOE exercises the Exclusive Purchase Option
Agreement to acquire all shareholders’ equity interest of Yanglin. If the 6% of
licence and management fees exceed the net profit before tax of Yanglin, the
amount  the  WFOE  is entitled to receive is
limited to the actual annual net profit before tax of Yanglin under the
contracts.




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





The loan
of $17 million to Yanglin is considered as an investment in Yanglin by the
Company through a series of contractual arrangements by way of the Loan. As a
result of entering into the abovementioned agreements, WFOE  is deemed to
control Yanglin as a Variable Interest Entity as required by FASB Interpretation
No. 46 (revised December 2003) Consolidation of Variable Interest Entities, and
Interpretation of ARB No. 51. The reverse-merger also included an equity
financing of $21,500,000 by the issuance of 10,000,000 Series A Convertible
Preferred Stock at $2.15 per share to 10 accredited investors.





-4-




The
Company, through its subsidiaries and Yanglin, (hereinafter, collectively
referred to as “the Group”), is now in the business of manufacturing,
distribution, and selling of non-genetically modified soybean products,
including soybean oil, soybean salad oil, and soybean meal,  throughout the
Province of Heilongjiang and other parts of China.





The
contractual agreements were utilized instead of a direct acquisition of
Yanglin’s assets because current PRC law which took effect on September 8, 2006
does not specifically establish the approval procedures and detailed
implementation regulations for a non-PRC entity’s equity to be used as
consideration to acquire a PRC entity's equity or assets. This makes it highly
uncertain, if not impossible, for a non-PRC entity to use its equity to acquire
a PRC entity. If acquisition of a PRC entity using foreign equity were possible,
we could have acquired 100% of the stock of Yanglin in exchange for shares of
our common stock. While PRC law does allow for the purchase of equity interests
in (or assets of) a PRC entity by a non-PRC entity for cash, the purchase price
must be based on the appraised value of such equity (or assets). Because we
presently do not have sufficient cash to pay the estimated full value of all of
the assets of Yanglin, we, through WFOE, purchased the maximum amount of assets
possible with the net proceeds of the private placement on October 7, 2007, and
leased from Yanglin the remainder of the assets used in Yanglin’s
business.





On
January 18, 2008, the Company changed its name from “Victory Divide Mining
Company” to Yanglin Soybean, Inc.”





Our
Industry





We are a
leading non-genetically modified (non-GM) soybean processor in the PRC. We
currently manufacture soybean oil in bulk and soybean meal, which are sold
throughout China to our customers directly or through distributors. Most of our
customer (approximately 80%) are located in Northern China.





Our
manufacturing process includes sifting, crushing, heating and pressing soybeans,
extracting and separating oil from crushed soybeans, and cleansing, hydrating
and packaging oil as well as drying and packaging soybean meal. Currently, our
main products include soybean oil, salad oil and soybean meal. We plan to
broaden our product line to include high end products such as squeezed oil,
powdered oil, protein concentrates, textured protein, and defatted soybean
powder, while greatly enlarging the production capacity of salad oil. We have
installed the equipment for manufacturing squeezed oil and expanded the
production line for salad oil and have started production of these products at
the end of 2007. The production facilities for powdered soy oil have been built
and are now in trial production and the “debugging” phase. The pilot production
of protein concentrates began in late 2008, with small quantities of commercial
grade product provided to customers. Defatted soy powder will be launched in
2009, and the production line of textured protein will also be put into
operation in 2009.




The
Soybean Processing Industry





Soybean
processing is a traditional industry. Typically, soybeans are ground and refined
into soybean oil and protein meal, which in turn are processed into refined
oils, animal feed, proteins and more value-added products such as foods,
pharmaceuticals and cosmetics.





(i) Soybean Oil and Soybean Salad
Oil





Soybean
oil is obtained by the extraction of oil from soybean seeds. Soybean oil
contains various vitamins, minerals and unsaturated fatty acids which are
essential to the well-being of the human body. It is an important ingredient in
products such as salad dressings, margarine, paint and medicines. The price,
adaptability and performance of soybean oil make it appropriate for a broad
range of food, chemical and medical manufacturing applications. Soybean oil
refers to Grade IV oil, as compared to the more refined salad oil. Both oils are
for human consumption.





-5-





(ii) Soybean Meal





Soybean
meal is manufactured by grinding soybean flakes which remain after removal of
most of the oil from soybeans by a solvent or mechanical extraction process.
Soybean meal is an important raw material used in the animal feed and farming
industry due to its high protein content, low fat composition and edible
characteristics. Given the PRC’s closer proximity to customers in the Asia,
there is a growing demand for PRC produced soybean meal from countries such as
Korea and Japan. This in turn has led to an increase in demand for our soybean
meal products.




Growth
in the Soybean Industry





Apart
from being a food commodity, soybean oil is also used in the cosmetics,
pharmaceutical and medical industries.  As soybean oil consumption in the
PRC has been rapidly increasing, the PRC has imported soybean oil from other
countries, such as Argentina, Brazil and the USA.





World
Vegetable Oil Consumption 2006











Million
                  Short Tons
                
                
                Million
                  Metric TonsPalm
                
                
                42.0
                
                
                
                38.1Soybeans
                
                
                39.3
                
                
                
                35.7Rapeseed
                
                
                19.7
                
                
                
                17.8Sunflower
      seed
                
                
                11.3
                
                
                
                10.2Peanut
                
                
                5.4
                
                
                
                4.9Cottonseed
                
                
                5.2
                
                
                
                4.8Palm
      Kernel
                
                
                4.8
                
                
                
                4.3Coconut
                
                
                3.6
                
                
                
                3.3Olive
                
                
                3.2
                
                
                
                2.9Total
                
                
                134.5
                
                
                
                122.0


Source:
USDA





-6-





World Protein Meal Consumption
2006











Million
                  Short Tons
                
                
                Million
                  Metric
                  TonsSoybeans
                
                
                166.7
                
                
                
                151.3Rapeseed
                
                
                30.2
                
                
                
                27.4Cottonseed
                
                
                16.4
                
                
                
                14.9Sunflower
      seed
                
                
                12.7
                
                
                
                11.5Peanut
                
                
                6.3
                
                
                
                5.7Fish
                
                
                6.0
                
                
                
                5.5Palm
      Kernel
                
                
                6.1
                
                
                
                5.5Copra
                
                
                1.9
                
                
                
                1.7Total
                
                
                246.3
                
                
                
                223.4




Source:
USDA





In the
past few years, the soybean industry has seen a period of sustained growth. We
believe that the soybean industry in the PRC has significant potential for
further growth and we, through Yanglin, are well positioned to take advantage of
such growth. Soybeans are grown for their oil and protein and are used to
manufacture various products including soybean oil and soybean meal. According
to the Food and Agriculture Organization of the United Nations, during the year
of 2005/06, global consumption of oils and fats has been steadily increasing,
rising at an average rate of approximately 3-4%.





Non-Genetically
Modified Soybean Products





Genetically
modified soybean plants are widespread in the world’s leading soybean producing
countries (such as Brazil, Argentina and the United States) and genetically
modified soybeans comprise a very large proportion of the world’s soybean
production. Conversely, most of the soybean food products exported from the PRC
is primarily made from non-genetically modified soybeans that are cultivated and
grown in the PRC.




We
believe that a growing number of consumers prefer their food products to be made
from non-genetically modified raw materials, including soybean based products.
Such non-genetically modified soybean products are perceived to be “green” and
hence more desirable to certain classes of consumers than genetically modified
soybean products, especially with respect to soy protein and other value-added
soybean products. Furthermore, we believe that as a result of the increasing
affluence and sophistication of the consumers in the PRC, European Union, Korea
and Japan, they have also become more aware of potential health issues arising
from the consumption of genetically modified soybean products and are willing to
pay a premium for non-genetically modified soybean products.





-7-





As a
producer of non-genetically modified soybean products, we believe we are well
positioned to take advantage of such growth.





Government
Support for the Soybean Industry





In
addition, there has been strong government support for the development of our
industry. In recent years, the PRC government has sought to differentiate
soybean exports from the PRC from those from other international exporters of
soybeans such as the United States and Argentina. Specifically, the PRC
government has take measures to promote industries and enterprises, such as our
business operations, that produce non-genetically modified soybean food
products. In 2003, the PRC Ministry of Agriculture announced a plan to develop
the PRC’s northeastern region (including the Heilongjiang province where we are
located) into the world’s largest non-genetically modified soybean production
centre for export within five years.





In
addition, the Heilongjiang provincial government has introduced a number of
measures to develop its organic farming industry such as improving its local
agriculture infrastructure and promoting the development of large industrial
groups that produce green and organic food products. Over the past five years,
Heilongjiang's green food industry has grown significantly and has become an
important growth sector in Heilongjiang’s burgeoning economy. Further, we
believe that the proportion of “deep-processed” soybean food products produced
by the PRC will increase and is expected to grow significantly, particularly
with the completion of the PRC’s largest non-genetically modified soybean
deep-processing base in by 2010.





We
believe that these various government initiatives at the national and local
levels will have a positive impact on the further development of our business
operations.





Our
Competitive Advantages





We
believe that we have several competitive advantages:




·
            Our
      products have favorable brand-name recognition due to their superior
      quality and our proven track record in the
  industry;




·
            We
      are strategically located to access cheaper and more stable soybean
      supplies. Jixian County, where the company is headquartered, is in heart
      of the Three Rivers Plains, a major soybean production area, and Yanglin
      has established long-term relationships with the local farmers and
      suppliers;




·
            We
      have an extensive sales network covering most areas of China and have
      negotiated better arrangements with distributors to save costs and to
      promote higher efficiency;




·
            Our
      business is better managed and our operations are more efficient compared
      to many larger state-owned soybean processors. Our costs are lower,
      margins are higher and we are in better financial
    conditions;




·
            We
      believe that we do not face direct competition from international
      conglomerates such as Archer Daniels Midlands and Cargill as they produce
      predominantly genetically modified soybean products whereas Yanglin
      produce non-genetically modified soybean products which appeal to more
      health-conscious customers;




·
            Both
      our management and workers are skilled and experienced in the soybean
      industry. Many of them have worked in the industry for more than 20
      years.





-8-




Our
Strategy





Increase
Our Sources of Supply




Due to
the increasing market demand, we expect our business to grow significantly in
the next few years. We believe that our need for soybean supply will only
increase. In order to increase our raw material supplies, we intend to expand
the soybean cultivation area supplying us through the development of further
supply arrangements with other private and state-owned farms within the
Heilongjiang province. Currently, we have access to soybeans produced in
approximately 164,745 acres of farmland and we plan to increase our access in
the next few years in other locations by signing up more soybean farmers and
through other arrangements.





Expand
Capacity by Building New Plants or through Acquisitions





To meet
the demand for soybean products, we plan to increase our capacity. We intend to
expand our production facilities by acquiring some additional factories. We
expect that these acquisitions will allow us to increase our current annual
soybean processing capacity to over 1 million tons of soybeans or even higher
over the next few years.





Expansion
of our Sales Network




We
currently sell more volume of products in northern China than any other parts of
China and currently do not have many sales offices in the South. We plan to
expand our sales and marketing network by establishing more sales offices within
the PRC. In addition, we are negotiating with potential agents in Southeast Asia
and Russia. Our plan is to expand internationally into countries such as
Singapore, Malaysia, Canada and the United States.  We intend to use
Chinese export agents to manage currency risks.





Expansion of our
Product Line





We
believe that value added soybean products will yield higher profit margins for
our operations. We intend to expand our product lines to include the following
high-end soybean products:





(i) Powdered Soybean
Oil





Powdered
soybean oil is manufactured by processing soybean oil and soybean salad oil
together with corn syrup and other raw materials. Powdered soybean oil not only
retains the nutritional value of liquid soybean oil, but also has a long shelf
life and can be easily packaged and transported. In addition, powdered soybean
oil can be used as a cheap substitute for milk or powdered milk because it can
be easily dissolved or mixed with other ingredients in water to produce a
mixture that has a strong fragrance similar to that of milk, as well as
containing beneficial proteins and minerals.





(ii) Textured Protein





Textured
protein products are manufactured from soy protein. Textured protein products
are hydrated in the production process and accordingly have a symmetrical,
consistent and smooth texture and specific structure. Textured protein can be
added to food products to impart a taste that is similar to that of meat.
Therefore, textured protein can be used as a food substitute for beef and pork.
In addition, textured protein contains anti-oxygenation ingredients that could
prolong the shelf-life of certain food products.





(iii) Defatted Soybean
Powder





Defatted
soybean powder is manufactured from specially-extracted soy meal and has a high
protein content (higher than 50 percent). Defatted soybean powder can be added
to fish, noodles, meat, dairy products and candy to improve the quality and
taste of food. Further, defatted soybean powder can prolong shelf life and
reduce cost.





-9-




(iv) Squeezed Oil





Squeezed
oil is made by extracting crude soybean oil from selected soybeans through
traditional methods of refining and hydration in order to remove the acids in
the oil. Squeezed oil is readily absorbed by the human body and contains no
cholesterol. It possesses vitamins such as A, D, and E, as well as other
nutrients which have been shown to help growth, improve immunity and prevent
hypertension and arteriosclerosis.





(v) Concentrated Soy
Protein





Concentrated
soy protein has a high protein content of up to 98% and contains no cholesterol.
Concentrated soy protein can be used as an ingredient in food products to
improve their texture and nutritional value. Concentrated soy protein is used as
an ingredient in a wide range of food products, including nutritional
supplements, seafood, processed meats, frozen food, nutritional beverages, cream
soups, sauces and snacks.





Our
Current Products





Our
current products include the following:





Product
                          
                          Use
                          
                          Major Customers
                          
                          2008 Volume (tons)Soybean Oil
                          
                          Cooking
                          
                          Hou
      Xinglin, Yingkou Bohai Oil Industries Co. Ltd.
                          
                          
                          52,842Salad Oil
                          
                          Cooking
                          
                          Yingkou
      Bohai Oil Industries Co. Ltd., Gu Changchun
                          
                          
                          17,708Soybean Meal
                          
                          Animal Feed
                          
                          Jilin
      Zhuoyue Animal Feed Factory
                          
                          
                          337,660





We sell
our products under the “Yanglin” brand name to various geographic regions of the
PRC through our various distribution channels (see “Sales and Marketing” below)
and directly to our customers primarily within the PRC market. In the
fiscal year ending 2008, we processed approximately 420,000 tons of soybeans and
generated total revenues amounting to approximately $250.7 million with net
income amounting to $14.4 million. Within the 2008 production volume of our main
products, namely soybean meal, soybean oil and salad oil, soybean meal occupied
a major share of about 83%, while soybean oil and salad oil combined made up of
approximately 17% of our production volume.





Our
Suppliers of Soybeans





Maintaining
a stable supply of raw materials (soybeans) is one of the key components for our
success. We purchase all of our soybean supplies from various farms in the
Heilongjiang province. We have established and maintained good relationships
with these farms.





The
following is a list of our top ten major suppliers of soybeans for the financial
year ended December 31, 2008:





Supplier
                  
                  Amount
                    Purchased
                    (in US$)
                  
                  
                  % of
                    Total
                    Purchases
                    (%)Cui
      Binyan
                  
                  
                  9,054,611
                  
                  
                  
                  4.4
                  %Duan
      Xufeng
                  
                  
                  8,694,515
                  
                  
                  
                  4.2
                  %Tang
      Lijun
                  
                  
                  8,398,688
                  
                  
                  
                  4.1
                  %Jiang
      Minghui
                  
                  
                  8,093,791
                  
                  
                  
                  3.9
                  %Wang
      Li
                  
                  
                  7,664,558
                  
                  
                  
                  3.7
                  %Baoqing
      North Granary
                  
                  
                  7,605,785
                  
                  
                  
                  3.7
                  %Bian
      Chaofeng
                  
                  
                  7,564,136
                  
                  
                  
                  3.7
                  %Guo
      Hongjun
                  
                  
                  7,286,556
                  
                  
                  
                  3.5
                  %Chi
      Cui’e
                  
                  
                  7,128,677
                  
                  
                  
                  3.4
                  %Lin
      Baosen
                  
                  
                  7,122,672
                  
                  
                  
                  3.4
                  %




-10-




Note:
the amounts are converted from RMB value using the yearly average rate of 2008,
1USD = 6.9623RMB.





Our top
ten suppliers together made up an aggregate of 38% of our total supply of
soybeans, but our biggest supplier only supplied about 4.4% of our total supply.
We believe this diversification of supply is beneficial to us as it increases
our bargaining power and prevents us from being over-reliant on any single
supplier.





We have
implemented unique arrangements with soybean suppliers. Through our affiliate
company, Heilongjiang Yanglin Group Seed Co. Ltd., we supply these farmers with
“Yanglin” soybean seeds which provide higher oil yield. Pursuant to annual
supply contracts, the farmers sell the harvested soybeans back to us. We extend
favorable commercial terms to these farmers, such as low price and credit
payment terms, for them to purchase “Yanglin” soybean seeds, and offer favorable
price, which is higher than average market price, and cash-upon-delivery payment
terms to the farmers for our purchases of the harvested soybeans grown from
“Yanglin” soybean seeds. These arrangements ensure that we maintain good
relations with our suppliers, enjoy a stable supply of soybeans that meet our
high quality standards at competitive rates, and allow us to maintain a low rate
of expenditure on raw materials.





To
further ensure a consistent supply of soybeans and to increase its volume, we
intend to enter into similar supply agreements with other soybean farmers in the
PRC.





The
Supplier of “Yanglin” Soybean Seeds





Heilongjiang
Yanglin Group Seed Co, Ltd. is owned and managed by Mr. Shulin Liu, our chief
executive officer.





Heilongjiang
Yanglin Group Seed Co., Ltd has developed several strains of non-genetically
modified soybean seeds (collectively, “Yanglin” seeds”). The Yanglin “East Nong
42” and the “Black Nong 44” boast high protein and fat content. It has also
developed the high oil content “Yang 02-01”, “Yang 03-02” and “Yang 03-03”
soybean seeds, the high protein content “Yang 03-656” soybean seeds and the high
protein and high yielding “Yang 03-149” soybean seeds.





A brief
summary of the characteristics of each strain of soybean seed is set forth
below:




Soybean
                                    
                                    Oil Content
                                    
                                    
                                    Protein Content
                                    
                                    
                                    Status of Development“East Nong 42”
                                    
                                    
                                    19.33%
                                    
                                    
                                    45% - 46.4%
                                    
                                    
                                    Completed“Black Nong 44”
                                    
                                    
                                    21.56% -22.61%
                                    
                                    
                                    38.56% -46.69%
                                    
                                    
                                    Completed“Yang 02-01” (high oil)
                                    
                                    
                                    22.3%-22.6%
                                    
                                    
                                    37.8%-40.2%
                                    
                                    
                                    Received
      governmental approval“Yang 03-02” (high oil)
                                    
                                    
                                    21.9%-22.7%
                                    
                                    
                                    37.2%-41.5%
                                    
                                    
                                    In
      trial phase“Yang 03-03” (high protein)
                                    
                                    
                                    21.7%-22.1%
                                    
                                    
                                    38.4%-45.9%
                                    
                                    
                                    In
      trial phase“Yang 03-656” (high protein)
                                    
                                    
                                    19.8%-20.6%
                                    
                                    
                                    39.7%-45.3%
                                    
                                    
                                    In
      trial phase“Yang 03-149” (high protein)
                                    
                                    
                                    20.3%-21.9%
                                    
                                    
                                    41.5%-44.7%
                                    
                                    
                                    In
      trail
phase




Major
Customers





Our
customers are primarily distributors of soybean oil and soybean meal, with some
of them being soybean food processors and animal feed manufacturers. The
following is a list of our top ten major customers for fiscal year 2008. All of
our major customers are located in the PRC.





-11-




Customers
                        
                        Type of Product
                        
                        Fiscal 2007 Sales
                          (USD)
                        
                        
                        % of Total Sales
                          (%)Yingkou Bohai
      Grease Industrial Co.Ltd.
                        
                        Soybean Oil
                        
                        
                        24,078,664
                        
                        
                        
                        9.6
                        %Gu
      Changchun
                        
                        Soybean Meal
                        
                        
                        8,461,130
                        
                        
                        
                        3.4
                        %Hou
      Xinglin
                        
                        Soybean Meal
                        
                        
                        7,175,525
                        
                        
                        
                        2.9
                        %Zhao
      San
                        
                        Soybean Meal
                        
                        
                        6,914,165
                        
                        
                        
                        2.8
                        %Huang
      Zujian
                        
                        Soybean Meal
                        
                        
                        6,912,752
                        
                        
                        
                        2.8
                        %Li
      Zhengqian
                        
                        Soybean Meal
                        
                        
                        6,697,392
                        
                        
                        
                        2.7
                        %Lin
      Xiwu
                        
                        Soybean Meal
                        
                        
                        6,420,336
                        
                        
                        
                        2.6
                        %Wang
      Chunyu
                        
                        Soybean Meal
                        
                        
                        6,405,120
                        
                        
                        
                        2.6
                        %Wang
      Xihe
                        
                        Soybean Meal
                        
                        
                        5,905,945
                        
                        
                        
                        2.4
                        %Jilin
      Zhuoyue Animal Feed Factory
                        
                        Soybean Meal
                        
                        
                        5,832,863
                        
                        
                        
                        2.3
                        %





Note:
the amounts are converted from RMB value using the yearly average rate of 2008,
1USD = 6.9623 RMB





Our sales
are widely diversified among our customers. Our largest customer accounts for
only 9.6% of our total sales in fiscal 2008 while our top ten customers
accounted for about 33.8% of our net sales in fiscal 2008. As such, we are not
dependent on any single customer and have accordingly maintained our bargaining
position in relation to our customers. Holding such a diversified customer base,
we have mitigated the commercial risk and associated impact of the loss of sales
from any single customer. As we begin to expand our product offering to include
“high end” soybean products, our customer base will accordingly change to
include more industrial users and some retail consumers.




Sales
of Products by Type and Locations





The
following table shows the breakdown of sales volume by customer type for fiscal
year 2008.





Salad Oil
                  
                  
                  Soy Oil
                  
                  
                  Soy MealType
                  
                  Volume
                    (Tonnes)
                  
                  
                  Number
                    of
                    customers
                  
                  
                  %
                  
                  
                  Volume
                    (Tonnes)
                  
                  
                  Number
                    of
                    customers
                  
                  
                  %
                  
                  
                  Volume
                    (Tonnes)
                  
                  
                  Number
                    of
                    customers
                  
                  
                  %Distributor
                  
                  
                  17,708
                  
                  
                  
                  64
                  
                  
                  
                  100
                  
                  
                  
                  52,842
                  
                  
                  
                  93
                  
                  
                  
                  100
                  
                  
                  
                  337,660
                  
                  
                  
                  64
                  
                  
                  
                  100Food
      ManufacturerAnimal
      Feed ManufacturerOthersTotal
                  
                  
                  17,708
                  
                  
                  
                  64
                  
                  
                  
                  100
                  
                  
                  
                  52,842
                  
                  
                  
                  93
                  
                  
                  
                  100
                  
                  
                  
                  337,660
                  
                  
                  
                  64
                  
                  
                  
                  100




-12-




All our
sales are primarily made to customers within the PRC, although some of our
products may be exported by some of the distributors to countries such as Japan,
Korea, Russia and India. The geographical distribution of our sales in the PRC
for fiscal 2008 is shown below.





Sales Revenue (Salad Oil)
                
                
                Sales Revenue (Soybean Oil)
                
                
                Sales Revenue (Soybean Meal)Province
                
                Volume
                  (Tonnes)
                
                
                Value (USD)
                
                
                Volume
                  (Tonnes)
                
                
                Value (USD)
                
                
                Volume
                  (Tonnes)
                
                
                Value (USD)Heilongjiang
                
                
                6,590
                
                
                
                9,612,783
                
                
                
                21,384
                
                
                
                28,479,808
                
                
                
                149,200
                
                
                
                68,285,578Jilin
                
                
                1,589
                
                
                
                2,317,456
                
                
                
                6,263
                
                
                
                8,340,771
                
                
                
                56,611
                
                
                
                25,905,799Liaoning
                
                
                5,808
                
                
                
                8,470,600
                
                
                
                13,236
                
                
                
                17,627,088
                
                
                
                29,570
                
                
                
                13,531,548Inner
      Mongolia
                
                
                862
                
                
                
                1,257,172
                
                
                
                3,108
                
                
                
                4,139,090
                
                
                
                15,278
                
                
                
                6,991,376Shanghai
                
                
                
                
                
                
                -
                
                
                
                1,155
                
                
                
                1,538,175
                
                
                
                1,631
                
                
                
                746,363Jiangsu
                
                
                331
                
                
                
                482,743
                
                
                
                814
                
                
                
                1,084,047
                
                
                
                1,939
                
                
                
                887,307Shanxi
                
                
                268
                
                
                
                390,861
                
                
                
                1,804
                
                
                
                2,402,483
                
                
                
                19,798
                
                
                
                9,059,776Henan
                
                
                
                
                
                
                -
                
                
                
                303
                
                
                
                403,521
                
                
                
                9,719
                
                
                
                4,447,518Sha’anxi
                
                
                
                
                
                
                -
                
                
                
                363
                
                
                
                483,426
                
                
                
                7,117
                
                
                
                3,256,815Zhejiang
                
                
                518
                
                
                
                755,470
                
                
                
                1,248
                
                
                
                1,662,028
                
                
                
                10,445
                
                
                
                4,779,744Guangxi
                
                
                270
                
                
                
                393,778
                
                
                
                1,210
                
                
                
                1,611,422
                
                
                
                5,995
                
                
                
                2,743,376Sichuan
                
                
                466
                
                
                
                679,631
                
                
                
                1,029
                
                
                
                1,370,374
                
                
                
                16,369
                
                
                
                7,490,629Hebei
                
                
                1,006
                
                
                
                1,467,187
                
                
                
                925
                
                
                
                1,231,872
                
                
                
                13,988
                
                
                
                6,401,058




Note:
the amounts are converted from RMB value using the yearly average rate of 2008,
1USD = 6.9623RMB.





Our
Competitors





Our
competitors are the non-genetically modified soybean processors operating in the
PRC. Our main competitor is Heilongjiang 93 Oil and Fat Co., Ltd., an integrated
state-owned enterprise which is located in Heilongjiang, Dalian and Tianjin. The
rest of our competitors are smaller state-owned enterprises.




Position
                        
                        Company
                        
                        Estimated Annual Non-
                          GM
                          Production Capacity
                          (in Tonnes)
                        
                        
                        Estimated
                          Market Share1
                        
                        Heilongjiang
      Jiushan 93 Group (SOE)
                        
                        
                        600,000
                        
                        
                        
                        6.7
                        %2
                        
                        Yanglin
      Soybean Group, Ltd
                        
                        
                        520,000
                        
                        
                        
                        5.0
                        %3
                        
                        Shandong
      Gaotang Lanshan Group (SOE)
                        
                        
                        200,000
                        
                        
                        
                        2.2
                        %4
                        
                        Henan
      Xuchang Vegetable Oil Company (SOE)
                        
                        
                        100,000
                        
                        
                        
                        1.1
                        %5
                        
                        Qitaihe
      City Nature Oil Company
                        
                        
                        100,000
                        
                        
                        
                        1.1
                        %6
                        
                        Shandong
      Guanxian Vegetable Oil Company
                        
                        
                        100,000
                        
                        
                        
                        1.1
                        %7
                        
                        Jiamusi
      Zhenda Company
                        
                        
                        90,000
                        
                        
                        
                        1.0
                        %





Source:
Information from respective companies' websites and Yanglin
estimates





Generally,
we do not compete with companies that are engaged primarily in the manufacturing
of genetically modified soybean products, especially international agriculture
conglomerates. Currently, most major producers of genetically modified soybean
products are state-owned enterprises and joint ventures of global agriculture
companies. Their operations are mostly located in the coastal cities in Southern
China, which enables them to conveniently import genetically modified soybean
from the U.S., Brazil, Argentina and other countries in bulk volume at
acceptable prices. The market for their products is also mainly in the southern
parts of China. Meanwhile our supply sources, production facilities and
customers are mostly in Northern China, where there is abundant supply of
non-genetically modified soybean. There is a geographical division between the
market for genetically modified soybean products and that for non-genetically
modified soybean products. Thus, we generally do not have direct competition
with our genetically modified counterparts.





-13-





Sales
and Marketing





Apart
from our high product quality, our marketing efforts have also contributed to
our success in the PRC markets. Presently, our main method of selling our
products is direct marketing, supplemented with indirect marketing. Given that
we are located in the Heilongjiang province, we are in close proximity to our
suppliers and customers and, thus, are able to communicate with them directly
(as opposed to going through the Dalian Commodities Exchange).





We have
sales offices in more than 5 cities in the PRC with approximately 40 independent
distributors spread over approximately 27 provinces. These provinces include
locations in the northeastern, northwestern and southern regions of the PRC.
Furthermore, we have a dedicated in-house sales team with 10 salespersons. Their
duties include monitoring the soybean industry, collecting market and price
information, developing and managing distributors, providing recommendations for
our marketing and sales strategy and pricing policies, filling sales orders and
after-sale services.





The
following map illustrates the geographical coverage of our sales and
distribution network within the PRC:





-14-










In
addition to our direct marketing efforts in the PRC, and as part of our
international expansion plans, we plan to appoint sales agents in North America,
Europe, Russia, Japan, Korea and other countries in southeast Asia in the near
future.





Advertising




We
advertise our products through various forms of media, including billboards
alongside highways. We are now building our own business website at the domain
name www.yanglin.com.cn.





In
addition, our marketing team develops and maintains a unified and distinctive
image throughout all of our corporate publicity materials, including our
corporate billboard advertisements, media publicity and corporate
branding.





Publicity





We hold
an annual conference with distributors and potential customers to promote our
products. We regularly attend exhibitions in different regions to market our
products.We plan to maintain and strengthen our existing customer relations
through symposiums, guided tours of the company and direct correspondences that
provide further information of our product offering. We will also strengthen
communications with the relevant government departments in order to keep abreast
of new policies and guidelines. This will enable us to adapt quickly to any
changes, better seize business opportunities and develop new
markets.





-15-





Delivery
of Products




Approximately
70% of our products are transported to our customers by railways, thanks to our
easy access to the PRC railroad network (see “Our Competitive Advantages”).
The costs of transportation are borne by our customers and are pre-paid in
advance ahead of delivery of the products. The remainder of our products is
collected from our facilities by our customers.





Pricing
and Terms




Prices of
our products are determined based on the daily spot market price, which is
determined by the average of ex-works prices of local producers and the
quotation on commodities exchanges. We distinguish between long-term customers
and short-term customers and provide rebate policies accordingly. Our short-term
customers (typically customers we have been dealing with for less than a year)
are required to pay us the full retail price in cash in advance of delivery of
their ordered products. For our long-term customers, we may offer credit terms
as well as certain preferential terms to them depending on the size of their
orders. Since we are paid with cash in advance most of the time, there are
almost no accounts receivables.





The
current prices for our products, as of December 31, 2008 are: (excluding
VAT)




Products
                  
                  Price
                    (USD/metric
                    ton)Soybean
      oil (Grade IV)
                  
                  $
                  930Salad
      oil
                  
                  $
                  981Soybean
      meal
                  
                  $
                  385





Based on
2008 year end exchange rate of 1US$ = 6.8542RMB




For the
past three years, the price of soybean meal has been in the range of $232 per
metric ton to $600 per metric ton (converted at the above mentioned foreign
exchange rate 1US$ = 6.8542RMB; the same rate is used hereinafter). By
comparison, the price range of soybean oil has been in the range of $633 per
metric ton to $2247 per metric ton, while the price range of salad oil was from
$704 per metric ton to $2324 per metric ton. The prices of our products are
determined by taking into account the costs of labor as well as the seasonality
of demand in the soybean market. Traditionally, the prices of our raw materials
are lowest during the soybean harvest period between October and December. Our
prices then peak from January to February because of the New Year and Spring
Festival.




Intellectual
Property





Yanglin
has registered the following trademarks in the PRC, which are currently
used for all of our products:





Trademark
              
              Country of
                Registration
              
              Class
              
              Registration
                Number
              
              Date of
                Registration
              
              Validity Period“Yanglin”logo
              
              PRC
              
              29
              
              
              1587278
              
              June 14, 2001
              
              From June
      14, 2001 to June 13, 2011“Yanglin”logo
              
              PRC
              
              31
              
              
              1586742
              
              June
      14, 2001
              
              From
      June 14, 2001 to June 13, 2011





Class 29
is for meat, fish, poultry and game; meat extracts, preserved, dried and cooked
fruits and vegetables; jellies, jams, fruit sauces; eggs, milk and milk
products; edible oils and fats. Class 31 is for agricultural, horticultural and
forestry products and grains not included in other classes; live animals, fresh
fruits and vegetables; seeds, natural plants and flowers; foodstuffs for
animals, malt.





-16-




Employees





Currently
we have 472 employees, most of whom are involved in production and
operations.





The
functional breakdown of our full-time employees as at December 31, 2007 and
2008 was:





FY2007
                  
                  
                  FY2008Production
      and operations
                  
                  
                  291
                  
                  
                  
                  291Sales
                  
                  
                  10
                  
                  
                  
                  10Management
                  
                  
                  165
                  
                  
                  
                  171Total
      number of employees
                  
                  
                  466
                  
                  
                  
                  472





Along
with staff incentive policies, we provide social security to every employee who
signs a long term contract with us, and we have paid all social security fees as
required by laws and regulations.





We have a
system of periodic performance reviews that are conducted annually.





Insurance





We have
the following insurance policies:





Description of Policy
                          
                          Term
                          
                          Coverage ($)
                          
                          Premium ($)
                          
                          InsuredChina
      Pingan Property
                          
                          July
      9,
                          
                          4,623,476
                          
                          6,372
                          
                          The
      assets of Plant 3Insurance
      Co. Ltd.,
                          
                          2008
      to21900004601010800092
                          
                          July
      9,2009China
      Pingan Property
                          
                          July
      9,
                          
                          350,150
                          
                          2,068
                          
                          The
      assets of Plant 3Insurance
      Co. Ltd.,
                          
                          2008
      to21900005801100800002
                          
                          July
      9,2009





Note:
the amounts in the column Coverage are converted from RMB value using the year
end rate of 2008, 1USD = 6.8542 RMB, and those in the column Premium are
converted from RMB value using the yearly average rate of 2008, 1USD = 6.9623
RMB.





Government
Regulations





We are
subject to various government regulations, such as Food Sanitation Law,
Environment Protection Law and Fire Prevention Law, and to national standards
for food issued by the national Food and Drug Administration. We have obtained
the Sanitation Admission certificate from the local Sanitation Bureau as well as
the industrial production permit, and our facilities are regularly inspected by
local authorities.




In
addition, we have been issued an ISO 9001-2000 Certificate by the Beijing
Zhongjing Kehuan Quality Authorization Co. Ltd and a Certificate of Class A
Green Food by the China Center of Development of Green Food.





-17-




Environmental
Compliance





We are
subject to the PRC environmental laws, rules and regulations governing our type
of manufacturing facility. We have complied with the prescribed standard of
environmental protection as evidenced by a certificate issued by the Jixian
Environment Protection Bureau dated February, 2007.





The
treatment of our waste water is subject to the PRC Environment Protection Law.
Our process of treating waste water meets the strict requirement of this
law.




Item
1A. Risk Factors





Cautionary
Statement Regarding Future Results, Forward-Looking Information And Certain
Important Factors





In this
report we make, and from time to time we otherwise make, written and oral
statements regarding our business and prospects, such as projections of future
performance, statements of management’s plans and objectives, forecasts of
market trends, and other matters that are forward-looking statements ..
Statements containing the words or phrases “will likely result,” “are expected
to,” “will continue,” “is anticipated,” “estimates,” “projects,” “believes,”
“expects,” “anticipates,” “intends,” “target,” “goal,” “plans,” “objective,”
“should” or similar expressions identify forward-looking statements, which may
appear in documents, reports, filings with the Securities and Exchange
Commission, news releases, written or oral presentations made by officers or
other representatives made by us to analysts, stockholders, investors, news
organizations and others, and discussions with management and other of our
representatives.




Our
future results, including results related to forward-looking statements, involve
a number of risks and uncertainties. No assurance can be given that the results
reflected in any forward-looking statements will be achieved. Any
forward-looking statement speaks only as of the date on which such statement is
made. Our forward-looking statements are based upon assumptions that are
sometimes based upon estimates, data, communications and other information from
suppliers, government agencies and other sources that may be subject to
revision. Except as required by law, we do not undertake any obligation to
update or keep current either (i) any forward-looking statement to reflect
events or circumstances arising after the date of such statement, or
(ii) the important factors that could cause our future results to differ
materially from historical results or trends, results anticipated or planned by
us, or which are reflected from time to time in any forward-looking
statement.





We face
special risks for doing business in China. We face the risk of changes in the
policies of the PRC government, the risk of recent PRC regulations restricting
the establishment of offshore companies by PRC residents, the risk of
ineffective contractual control of Yanglin, the risk of uncertain legal
environment in China, the risk of substantial influence by the PRC government
over the manner we conduct our business activities, the risk of inflation in
China, the risk of restrictions on currency exchange, the risk of fluctuation of
Renminbi exchange rate, the risk of distribution our assets upon liquidation,
the risk of being treated as a resident enterprise for PRC tax purposes, the
risk of limited business insurance coverage, and the risk of future outbreaks of
SARS and Avain Flu in China.





In
addition to other matters identified or described by us from time to time in
filings with the SEC, there are several important factors that could cause our
future results to differ materially from historical results or trends, results
anticipated or planned by us, or results that are reflected from time to time in
any forward-looking statement. Some of these important factors, but not
necessarily all important factors, include the following:




Risks
Related To Our Business





Our raw
material supply is vulnerable to natural disasters, which could severely disrupt
the normal operation of our business and therefore adversely affect our
business.





As
soybeans are our main raw materials and most of our soybeans are grown in and
obtained from farmers in the Heilongjiang province, natural disasters such as
drought, earthquakes, floods, and heavy rains in Heilongjiang may lead to a
shortage in our supply of soybeans and result in soybean price increases, and
consequently adversely affect our operations.





-18-




Our
efforts to manufacture value added products may not be
successful.





In order
to grow our business and achieve higher profit margins, we have begun to
construct new plants and add new equipment to manufacture value added products
such as high-grade oil, protein concentrate, textured protein, powdered oil,
etc. If the consumers do not accept our new products, the market for such
products has not fully developed, or we do not have experienced sales personnel
to market such products, we may not achieve the result as we expect and our
business operation and financial conditions may be adversely
affected.





Soybean prices fluctuate
greatly. This may adversely affect our operations.





As a
commodity, soybeans are subject to the price fluctuation of the commodity market
in China and indirectly to the international commodity market. For example, the
soybean price went up from RMB 2.16 per 500 grams at the beginning of 2008 to
RMB2.75 per 500 grams at the beginning of Mar 2008, then to RMB 2.70 per 500
grams in early July and went down to RMB 1.65 per 500 grams at the end of 2008,
due to both the shortage in soybean supply caused by a severe drought in 2007
and farmers’ cutting growing areas of soybeans brought by the continuously low
price level by the end of 2006. If the soybean price increases significantly, we
may have a problem caused by increased demand on working capital to satisfy the
raw materials needs of our operations.





Our
full capacity may be reached soon. Our growth may be impacted if we could
not expand our capacity in the near future.





The
designed capacity of our facilities is 520,000 tons per year and the maximum
utilization rate for our industry is approximately 90%. We processed 420,000
tons of soybean in 2008 and we expect to process about 450,000 tons in 2009.We
will soon need additional capacity to grow our business. If we are not able to
build or acquire new facilities in 2009, the growth of our business maybe
adversely affected.





We do not have long-term
soybean supply contracts, which could have a material adverse effect on
us.





Currently,
we source about 70%of our raw materials from farmers with whom we have a long
term relationship and about 30% from intermediaries who purchase directly from
other farmers. However, we do not have long term contracts with the farmers or
the intermediaries. All current supply contracts with the soybean farmers are
one-year contracts without fixed prices. Therefore, we may not be able to
control supply risks. Any significant fluctuation in price of our raw materials
could have a material adverse effect on the manufacturing cost of our
products.





We have
tried to mitigate the risks by paying attractive premium to those farmers who
will purchase “Yanglin” soybean seeds, cultivate and plant them and then sell
the soybeans to us in order to guarantee our soybean supplies. However, if our
competitors also pay premium or even pay higher premium to attract the
suppliers, we may lose our advantage in purchasing price and lose some of the
soybean supplies.





The soybean price is largely
beyond our control in addition to natural disaster or supply
competition.





The
soybean price may also be affected by other factors in addition to natural
disaster or supply competition, such as global commodity price increase,
government control or suppliers’ financial difficulties. We may have limited
options in the short-term for alternative supply if our suppliers fail for any
reason, including suppliers’ business failure or financial difficulties to
continue the supply of raw materials. Moreover, identifying and accessing
alternative sources may increase our costs. Although raw materials are generally
available and we have not experienced any raw material shortage in the past, we
cannot assure that the necessary materials will continue to be available to us
at prices currently in effect or acceptable to us.





-19-





Some of our land may be
reclaimed by the government and this may materially impact our
operations.





Most land
in China is state-owned and land use rights may be granted, transferred, leased
or allocated. Allocated land use rights are generally provided by the government
for an indefinite period (usually to state-owned entities) and cannot be
pledged, mortgaged, leased, or transferred by the user. As the same time,
allocated land can be reclaimed by the government at any time. The lands
occupied by Factory No. 1 and No. 2 is allocated land and accordingly subject to
the risk of being reclaimed. We are in the process of applying for the land use
rights over Factory No. 2 to be changed to transferred. Although the risk being
reclaimed is very small because the government is encouraging the growth of our
industry and in general the market economy system and will continue to support
our business, we cannot guarantee the land will not be reclaimed in the
future.





We may lose our advantages
if there is emergence of new production technologies for other
competitors.





Our
business is dependent on our ability to utilize current technologies to produce
high quality products with low cost. Currently, we employ advanced technologies
now available in our manufacturing process. However, newer and better
manufacturing technologies may emerge. If we are unable to adapt the production
processes to newer and more efficient manufacturing technologies that may be
used by our competitors to manufacture products that are of higher quality or at
a lower cost, we may lose market share and our financial performance may be
adversely affected because we do not have the financial resources to build new
facilities using such new technologies.




Our manufacturing process is
highly dangerous, which could cause adverse effects on our
operation.




In our
manufacturing process, we use highly inflammable and explosive chemical
solutions. Therefore, fires and explosions could occur, which could cause delay
in our production, damages to our facilities and injuries to our
workers.





We
receive a significant portion of our revenues from a small number of customers.
Our business will be harmed if our main customers reduce their orders from
us.





Our
customers mainly comprise approximately 40 distributors of soybean oil and other
soybean products, as well as soybean food product and animal feed manufacturers.
Although our sales are widely diversified among our customers and our largest
customer accounts for only 10% of our total sales, our top ten customers
accounted for about 34% of our net sales in fiscal 2008. Dependence on a few
customers could make it difficult to negotiate attractive prices for our
products and could expose us to the risk of substantial losses if a single
dominant customer ceases purchasing. If we lose any customers and are unable to
replace them with other customers that would purchase a similar amount of our
products, our revenues and net income would decline considerably.




Our product delivery is
dependent upon the efficiency of the rail system and any disruption in the
services or increase in transportation costs will have a material adverse impact
on our operations.





Approximately
70% of our products are transported to our customers by rail. We are largely
dependent upon the efficiency of China’s rail system and network to deliver our
products. Any disruption of their service will largely impact our ability to
fulfill our orders on a timely basis and recognize revenue. Also any increase in
transportation costs may deter our customers and lead them to source products
from other nearby suppliers, thus negatively affecting our sales.





-20-





Potential environmental
liability could have a material adverse effect on our operations and financial
condition.





To the
knowledge of management, we have complied with the prescribed standard of
environment protection as evidenced by a certificate issued by the government.
Although it has not been alleged by government officials that we have violated
any current environmental regulations, we cannot assure that the government will
not amend the current environmental protection laws and regulations. Our
business and operating results may be materially and adversely affected if we
were to be held liable for violating existing environmental regulations or if we
were to increase expenditures to comply with environmental regulations affecting
our operations.





Inadequate funding for our
capital expenditure may affect our growth strategy and
profitability.




Our
continued growth depends upon our ability to raise capital from outside sources.
To maintain our profitability, we should increase the efficiency and achieve
economies of scale in production of those low-margin products, and at the same
time to develop those high-margin profit products. Adequate funding is needed to
expand the production scale or develop new products. However, adequate funding
is dependent upon a number of factors, including but without limitation the
nation’s or the world’s economy, our business condition, the financial
environment as well as the relevant legal environment. If we are unable to
obtain sufficient financing, our growth and profitability may be adversely
limited.





The sales
price fluctuation for our products is periodic, which could affect on our
financial results.





The
prices of our products vary seasonably, among others, by the change of soybean
supply and demand. Usually, our prices are lowest during the soybean harvest
time between October and December and on the peak from January to February
because of the New Year and Spring Festival. However, the price also subject to
other conditions. As a result, we believe that period-to-period comparisons of
our historical results of businesses are not necessarily meaningful and that you
should not rely on them as an indication for future performance. It is also
possible that our quarterly results of operations may be below the expectations
of public market analysts and investors.




Risks
Related To Our Management and Internal Control




We
may not be able to achieve and maintain an effective system of internal control
over financial reporting, a failure of which may prevent us from accurately
reporting our financial results or detecting and preventing fraud.




We are
constantly striving to establish and improve our business management and
internal control over financial reporting to forecast, budget and allocate our
funds. However, as a Chinese company that has recently become a US public
company, we face difficulties  in hiring and retaining a sufficient
number of qualified employees to achieve and maintain an effective system of
internal control over financial reporting in a short period of
time.





The
following is a description of each deficiency with respect to our internal
controls over financial reporting identified by our management.





1)
            The
      Company currently does not have a complete set of Articles for the board
      of directors. The Company now does not have any independent
      director.





2)
            The
      special committees of the board, including audit committee, appointment
      committee and compensation committee, have not been
      established.





3)
            The
      Company does not have an accounting policy manual based on U.S. GAAP and
      has not formulated formal procedures on the accounting treatment of
      significant transactions and
processes.





-21-




Because
of the above-referenced deficiencies and weaknesses in our disclosure controls
and procedures and internal control over financial reporting, we may be unable
to comply with the Sarbanes-Oxley Act’s internal controls requirements, and
therefore may not be able to obtain the independent auditor certifications that
the Sarbanes-Oxley Act requires publicly-traded companies to
obtain.  As a result of any deficiencies and weaknesses, we may
experience difficulty in collecting financial data and preparing financial
statements, books of account and corporate records, and instituting business
practices that meet international standards, failure of which may prevent us
from accurately reporting our financial results or detecting and preventing
fraud.





We depend on key personnel
for our business operations, whose discontinuance could incur our high
replacement cost.





Our
future success depends substantially on the continued services of our executive
officers, especially Mr. Shulin Liu, our chairman and chief executive officer,
Mr. Zhongtai Guo, chief operating officer, and Mr. Shaocheng Xu, chief financial
officer. If one or more of our key executive officers are unable or unwilling to
continue in their present positions, we may not be able to replace them readily,
if at all. Therefore, our business may be severely disrupted, and we may incur
additional expenses and take additional time to recruit and retain new
officers.




We may not be able to
effectively protect our proprietary rights, which could harm our business and
competitive position.




Our
success depends, in part, on our ability to protect our proprietary rights. At
present, we have registered the trademarks for “Yanglin” logo in China which are
currently used for all our products. We cannot assure you that we will be able
to effectively protect our trademarks in the future. Currently, implementation
of PRC intellectual property-related laws has historically been lacking,
primarily because of ambiguities in the PRC laws and difficulties in
enforcement. Accordingly, intellectual property rights and confidentiality
protections in the PRC may not be as effective as in the United States
or other developed countries. Policing unauthorized use of proprietary
technology is difficult and expensive, and we might need to resort to litigation
to enforce our rights or defend us, or to determine the enforceability, scope
and validity of our proprietary rights or those of others. Such litigation may
require significant expenditure of cash and management efforts and could harm
our business, financial condition and results of operations. An adverse
determination in any such litigation will impair our intellectual property
rights and may harm our business, competitive position, business prospects and
reputation.




We may be exposed to
intellectual property infringement and other claims by third parties, which, if
successful, could cause us to pay significant damage awards and incur other
costs.





While we
believe that the technology we use is not protected by any patent or
intellectual property rights, we face the risk of being the subject of
intellectual property infringement claims. The validity and scope of claims
relating to the manufacturing of soybean products may involve complex technical,
legal and factual questions and analysis and, therefore, may be highly
uncertain. The defense and prosecution of intellectual property suits, patent
opposition proceedings and related legal and administrative proceedings can be
both costly and time consuming and may significantly divert the efforts and
resources of our technical and management personnel. An adverse determination in
any such litigation or proceedings to which we may become a party could subject
us to significant liability, including damage awards to third parties, require
us to seek licenses from third parties, to pay ongoing royalties, or to redesign
our products or subject us to injunctions preventing the manufacture and sale of
our products. Protracted litigation could also result in our customers or
potential customers deferring or limiting their purchase or use of our products
until resolution of such litigation. Further, we do not have adequate product
liability insurance coverage against defective products as our products are
manufactured according to fairly basic formulas. Any disputes so far have been
resolved through friendly negotiations. There is no guarantee that we will not
be involved in any legal proceedings should such negotiations fail one
day.





-22-





Risks
Related to Our Expansion





We give no assurances that
any plans for future expansion will be implemented or that they will be
successful.





While we
have expansion plans, which include manufacturing “deep-processed” and refined
soybean products, expanding our production lines and expanding our sales, there
is no guarantee that such plans will be implemented or that they will be
successful. These plans are subject to, among other things, the feasibility to
meet the challenges we face, our ability to arrange for sufficient funding for
more manufacturing facilities and the increasing working capital and the ability
to hire qualified and capable employees to carry out these expansion
plans.





Our personnel may not
effectively support our growth and therefore impeding the expansion
plan.





We
currently have sufficient experienced and skilled employees for our business
operations. But if our business and markets grow and develop, it will be
necessary for us to expand our operation in an orderly fashion, which will put
added pressure on our management and operational infrastructure. We may not have
the requisite experience to manage and operate a larger, more modern
manufacturing plant and bigger production lines. In addition, we may face
challenges in product offerings and in integrating acquired businesses. These
events would increase demands on our existing management, workforce and
facilities. Failure to satisfy these increased demands could interrupt or
adversely affect our operations and cause production backlogs, longer product
development time frames and administrative inefficiencies.





We may not able to increase
our sources for soybean supply. As a result, we may not support our plan to
increase production.





In order
to increase our raw material supplies, we intend to expand our soybean supply
area through development of additional farmland soybean agreements, which in
turn will be accomplished through contract negotiations with private farmers and
cooperation with state-owned farms. However, it is difficult to obtain access to
farmlands from private farmers or state-owned farms. If we cannot expand the
soybean supply area, we may not be able to increase the supplies of the soybean
and our plan to increase soybean production.




We may have difficulty to
expand our sales network in domestic market or to explore new overseas
market.




We intend
to intensify our marketing efforts in the PRC by expanding existing sales and
marketing network coverage to reach more areas by establishing more sales
offices within the PRC and maybe in other countries such as Singapore, Malaysia,
Canada and the United States. However, overseas consumers may not accept the
value of non-generically modified soybean products and would not like to pay the
premium of it. It also may be difficult to expand the sales channels in China’s
markets if we are unable to advertise our products through various forms of
media. But the advertising in commercial magazines, popular newspapers or over
the internet will enhance our sales costs.





Our acquisition plan may not
succeed, which will adversely affect our overall expansion
plan.





We plan
to expand our production facilities through the acquisition of approximately 3
to 4 additional factories, which can increase our current annual soybean
production capacity up to about 1.5 million tons of soybeans over the next 3
years. However, it will be difficult for us to negotiate the acquisition with
those factories, who may bargain for higher acquiring prices. Additionally, the
acquisition will be submitted to the government for approval. That process may
increase the risk of the acquisition failure or increase our acquisition cost,
which decreases the value of the acquisition. If our acquisition fails, it will
block our overall expansion plan.





-23-





Risks
Related To Our Industry





Disruptions
in the capital and credit markets related to the current national and worldwide
financial crisis, which may continue indefinitely or intensify, could adversely
affect our results of operations, cash flows and financial condition, or those
of our customers and suppliers.




The
current disruptions in the capital and credit markets may continue indefinitely
or intensify, and adversely impact our results of operations, cash flows and
financial condition, or those of our customers and suppliers. Disruptions in the
capital and credit markets as a result of uncertainty, changing or increased
regulation, reduced alternatives or failures of significant financial
institutions could adversely affect our access to liquidity needed to conduct or
expand our businesses or conduct acquisitions or make other discretionary
investments, as well as our ability to effectively hedge our currency or
interest rate. Such disruptions may also adversely impact the capital needs of
our customers and suppliers, which, in turn, could adversely affect our results
of operations, cash flows and financial condition.




China’s
commitments to the World Trade Organization may intensify
competition.





In
connection with its accession to the World Trade Organization, China made many
commitments including opening its markets to foreign products, allowing foreign
companies to conduct distribution business and reducing customs duties. Foreign
manufacturers may begin to manufacture non-genetically modified soybean products
and ship their products or establish manufacturing facilities in China.
Competition from foreign companies may reduce profit margins and hence our
business results would suffer.





If the substitute products
for soybean oil increase, we may lose our market share of soybean oil
market.





Substitute
products for soybean oil, such as vegetable oil of peanut and palm oil could
increase the intensity of competition faced by us. With the appearance of
substitute products for soybean oil, consumers have more choices. Part of
consumers may prefer vegetable oil. As a result, we may lose our market share of
soybean oil market.





If we are not be able to
maintain competitive in non-genetically modified soybean product business, we
may not achieve sufficient product revenues.





At
present, we are the largest and most integrated private non-genetically modified
soybean producer in China. Our products compete with a multitude of products
developed, manufactured and marketed by others and we expect competition from
new market entrants in the future. Our current competitors are the other
domestic non-genetically modified soybean companies and global manufacturers who
may enter the non-genetically modified soybean business. Although currently we
view ourselves in a favorable position, we may not remain competitive if
existing or future competing products may provide better quality, greater
utility, lower cost or other benefits from their intended uses than our
products, or may offer comparable performance at lower cost. If our products
fail to capture and maintain market share, we may not achieve sufficient product
revenues, and our business would suffer.





The inability of the PRC
government to keep the PRC a genetically modified-free soybean zone will remove
our competitive edge and negatively impact our operations.





We
distinguish ourselves from our competitors in that we manufacture and sell
non-genetically modified soybean products. Because the PRC is a non-genetically
modified soybean growing zone, our competitors are not the large, better
capitalized producers of genetically modified soybean products. The PRC has one
of the strictest bio-safety regulations in the world, requiring safety
certificates and labeling of genetically modified products. However, with so
much genetically modified soybeans being imported into the country, there is a
question as to whether the PRC is able to keep it a genetically modified-free
soybean zone. If the PRC is unsuccessful in keeping the PRC a genetically
modified-free soybean zone and our soybeans are tainted through pollination, we
will lose our competition edge and this would adversely affect our
operations.





-24-





Our failure to comply with
ongoing governmental regulations could hurt our operations and reduce our market
share.





In China,
the food industry is undergoing increasing regulations as environmental
awareness increases in China. The trend is that the Chinese government toughens
its regulations and penalties for violations of environmental regulations. New
regulatory actions are constantly changing our industry. Although we believe we
have complied with applicable government regulations, there is no assurance that
we will be able to do so in the future.




Risks
Related To Doing Business In China





We face the risk that
changes in the policies of the PRC government could have a significant impact
upon the business we may be able to conduct in the PRC and the profitability of
such business.





All of
our business operations are conducted in China. Accordingly, our business,
financial condition, results of operations and prospects are affected
significantly by economic, political and legal developments in China. The
Chinese economy differs from the economies of most developed countries in many
respects, including level of government involvement in economic activities,
stage of national development, and control of foreign exchange.





While the
Chinese economy has grown significantly in the past 20 years, the growth
has been uneven, both geographically and among various sectors of the economy.
Policies of the PRC government can have significant effects on the economic
conditions of the PRC. The PRC government has confirmed that economic
development will follow the model of a market economy. Under this direction, we
believe that the PRC will continue to strengthen its economic and trading
relationships with foreign countries and business development in the PRC will
follow market forces. While we believe that this trend will continue, we cannot
assure you that this will be the case. A change in policies by the PRC
government could adversely affect our interests by, among other factors: changes
in laws, regulations or the interpretation of laws and regulations, confiscatory
taxation, restrictions on currency conversion, imports or sources of supplies,
or the expropriation or nationalization of private enterprises. Although the PRC
government has been pursuing economic reform policies for more than two decades,
we cannot assure you that the government will continue to pursue such policies
or that such policies may not be significantly altered, especially in the event
of a change in leadership, social or political disruption, or other
circumstances affecting the PRC’s political, economic and social
life.




Recent PRC regulations
relating to the establishment of offshore companies by PRC residents may subject
our PRC resident shareholders to personal liability and limit our ability to
inject capital into our PRC subsidiaries, limit our subsidiaries’ ability to
distribute profits to us or otherwise adversely affect us.




China
State Administration of Foreign Exchange, or the SAFE, issued a public circular
on October 21, 2005 concerning the acquisition by an offshore company
controlled by PRC residents of onshore assets in China. This circular requires
that (1) a PRC resident shall register with a local branch of the SAFE
before he or she establishes or controls an overseas special purpose vehicle, or
SPV, for the purpose of overseas equity financing (including convertible debt
financing); (2) when a PRC resident contributes the assets of or his or her
equity interests in a domestic enterprise to an SPV, or engages in overseas
financing after contributing assets or equity interests to an SPV, such PRC
resident must register his or her interest in the SPV and any changes in such
interest with a local branch of the SAFE; and (3) when the SPV undergoes a
material change outside of China, such as a change in share capital or merger or
acquisition, the PRC resident shall, within 30 days from the occurrence of the
event that triggers the change, register such change with a local branch of the
SAFE. Furthermore, PRC residents who are shareholders of SPVs established before
November 1, 2005 are required to register with a local branch of the SAFE
before March 31, 2006.




The
beneficial owners of our company who are PRC residents are required to update
their respective registrations with the local branch of the SAFE. However, we
cannot assure you that these beneficial owners will update their registrations
with the local branch of the SAFE in full compliance with the October 2005 SAFE
circular. The failure or inability of beneficial owners of our company who are
resident in the PRC to comply with the registration procedures set forth in the
October 2005 SAFE circular may subject these beneficial owners to fines and
legal sanctions and may also limit our ability to contribute additional capital
into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute
dividends to us or otherwise adversely affect our business.





-25-





Contractual
arrangements through which we have established control of Yanglin may not be as
effective in providing operational control as direct ownership. If Yanglin fails
to perform its obligations under these contractual arrangements, we may have to
legally enforce such arrangements and our business, financial condition and
results of operations may be materially and adversely affected if these
arrangements cannot be enforced.




We rely
on contractual arrangements with Yanglin and its shareholders for operating our
business. These contractual arrangements may not be as effective in providing us
with control over Yanglin as direct ownership.




Under the
current contractual arrangements, as a legal matter, if Yanglin fails to perform
its obligations under these contractual arrangements, we may have to
(i) incur substantial costs and resources to enforce such arrangements, and
(ii) rely on legal remedies under PRC law, which we cannot be sure would be
effective.




These
contractual arrangements are governed by PRC law and provide for the resolution
of disputes through either arbitration or litigation in the PRC. Accordingly,
these contracts would be interpreted in accordance with PRC law and any disputes
would be resolved in accordance with PRC legal procedures. If Yanglin fails to
perform its obligations under these contractual arrangements, we may have to
rely on legal remedies under PRC law, including seeking specific performance or
injunctive relief, and claiming damages, which we cannot be sure would be
effective. In addition, the legal environment in the PRC is not as developed as
in other jurisdictions, such as the United States. As a result, uncertainties in
the PRC legal system could limit our ability to enforce these contractual
arrangements. In the event that we are unable to enforce these contractual
arrangements, our business, financial condition and results of operations could
be materially and adversely affected.





Our Chief
Executive Officer, Mr. Shulin Liu and his wife Mrs. Huanqin Ding, beneficially
own approximately 91% of our common stock through their 100% holding in
Winner State (BVI). Our loan in the amount of approximately $17 million to the
domestic Chinese Yanglin Soybean Group Co. Ltd. is callable should Mr. Shulin
Liu decide to sell his and/or his wife’s majority interest in Yanglin. This
could cause disruption in our operations and as a consequence may adversely
affect our financial condition and results of operation.





According
to the Exclusive Purchase Option Agreement, Faith Winner (Jixian) (“WFOE”) has
the exclusive purchase option to the equity and assets of Yanglin, any other
party has no right to purchase any equity from Mr. Shulin Liu and his wife. If
Mr. Shulin Liu and his wife breach the Exclusive Purchase Option Agreement to
sell the equity, under the Loan Agreement, repayment should be made in its
entirety or in part, at WFOE’s option and upon 10 days written notice. Yanglin
may choose two ways to repay the debt, either (i) in cash, or (ii) by a transfer
of equity interests of Yanglin or all its assets (at the price of $17 million
with excess treated as interests on the loan). If Yanglin chooses to repay the
debt in cash, it may cause disruption in its operations due to lack of the
working capital.





Conflict
of interest that exists as a result of Mr. Liu’s role as our chief executive
officer and our majority shareholder, and his role as a majority shareholder of
Yanglin and therefore Yanglin may not repay the loan which would cause
disruption in our business and adversely affect our financial condition and
result of  operations.





Mr.
Shulin Liu with his wife, Mrs. Huanqin Ding, beneficially own approximately 91%
of our common stock through their 100% holding in Winner State (BVI). Mr. Liu is
also our chief executive officer.  Mr. Liu with his wife beneficially
own approximately 90% of Yanglin’s equity interest.  Thus, there is
conflict of interest as a result of Mr. Liu’s role as our chief executive
officer and our majority shareholder, and his role as a majority
shareholder of Yanglin.  As a consequence, Yanglin may not repay the
loan made on September 24, 2007.  Even though we may choose to
foreclose on the equity interests of Yanglin or all its assets and become the
owner of Yanglin  under Article 1 of the Exclusive Purchase Option
Agreement, there is the risk that the equity interests of Yanglin or all its
assets will not be sufficient to repay the loan or that we may not be able to
foreclose on the equity interests of Yanglin or all its assets at all, which
would cause disruption in our business and adversely affect our financial
condition and result of operations.




The approval of the China
Securities Regulatory Commission, or the CSRC, may be required in connection
with this Prospectus under a recently adopted PRC regulation. Any requirement to
obtain prior CSRC approval could delay the effectiveness of this Prospectus and
a failure to obtain this approval, if required, could have a material adverse
effect on the rights of our current and prospective stockholders, and would
adversely affect the value of our common stock.




On
August 8, 2006, six PRC regulatory agencies, namely, the PRC Ministry of
Commerce, the State Assets Supervision and Administration Commission, or SASAC,
the State Administration for Taxation, the State Administration for Industry and
Commerce, the CSRC and SAFE, jointly adopted the Regulations on Mergers and
Acquisitions of Domestic Enterprises by Foreign Investors, or the New M&A
Rule, which became effective on September 8, 2006. The New M&A Rule
purports to require, among other things, offshore special purpose vehicles, or
SPVs, formed for overseas listing purposes through acquisitions of PRC domestic
companies and directly or indirectly controlled by PRC companies or individuals
to obtain the approval of the CSRC prior to publicly listing their securities on
an overseas stock exchange. The application of their new PRC regulation is
unclear. On December 14, 2006, the CSRC published a notice on its official
website specifying the documents and materials required to be submitted by SPVs
seeking CSRC approval of their overseas listings, or the Related
Clarification.





However,
the CSRC has not promulgated any guidance on the application and acceptance
procedures for these matters. If the CSRC or other PRC regulatory authorities
subsequently determine that we need to obtain the CSRC’s approval for this
offering, we may face sanctions by the CSRC or such other PRC regulatory
authorities. In such event, these regulatory authorities may impose fines and
penalties on our operations in the PRC, limit our operating privileges in the
PRC, require us to divest ourselves of any interests we hold in Yanglin, or take
other actions that could have a material adverse effect on our business,
financial condition, results of operations, the rights of our current and
prospective stockholders, as well as onthe value of our common
stock.




Our
business is largely subject to the uncertain legal environment in China and your
legal protection could be limited.





The
Chinese legal system is a civil law system based on written statutes. Unlike
common law systems, it is a system in which precedents set in earlier legal
cases are not generally used. The overall effect of legislation enacted over the
past 20 years has been to enhance the protections afforded to foreign invested
enterprises in China. However, these laws, regulations and legal requirements
are relatively recent and are evolving rapidly, and their interpretation and
enforcement involves uncertainties. These uncertainties could limit the legal
protections available to foreign investors, such as the right of foreign
invested enterprises to hold licenses and permits such as requisite business
licenses. In addition, all of our executive officers and our directors are
residents of China, and substantially all the assets of these persons are
located outside the U.S. As a result, it could be difficult for investors to
effect service of process in the U.S., or to enforce a judgment obtained in the
U.S. against us or any of these persons.





-26-




You may experience
difficulties in effecting service of legal process and enforcing judgments
against us and our management in China.





Substantially
all of our assets and our subsidiaries are located in China. In addition, all of
our directors and officers reside within China, including our certified public
accountant (“CPA”), Albert Wong & Co. As a result, it may not be possible to
effect service of process within the United States or elsewhere outside of China
upon most of our directors and officers and our CPA, including with respect to
matters arising under the U.S. federal securities laws or applicable state
securities laws. Moreover, China is not a party to any treaties providing for
reciprocal enforcement of judgments of courts with the United States or most
other western jurisdictions. As a result, recognition and enforcement in China
of judgments of a court in the United States or any other jurisdictions
mentioned above in relation to any matter may be difficult or impossible. In
addition, you will have difficulties in bring an original action in a Chinese
court to enforce liabilities against our directors, officers and our CPA based
upon the U.S. federal securities laws.





The
Chinese government exerts substantial influence over the manner in which we must
conduct our business activities.





China
only recently has permitted provincial and local economic autonomy and private
economic activities. Chinese government has exercised and continues to exercise
substantial control over virtually every sector of the Chinese economy through
regulation and state ownership. Our ability to operate in China may be harmed by
changes in its laws and regulations, including those relating to taxation,
import and export tariffs, environmental regulations, land use rights, property
and other matters. We believe that our operations in China are in material
compliance with all applicable legal and regulatory requirements. However, the
central or local governments of these jurisdictions may impose new, stricter
regulations or interpretations of existing regulations that would require
additional expenditures and efforts on our part to ensure our compliance with
such regulations or interpretations. Accordingly, government actions in the
future, including any decision not to continue to support recent economic
reforms and to return to a more centrally planned economy, or regional or local
variations in the implementation of economic policies, could have a significant
effect on economic conditions in China or particular regions thereof, and could
require us to divest ourselves of any interest we hold in Chinese
properties.




Inflation in China may
inhibit our activity to conduct business in China.





In recent
years, the Chinese economy has experienced periods of rapid expansion and high
rates of inflation. During the past ten years, the rate of inflation in China
has been as high as 20.7% and as low as -2.2%. These factors have led to the
adoption by Chinese government, from time to time, of various corrective
measures designed to restrict the availability of credit or regulate growth and
contain inflation. While inflation has been more moderate since 1995, high
inflation may in the future cause Chinese government to impose controls on
credit and/or prices, or to take other action, which could inhibit economic
activity in China, and thereby harm the market for our products.




Restrictions
on currency exchange may limit our ability to receive and use our revenues
effectively.





The
majority of our revenues will be settled in Renminbi, and any future
restrictions on currency exchanges may limit our ability to use revenue
generated in Renminbi to distribute dividend or make other payments in U.S.
dollars. Normally the revenue will be reinvested in China. If we distribute
dividend or  make other payments in U.S. dollars to the shareholders,
PRC Foreign Investment Companies Laws require us to provide relevant documents
such as tax payment evidence and resolutions of the board of the
directors.  Although the Chinese government introduced regulations in
1996 to allow greater convertibility of the Renminbi for current account
transactions, significant restrictions still remain, including primarily the
restriction that foreign-invested enterprises may only buy, sell or remit
foreign currencies after providing valid commercial documents at those banks in
China authorized to conduct foreign exchange business. In addition, conversion
of Renminbi for capital account items, including direct investment and loans, is
subject to governmental approval in China, and companies are required to open
and maintain separate foreign exchange accounts for capital account items. We
cannot be certain that the Chinese regulatory authorities will not impose more
stringent restrictions on the convertibility of the Renminbi.





-27-





The fluctuation of the
Renminbi may materially and adversely affect your
investment.





The value
of our common stock will be affected by the foreign exchange rate between U.S.
dollars and Renminbi, and between those currencies and other currencies in which
our sales may be denominated. For example, to the extent that we need to convert
U.S. dollars into Renminbi for our operational needs and should the Renminbi
appreciate against the U.S. dollar at that time, our financial position, the
business of the company, and the price of our common stock may be harmed. If we
decide to convert our Renminbi into U.S. dollars for the purpose of declaring
dividends on our common stock or for other business purposes and the U.S. dollar
appreciates against the Renminbi, the U.S. dollar equivalent of our earnings
from our subsidiaries in China would be reduced.





We may not be able to
distribute our assets upon liquidation and dividend payment will be subject to
restrictions under Chinese foreign exchange rule.





Our
assets are predominately located inside China. Under the laws governing foreign
investment enterprises in China, dividend distribution and liquidation are
allowed but subject to special procedures under the relevant laws and rules. Any
dividend payment will be subject to the decision of the board of directors and
subject to foreign exchange rules governing such repatriation. Any liquidation
is subject to both the relevant government agency’s approval and supervision as
well the foreign exchange control. The foreign exchange control authority may or
may not approve the repatriation of funds out of China if any funds left after
liquidation.  This may generate additional risk for our investors in
case of liquidation.




We may be treated as a
resident enterprise for PRC tax purposes as the Enterprise Income Tax Law became
effective on January 1, 2008, which may subject us to PRC income tax for any
dividends we receive from our subsidiaries and PRC income tax withholding for
any dividends we pay to our non-PRC shareholders.





The
Enterprise Income Tax Law provides that enterprises established outside of China
whose “de facto management bodies” are located in China are considered “resident
enterprises” and will generally be subject to the uniform 25.0% enterprise
income tax rate as to their global income, including income we receive from our
subsidiaries. The term “de facto management bodies” is not defined under the
Enterprise Income Tax Law and it is currently unclear in which situations a
non-PRC enterprise’s “de facto management body” is located in China. All of our
management is currently based in China, and if a majority of the members of our
management team continue to be located in China after the effective date of the
Enterprise Income Tax Law, we may be considered a PRC resident enterprise and
therefore subject to PRC enterprise income tax at the rate of 25% on our
worldwide income, which will include any dividend income we receive from our
subsidiaries. If we are required under the Enterprise Income Tax Law to pay
income tax for any dividends we receive from our subsidiaries, our revenues
could decrease significantly.





We have
limited business insurance coverage in China, which could harm our
business.





We are
exposed to many risks, including equipment failures, natural disasters,
industrial accidents, power outages, and other business interruptions. We do not
carry business interruption insurance and as a result, we may be required to pay
for financial and other losses, damages and liabilities, including those caused
by natural disasters and other events beyond our control, out of our own funds,
which could have a material adverse effect on our business, financial condition
and results of operations.





Our
property and equipment insurance does not cover the full value of our property
and equipment, which leaves us with exposure in the event of loss or damage to
our properties or claims filed against us. We currently do not carry any
product liability or other similar insurance. We cannot assure you that we would
not face liability in the event of the failure of any of our products. This is
particularly true given our plan to significantly expand our sales into
international markets, like the United States, where product liability claims
are more prevalent.





-28-





Except
for property and automobile insurance, we do not have other insurance such as
business liability or disruption insurance coverage for our operations in the
PRC. We do not maintain a reserve fund for warranty or defective products
claims. Our costs could substantially increase if we experience a significant
number of warranty claims. We have not established any reserve funds for
potential warranty claims since historically we have experienced few warranty
claims for our products so that the costs associated with our warranty claims
have been low. If we experience an increase in warranty claims significantly, it
would have a material adverse effect on our financial condition and results of
operations.




Any future outbreak of
severe acute respiratory syndrome or avian influenza in China, or similar
adverse public health developments, may severely disrupt our business and
operations.





A renewed
outbreak of severe acute respiratory syndrome, the Avian Flu or another
widespread public health problem in China, where all of our manufacturing
facilities are located and where all of our revenues are derived from, could
have a negative effect on our operations. In addition, there have been confirmed
human cases of avian influenza in PRC, Vietnam, Iraq, Thailand, Indonesia,
Turkey, Cambodia and other countries which have proven fatal in some instances.
If such an outbreak or any other similar epidemic were to spread in China, where
our operations are located, it may adversely affect our business and operating
results. Such an outbreak could have an impact on our operations as a result of
quarantines or closures of our manufacturing facilities or the retail outlets,
which would severely disrupt our operations, the sickness or death of our key
officers and employees, and a general slowdown in the Chinese
economy.





Risks
Related To The Market For Our Stock




Our Common Stocks subject to
price volatility and may result in losses for investors.





The stock
market has experienced significant price and volume fluctuations that have
particularly affected the trading prices of equity securities of many companies
that have business operations exclusively in China. These fluctuations have
often been unrelated or disproportionate to the operating performance of many of
these companies. Any negative change in the public’s perception of these
companies could decrease our stock price regardless of our operating results.
The market price of our common stock has been and may continue to be volatile.
We expect our stock price to be subject to fluctuations as a result of a variety
of factors, including factors beyond our control.





These
factors include without limitation actual or anticipated variations in our
quarterly operating results, announcements of technological innovations or new
products or services by us or our competitors, announcements relating to
strategic relationships or acquisitions, additions or terminations of coverage
of our common stock by securities analysts, statements by securities analysts
regarding us or our industry, conditions or trends in the our industry, and
changes in the economic performance and/or market valuations of other soybean
product companies.





The
prices at which our common stock trades will affect our ability to raise
capital, which may have an adverse affect on our ability to fund our
operations.





Our common stock may be
considered to be a “penny stock” and, as such, the market for our common stock
may be further limited by certain SEC rules applicable to penny
stocks.





To the
extent the price of our common stock remains below $5.00 per share or we have
net tangible assets of $2,000,000 or less, our common shares will be subject to
certain “penny stock” rules promulgated by the SEC. Those rules impose certain
sales practice requirements on brokers who sell penny stock to persons other
than established customers and accredited investors (generally institutions with
assets in excess of $5,000,000 or individuals with net worth in excess of
$1,000,000). For transactions covered by the penny stock rules, the broker must
make a special suitability determination for the purchaser and receive the
purchaser’s written consent to the transaction prior to the sale. Furthermore,
the penny stock rules generally require, among other things, that brokers
engaged in secondary trading of penny stocks provide customers with written
disclosure documents, monthly statements of the market value of penny stocks,
disclosure of the bid and asked prices, disclosure of the compensation to the
brokerage firm, and disclosure of the sales person working for the brokerage
firm. These rules and regulations adversely affect the ability of brokers to
sell our common shares and limit the liquidity of our securities.





-29-





We do not intend to pay cash
dividends in the foreseeable future.





We do not
anticipate paying any cash dividends in the foreseeable future. We currently
intend to retain all available funds and any future earnings for use in the
operation and expansion of our business. In addition, the terms of any future
debt or credit facility may preclude us from paying any dividends. As a result,
capital appreciation, if any, of our common stock will be your sole source of
potential gain in your investment for the foreseeable future.




Our chief executive officer
could exert significant influence over our significant corporate decisions and
may act in a manner that advances his best interests and not necessarily those
of other stockholders.





Our Chief
Executive Officer, Mr. Shulin Liu and his wife Mrs. Huanqin Ding, beneficially
own approximately 91% of our common stock through their 100% holding in
Winner State (BVI). As a result, Mr. Liu may be able to influence
significantly the outcome of all matters requiring stockholder approval,
including the election and removal of directors and any merger, consolidation,
or sale of all or substantially all of our assets and he may act in a manner
that advances his best interests and not necessarily those of other
stockholders, including investors in this offering, by, among other things:
delaying, deferring or preventing a change in control of us; entrenching our
management and/or our board of directors; impeding a merger, consolidation,
takeover or other business combination involving us; discouraging a potential
acquirer from making a tender offer or otherwise attempting to obtain control of
us; or causing us to enter into transactions or agreements that are not in the
best interests of all stockholders.





There is currently a very
limited trading market for our common stock





Our
common stock is quoted on the over-the-counter Bulletin Board. However, our bid
and asked quotations have not regularly appeared on the OTC Bulletin Board for
any consistent period of time. There is no established trading market for our
common stock and our common stock may never be included for trading on any stock
exchange or through any other quotation system (including, without limitation,
the NASDAQ Stock Market). You may not be able to sell your shares due to the
absence of a trading market.





We will incur increased
costs as a result of changes in laws and regulations relating to corporate
governance matters.





As a
public reporting company, we will need to comply with the Sarbanes-Oxley Act of
2002 and the related rules and regulations adopted by the SEC, including
expanded disclosures, accelerated reporting requirements and more complex
accounting rules. Compliance with Section 404 of the Sarbanes-Oxley Act of 2002
and other requirements will increase our costs and require additional management
resources. Additionally, these laws and regulations could make it more difficult
or more costly for us to obtain certain types of insurance, including director
and officer liability insurance, and we may be forced to accept reduced policy
limits and coverage or incur substantially higher costs to obtain the same or
similar coverage. The impact of these events could also make it more difficult
for us to attract and retain qualified persons to serve on our board of
directors, our board committees or as executive officers. We are presently
evaluating and monitoring developments with respect to these laws and
regulations and cannot predict or estimate the amount or timing of additional
costs we may incur to respond to their requirements.





-30-





We may not be able to
achieve and maintain an effective system of internal control over financial
reporting, a failure which may prevent us from accurately reporting our
financial results or detecting and preventing fraud.





We will
be subject to reporting obligations under the U.S. securities law. Beginning
with our annual report on Form 10-K for the fiscal year ending December 31,
2007, we will be required to prepare a management report on our internal control
over financial reporting containing our management’s assessment of the
effectiveness of our internal control over financial reporting. In addition, our
independent registered public accounting firm must attest to and report on the
effectiveness of our internal control over financial reporting. Our management
may conclude that our internal controls over our financial reporting is not
effective. Moreover, even if our management concludes that our internal control
over financial reporting is effective our independent registered public
accounting firm may still decline to attest to the effectiveness or may issue a
report that is qualified if it is not satisfied with our controls or the level
at which our controls are documented, designed, operated or reviewed, or if it
interprets the relevant requirements differently from us. Our reporting
obligations as a public company will place a significant strain on our
management, operational and financial resources and systems for the foreseeable
future.




We may require additional
capital, which may not be available on commercially reasonable terms, or at
all.





Capital
raise through the sale of equity securities may result in dilution to our
shareholders. The incurrence of indebtedness would result in increased debt
service obligations and could result in operating and financing covenants that
would restrict our operations. Financing may be unavailable in amounts or on
terms acceptable to us, or at all. Failure to obtain such additional capital
could have an adverse impact on our business strategies and growth
prospects.




Our future capital raising
and the conversion of our outstanding shares of preferred stock and warrants may
dilute our shareholders’ equities.




If we
need to obtain external financing, our capital raising could require us to sell
additional equity or debt securities or obtain credit facilities. The sale of
additional equity or equity-linked securities could result in additional
dilution to our then existing shareholders. In addition the conversion of
outstanding shares of preferred stock and exercise of warrants into common stock
may dilute our then existing shareholders’ equities. Certain registration rights
have been granted to holders of the preferred stock and warrants. Pursuant to
the registration rights agreement, certain holders of the preferred stock and
warrants have the demand rights to require us to register the shares common
stock held by these holders. Therefore, as our existing shareholders, your share
equities may be diluted upon the conversion of outstanding shares of preferred
stock, exercise of warrants and sale of common stock pursuant to the
registration rights agreement.





ITEM
2. Properties





We own
and operate three soybean production factories in Jixian county in the
Heilongjiang province. Our factories have a combined annual soybean processing
capacity of 520,000 tons.





Factory
No.1 manufactures salad oil, Grade IV soybean oil and soybean meal. Factory No.
2 manufactures Grade IV soybean oil and soybean meal. Our newest facility,
Factory No.3, which was built in 2005, manufactures Grade IV soybean oil,
soybean meal and salad oil. Our new, high end products, including defatted soy
powder, soy protein concentrates and textured protein, will be manufactured in
Factory No. 2. Powdered soy oil will be produced in Factory No. 3. We have
finished building the production lines for salad oil and squeezed oil and put
them into operations in the last quarter of 2007.





The
following tables indicate the land area and annual production capacity of our
production facilities:




Production
                      Facility
                    
                    Area
                    
                    
                    CapacityFactory
      No. 1
                    
                    
                    27,000
                    m2
                    
                    
                    100,000Factory
      No. 2
                    
                    
                    43,572
                    m2
                    
                    
                    120,000Factory
      No. 3
                    
                    
                    45,596
                    m2
                    
                    
                    300,000




-31-





Annual
                            Production
                            Capacity for
                            2007
                            (Tonnes)
                          
                          Actual
                            Output for
                            2007
                            (Tonnes)
                          
                          Utilization
                            Rate for 2007
                          
                          
                          Annual
                            Production
                            Capacity for
                            2008
                            (Tonnes)
                          
                          Actual
                            Output for
                            2008
                            (Tonnes)
                          
                          Utilization
                            Rate for 2008520,000
                          
                          
                          385,000
                          
                          74
                          %
                          
                          520,000
                          
                          
                          420,000
                          
                          81
                          %





Note: The annual production
capacity is based on 3 shifts (8 hours per shift) a day for 300 days a
year.





We
purchased the land use rights for the 45,596 m2 of land
of Factory No. 3. The land use rights for Factory No. 1 and No. 2 are allocated
by the local government at minimal cost.





Our
machinery and equipment for soybean processing include conveyor belt, sifting
machines, dyers; steamer, crushers; flaking machines, extractors; distillers;
packaging machines; containers, etc. Our machinery has been kept in good
conditions and with property insurance coverage.




All
land in the PRC is owned by the government and cannot be sold to any individual
or entity. Instead, the government grants or allocates landholders a “land use
right.” There are four methods to acquire land use rights:




·
            grant
      of the right to use land;


·
            assignment
      of the right to use land;


·
            lease
      of the right to use land; and


·
            allocated
      land use rights.




In
comparison with Western common law concepts, granted land use rights are similar
to life estates and allocated land use rights are in some way similar to
leaseholds.




Granted
land use rights are provided by the government in exchange for a grant fee, and
carry the rights to pledge, mortgage, lease, and transfer within the term of the
grant. Land is granted for a fixed term - generally 70 years for residential
use, 50 years for industrial use, and 40 years for commercial and other use. The
term is renewable in theory. Unlike the usual case in Western nations, granted
land must be used for the specific purpose for which it was
granted.




Allocated
land use rights are generally provided by the government for an indefinite
period (usually to state-owned entities) and cannot be pledged, mortgaged,
leased, or transferred by the user. Furthermore, allocated land can be reclaimed
by the government at any time. Allocated land use rights may be converted into
granted land use rights upon the payment of a grant fee to the
government.





In
addition to the abovementioned land use rights, Yanglin has the following leased
land use right:





-32-








Lessor
                                        
                                        Location
                                        
                                        Area (square
                                          meters)
                                        
                                        Rental Fee
                                          (RMB)
                                        
                                        Construction
                                          on Land
                                        
                                        Term and
                                          ExpirationJixian Industrial Company
                                        
                                        Jixian County Hedong
      District
                                        
                                        27,000
                                        
                                        8,900,567
                                        
                                        Workshop,warehouse
                                        
                                        December 4, 2001 -December 3,
      2051Hongtai
      Oil Factory
                                        
                                        Jixian County,Shuangfu Road East
                                        
                                        43,572.1
                                        
                                        8,714,400
                                        
                                        Workshop,warehouse
                                        
                                        November 1, 2006 –October 30, 2056Jixian
      County
                                          Government
                                        
                                        Jixian County
                                        
                                        45,596
                                        
                                        9,383,267.88
                                        
                                        Workshop,warehouse
                                        
                                        September 6, 2005 –September 5, 2055Wansheng
      Village
                                          Commission
                                        
                                        Wansheng Village OilPump Station West,Daoban Dong Qiang
                                        
                                        3,844.6
                                        
                                        100,000
                                        
                                        Farmland
                                        
                                        October 19, 2003 -October 18, 2053Wansheng
      Village
                                          Commission
                                        
                                        Hatong ExpresswayNorth, WanshengVillage
                                        
                                        16,643.7
                                        
                                        99,862.2
                                        
                                        Farmland
                                        
                                        April 1, 2004 – December 31, 2028Mr.Liu
      Fengyu, Ms.
                                          Tian
      Shubai
                                        
                                        Jian San JiangAdministrationDaxing Farm 24Group Nan.
                                        
                                        1,000,000
                                        
                                        1,100,000
                                        
                                        Farmland
                                        
                                        January 1, 2005 -December 31, 2026




We have
embarked on the process to convert the allotted land use rights for Factory No.
1, Factory No. 2, Wansheng Village and Jiansan Farm into granted land use
rights. The conversion will involve a payment of a “transfer fee” to the Jixian
County Land Bureau.




Yanglin
also owns the following buildings, comprising Factory No. 3:





Location
                              
                              Area (square
                                meters)
                              
                              Nature of building
                              
                              Function
                              
                              CertificateBei No.4, Nongfeng
                                Village
      (Factory No. 3)
                              
                              
                              1658.46
                              
                              Private
      Asset
                              
                              Office,
      garage
                              
                              Ji
      Fang Quan Zheng
                                Fanrong
      Zi No. 00033652Bei
      No.4, Nongfeng
                                Village
      ( Factory No. 3)
                              
                              
                              9224.93
                              
                              Private
      Asset
                              
                              Workshop
                              
                              Ji
      Fang Quan Zheng
                                Fanrong
      Zi No. 00036015Factory
      No. 3
                              
                              
                              1401.47
                              
                              Private
      Asset
                              
                              Boiler
      room
                              
                              Ji
      Fang Quan Zheng
                                Fanrong
      Zi No. 00033653Hedong
      51A (Factory
                                No.
      1)
                              
                              
                              5772
                              
                              Private
      Asset
                              
                              Office,
      electricity distribution room, workshop, storage room.
                              
                              Ji
      Fang Quan Zheng
                                Shagang
      Zi No.
000278




-33-





Item
3. Legal Proceedings





There are
no known pending legal proceedings to which we or our properties are
subject.





Item
4. Submission Of Matters To A Vote Of Shareholders




No
matters were submitted to a vote of shareholders in the last
quarter.




PART
II





Item
5. Market For Registrant’s Common Equity, Related Shareholder Matters, And
Issuer Purchases Of Equity Securities




Our stock
is currently quoted on the Over the Counter Bulletin Board and our trading
symbol is "YSYB.OB”. There has never been any established public market for
shares of our Common Stock.





The
following table sets forth for the period indicated the prices of the Common
Stock in the over-the-counter market, as reported and summarized by the OTC
Bulletin Board. Such prices are based on inter-dealer bid and asked prices,
without markup, markdown, commissions, or adjustments and may not represent
actual transactions.





CALENDAR QUARTER ENDED
                
                HIGH
                
                
                LOWMarch
      31, 2007
                
                
                0
                *
                
                
                0
                *June
      30, 2007
                
                
                0
                *
                
                
                0
                *September
      30, 2007
                
                
                0
                *
                
                
                0
                *December
      31, 2007
                
                $
                4.50
                
                
                $
                2.50March
      31, 2008
                
                $
                3.25
                
                
                $
                3.25





CALENDAR QUARTER ENDED
                
                HIGH
                
                
                LOWJune
      30, 2008
                
                $
                5.50
                
                
                $
                2.85September
      30, 2008
                
                $
                5.50
                
                
                $
                4.90December
      31, 2008
                
                $
                5.25
                
                
                $
                2.50March
      31, 2009
                
                $
                4.90
                
                
                $
                3.25Until
      April 9, 2009
                
                $
                4.90
                
                
                $
                3.50




* There
was almost no trading activity of the company’s common stock on and before
September 30, 2007.





On April
9, 2009, the last reported sale price of our common stock on the Over the
Counter Bulletin Board was $3.50 per share.





Shareholders





As of
April 10, 2009, we have 20,000,003 shares of Common Stock issued and outstanding
held by approximately 360 shareholders and 10,000,000 shares of Series A
Preferred Stock issued and outstanding held by approximately 10 shareholders. We
have authorized and issued 10,000,000 Series A Preferred Stock and authorized
10,000,000 Series B Preferred Stock but have not issued any Series B Preferred
Stock.





Dividend
Policy





Our board
of directors has not declared a dividend on our Common Stock during the last two
fiscal years or the subsequent interim period and we do not anticipate the
payments of dividends in the near future, as we intend to reinvest our profits
to grow operations. We rely on dividends from Yanglin for our funds and PRC
regulations may limit the amount of funds distributed to us from Yanglin, which
will affect our ability to declare any dividends.





-34-





Repurchases
of Equity Securities





No
repurchases of our common stock were made in a month within the fourth quarter
of the fiscal year covered by this report.





Item
6.   Selected Financial Data





SELECTED
CONSOLIDATED FINANCIAL DATA





You
should read the following selected consolidated financial data in conjunction
with “Management's Discussion and Analysis of Financial Condition and Results of
Operations,” the financial statements and related notes, and the other financial
information included in this prospectus.




Consolidated Statement of
                          Operations
                        
                        The year ended
                          Dec. 31, 2004
                          ($)
                        
                        
                        The year ended
                          Dec. 31, 2005
                          ($)
                        
                        
                        The year ended
                          Dec. 31, 2006
                          ($)
                        
                        
                        The year ended
                          Dec. 31, 2007
                          ($)
                        
                        
                        The year ended
                          Dec. 31, 2008
                          ($)(audited)
                        
                        
                        (audited)
                        
                        
                        (audited)
                        
                        
                        (audited)
                        
                        
                        (audited)Sales
      Revenue (net of discounts, returns and allowances)
                        
                        
                        26,325,611
                        
                        
                        
                        38,430,465
                        
                        
                        
                        88,078,494
                        
                        
                        
                        155,206,867
                        
                        
                        
                        250,728,674Other
      sales
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Cost
      of sales
                        
                        
                        (24,557,296
                        )
                        
                        
                        (35,132,664
                        )
                        
                        
                        (79,862,179
                        )
                        
                        
                        (142,568,658
                        )
                        
                        
                        (229,838,842
                        )Gross
      Profit
                        
                        
                        1,768,315
                        
                        
                        
                        3,297,801
                        
                        
                        
                        8,216,315
                        
                        
                        
                        12,638,209
                        
                        
                        
                        20,889,832Selling
      expenses
                        
                        
                        (54,553
                        )
                        
                        
                        (43,094
                        )
                        
                        
                        (63,209
                        )
                        
                        
                        (146,411
                        )
                        
                        
                        (249,812
                        )General
      and administrative expenses
                        
                        
                        (902,258
                        )
                        
                        
                        (1,103,262
                        )
                        
                        
                        (1,078,184
                        )
                        
                        
                        (1,812,450
                        )
                        
                        
                        (5,552,223
                        )Income
      from operations
                        
                        
                        811,504
                        
                        
                        
                        2,151,445
                        
                        
                        
                        7,074,922
                        
                        
                        
                        10,679,348
                        
                        
                        
                        15,087,797Interest
      expense, net
                        
                        
                        (100,455
                        )
                        
                        
                        (150,370
                        )
                        
                        
                        (219,032
                        )
                        
                        
                        (394,705
                        )
                        
                        
                        (677,015
                        )Other
      income
                        
                        
                        211,168
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        39,385
                        
                        
                        
                        797Other
      expense
                        
                        
                        
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (31,113
                        )Income
      before taxation
                        
                        
                        922,217
                        
                        
                        
                        2,001,075
                        
                        
                        
                        6,855,890
                        
                        
                        
                        10,324,028
                        
                        
                        
                        14,380,466Income
      tax
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Net
      Income
                        
                        
                        922,217
                        
                        
                        
                        2,001,075
                        
                        
                        
                        6,855,890
                        
                        
                        
                        10,324,028
                        
                        
                        
                        14,380,466Basic
      earnings per share
                        
                        
                        0.046
                        
                        
                        
                        0.100
                        
                        
                        
                        0.343
                        
                        
                        
                        0.516
                        
                        
                        
                        0.72Diluted
      earnings per share
                        
                        
                        0.046
                        
                        
                        
                        0.100
                        
                        
                        
                        0.343
                        
                        
                        
                        0.069
                        
                        
                        
                        0.38Consolidated Balance Sheets
                        
                        The year ended
                          Dec. 31, 2004
                          ($)
                        
                        
                        The year ended
                          Dec. 31, 2005
                          ($)
                        
                        
                        The year ended
                          Dec. 31, 2006
                          ($)
                        
                        
                        The year ended
                          Dec. 31, 2007
                          ($)
                        
                        
                        The year ended
                          Dec. 31, 2008
                          ($)(audited)
                        
                        
                        (audited)
                        
                        
                        (audited)
                        
                        
                        (audited)
                        
                        
                        (audited)Current
      Assets
                        
                        
                        13,069,478
                        
                        
                        
                        9,911,883
                        
                        
                        
                        11,272,054
                        
                        
                        
                        35,828,927
                        
                        
                        
                        46,386,564Total
      Assets
                        
                        
                        20,454,198
                        
                        
                        
                        27,090,833
                        
                        
                        
                        35,245,747
                        
                        
                        
                        70,732,531
                        
                        
                        
                        82,549,237Current
      Liabilities
                        
                        
                        6,350,104
                        
                        
                        
                        10,634,636
                        
                        
                        
                        11,050,319
                        
                        
                        
                        15,587,625
                        
                        
                        
                        9,243,080Total
      Liabilities
                        
                        
                        6,670,729
                        
                        
                        
                        10,908,533
                        
                        
                        
                        11,512,096
                        
                        
                        
                        16,044,732
                        
                        
                        
                        9,677,758Total
      Stockholders’ Equity
                        
                        
                        13,783,469
                        
                        
                        
                        16,182,300
                        
                        
                        
                        23,733,651
                        
                        
                        
                        54,687,799
                        
                        
                        
                        72,871,479





-35-




Item
7. Management’s Discussion and Analysis of Financial Condition and Results of
Operation





The
following discussion of our financial condition and results of operations should
be read in conjunction with our audited consolidated financial statements and
the notes to those financial statements appearing elsewhere in this Form 10-K.
This discussion contains forward-looking statements that involve significant
risks and uncertainties. As a result of many factors, such as those set forth
under "Forward Looking Statements" and "Item 1A. Risk Factors" and elsewhere in
this Form 10-K, our actual results may differ materially from those anticipated
in these forward-looking statements.





Company
Overview





We are a
leading non-genetically modified (non-GM) soybean processor in the PRC. We
currently manufacture ordinary soybean oil, salad oil and soybean meal in bulk
package, which are sold throughout China to our customers directly or through
distributors. Most of our customers (approximately 80%) are located in Northern
China.





Our
manufacturing process includes sifting, crushing, heating and pressing soybeans,
extracting and separating oil from crushed soybeans, and cleansing, hydrating
and packaging of oil as well as drying and packaging soybean meal. Currently,
our main products include ordinary soybean oil, salad oil and soybean meal. We
plan to broaden our product line to include high end products such as squeezed
oil, powdered soy oil and protein concentrates, textured protein and defatted
soybean powder, while greatly enlarging the production capacity of salad oil. We
have installed the equipment for manufacturing squeezed oil and expanded the
production line for salad oil and have started production of these products at
the end of 2007. The production facilities for powdered soy oil have been built
and are now in the trial production and “debugging” phase. The pilot production
of protein concentrates began in late 2008, with small quantities of commercial
grade product provided to customers. Defatted soy powder will be launched in
2009, and the production line of textured protein will also be put into
operation in 2009.





We sell
our products under the “Yanglin” brand name primarily to various geographic
regions of the PRC through our various distribution channels. In the fiscal year
ended December 31, 2008, we processed approximately 420,000 tons of soybeans and
generated total revenues amounting to approximately $250.7 million with net
income amounting to $14.4 million.





Our goal
is to become the market leader in the non-GM soybean industry of China, and we
believe that we can accomplish this objective in the near future. We are now
considering future expansion and an acquisition plan, with the intention of
significantly increasing our processing capacity. The plan is still in a
preliminary stage, but this will be a vital step in achieving our objective. We
are also making great efforts to improve and strengthen our management and
internal control over financial reporting. We have engaged Ernst & Young as
a consultant on our Sarbanes-Oxley compliance project, and Ernst & Young’s
project team has finished their review of our internal control over financial
reporting. By the end of 2008, we were close to successfully completing the
project . This project is a great opportunity to reinforce our capability
to protect the interests of the company and its shareholders while improving
management effectiveness and efficiency.





Organizational
History





Yanglin
Soybean Inc. (f/k/a, Victory Divide Mining Company, the “Company”) was
incorporated in the state of Nevada on May 26, 1921. Prior to October 3, 2007
the company had only nominal operations and assets.





On
October 3, 2007, the Company executed a reverse-merger with Faith Winner
Investments Limited (“Faith Winner (BVI)”) by an exchange of shares whereby the
Company issued 18,500,000 common shares at $0.001 par value in exchange for all
Faith Winner (BVI) shares.





Faith
Winner (BVI) formed Faith Winner (Jixian) Agriculture Development Company
(“Faith Winner (Jixian)” or “WFOE”), then Faith Winner (BVI) and WFOE entered
into a series of agreements with Heilongjiang Yanglin Soybean Group Co., Ltd.
(“Yanglin”) including but not limited to management, loan, purchase option,
consignment, trademark licensing, non-competition, etc. As a result of such
arrangements WFOE gained control of all of Yanglin’s assets, management and
business as if Yanglin were a wholly-owned subsidiary of WFOE, so WFOE is deemed
to control Yanglin as a Variable Interest Entity as required by FASB
Interpretation No. 46 (revised December 2003) Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51.





-36-





However,
the shareholders of Yanglin, Mr. Shulin Liu with his wife, Mrs. Huanqin Ding,
also have effective control over Faith Winner (BVI) and WFOE as our
subsidiaries, because they beneficially own approximately 91% of our common
stock through their 100% holding in Winner State (BVI) and thus have a
controlling interest in us.





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





Under the
Registered Trademark Transfer Agreement, Yanglin agreed to transfer to WFOE all
of its rights in connection with the two trademarks, including without
limitation the title of the trademarks and right to license ( the “Transferred
Trademark”) for a purchase price of $1,000,000, which is subject to a purchase
price adjustment based on the minimum appraised value on intellectual property
(“IP”) rights allowed under PRC laws and regulations for such
transfer. Under the Trademark Licensing Agreement, WFOE agreed to grant an
exclusive license to Yanglin, for a term of 10 years, to use the Transferred
Trademark for an annual licensing fee equal to 1% of Yanglin’s revenue of that
year. The license fee and the management fee aforesaid – total of 6% of the
revenue of Yanglin- entitled to WFOE are approximately the whole net profit
before  tax of Yanglin. Any excess profit in Yanglin will not be
distributed as dividend according to the contractual arrangements until WFOE
exercises the Exclusive Purchase Option Agreement to acquire all shareholders’
equity interest of Yanglin. If the 6% of licence and management fees exceed the
net profit before tax of Yanglin, the amount entitled to WFOE is limited to the
actual annual net profit before tax of Yanglin under the contracts.





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





The
reverse-merger also included an equity financing of $21,500,000 by the issuance
of 10,000,000 Series A Convertible Preferred Stock at $2.15 per share to 10
accredited investors.





-37-





The
Company, through its subsidiaries and Yanglin, (hereinafter, collectively
referred to as “the Group”), is now in the business of manufacturing,
distribution, and selling of non-genetically modified soybean oil, soybean salad
oil, and soybean meal throughout the Province of Heilongjiang and other parts of
China.





On
January 17, 2008, the Company changed its name from “Victory Divide Mining
Company” to Yanglin Soybean, Inc.”





Major Performance
Factors





Revenue





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


·
            Processing
      capacity of soybean;


·
            Pricing
      of soybean oil, salad oil and soybean meal;
  and,


·
            Market
      demand





Processing capacity of soybean.Our current annual processing capacity of soybean is 520,000 metric tons,
which is sufficient for our current level of operations.





Pricing of soybean oil, salad oil
and soybean meal.Generally, we determine the price of our products based
on market price and our cost, while there is an overall trend
towards price increases to compensate for inflation and strong demand for
soybean products. We believe that our price is usually more competitive than
those of our major competitors, which are mostly state owned enterprises (SOEs),
because we have higher operating efficiencies and better cost
controls.





Market demand.The growth
potential of our revenue depends on the market demand for our products. As the
total market demand for these products is more than sufficient to absorb our
production, and our products have been recognized as high quality and
competitively priced, we can sell substantially all of our production
volume, and we believe that there is a considerable growth potential for our
sales revenue, especially after we expand our production capacity and when our
new high-end products, which will be sold at higher prices, are put into the
market.





Cost
of Sales





Cost of
sales generally consists of four major parts: raw materials, labor, production
overhead and manufacturing related depreciation. Raw materials mainly refers to
soybean, and it accounts for the most significant part of the cost of sales
(COS), over 90%. Labor cost is relatively low and only makes up less than 1% of
COS. Production overhead includes auxiliary materials, utility expenses,
machinery maintenance costs, inspection costs and other related expenses.
Depreciation costs are applied to manufacturing facilities and equipment, such
as production lines, steam generators, factory buildings, etc.





Cost of
sales is mainly determined by the following factors, directly or
indirectly:


·
            The
      availability and price of raw materials, especially soybeans;
      and,


·
            Output
      ratio and operating efficiency of production
  facilities.





-38-




The availability and price of raw
materials, especially soybeans.Raw material cost accounts for the major
portion of our cost of sales, and soybean is the only major raw material, so its
price fluctuation will have a material impact on our cost. The price of
soybeans may be affected by a series of factors, including the production volume
of soybeans, the weather, government policies, and the transactions of soybeans
on domestic and international commodity markets. Meanwhile, if there is a
shortage in the supply of raw materials, our production facilities will have to
operate at lower than the achievable maximum efficiency. As our processing
volume represents a relatively small portion of the total soybean supply of
Heilongjiang Province, let alone the whole of China, we expect that this factor
will have little influence over our cost.
 
 Output ratio and operating
efficiency of production facilities.Output ratio is the ratio between
the input of raw materials, mostly soybeans, and the output of finished
products. The more units of finished products we can produce using a single unit
of raw material, the higher the output ratio. As the labor, production overheads
and manufacturing related depreciation expenses are mostly of a fixed nature,
generally speaking, the more we produce, the lower the unit cost. Our output
ratio and operating efficiency are continuously being raised, due to the recent
purchase and renovation of facilities and equipment, the enhanced competence and
proficiency of our staff and the improvement of our management
skills.
 
 Gross
Profit
 
 Gross
profit is the result of the combined effects of the following factors: (a) the
selling price of our products, (b) the sales volume and the individual profit
margin of each product, and (c) the cost of sales. As we are a middle stream
processor, and the profit margin of middle stream processing is usually
relatively stable, our gross profit ranges between 7% to 9% over the past 4
years.
 
 Operating
Expenses
 
 Operating
expenses consist of selling expenses and general & administrative expenses.
Generally speaking, operating expenses occupy only a small portion of total
costs and expenses.
 
 Selling
expenses generally include business development expenses, sales meeting
expenses, loading and handling, advertising, sales-related staff salaries and
welfare expenses, and travel expenses. We expect that these expenses will rise
considerably in the following years, as we will be recruiting more sales staff
and expanding our sales network, establishing new sales channels,
plus  investing in promotion and advertising to promote and sell our
new products.
 
 General
& administrative expenses cover the depreciation of office buildings and
equipment, office expenses & supplies, management & administrative
salaries, etc. These expenses are generally more of a fixed nature. There may be
an increase in these expenses, as we will restructure our organizational
structure and improve our management systems. As a public company, we need to
maintain our internal control over financial reporting to comply
with the Sarbanes-Oxley Act, which involves substantial redesign and
restructure of our internal control system and processes.  We expect
that this will cause a material increase in our management
expenses.
  -39-
  Income
Tax
 
 We are a
company incorporated in the State of Nevada and Faith Winner (BVI) is
incorporated under the laws of the British Virgin Islands, and we conduct all
our operations under certain contractual arrangements with Yanglin, a PRC
company.
  Although
we are subject to United States taxation, we do not anticipate incurring
significant United States income tax liability for the foreseeable future
because:
  ·
              We do not conduct any material
      business or maintain any branch office in the United
      States;
 
 ·
              the earnings generated from our
      non-U.S. operating companies are generally eligible for a deferral from
      United States taxation until such earnings are repatriated to the United
      States; and,
 
 ·
              we
      believe that we will not generate any significant amount of income
      inclusions under the income imputation rules applicable to a United States
      company that owns "controlled foreign corporations" for United States
      federal income tax purposes.
 
 Therefore,
we have made no provision for U.S. federal income taxes or tax benefits on the
undistributed earnings and/or losses.
  Yanglin,
a PRC company, has income tax liabilities in the PRC. PRC enterprise income tax
is calculated based on taxable income determined under PRC accounting
principles. In accordance with Income Tax Law applicable to domestic companies,
we are generally subject to an enterprise income tax rate of 25%.
 
 However,
as Yanglin has been recognized as a Key Leading Enterprise in the
Industrialization of Agriculture Industry by a collection of government
agencies, including the National Development and Reform Commission, the
Department of Finance and the Department of Agriculture, we enjoy a complete
exemption from income taxes. Our status is reviewed every two years, and the
next review has been postponed by the government until the end of
2009.
  -40-
  Results of
Operations
 
 The
following table shows the operating results for the years ended December 31,
2008 and December 31, 2007.
 
 Consolidated Statement of Operations
                        
                        The year ended Dec.
                          31, 2008
                          ($)
                        
                        
                        The year ended Dec.
                          31, 2007
                          ($)(audited)
                        
                        
                        (audited)Sales
      Revenue (net of discounts, returns and allowances)
                        
                        
                        250,728,674
                        
                        
                        
                        155,206,867Other
      sales
                        
                        
                        
                        
                        
                        
                        -Cost
      of sales
                        
                        
                        (229,838,842
                        )
                        
                        
                        (142,568,658
                        )Gross
      Profit
                        
                        
                        20,889,832
                        
                        
                        
                        12,638,209Selling
      expenses
                        
                        
                        (249,812
                        )
                        
                        
                        (146,411
                        )General
      and administrative expenses
                        
                        
                        (5,552,223
                        )
                        
                        
                        (1,812,450
                        )Income
      from operations
                        
                        
                        15,087,797
                        
                        
                        
                        10,679,348Interest
      expense, net
                        
                        
                        (677,015
                        )
                        
                        
                        (394,705
                        )Other
      income
                        
                        
                        797
                        
                        
                        
                        39,385Other
      expense
                        
                        
                        (31,113
                        )
                        
                        
                        -Income
      before income taxs
                        
                        
                        14,380,466
                        
                        
                        
                        10,324,028Income
      tax
                        
                        
                        -
                        
                        
                        
                        -Net
      Income
                        
                        
                        14,380,466
                        
                        
                        
                        10,324,028Foreign
      currency translation adjustment
                        
                        
                        3,803,214
                        
                        
                        
                        2,676,688Comprehensive
      income
                        
                        
                        18,183,680
                        
                        
                        
                        13,000,716
 
 Year
Ended December 31, 2008 Compared with Year Ended December 31, 2007
 
 Net
Sales
 
 For
      The Year Ended December 31
                        
                        
                        Period
      to Period ChangeItem
                        
                        2008 Amount ($)
                        
                        
                        2007 Amount ($)
                        
                        
                        Amount
      ($)
                        
                        
                        %Soybean
      meal
                        
                        
                        154,526,888
                        
                        
                        
                        92,563,442
                        
                        
                        
                        61,963,446
                        
                        
                        
                        66.9Soybean
      oil
                        
                        
                        70,374,106
                        
                        
                        
                        47,071,641
                        
                        
                        
                        23,302,465
                        
                        
                        
                        49.5Salad
      Oil
                        
                        
                        25,827,680
                        
                        
                        
                        15,571,784
                        
                        
                        
                        10,255,896
                        
                        
                        
                        65.9Total
      Net Sales
                        
                        
                        250,728,674
                        
                        
                        
                        155,206,867
                        
                        
                        
                        95,521,807
                        
                        
                        
                        61.5
 
 Net sales
were $250,728,674 for the year ended December 31, 2008, an increase of
$95,521,807 or 61.5% from $155,206,867 for the year ended December 31, 2007.
This is primarily due to the increase in the market price of soybean products
and partly due to the considerable increase in our processing and
production volume and the resultant growth in sales volume. Our three main
products, soybean meal, soybean oil and salad oil, achieved a year over year
sales growth rate of 66.9%, 49.5% and 65.9%, respectively.
 
 The price
of processed soybean products continuously rose during 2008. The average selling
price of soybean meal increased by $168 or 57.9% from $290 per ton for the year
ended December 31, 2007 to $458 per ton for the year ended December 31,
2008. The price of soybean oil rose by $382 or 40.2% from $950 per ton to $1,332
per ton over the same period, while the price increase of salad oil over the
period was $435 or 42.5%, from $1,024 per ton to $1,459 per ton. These increases
are in line with the trend of material increases in soybean prices, which
started in early 2007. The trend was primarily due to two
reasons,  First,  farmers were disincentivized by the
unusually low soybean prices by the end of 2006 and reduced soybean production.
Second, soybean production volume was further decreased by the large scale
drought in Heilongjiang, the major soybean farming area of China (please refer
to the section “Cost of Sales and Gross Profit” for more details). The effects
of these factors were transferred downstream and increased soybean prices, which
increased the prices of soybean products at the same time, and thus made a
major contribution to the growth in our sales revenue.
  -41-
  In the
year ended December 31, 2007, we processed 421,314 metric tons of soybeans and
produced 337,870 tons of soybean meal, 52,994 tons of soybean oil
and 18,038 tons of salad oil, compared to 385,087 metric tons of soybeans,
308,069 tons of soybean meal, 49,576 tons of soybean oil and 15,238 tons of
salad oil respectively for the previous year, resulting in growth rates of
9.4%, 9.7%, 6.9% and 18.4%, respectively.
 
 In the
year ended December 31, 2008, we sold 337,660 tons of soybean meal, 52,842 tons
of soybean oil and 17,708 tons of salad oil, achieving growth rates of
5.6%, 6.6% and 16.4%, respectively, over the previous year ended December
31, 2007, when we sold 319,706 tons of soybean meal, 49,566 tons of soybean
oil and 15,207 tons of salad oil. So we have sold almost everything we have
produced in 2008, due to the demand for soybean products in the PRC market
consistently exceeding total domestic supply.
 
 We expect
that the sales revenue growth rate will decrease in the early part of 2009, due
to the surge in imported soybean and the resulting material increase in the
supply volume of soybean products in the PRC,.The situation may improve later in
2009, as we will increase our processing and sales volume and formally introduce
some of our high-end products that possess higher prices (please refer to the
section “Company Overview” above for more details). In addition, we believe that
the price of soybean products will increase as a result of the likely rise in
soybean prices due to the expected materially lowered supply of imported
soybean in the later part of 2009. (Please refer to the section “Cost of Sales
and Gross Profit” for more details.)
 
 Cost
of Sales and Gross Profit
 
 For The Year Ended December 31
                          
                          
                          Period to Period
                            Change2008
                          
                          
                          % of Sales
                          
                          
                          2007
                          
                          
                          %of SalesAmount ($)
                          
                          
                          Revenue
                          
                          
                          Amount ($)
                          
                          
                          Revenue
                          
                          
                          Amount ($)
                          
                          
                          %Soybean
      meal
                          
                          
                          (141,924,170
                          )
                          
                          
                          91.8
                          
                          
                          
                          (86,654,275
                          )
                          
                          
                          93.6
                          
                          
                          
                          55,269,895
                          
                          
                          
                          63.8Soybean
      oil
                          
                          
                          (64,571,952
                          )
                          
                          
                          91.8
                          
                          
                          
                          (42,075,631
                          )
                          
                          
                          89.4
                          
                          
                          
                          22,496,321
                          
                          
                          
                          53.5Salad
      Oil
                          
                          
                          (23,342,720
                          )
                          
                          
                          90.4
                          
                          
                          
                          (13,838,752
                          )
                          
                          
                          88.9
                          
                          
                          
                          9,503,968
                          
                          
                          
                          68.7Cost
      of Sales
                          
                          
                          (229,838,842
                          )
                          
                          
                          91.7
                          
                          
                          
                          (142,568,658
                          )
                          
                          
                          91.9
                          
                          
                          
                          87,270,184
                          
                          
                          
                          61.2Soybean
      meal
                          
                          
                          12,602,718
                          
                          
                          
                          8.2
                          
                          
                          
                          5,909,167
                          
                          
                          
                          6.4
                          
                          
                          
                          6,693,551
                          
                          
                          
                          113.3Soybean
      oil
                          
                          
                          5,802,154
                          
                          
                          
                          8.2
                          
                          
                          
                          4,996,010
                          
                          
                          
                          10.6
                          
                          
                          
                          806,144
                          
                          
                          
                          16.1Salad
      Oil
                          
                          
                          2,484,960
                          
                          
                          
                          9.6
                          
                          
                          
                          1,733,032
                          
                          
                          
                          11.1
                          
                          
                          
                          751,928
                          
                          
                          
                          43.4Gross
      Profit
                          
                          
                          20,889,832
                          
                          
                          
                          8.3
                          
                          
                          
                          12,638,209
                          
                          
                          
                          8.1
                          
                          
                          
                          8,251,623
                          
                          
                          
                          65.3
  -42-
 
 Our cost
of sales for the year ended December 31, 2008 increased by
$87,270,184 or 61.2% as compared to the year ended December 31, 2007, from
$142,568,658 to $229,838,842, while the ratio of cost as a percentage to
net sales fell slightly to 91.7% from 91.9% over the same period. The main
reasons for the changes in the cost of sales were the significant increase in
the price of soybeans and the growth in processing and production volumes
in 2008..
 
 The rise
in soybean prices was due to two reasons. First, the drought in the summer of
2007 caused soybean production volumes to fall significantly in Heilongjiang
province, with some of Heilongjiang’s soybean production areas witnessing a 60%
fall in production. Second, the continuously low price of soybeans in 2006 and
prior years discouraged farmers from producing soybeans.
  As a
result, soybean planting areas in China were 12% less in 2007 than in 2006. The
reduction in supply resulted in the average unit cost of soybeans rising to
about $538 per ton for the year ended December 31, 2008 from $405 per ton for
the year ended December 31, 2007, an increase of approximately 32.8%. The price
increase trend started in early 2007 and lasted until the third quarter of 2008.
During this period, the purchase price of soybean in our local
area increased from $318 per ton at the beginning of 2007 to $439 per
ton around September 20, 2007, before the harvest season (when the price
for soybeans is usually at its peak). Prices then reached a record high of $697
per ton in early July 2008, and decreased to $478 before the harvest season
of 2008. In the fourth quarter of 2008, the Chinese government started to
conduct a strategic reserve purchase of soybeans, buying soybean from farmers at
higher than market price to encourage the farmers to continue to grow more
soybeans. This campaign helped to keep soybean prices at a level higher then the
market price. Such large scale price increases constituted the main reason for
the increase in our cost of sales in 2008.
 
 The fact
that the ratio of cost as a percentage to net sales remained almost unchanged
from 2007 to 2008 reflected the characteristics of our business as a middle
stream processor. Our cost ratio and, hence our gross margin, is
usually quite stable. Generally, the changes in the ratio of cost and gross
margins are usually quite small, although there may be differences between
various products due to the respective market status and trends of each product.
For example, the cost ratio of soybean meal dropped from 93.6% in the year ended
December 31, 2007 to 91.8% in the year ended December 31, 2008, reflecting the
fact that the price of soybean meal grew in line with the increase in soybean
prices. This was due to China’s recent strong demand for animal feed. The cost
ratio of soybean oil and salad oil rose from 89.4% and 88.9% in 2007 to 91.8%
and 90.4% in 2008, respectively, showing a lagging effect to the change in
prices of soybean oil and salad oil in the market generally, which was caused by
the influence of soybean oils made from imported soybeans.
 
 As a
result, overall gross margin improved by 0.2%, from 8.1% in the year ended
December 31, 2007 to 8.3% in the year ended December 31, 2008, and gross profits
enjoyed an increase of $8,251,623 or 65.3% over the same period. With respect to
our individual products, the gross margin of soybean meal, soybean oil and salad
oil changed from 6.4%, 10.6% and 11.1% in the year 2007 to 8.2%, 8.2% and 9.6%
in the year 2008, respectively. The changes were in accordance with the changes
and trends analyzed in the preceding paragraph.
  We expect
that gross margins may decline in early 2009, as a result of the national
reserve purchase of soybeans conducted by the Chinese government at the end of
2008. The purchases were done at a price higher than market price and
have increased the market price of soybeans, which will be reflected in the
rising cost of materials in the first quarter of 2009 or perhaps even
longer. At the same time, the large volume of cheap imported soybeans may
tend to keep the overall price levels of soybean products low. Nevertheless, we
also anticipate that gross margins may improve in the later part of 2009.
This is due to the fact that it is estimated that soybean production in the US
will only increase slightly in 2009, while soybean production in South America
will be reduced over the same period. Consequently, there may be less imported
soybeans in China’s market after harvest season in 2009 and, as a result,
those imports and the soybean products made from them may be at higher prices in
China’s market, which will help raise the overall market prices of soybean
products, considering the strong and growing domestic demand.
  -43-
  Operating
Expenses
  For The Year Ended December 31
                              
                              
                              Period to Period2008
                              
                              
                              % of Sales
                              
                              
                              2007
                              
                              
                              % of Sales
                              
                              
                              ChangeAmount ($)
                              
                              
                              Revenue
                              
                              
                              Amount ($)
                              
                              
                              Revenue
                              
                              
                              Amount ($)
                              
                              
                              %Selling
      Expenses
                              
                              
                              (249,812
                              )
                              
                              
                              0.1
                              
                              
                              
                              (146,411
                              )
                              
                              
                              0.1
                              
                              
                              
                              103,401
                              
                              
                              
                              70.6General
      & Administrative Expenses
                              
                              
                              (5,552,223
                              )
                              
                              
                              2.2
                              
                              
                              
                              (1,812,450
                              )
                              
                              
                              1.2
                              
                              
                              
                              3,739,773
                              
                              
                              
                              206.3Total
      Operating Expenses
                              
                              
                              (5,802,035
                              )
                              
                              
                              2.3
                              
                              
                              
                              (1,958,861
                              )
                              
                              
                              1.3
                              
                              
                              
                              3,843,174
                              
                              
                              
                              196.2
 
 Selling
expenses for the year ended December 31, 2008 increased by $103,401 or 70.6% as
compared to the year ended December 31, 2007. This was mainly due to the
increase in sales-related shipping and handling expenses, which usually is
directly related to sales volume. As a percentage of net sales, selling expenses
remained stable at 0.1% year over year.
 
 General
and administrative expenses for the year ended December 31, 2008 rose by
$3,739,773 or 206.3% over the year ended December 31, 2007. The
increase was primarily due to two reasons. First, there were large management
expenses related to our Sarbanes-Oxley compliance project launched in 2008 with
Ernst and Young as our consultant. The related expenses cover items such as the
professional fees of the consultant, investigating the internal control systems,
drafting and implementation of procedures, and redesigning of business
processes. Another important reason for the increase was the more than $3
million expenses of disposing fixed assets. As a percentage of net sales,
general and administrative expenses rose from 1.2% for the year ended December
31, 2007 to 2.2% for the year ended December 31, 2008.
 
 We expect
that selling expenses will increase over the coming years as we launch the
commercial sales of our new high end products, including soy protein
concentrates and powdered soy oil. This is due to the fact that we will need to
expand our sales network and develop new sales channels as well as conduct
promotional campaigns. General and administrative expenses may also rise,
because we will reorganize our organizational structure to prepare for future
expansion. In addition, as we are now a public company and plan to file the
application to transfer to the main board of NASDAQ, there will be increased
expenses related to strengthening our reporting, compliance, internal controls
and corporate governance systems to comply with the relevant laws and
regulations applicable to a U.S. listed company.
  -44-
  Income
from Operations and Net Income
 
 For The Year Ended December 31
                            
                            
                            Period to Period2008
                            
                            
                            % of Sales
                            
                            
                            2007
                            
                            
                            %of Sales
                            
                            
                            ChangeAmount ($)
                            
                            
                            Revenue
                            
                            
                            Amount ($)
                            
                            
                            Revenue
                            
                            
                            Amount
      ($)
                            
                            
                            %Income
      from operations
                            
                            
                            15,087,797
                            
                            
                            
                            6.0
                            
                            
                            
                            10,679,348
                            
                            
                            
                            6.9
                            
                            
                            
                            4,408,449
                            
                            
                            
                            41.3Interest
      expenses, net
                            
                            
                            (677,015
                            )
                            
                            
                            0.3
                            
                            
                            
                            (394,705
                            )
                            
                            
                            0.25
                            
                            
                            
                            282,310
                            
                            
                            
                            71.5Other
      income, net of expenses
                            
                            
                            (30,316
                            )
                            
                            
                            0.01
                            
                            
                            
                            39,385
                            
                            
                            
                            0.03
                            
                            
                            
                            69,701
                            
                            
                            
                            177.0Income
      tax
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            -Net
      income
                            
                            
                            14,380,466
                            
                            
                            
                            5.7
                            
                            
                            
                            10,324,028
                            
                            
                            
                            6.7
                            
                            
                            
                            4,056,438
                            
                            
                            
                            39.3
 
 Income
from operations rose by 41.3% or $4,408,449 for the year ended December 31,
2008, to $15,087,797, as compared to $10,679,348 for the year ended December 31,
2007, primarily due to the increase of 61.5% in sales revenue. At the same time,
operating margin fell from 6.9% to 6.0%, as a result of the material
general and administrative expenses related to compliance and the disposal
of fixed assets. We estimate that this ratio may fall in early 2009, due to the
impact of imported soybeans, the launch of new products and heavy compliance
expenses (please refer to the section “Operating Expenses” above for more
details), and improve later in 2009 due to the  the likely reduction
in import volumes after the harvest of 2009 (please refer to the section “Cost
of Sales and Gross Profit” for more details).
 
 Net
interest expenses increased by $282,310 or 71.5% from the year ended
December 31, 2007 to the year ended December 31, 2008. As a percentage of net
sales, net interest expense was 0.3% for the year ended December 31, 2008,
compared to 0.25% for the year ended December 31, 2007. The increase was largely
due to the repayment of interest  of a large short-term bank loan that was
due in 2008.
 
 Net other
expenses were $30,316 for the year ended December 31, 2008, and consisted mostly
of a donation to the earthquake areas in Sichuan Province. This
compares with $39,385 of net other income for the year ended
December 31, 2007, which was mainly a government subsidy.
 
 Since we
have been recognized as a “Key Leading Enterprise” in the industrialization of
the agriculture industry by the Chinese government, we enjoy a complete
exemption from income taxes. This status is usually reviewed in every two years,
and the next review has currently been postponed and scheduled for the end of
2009.
 
 Net
income increased by $4,056,438 or 39.3% from the year ended December 31, 2007 to
the year ended December 31, 2008. During the same period, net profit margin fell
from 6.7% to 5.7%. This was related to the reasons previously discussed under
the section Income from Operations.
  -45-
  Operating
Activities
  Year
Ended December 31, 2008 Compared with Year Ended December 31, 2007
  Cash
generated from operating activities for the year ended December 31, 2008 was
$30,834,483, while cash used in operating activities for the year ended December
31, 2007 was $4,866,156. This change was mainly due to the reduction of
inventories, especially those of raw materials.
 
 At the
end of 2008, the Chinese government conducted a national strategic reserve
purchase of soybeans, which was designed to uphold the price of domestically
produced non-GM soybeans (please refer to the section “Cost of Sales and Gross
Profit” for more details). The designated purchase price was about $58 per ton
higher than market price. Consequently, we reduced our volume of purchase
to avoid absorbing the high cost of raw materials. In the year ended December
31, 2008, we released nearly $15 million of cash from maintaining inventories,
mostly raw materials.
 
 Due to
the pressure of the national strategic reserve purchase, we spent $4.4 million
in advances to suppliers, in order to secure the supply of raw
materials.
 
 As a
result of the reduced purchase volumes, we released about $1.68 million in cash
from prepaid VAT and other taxes, which mostly comprises the incoming VAT
included in the gross purchase price of the soybean we have bought.
 
 Generally,
our cash flows are stable, as we sell mostly on cash basis, with ignorable trade
receivables, and usually, our products are sold just a few days after they
are produced. We expect that this will continue in 2009, We expect that this
will continue in 2009, as the sales of our products is still very robust and we
can sell almost everything we produce, and we do not plan to change our mostly
cash sales policy.
  -46-
  Investing
Activities
 
 Year
Ended December 31, 2008 Compared with Year Ended December 31, 2007
 
 Net cash
used in investing activities for the year ended December 31, 2008 was
$4,166,921, compared to $12,413,404 for the year ended December 31, 2007. The
major reason for this reduction was that we have completed the majority of our
construction projects, including the renovation of Plant 2 and the building of
several production lines in 2007.
 
 In the
year ended December 31, 2008, we paid net cash of $135,534 for plant and
equipment, and made payment of $4,176,943 for construction in
progress.
 
 We
satisfied the demand for cash used in capital investments with a short-term bank
loan, supplemented by our cash reserves.
  -47-
  Financing
Activities
 
 Recent
Events
 
 On
October 3, 2007, we completed, at a price of $2.15 per share, a private
placement of 10,000,000 shares of Series A Convertible Preferred Stock, with a
par value $0.001 per share and attached warrants to purchase Common Stock. The
gross proceeds of the offering was $21.5 million.
 
 Year
Ended December 31, 2008 Compared with Year Ended December 31, 2007
 
 Net
cash used in financing activities was $6,367,610 for the year ended
December 31, 2008, compared to net cash provided of $22,926,970 for the
year ended December 31, 2007. The major reason for this change in year 2008 was
that we repaid $12,974,669 of a bank loan due, while we received a new loan
of $6,607,059.
 
 Loans
 
 The
balance of short-term bank loans was $6,711,214 at December 31, 2008, compared
to $12,305,000 at December 31, 2007. This was caused by the decrease in demand
for working capital, mainly due to reduced soybean purchases(please refer
to the section “Cost of Sales and Gross Profit” in the comparison between the
operational results of 2008 and 2007 above).
 
 The
balance of our long-term bank loan was about $434,678 at December 31, 2008, plus
a current portion of $55,149, payable within one year of the balance sheet
date.
 
 As a
result of our A credit ranking by the Agricultural Development Bank,
Shuangyashan City Branch, we currently have a credit line of up to RMB190
million, or about USD27.7 million. We believe that this is sufficient for
our working capital needs at current level of operations.
 
 The
credit line has the following material terms:
 
 1.
              The
      term of the credit line is for one year, and the interest rate is 6.93%.
      subject to adjustment;   The Company/borrower shall
      purchase insurance for pledged assets, with the Bank as the first
      beneficiary of insurance proceeds.
 2.
              The
      loans borrowed within this credit line can only be used to purchase crops.
      In Yanglin’s case, the loans  can only be used to purchase
      soybeans.
 3.
              When
      Yanglin applies to actually borrow the funds, the Bank shall confirm the
      conditions and/or circumstances of the loan, and report to the appropriate
      higher officers within the Bank to verify, examine and approve such
      applications, before actually releasing any money to Yanglin under the
      maximum credit line.
 4.
              When
      the People’s Bank of China adjusts the interest rate of loans, the Bank
      has the right and discretion to adjust the interest rate of loans
      accordingly.
 5.
              The
      loans would be secured by Yanglin’s assets, i.e., building, machinery and
      land use rights.
  -48-
  Future
Cash Commitments
 
 We have
no future cash commitments as at December 31, 2008.
 
 Critical Accounting Policies
and Estimates
 
 Management's
discussion and analysis of its financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with United States generally accepted accounting principles. Our
financial statements reflect the selection and application of accounting
policies that require management to make significant estimates and judgments.
See note 1 to our consolidated financial statements, "Summary of Significant
Accounting Policies and Organization". We believe that the following reflect the
more critical accounting policies that currently affect our financial condition
and results of operations:
 
 Method
of accounting
 
 The
Company maintains its general ledger and journals with the accrual method
accounting for financial reporting purposes.  The financial statements
and notes are representations of management.  Accounting policies
adopted by the Company conform to generally accepted accounting principles in
the United States of America and have been consistently applied in the
presentation of its financial statements.
 
 The share
exchange transaction has been accounted for as a recapitalization of Yanglin
Soybean Inc. where the Company (the legal acquirer) is considered the accounting
acquiree and Faith Winner (BVI) (the legal acquiree) is considered the
accounting acquirer. As a result of this transaction, the Company is deemed to
be a continuation of the business of Faith Winner (BVI).
 
 Accordingly,
the accompanying financial statements are those of the accounting acquirer,
Faith Winner (BVI). The historical stockholders’ equity of the accounting
acquirer prior to the share exchange has been retroactively restated as if the
share exchange transaction occurred as of the beginning of the first period
presented.
 
 Principles
of consolidation
 
 The
consolidated financial statements, which include the Company and its
subsidiaries, are complied in accordance with generally accepted accounting
principles in the United States of America. All significant inter-company
accounts and transactions have been eliminated. The consolidated financial
statements include 100% of assets, liabilities, and net income or loss of those
wholly-owned subsidiaries.
 
 Name
      of Company
                              
                              Place of
                                incorporation
                              
                              Attributable
                                interestFaith
      Winner Investments Ltd
                              
                              British Virgin Islands
                              
                              
                              100
                              %Faith
      Winner (Jixian) Agriculture Development Company
                              
                              PRC
                              
                              
                              100
                              %Heilongjiang
      Yanglin Soybean Group Co. Ltd
                              
                              PRC
                              
                              
                              100
                              %*Deemed
      variable interest entity member
  -49-
  Use
of estimates
 
 The
preparation of the financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting periods.  Management made these estimates using
the best information available at the time the estimates were made; however
actual results could differ materially from those estimates.
 
 Economic
and political risks
 
 The
Group’s operations are conducted in the PRC. Accordingly, the Company’s
business, financial condition and results of operations may be influenced by the
political, economic and legal environment in the PRC, and by the general state
of the PRC economy.
 
 The
Group’s operations in the PRC are subject to special considerations and
significant risks not typically associated with companies in North America and
Western Europe. These include risks associated with, among others, the
political, economic and legal environment and foreign currency exchange. The
Group’s results may be adversely affected by changes in the political and social
conditions in the PRC, and by changes in governmental policies with respect to
laws and regulations, anti-inflationary measures, currency conversion,
remittances abroad, and rates and methods of taxation, among other
things.
 
 Land
use rights
 
 Land use
rights are stated at cost less accumulated amortisation.  Amortisation
is provided over the respective useful lives, using the straight-line
method.  Estimated useful lives range from 22 to 50
years.
 
 Railway
use rights
 
 Railway
use rights are stated at cost less accumulated amortisation. Amortisation is
provided over the respective useful lives, using the straight-line method.
Estimated useful life is 10 years.
 
 Property,
plant and equipment
 
 Property,
plant and equipment are carried at cost less accumulated
depreciation.  Depreciation is provided over their estimated useful
lives, using the straight-line method. Estimated useful lives of the plant and
equipment are as follows:
 
 Buildings
                  10
      - 35 yearsMachinery
      and equipment
                  3.5
      - 30 yearsOffice
      equipment
                  4 -
      20 yearsMotor
      vehicles
                  6 -
      10 years
 
 The costs
and related accumulated depreciation of assets sold or otherwise retired are
eliminated from the accounts and any gain or loss is included in the statement
of income. The cost of maintenance and repairs is charged to income when
incurred, whereas significant renewals and betterments are
capitalized.
 
 Accounting
for the impairment of long-lived assets
 
 The
long-lived assets held and used by the Group are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
assets may not be recoverable. It is reasonably possible that these assets could
become impaired as a result of changes in technologies or situation in the
industry.  Determination of recoverability of assets to be held and
used is done by comparing the carrying amount of an asset to the future net
undiscounted cash flows to be generated by the asset.
  -50-
  If such
assets are considered to be impaired, the impairment losses to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less estimated costs of disposal.
 
 During
the reporting years, there was no known impairment losses.
 
 Inventories
 
 Inventories
consist of finished goods, and raw materials, and are stated at the lower of
cost or market value. Substantially all inventory costs are determined using the
weighted average basis. Finished goods are comprised of direct materials, direct
labor and an appropriate proportion of production overheads.
 
 Trade
receivables
 
 Trade
receivables are recognized and carried at the original invoice amount less
allowance for any uncollectible amounts. An allowance for doubtful accounts is
maintained for all customers after considering a variety of factors, including
the length of time past due, significant one-time events and the company’s
historical experience.  Bad debts are written off as
incurred.
 
 Cash
and cash equivalents
 
 The
Company considers all highly liquidate investments purchased with original
maturities of three months or less to be cash equivalents.
 
 Foreign
currency translation
 
 The
accompanying financial statements are presented in United States Dollars. 
The reporting currency of the Group is the U.S. Dollar (USD). Faith Winner
(Jixian) and Yanglin use its local currency, Renminbi (RMB), as its
functional currency. Results of operations and cash flow are translated at
average exchange rates during the period, and assets and liabilities are
translated at the end of period exchange rates. Translation adjustments
resulting from this process are included in accumulated other comprehensive
income in stockholders’ equity. Transaction gains and losses that arise from
exchange rate fluctuations from transactions denominated in a currency other
than the functional currency are included in the results of operations as
incurred.
 
 The PRC
government imposes significant exchange restrictions on fund transfers out of
the PRC that are not related to business operations. These restrictions have not
had a material impact on the Group because it has not engaged in any significant
transactions that are subject to the restrictions.
 
 The
exchange rates used to translate amounts in RMB into USD for the purposes of
preparing the consolidated financial statements were as follows:
 
 2008
                      
                      
                      2007Year
      end RMB : USD exchange rate
                      
                      
                      6.8542
                      
                      
                      
                      7.3141Average
      yearly RMB : USD exchange rate
                      
                      
                      6.9623
                      
                      
                      
                      7.6172
 
 RMB is
not freely convertible into foreign currency and all foreign exchange
transactions must take place through authorized institutions. No representation
is made that the RMB amounts could have been, or could be, converted into USD at
the rates used in translation.
 
 Revenue
recognition
 
 Revenue
represents the invoiced value of goods sold recognized upon the delivery of
goods to customers. Revenue is recognized when all of the following criteria are
met: Persuasive evidence of an arrangement exists, delivery has occurred or
services have been rendered, the seller’s price to the buyer is fixed or
determinable, and collection is reasonably assured.
  -51-
  Costs
of sales
 
 Cost of
sales consists primarily of direct material costs, direct labor cost, direct
depreciation and related direct expenses attributable to the production of
products.  Written-down inventory to the lower of cost or market value
is also reflected in cost of revenues.
 
 Advertising
 
 The Group
expenses all advertising expenses as incurred.
 
 Shipping
and handling
 
 All
shipping and handling costs are expensed as incurred.
 
 Research
and development
 
 All
research and development costs are expensed as incurred.
 
 Retirement
benefits
 
 Retirement
benefits in the form of contributions under defined contribution retirement
plans to the relevant authorities are charged to the statements of income as
incurred.
 
 Income
taxes
 
 The Group
accounts for income tax using an asset and liability approach and allows for
recognition of deferred tax benefits in future years.  Under the asset
and liability approach, deferred taxes are provided for the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes.  A valuation allowance is provided for deferred tax assets
if it is more likely than not these items will either expire before the Group is
able to realize their benefits, or that future realization is
uncertain.
 
 Statutory
reserves
 
 As
stipulated by the PRC’s Company Law and as provided in the Faith Winner
(Jixian), and Yanglin’s Articles of Association, Faith Winner and
Heilongjiang Yanglin’s net income after taxation can only be distributed as
dividends after appropriation has been made for the following:
 
 (i)
              Making up cumulative prior years’
      losses, if any;
 (ii)
              Allocations to the “Statutory
      surplus reserve” of at least 10% of net income after taxation, as
      determined under PRC accounting rules and regulations, until the fund
      amounts to 50% of the Company's registered capital, which is restricted
      for set off against losses, expansion of production and operation or
      increase in registered
capital;
 (iii)
              Allocations
      of 5-10% of income after tax, as determined under PRC accounting rules and
      regulations, to the Company's “Statutory common welfare fund”, which is
      restricted for capital expenditure for the collective benefits of the
      Company's employees; and
 (iv)
              Allocations
      to the discretionary surplus reserve, if approved in the shareholders’
      general meeting.
  -52-
  On
December 31, 2001, Heilongjiang Yanglin established a statutory surplus reserve
as well as a statutory common welfare fund and commenced to appropriate 10% and
5%, respectively of the PRC net income after taxation to these
reserves.
 
 Comprehensive
income
 
 Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners.  Among other
disclosures, all items that are required to be recognized under current
accounting standards as components of comprehensive income are required to be
reported in a financial statement that is presented with the same prominence as
other financial statements. The Group’s current component of other comprehensive
income is the foreign currency translation adjustment.
 
 Recent
accounting pronouncements
 
 In
December 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (“SFAS”) No. 160, "Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS 160
establishes accounting and reporting standards for the noncontrolling interest
in a subsidiary and for the deconsolidation of a subsidiary.  SFAS 160
is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. As such, the Company is required to
adopt these provisions at the beginning of the fiscal year ended December
31, 2009. The Company is currently evaluating the impact of SFAS 160 on its
consolidated financial statements but does not expect it to have a material
effect
 
 In
December 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (“SFAS”) No. 141(R), "Business
Combinations”.  SFAS 141(R) establishes principles and requirements
for how the acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, an any noncontrolling
interest in the acquiree, recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase, and determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination.  SFAS
141(R) is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008.  As such, the Company
is required to adopt these provisions at the beginning of the fiscal year ended
December 31, 2009.  The Company is currently evaluating the impact of
SFAS 141(R) on its consolidated financial statements but does not expect it to
have a material effect.
 
 In March
2008, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard (“SFAS”) No. 161 “Disclosures about Derivative Instruments
and Hedging Activities”. SFAS 161 is intended to improve financial reporting
about derivative instruments and hedging activities by requiring enhanced
disclosures to enable investors to better understand their effects on an
entity’s financial position, financial performance, and cash flows. It is
effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The Company is currently evaluating the impact of SFAS 161 on its
consolidated financial statements but does not expect it to have a material
effect.
 
 In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles. SFAS 162 identifies the sources of accounting principles
and the framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with GAAP. SFAS 162 directs the GAAP hierarchy to the entity, not the
independent auditors, as the entity is responsible for selecting accounting
principles for financial statements that are presented in conformity with GAAP.
SFAS 162 is effective 60 days following the SEC's approval of the Public Company
Accounting Oversight Board amendments to remove the GAAP hierarchy from the
auditing standards. SFAS 162 is not expected to have a material impact on the
Company’s financial statements.
  -53-
  Off-Balance
Sheet Arrangements
 
 We do not
have any off-balance sheet arrangements.
 
 Tabular
Disclosure of Contractual Obligations
 
 Payments
      due by periodContractual
                          obligations
                        
                        Total
                        
                        
                        Less
                          than
      1
                          year
                        
                        
                        1-3
      years
                        
                        
                        3-5
      years
                        
                        
                        More
                          than
      5
                          yearsLong-Term
      Debt Obligations
                        
                        $
                        489
      , 827
                        
                        
                        $
                        55,149
                        
                        
                        $
                        123,719
                        
                        
                        $
                        113,507
                        
                        
                        $
                        197,452Capital
      Lease Obligations
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Operating
      Lease Obligations
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Purchase
      Obligations
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
  Item
7A. Quantitative And Qualitative Disclosures About Market Risk
 
 Market
risk is the risk of loss to future earnings, to fair values or to future cash
flows that may result from changes in the price of a financial instrument. The
value of a financial instrument may change as a result of changes in interest
rates, exchange rates, commodity prices, equity prices and other market changes.
Our cash and cash equivalents are held for working capital purposes and consist
primarily of bank deposits. We do not enter into investments for trading or
speculative purposes.
 
 Interest
Rate Risk
 
 Our
exposure to interest rate risk primarily relates to the interest income
generated by excess cash invested in demand deposits. We have not used
derivative financial instruments in our investment portfolio in order to reduce
interest rate risk. Interest earning instruments carry a degree of interest rate
risk. We have not been exposed nor do we anticipate being exposed to material
risks due to changes in interest rates.
 
 Foreign
Currency Risk
 
 Our
business is operated in the PRC, and its value is effectively denominated in
Renminbi. The fluctuation of foreign exchange rate between U.S. dollars and
Renminbi could affect the value of our common stock. Our revenues and expenses
are primarily denominated in Renminbi, and so our exposure to foreign exchange
risks should generally be limited. We do not have material monetary assets and
liabilities denominated in U.S. dollars, although to the extent that we do in
the future, the fluctuation of foreign exchange rate would affect the value of
these monetary assets and liabilities denominated in U.S. dollars. Generally,
appreciation of Renminbi against U.S. dollars will devaluate the assets and
liabilities denominated in U.S. dollar, while devaluation of Renminbi again U.S.
dollars will appreciate the assets and liabilities denominated in U.S. dollar.
In China, very limited hedging transactions are available to reduce our exposure
to exchange rate fluctuations. To date, we have not entered into any hedging
transactions in an effort to reduce our exposure to foreign currency exchange
risk. While we may decide to enter into hedging transactions in the future, the
availability and effectiveness of these hedges may be limited and we may not be
able to successfully hedge our exposure at all.
  -54-
  The
conversion of RMB into foreign currencies, including U.S. dollars, has been
based on rates set by the People’s Bank of China. On July 21, 2005, the PRC
government changed its decade-old policy of pegging the value of the RMB to the
U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a
narrow and managed band against a basket of certain foreign currencies. This
change in policy has resulted in an appreciation of the RMB against the U.S.
dollar by approximately 6% during 2007 and approximately 12% since the change of
the policy to the end of 2007. While the international reaction to the RMB
revaluation has generally been positive, there remains significant international
pressure on the PRC government to adopt an even more flexible currency policy,
which could result in a further and more significant appreciation of the RMB
against the U.S. dollar. We use the U.S. dollar as the reporting currency for
our financial statements. Fluctuations in exchange rates, primarily those
involving the U.S. dollar, may affect our costs and operating margins as well as
our net income reported in U.S. dollars. For example, to the extent that we need
to convert U.S. dollars into RMB for our operations, appreciation of the RMB
against the U.S. dollar would have an adverse effect on the RMB amount we
receive from the conversion. Assuming we had converted the U.S. dollar
denominated cash balance equivalent to US$ 30,365,413 as of December 31, 2008
into RMB at the exchange rate of US$1.00 for RMB 6.8346, the respective People’s
Bank of China rates as of December 31, 2008, this cash balance would have been
RMB 207.5 million. Assuming a further 10% appreciation of the RMB against the
U.S. dollar, this cash balance would have decreased to RMB 186.75 million as of
December 31, 2008. Conversely, if we decide to convert our RMB into U.S. dollars
for the purpose of making payments for dividends for business purposes,
appreciation of the U.S. dollar against the RMB would have a negative effect on
the U.S. dollar amount available to us.
 
 Commodity
Price Risk
 
 We engage
in manufacturing of non-genetically modified soybean-based products in the PRC.
Our main raw materials are commodities. Our exposure to commodity price risk is
directly related to fluctuations of PRC domestic market and indirectly related
to that of international market. For example, the soybean price went up from RMB
1.23 per 500 grams at the beginning of the last year to RMB 2.13 per 500 grams
at the end of 2007, and in early March 2008 it has climbed to as high as RMB
2.75 per 500 grams, due to both the shortage in soybean supply caused by a
severe drought in 2007 and farmers’ cutting growing areas of soybeans brought by
the continuously low price level by the end of 2006. However, due to current
economic crisis, the price dropped to RMB 1.62 per 500 grams as of April 10,
2009. To date, we have not entered into any hedging transactions in an effort to
reduce our exposure to commodity price risk.
 
 Item
8. Financial Statements And Supplementary Data
 
 Please
refer to Item 15 “Exhibits and Financial Statement Schedules” of this
report.
  -55-
  Item
9.  Changes In and Disagreements With Accountants On Accounting and
Financial Disclosure
 
 There are
no such reportable events as required by Item 304(b) of Regulation
S-K.
 
 Item
9a. Controls And Procedures
 
 (a)
              Management’s Report on Disclosure
      Controls and Procedures
 
 As
required by Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act, our
management has carried out an evaluation, with the participation and under the
supervision of our chief executive officer and chief financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as of December 31, 2008.
 
 Disclosure
controls and procedures refer to controls and other procedures designed to
ensure that information required to be disclosed in the reports we file or
submit under the Securities Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the SEC and
that such information is accumulated and communicated to our management,
including our chief executive officer and chief financial officer, as
appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating our disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management is required to apply its judgment in evaluating and
implementing possible controls and procedures.
  Management
conducted its evaluation of disclosure controls and procedures under the
supervision of our chief executive officer and our chief financial officer.
Based upon, and as of the date of this evaluation, our chief executive officer
and chief financial officer concluded that, as of December 31, 2008, our
disclosure controls and procedures were effective, though there were some
significant deficiencies in our internal control over financial reporting
described below.
 
 (b)
              Management’s Report on Internal
      Control over Financial
Reporting
 
 Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act. The Company's internal control system over
financial reporting is a process designed under the supervision of the Company's
Chief Executive Officer and Chief Financial Officer to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of the consolidated financial statements in accordance with United States
generally accepted accounting principles (“U.S. GAAP”). Because of its inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies and
procedures may deteriorate.
 
 A
material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility
that a material misstatement of our annual or interim financial statements will
not be prevented or detected on a timely basis. A significant deficiency is a
deficiency, or a combination of deficiencies, in internal control over financial
reporting that is less severe than a material weakness, yet important enough to
merit attention by those responsible for oversight of our financial
reporting.
 
 Management
assessed the effectiveness of our internal control over financial reporting as
of December 31, 2008. In making this assessment, we used the criteria set forth
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
in Internal Control - Integrated Framework. Based on our assessment, we
determined that, as of December 31, 2008, our internal control over financial
reporting was effective, though there were certain identified significant
deficiencies by December 31, 2008 as follows:
 
 The
significant deficiencies include: that there were no code of ethics for the
board of directors and of independent directors as of December 31, 2008 (we have
remedied these deficiencies, please see “Recent progress after December 31,
2008” below); that special committees of the board have not been established;
and that no formal accounting manual has been issued.
These deficiencies will be described in details in the section
“Management’s Remediation Initiatives and Interim Measures” below.
 
 As we
have disclosed in our prior SEC filings, we conduct all of our operations
through our Chinese operating subsidiaries, which were privately owned until
October 2007. At the time of their acquisition, these Chinese companies did not
have in place the financial controls and procedures required of a U.S. public
company. Now as a public company, we are implementing and will continue to
implement remediation initiatives and interim measures with respect to our
internal controls over financial reporting.
 
 Management’s
Remediation Initiatives and Interim Measures
 
 The
following is a description of each deficiency with respect to our internal
controls over financial reporting identified by our management and the
remediation initiatives and progress that we have implemented or intend to
implement in the near future.
  -56-
  1)
              The Company currently does not
      have a complete set of Articles for the board of directors. The Company
      now does not have any independent director as of December 31,
      2008.
  Recent
progress after December 31, 2008
 
 We have
formally released our bylaws, appointed independent directors and established
the audit, compensation and nomination committees of the board on
March  9, 2009 and filed Form 8-K with SEC.
 
 2)
              The special committees of the
      board, including audit committee, appointment committee and compensation
      committee, have not been
established.
  Recent
progress after Dec. 31, 2008
 
 We have
formally appointed independent directors, established the audit,
compensation and nomination committees of the board and approved the charters
for each of the committees on March 9, 2009 and filed Form 8-K.
  3)
              The Company does not have an
      accounting policy manual based on U.S. GAAP and have not formulated formal
      procedures on the accounting treatment of significant transactions and
      processes.
  Remediation
Initiative and Progress
 
 We have
already formulated the Financial Management Procedure under China GAAP and
released it formally after approval of senior management. This procedure became
effective on September  1, 2008. We will draft the Accounting Manual
under US GAAP, and it will include accounting policies and the detailed
procedures of accounting treatments. To complete this task, we need the help of
competent professional accounting advisors. We are currently seeking such
advisors.
 
 There
will be the significant costs involved for  engaging professional
accounting advisors; studying and researching U.S. GAAP; drafting, revising and
approving our accounting manual; and training and educating our accounting
staff with the knowledge of U.S.GAAP.
 
 This
annual report 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 annual report.
 
 (c)
Changes in Internal Controls over Financial Reporting
 
 During
the year ended December 31, 2008, we have completed the following remediation
measures on the internal control  over financial
reporting:
 
 1. We
have already formulated a Code of Conduct, in both Chinese and English, and
released it formally in September, 2008 after it was approved by the Board of
Directors. This Code of Conduct is applicable to all staff including our
senior management, and it covers various contents such as integrity, fair
trading, conflict of interests, disclosure of information, compliance to laws,
confidentiality of information, non-discriminatory treatment, safe-guarding of
the company’s assets, reporting of violation of the Code and reporting of fraud.
We have also established a channel for issuing and communicating the Code of
Conduct to all staff.
  -57-
  2. We
have developed the detailed procedures and regulations for identifying and
investigating fraud and for staff reporting and exposing wrongful behavior, and
include such contents into the Code of Conduct ,which was formally released in
September, 2008.
 
 3. We
have formulated the Management Procedure of Company Institutions, which
provides the management regulations on the formulation, approval and update of
the management institutions of the company, and released it formally after being
approved by senior management.
  Item
9b. Other Information
 
 None.
 
 PART
III
 
 Item
10. Directors, Executive Officers and Corporate Governance
 Our
Directors and Executive Officers
 
 We have
provided below certain information about our executive officers and directors.
Our directors serve one-year terms or until their successors are elected
Officers serve at the discretion of the board of directors.
 
 Name
                    
                    Age
                    
                    PositionShulin
      Liu
                    
                    44
                    
                    Chief
      Executive Officer/DirectorShaocheng
      Xu
                    
                    33
                    
                    Chief
      Financial OfficerYang
      Miao (resigned March 2009)
                    
                    36
                    
                    DirectorZongtai
      Guo
                    
                    50
                    
                    Director
      and Chief Operating OfficerAlbert
      McLelland (since March 2009)
                    
                    50
                    
                    DirectorMichael
      Marks (since March 2009)
                    
                    36
                    
                    DirectorXiao
      Feng
                    
                    52
                    
                    DirectorYulin
      Liu
                    
                    51
                    
                    President
      and General Manager of Heilongjiang Yanglin Soybean Group Co.
      LtdShuhua
      Xia
                    
                    56
                    
                    Accounting
      Supervisor of Heilongjiang Yanglin Soybean Group Co.
  Ltd
 
 The
following is a summary of the biographical information of our directors and
officers:
 
 Shulin Liu, is founder,
Chairman and Chief Executive Officer of Yanglin. Mr. Liu is involved in
Yanglin’s overall management and is responsible for establishing strategic
directions. From 2002 to present, Mr. Liu has been the Chief Executive Officer,
Chairman and Director of Yanglin when its name was changed. From 2001 to 2002,
he jointly established Jixian County Golden Land Oil Company Limited
(predecessor to Yanglin) with Ms. Huanqin Ding and Mr. Shulin Liu and had been
the Chief Executive Officer, Chairman and a Director. From 1996-2000, he was
manager of Jinxian County Longfu Food & Oil Trade Co. Ltd., Xiwang Feed
Company, Jixian County Tianlin Food & Oil Co. Ltd in Jixian County. From
1992 to 1996, Mr. Liu was appointed General Manger of Jixian Construction
Material Food and Oil Trading Company. Prior to that, from 1983-1992, Mr. Liu
assumed the positions of supervisor at the Shuangyashan Jixian County Land
Authority, supervisor of the Minerals Resources Management Station, and manager
of Labor Service Company of Land Bureau of Jixian County. From 1980 to 1983, Mr.
Liu worked as a government officer in Shuangyashan Jixian County, Fuli Town. Mr.
Liu holds a Master degree in Enterprise Management from Heilongjiang
University.
  -58-
  Shaocheng Xu, was appointed as
Yanglin’s Chief Financial Officer in March 2007. Previously, he worked as a
financial consultant in Dow Jones Business Consultants, Inc. from August 2006 t
o March 2007 and as the Internal Control Supervisor at Citigroup Asia Pacific
Operations Center from July 2005 to August 2006. From September 2004 to July
2005, he was studying for a Master of Professional Accounting with the Shanghai
University of Finance and Economics and will soon obtain the degree. From
September 2001 to August September 2004, he was the corporate management
coordinator for United Automotive Electronics Systems Co., Ltd. From August 1999
to September 2001, he worked as a senior customer services representative in
Shanghai Eastern Rohm and Haas Corp. From July 1997 to August 1999, he was the
Manager Assistant in Shanghai Foreign Aviation Corp. Mr. Xu received his
Bachelor of Arts in English from Foreign Affairs College of China in 1997. He is
currently still studying for a Master of Accounting with the Shanghai University
of Finance and Economics. Mr. Xu is also soon to be qualified as a Professional
Accountant with the Association of Chartered Certified Accountants (ACCA) of the
United Kingdom.
  Zongtai Guo,joined Yanglin as its
Vice President and Chief Operating Officer in 2006. Mr. Guo is responsible
sales, operations and assists Mr. Shulin Liu, Yanglin’s President and Chief
Executive Officer, in the strategic planning and the development of Yanglin.
Prior to joining Yanglin, Mr. Guo was the Vice President of Qingdao Haoke Family
Products Company (daily housekeeping products company, such as soap and
detergent)between 2004 and 2005.From 2001 to 2004, he was an Assistant Manager
at Heilongjiang Sanjiang Food Company (manufacturing soybean products). He also
worked in Shanghai Yikun Food Company as its General Manager from 1999 to 2001.
From 1994 to 1999, Mr. Guo also worked in various companies such as Hainan
Longhua Company and China Xingnan Company and Heilongjiang Eight One Farm
University as their Finance Manager. He graduated from Bayi Agriculture
Development University of Heilongjiang Province, majoring degree in Enterprise
Management and became a qualified accountant in the PRC in 1993.
 
 Mr. Albert McLelland was
appointed as a director since March 2009. He has been senior managing director
of AmPac Strategic Capital LLC (AmPac) since 2003. He is also a founder and
managing director of AmPac-TDJ LLC. Prior to founding AmPac, Albert was
responsible for cross-border transactions practice of PricewaterhouseCoopers’
(PwC) Financial Advisory Services. Albert possesses extensive investment and
merchant banking experience. He has built two Asian based financial service
firms in 1980-1990’s. He also ran corporate finance at CEF Taiwan Limited.
Albert began his investment banking career at Shearson Lehman underwriting bond
issues. Albert holds an MBA degree from the University of Chicago and a Master
of International Affairs from Columbia University. He did his undergraduate
studies at the University of South Florida and also studied Mandarin at the
National Normal University in Taiwan.
 
 Mr. Michael Marks was
appointed as a director since March 2009.  He is the President and
Director of Middle Kingdom Alliance Corp., a special purpose acquisition
corporation listed on Over-The-Counter Bulletin Board. Until December 2007 he
was a managing director and principal of Sonnenblick Goldman Asia Pacific
Limited, a firm that provides advisory services in real estate investments.
Previously, Mr. Marks served as a director of Horwath Asia Pacific from January
2002 to December 2005 and was the Chief Executive Officer and Director at
B2Globe Limited from May 2001 to August 2002. Mr. Marks received both Bachelor’s
and Master’s Degrees in Commerce from the University of the Witwatersrand in
Johannesburg, South Africa in 1994 and 1997, respectively, and also received a
Bachelor’s Degree in Psychology from the University of South Africa in 1998. In
1997, Mr. Marks qualified as a Chartered Accountant in South Africa, and in 1999
as a Fellow of the Association of International Accountants in the United
Kingdom.
 
 Mr. Xiao Feng was the
President of Soybean Research & Development Center of Heilongjiang Province
since November 2005.  He has also been the Vice President of
Northeastern Agriculture University since September 2007.  He was the
section chief for Development and Planning in Science & Technology division
of Heilongjiang Provincial government from March 1998 to November
2005.  He obtained his Medical Doctor’s degree from Harbin Medical
University in 1983.
  -59-
 
 Yulin Liu, was appointed
Yanglin’s President and General Manager in March 2007. He is responsible for
Yanglin’s day-to-day operations. Mr. Liu has a strong background in financial
management. He worked as chief internal auditor of the Central Bank of Ji Xian
County between 1986 and 1989. He was the vice president of Industrial and
Commercial Bank of China, Ji Xian County between 1989 and 2001. From January
2002 to May 2005, he was the President of Industrial and Commercial Bank of
China, Jianshan Branch and from May 2005 to February 2007, he was President of
Industrial and Commercial Bank of China, Dianchang Branch. Mr. Liu graduated
from Harbin Senior Finance College, majoring in Finance
 
 Shuhua Xia, joined Yanglin as
Chief Accountant in 2003. Ms. Xia is primarily responsible for Yanglin’s
accounting and financial operations as well as its reporting requirements. Prior
to joining Yanglin, Ms. Xia was the Finance Manager of Jixian Drying Tobacco
Leaf Factory from 1991-2002. She also held various positions in Jixian Steel and
Iron Factory including Finance Manager from 1986 to 1990, and Finance Supervisor
from 1970 to 1983. Between 1983 and 1986, Ms. Xia pursued and obtained a Junior
College degree from Jiamusi Engineering College.
 
 There are
no family relationships among our directors and executive officers except that
Yulin Liu is the first cousin of Shulin Liu. There is no arrangement or
understanding between or among our executive officers and directors pursuant to
which any director or officer was or is to be selected as a director or officer,
and there is no arrangement, plan or understanding as to whether non-management
shareholders will exercise their voting rights to continue to elect the current
board of directors.
 
 Our
directors and executive officers have not, during the past five
years:
 
 ·
              had any bankruptcy petition
      foiled by or against any business of which was a general partner or
      executive officer, either at the time of the bankruptcy or within two
      years prior to that time,
 
 ·
              been convicted in a criminal
      proceeding and is not subject to a pending criminal
      proceeding,
 
 ·
              been subject to any order,
      judgment or decree, not subsequently reversed, suspended or vacated, of
      any court of competent jurisdiction, permanently or temporarily enjoining,
      barring, suspending or otherwise limiting his involvement in any type of
      business, securities, futures, commodities or banking activities;
      or
 
 ·
              been
      found by a court of competent jurisdiction (in a civil action), the
      Securities Exchange Commission or the Commodity Futures Trading Commission
      to have violated a federal or state securities or commodities law, and the
      judgment has not been reversed, suspended or
  vacate
  -60-
  Board
Composition and Committees:
 
 Our Board
has 5 members. Messrs McLelland, Marks and Feng are independent
directors.  We have an Audit Committee, a Compensation Committee and a
Nominating and Corporate Governance Committee. The Audit Committee has at least
one member, Mr. Albert McLelland, who meets the definition of a “financial
expert” under SEC rules and whom the Board has determined to be
“independent”.
 
 Audit Committee. The Audit
Committee is currently comprised of Messrs. Albert McLelland, Xiao Feng and
Michael Marks with Mr. Albert Mclelland as the chairman, each of whom are
“independent” as that term is defined by SEC rules and under the NASDAQ listing
standards. The Audit Committee is directly responsible for the appointment,
retention, compensation and oversight of the work of any registered public
accounting firm employed by the Company (including resolution of disagreements
between management and the accounting firm regarding financial reporting) for
the purpose of preparing or issuing an audit report or related work or
performing other audit, review or other services. The Audit Committee has the
ultimate authority and responsibility to evaluate and, where appropriate,
replace the registered public accounting firm. The Audit Committee has the
authority to review and approve transactions between the Company and its
directors, officers and affiliates.
  Compensation Committee. The
Compensation Committee is responsible for the administration of all salary,
bonus and incentive compensation plans for our officers and key employees. The
members of the Compensation Committee are Messrs. Michael Marks, Albert
McLelland and Xiao Feng, with Mr. Marks as the chairman. All of whom are
“independent” directors.
 
 Nominating and Corporate Governance
Committee. The Nominating and Corporate Governance Committee is
responsible for preparing the list of candidates to fill the expiring terms of
directors on our Board of Directors. The committee submits the list of
candidates to the Board of Directors who determines which candidates will be
nominated to serve on the Board of Directors. The nominees are then submitted
for election at the annual meeting of stockholders. The committee also submits
to the entire Board of Directors, a list of candidates to fill any interim
vacancies on the Board of Directors resulting from the departure of a member of
the Board of Directors for any reason prior to the expiration of his term. In
recommending candidates for the Board of Directors, the committee keeps in mind
the functions of this body.
 
 The
committee considers various criteria, including the ability of the individual to
meet SEC and NASDAQ “independence” requirements, general business experience,
general financial experience, knowledge of the company’s industry (including
past industry experience), education, and demonstrated character and judgment.
The committee will consider director candidates recommended by a stockholder if
the stockholder mails timely notice to the secretary of the Company at its
principal offices, which notice includes (i) the name, age and business address
of such nominee, (ii) the principal occupation of such nominee, (iii) a brief
statement as to such nominee’s qualifications, (iv) a statement that such
nominee consents to his or her nomination and will serve as a director if
elected, (v) whether such nominee meets the definition of an “independent”
director under the SEC rules and under NASDAQ listing standards and (vi) the
name, address, class and number of shares of company stock held by the
nominating stockholder.
 
 Any
person nominated by a stockholder for election to the Board of Directors will be
evaluated based on the same criteria as all other nominees. The committee also
oversees our adherence to our corporate governance standards. The members of the
committee are Messrs. Xiao Feng, Michael Marks and Albert McLelland, with Xiao
Feng as the chairman.
 
 The Board
had 3 meetings during last fiscal year.  All members attended at least
75% of the meetings.
 
 Section
16(a) Beneficial Ownership Reporting Compliance
 
 Section
16(a) of the Exchange Act requires our executive officers, directors and
beneficial owners of more than ten percent (10%) to report their beneficial
ownership of equity interests in the company to the SEC. Their initial reports
are required to be filed using the SEC's Form 3, and they are required to report
subsequent purchases, sales, and other changes using the SEC's Form 4, which
must be filed within two business days of most transactions. Officers,
directors, and persons owning more than 10% of our capital shares are required
by SEC regulations to furnish us with copies of all of reports they file
pursuant to Section 16(a).
 
 According
to our records, Zongtai Guo and Yang Miao have not filed their form 3’s in a
timely manner.
 
 Code
of Ethics
 
 We have
adopted a Code of Ethics (as defined in Item 406 of Regulation S-K) that applies
to our principal executive, financial and accounting officers. Yanglin Soybean,
Inc. will provide a copy of its code of ethics, without charge, to any person
that requests it. Requests should be addressed in writing to Mr. Bode Xu, Chief
Financial Officer, #99 Fanrong Street, Jixian, Shuan Ya Shan City, Heilongjiang
Province, 155900, People’s Republic of China.
  Item
11 Executive Compensation
 
 The
Company’s executive compensation program is designed to pay key management
personnel competitive remuneration based on the authority, responsibility and
accountability of the position held by the individual.
 
 The
following is a summary of the compensation paid by the company to its executive
officers for years 2008 ended December 31, 2008, 2007 ended December 31, 2007
and for 2006 ended December 31, 2006. No other executive officers received
compensation in excess of $100,000 for the years of 2008, 2007 and 2006. We did
not engage in any benchmarking of compensation to set the compensation to our
executive officers.
  -61-
  Compensation
Table
 
 Name
      & Principal Position
                                                
                                                Year
                                                
                                                Salary
                                                  (1)
                                                
                                                Bonus
                                                
                                                Non-Equity
                                                  Incentive
                                                  Plan
                                                  Compensation
                                                
                                                All
      other
                                                  Compensation
                                                
                                                TotalShulin
      Liu
                                                
                                                2008
                                                
                                                $
                                                34,472
                                                
                                                0
                                                
                                                
                                                0
                                                
                                                0
                                                
                                                $
                                                34,472(President
      and Chief Executive Officer )
                                                
                                                2007
                                                
                                                $
                                                31,508
                                                
                                                0
                                                
                                                
                                                0
                                                
                                                0
                                                
                                                $
                                                31,5082006
                                                
                                                
                                                40,090
                                                
                                                0
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                40,090Shaocheng
      Xu
                                                
                                                2008
                                                
                                                $
                                                20,683
                                                
                                                0
                                                
                                                
                                                0
                                                
                                                0
                                                
                                                $
                                                20,683(Chief
      Financial Officer )(2)
                                                
                                                2007
                                                
                                                
                                                18,905
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                18,905Zongtai
      Guo
                                                
                                                2008
                                                
                                                $
                                                25,854
                                                
                                                0
                                                
                                                
                                                0
                                                
                                                0
                                                
                                                $
                                                23,631(Chief
      Operational Officer )
                                                
                                                2007
                                                
                                                $
                                                23,631
                                                
                                                0
                                                
                                                
                                                0
                                                
                                                0
                                                
                                                $
                                                7,5172006
                                                
                                                
                                                7,517Glenn
      A. Little
                                                
                                                2007
                                                
                                                
                                                0
                                                
                                                0
                                                
                                                
                                                0
                                                
                                                0
                                                
                                                
                                                0(President,
      Chief Executive Officer
                                                
                                                2006
                                                
                                                
                                                0
                                                
                                                0
                                                
                                                
                                                0
                                                
                                                0
                                                
                                                
                                                0Officer
      and Chief Financial) (3)Yulin
      Liu
                                                
                                                2008
                                                
                                                $
                                                25,854
                                                
                                                0
                                                
                                                
                                                0
                                                
                                                0
                                                
                                                $
                                                25,854(President
      and General Manager of
                                                
                                                2007
                                                
                                                
                                                23,631
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                $
                                                23,631Heilongjiang
      Yanglin Soybean Group Co. Ltd)(4)
 
 (1)
              The relevant exchange rates for
      financial years 2008, 2007 and 2006 are $1 to RMB 6.8347, $1 to RMB7.6172
      and $1 to RMB7.98189.
 
 (2)
              Shaocheng Xu, was appointed as
      Yanglin’s Chief Financial Officer in March
  2007.
 
 (3)
              Mr. Little was appointed
      President, Chief Executive Officer and Chief Financial Officer in February
      2006. He resigned from these positions effective October 3,
      2007.
 
 (4)
              Yulin Liu, was appointed
      Yanglin’s President and General Manager in March 2007 and is the first
      cousin of Mr. Shulin Liu.
 
 Material
Terms of Employment
 
 Each of
the executive officers has signed a three-year employment contract with Yanglin
effective September 2007 until September 2010. In addition to their salary
compensation, the executive officers are entitled to social insurance benefits
according to PRC laws and regulations.
 
 Termination
of Employment
 
 Yanglin
can terminate the employment contract with the executive officers with immediate
effect without any prior notice under the following circumstances: serious
violation of Yanglin’s rules and disciplines by the executive officers, serious
dereliction of duties by the executive officers; executive officers being
prosecuted under Chinese criminal law.
 
 Yanglin
can terminate the employment contract with the executive officers with 30 days’
prior written notice under the following circumstances: unfit to perform for the
jobs or any new jobs after non-work-related injury; unfit to perform for the
jobs despite additional training; unable to reach an agreement regarding the
employment between the executive officers and Yanglin due to major change of
circumstances.
 
 Compensation
Discussion & Analysis
 
 Yanglin
strives to provide its named executive officers (as defined in Item 402 of
Regulation S-K) with a competitive base salary that is in-line with their roles
and responsibilities.
 
 It is not
uncommon for PRC corporations in that locality to have base salaries as the sole
and only form of compensation. The base salary level is established and reviewed
based on the level of responsibilities, the experience and tenure of the
individual and the current and potential contributions of the individual. The
base salary is compared to the list of similar positions within comparable peer
companies and with consideration of the executive’s relative experience in his
or her position.  Base salaries are reviewed periodically and at the
time of promotion or other changes in responsibilities.
 
 We plan
to implement a more comprehensive compensation program, which takes into account
other elements of compensation, including without limitation, short and long
term compensation, cash and non-cash, and other equity-based compensation such
as stock options. Such compensation program shall be comparative to our peers in
the industry and aimed to retain and attract talented individuals.
 
 Our
Compensation Committee comprising predominantly of independent directors will
oversee the compensation of our named executive officers.
 
 Grants
of Plan-Based Awards
 
 The
Company currently does not have any award plans. No options were granted to any
officer in 2008.
 
 Outstanding
Equity Awards at Fiscal Year End
 
 The
Company currently does not have an equity compensation plan. No options or
shares of stock were granted to any officer in 2008.
  -62-
  Option
Exercises and Stock Vested
 
 No
options were exercised and no shares of stock were vested in 2008.
 
 Pension
Benefits
 
 The
Company does not have any pension plans for its officers.
 
 Nonqualified
Deferred Compensation
 
 There was
no nonqualified deferred compensation for the officers in 2008.
 
 Potential
Payment Upon Termination or Change in Control
 
 The
Company currently does not have payment arrangements for its officers upon
termination or change in control.
 
 Compensation
of Directors
 
 We have
no formal or informal arrangements or agreements to compensate our directors for
services they provide as directors. We plan to implement a compensation program
for our independent directors, as and when they are appointed, which we
anticipate will include such elements as an annual retainer, meeting attendance
fees and stock options. The details of such compensation program will be
negotiated with each such director.
 
 The
directors for Yanglin are not compensated for their services as directors as of
the date of this report.
 
 Item
12. Security Ownership Of Certain Beneficial Owners And Management And Related
Shareholders Matters
 
 The
following table sets forth certain information with respect to the beneficial
ownership of our voting securities following the closing of the Share Exchange
Agreement and the Series A Convertible Preferred Stock Purchase Agreement by (i)
any person or group owning more than 5% of each class of voting securities, (ii)
each director, (iii) our chief executive officer and our top three most highly
compensated officers and (iv) all executive officers and directors as a group as
of April 9, 2009.
  -63-
  Amount
      and Nature of Beneficial
                          Ownership
      (1)Name and
      Address of Beneficial Owner
                        
                        Series
      A
                        
                        
                        Series
      B
                        
                        
                        Common
                          Stock
                        
                        
                        Percentage
      of
                          Class
      (1)Owner
      of More than 5% of ClassVision
      Opportunity Master Fund Ltd
                          20
      West 55th
      Street, 5th
      Floor,
                          New
      York, NY 10019-5373
                        
                        
                        3,720,930
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        37.2
                        %Sansar
      Capital Special Opportunity
                          Master
      Fund, LP (Cayman Master)
                          Walkers
      SPV Ltd.
                          Walkers
      House
                          Mary
      Street 908GT
                          Georgetown,
      Grand Cayman
                          Cayman
      Islands
                        
                        
                        2,767,442
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        27.7
                        %Vicis
      Capital Master Fund
                          126
      East 56th
      Streey, 7th
      Floor,
                          New
      York, NY 10019-5373
                        
                        
                        2,093,023
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        20.9
                        %Vision
      Opportunity Master Fund Ltd
                          20
      West 55th
      Street, 5th
      Floor,
                          New
      York, NY 10019-5373 (2)
                        
                        
                        
                        
                        
                        
                        3,382,664
                        (2)
                        
                        
                        
                        
                        
                        43.4
                        %Sansar
      Capital Special Opportunity
                          Master
      Fund, LP (Cayman Master)
                          Walkers
      SPV Ltd.
                          Walkers
      House
                          Mary
      Street 908GT
                          Georgetown,
      Grand Cayman
                          Cayman
      Islands (2)
                        
                        
                        
                        
                        
                        
                        2,515,856
                        (2)
                        
                        
                        
                        
                        
                        32.3
                        %Vicis
      Capital Master Fund
                          126
      East 56th
      Streey, 7th
      Floor,
                          New
      York, NY 10019-5373 (2)
                        
                        
                        
                        
                        
                        
                        1,902,748
                        (2)
                        
                        
                        
                        
                        
                        24.4
                        %Vision
      Opportunity Master Fund Ltd
                          20
      West 55th
      Street, 5th
      Floor,
                          New
      York, NY 10019-5373 (7)
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        18,283,985
                        (3)
                        
                        
                        47.8
                        %Sansar
      Capital Special Opportunity
                          Master
      Fund, LP (Cayman Master) (7)
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        13,208,245
                        (3)
                        
                        
                        39.8
                        %Vicis
      Capital Master Fund
                          126
      East 56th
      Streey, 7th
      Floor,
                          New
      York, NY 10019-5373 (7)
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        9,989,429
                        (3)
                        
                        
                        33.3
                        %Winner
      State Investments Limited
                          No.
      99, Fanrong Street, Jixian Town,
                          Heilongjiang,
      the People’s Republic of China.
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        18,200,000
                        (4) (5)
                        
                        
                        91.0
                        %Directors
      and Executive OfficersShulin
      Liu
                          99
      Fanrong Street, Jixian County,
                          Heilongjiang
      Province, People’s Republic of China 155900
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        9,100,000
                        (5)
                        
                        
                        45.5
                        %Yang
      Miao
                          99
      Fanrong Street, Jixian County,
                          Heilongjiang
      Province, People’s Republic of China 155900
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        100,000
                        
                        
                        
                        0.5
                        %All
      Directors and Executive Officers
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        9,200,000
                        
                        
                        
                        46
                        %
 
 (1)
              On October 3, 2007, we entered
      and consummated a Series A Preferred Agreement for the sale of a total of
      10,000,000 shares of our newly designated Series A Preferred Shares for
      the purchase price of $2.15 per share. Each entity’s number of Series A
      Preferred Shares were determined by dividing the amount of Purchase Price
      (as defined in the Series A Preferred Agreement) paid by such entity by
      the $2.15 per share price. Each share of Series A Preferred Stock is
      convertible into one share of our Common Stock. In determining the percent
      of preferred stock owned by a person or entity on April 9, 2009, (a) the
      numerator is the number of shares of the class beneficially owned by such
      person or entity, and (b) the denominator is the total shares of that
      class outstanding on April 9, 2009. Unless otherwise stated, each
      beneficial owner has sole power to vote and dispose of its
      shares.
 
 In
addition, in determining the percent of common stock owned by a person or entity
on April 9, 2009, (a) the numerator is the number of shares of the class
beneficially owned by such person and includes shares which the beneficial owner
may acquire within 60 days upon conversion or exercise of a derivative security,
and (b) the denominator is the sum of (i) the shares of that class outstanding
on April 9, 2009, (20,000,000 shares of Common Stock)and (ii) the total number
of shares that the beneficial owner may acquire upon conversion or exercise of a
derivative security within such 60 day period. Unless otherwise stated, each
beneficial owner has sole power to vote and dispose of the
shares.
  -64-
  (2)
              Pursuant to the October 3 2007
      Series A Preferred Agreement, each purchaser who purchases not less than
      $4 million worth of Series A Preferred Shares shall also be issued a
      Series J Warrant (expired on April 2, 2009; the same is true hereafter),
      to purchase such number of our newly designated Series B Preferred Shares,
      equal to the Purchase Price (as defined in the Series A Preferred
      Agreement) paid by such purchaser pursuant to this Agreement divided by
      $2.37 per share or, if the Purchase Price is reduced pursuant to Section
      1.6 of the Agreement, 110% of the adjusted per share Purchase Price.
      Vision Opportunity Master Fund Ltd, Sansar Capital and Vicis Master Fund
      have exceeded this threshold and have been granted a Series J Warrant to
      purchase 3,382,664, 2,515,856 and 1,902,748 shares of our Series B
      Preferred Shares
respectively.
 
 (3)
              Each Series A Preferred Share is
      convertible, at the option of the holder, into one share of our Common
      Stock. Accordingly, in total, the Series A Preferred Shares are
      convertible into 10,000,000 shares of our Common Stock. Each share of
      Series B Preferred Share is convertible, at the option of the holder, into
      one share of our Common Stock. The share number of Common Stock is
      determined by assuming conversion of all Series A and Series B Preferred
      Shares, exercise of all warrants (A, B, J, C, and D)(series C and D
      warrants are conditional on the exercise of series J warrants; the same is
      true hereafter) by the parties and then add all the numbers together, we
      would have the shares of our Common Stock for such parties. For example,
      for Vision Opportunity Master Fund Ltd, we add all the numbers from
      different columns from the table of footnote 8 below, and we would have
      18,283,985 shares of Common
Stock.
 
 Pursuant
to the Series A Preferred Agreement, the Purchasers shall also be issued (i)
Series A Warrants to purchase the number of shares of our Common Stock equal to
one hundred percent (100%) of the number of shares of Common Stock issuable upon
conversion of the Series A Preferred Shares purchased by each Purchaser and (ii)
Series B Warrants to purchase the number of shares of Common Stock equal to
fifty percent (50%) of the number of shares of Common Stock issuable upon
conversion of the Series A Preferred Shares purchased by each
Purchaser.
 
 Also,
each Purchaser who purchases not less than $4 million worth of Series A
Preferred shall also be issued (i) a Series J Warrant, to purchase such number
of our newly designated Series B Preferred Shares, par value $0.001 per share,
(ii) a Series C Warrant to purchase the number of shares of Common Stock equal
to one hundred percent (100%) of the number of Series B Preferred Shares
purchased by such Purchaser pursuant to the Series J Warrant, and (z) a Series D
Warrant to purchase the number of shares of Common Stock equal to fifty percent
(50%) of the number of Series B Preferred Shares purchased by such Purchasers
pursuant to the Series J Warrant.
 
 Pursuant
to Section 3.27 of the Series A Preferred Agreement, at no time may a Purchaser
of preferred shares convert their preferred shares into shares of our Common
Stock if the number of shares of Common Stock to be issued pursuant to such
conversion would exceed, when aggregated with all other shares of Common Stock
beneficially owned by such Purchaser at such time, the number of shares of
Common Stock which would result in such Purchaser beneficially owning (as
determined in accordance with Section 13(d) of the Exchange Act and the rules
thereunder) in excess of 4.99% of the then issued and outstanding shares of
Common Stock; provided, however, that upon a
Purchaser providing us with sixty-one (61) days notice that such Purchaser
wishes to waive the cap, then the cap will be of no force or effect with regard
to all or a portion of the preferred shares referenced in the waiver
notice.
 
 (4)
              On October 3, 2007, we acquired
      Faith Winner (BVI) in a share exchange transaction with Winner State
      (BVI), Fang Chen, Yang Miao and Ying Zhang. Winner State (BVI), Fang Chen,
      Yang Miao and Ying Zhang are collectively the owners of 100% of the Faith
      Shares.
 
 In the
Share Exchange, we received the Faith Shares from Winner State (BVI), Fang Chen,
Yang Miao and Ying Zhang and in exchange we issued and delivered to them
18,500,000 of our newly -issued shares of Common Stock. Winner State (BVI)
received 18,200,000 shares of Common Stock.
 
 (5)
              Winner State (BVI) is jointly
      owned in equal shares by Mr. Shulin Liu, our Chief Executive Officer and
      his wife, Ms. Huanqin Ding. Accordingly, shares of Common Stock issued to
      Winner State (BVI) as a result of the consummation of the Share Exchange
      Agreement are beneficially attributed to Mr. Shulin Liu and Ms. Huanqin
      Ding based on their respective shareholder percentage ownership in Winner
      State (BVI) immediately prior to the Share Exchange. Mr Shulin Liu was
      appointed our director and Chief Executive Officer on October 3,
      2007.
 
 (6)
              Mr. Glenn Little was appointed
      our President, Chief Executive Officer and Chief Financial Officer in
      February 2006. He resigned from these positions effective October 3, 2007.
      He resigned from his position as director on October 13,
      2007.
 
 (7)
              As of April 9, 2009,
      below is a breakdown of the current holdings
of:
  -65-
   Amount
      and Nature of Beneficial OwnershipPreferred
      Stock
                          
                          
                          Common
                          
                          
                          WarrantsName
                          
                          Series
      A
                          
                          
                          Series B
                          
                          
                          Stock
                          
                          
                          A
                          
                          
                          B
                          
                          
                          J
                          
                          
                          C
                          
                          
                          DVision
      Opportunity Master Fund Ltd
                          
                          
                          3,720,930
                          
                          
                          
                          —
                          
                          
                          
                          525,000
                          
                          
                          
                          3,720,930
                          
                          
                          
                          1,860,465
                          
                          
                          
                          3,382,664
                          
                          
                          
                          3,382,664
                          
                          
                          
                          1,691,332Sansar
      Capital Special Opportunity Master Fund, LP (Cayman
Master)
                          
                          
                          2,767,442
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          2,767,442
                          
                          
                          
                          1,383,721
                          
                          
                          
                          2,515,856
                          
                          
                          
                          2,515,856
                          
                          
                          
                          1,257,928Vicis
      Capital Master Fund
                          
                          
                          2,093,023
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          2,093,023
                          
                          
                          
                          1,046,512
                          
                          
                          
                          1,902,748
                          
                          
                          
                          1,902,748
                          
                          
                          
                          951,374
 
 As of
April 9, 2009, we had outstanding (i) 20,000,000 shares of Common Stock, (ii)
10,000,000 shares of Series A Preferred Shares, which were issued in a private
placement to the Purchasers under the Series A Preferred Agreement, (iii) Series
A Warrants to purchase an aggregate of 10,000,000 shares of Common Stock at
$2.75 per share, (iv) Series B Warrants to purchase an aggregate of 5,000,000
shares of Common Stock at $3.50 per share, (v) Series J Warrants to purchase an
aggregate of 7,801,268 shares of Series B Preferred Shares at $2.37 per share;
(vi) Series C Warrants to purchase an aggregate of 7,801,268 shares of Common
Stock at $3.03 per share, (vii) Series D Warrants to purchase an aggregate of
3,900,634 shares of Common Stock at $3.85 per share, (viii) Series E Warrants to
purchase 1,000,000 shares of Common Stock issued to Kuhns Brothers, Inc. and its
designees under the Kuhns Bros Engagement Agreement at $2.58 per share and (ix)
Series F Warrants to purchase 500,000 shares of Common Stock issued to Mass
Harmony Asset Management Limited pursuant to the Mass Harmony Financial
Consulting Agreement at $3.01 per share.
 
 Each of
Series A, B, C, D, E and F Warrants have five year terms. Series J Warrants have
an eighteen (18) month term. The Series C and D Warrants are only exercisable
once the Series J Warrant is exercised.
 
 Item 13. Certain Relationships and Related
Transactions
 
 None.
 
 Item
14. Principal Accounting Fees And Services
 
 Samuel H.
Wong & Company, LLP issued a report on the audited financial statements of
Heilonjiang Yanglin Soybean Group Co. Ltd. for the three years ended December
31, 2004, December 31, 2005, and December 31, 2006 which were included in our
current report on Form 8-K filed on October 10, 2007.
 
 On
January 16, 2008, we dismissed Samuel H. Wong & Company, LLP as our
independent accountant. On the same date, we retained Albert Wong & Company,
LLP to serve as our principal independent accountant.
 
 All of
the services described below were approved by our board prior to performance.
Our board has determined that the payments made to its independent accountant
for these services are compatible with maintaining such auditor's
independence.
 
 Audit Fees.The aggregate fees
billed by Samuel H. Wong & Company, LLP, for professional services rendered
for the audit of the company’s financial statements for the year December 31,
2006 as well as for the review of the interim financial statements ended
September 30, 2007 are $150,000.
 
 The
aggregate fees billed by Albert Wong & Company, LLP for professional
services rendered for the audit of the company’s financial statements for the
year December 31, 2007 and 2008 are $90,000 and $86,000.
 
 Audit-Related Fees. There were
no fees for assurance and related services by Samuel H. Wong & Company, LLP
or Albert Wong & Company, LLP for years 2007 or 2008.
 
 Tax Fees. There were no fees
for services for the income tax returns in US by Samuel H. Wong & Company,
LLP or Albert Wong & Company, LLP for years 2007 or 2008.
 
 All Other Fees. There was no
other fees for either audit-related or non-audit services billed by Samuel H.
Wong & Company, LLP or Albert Wong & Company, LLP for years 2007 or
2008.
  -66-
  PART
IV
 
 Item
15. Exhibits And Financial Statement Schedules
 
 (a) (1)
Financial Statements
 
 (2)
Financial Statement Schedules
 
 None
  -67-
  YANGLIN
SOYBEAN INC.
 
 CONSOLIDATED
FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
 (Stated
in US dollars)
  
 
 YANGLIN SOYBEAN
INC.
 
 CONTENTS
                      
                      PAGESREPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                      
                      
                      1CONSOLIDATED
      BALANCE SHEETS
                      
                      
                      2 –
      3CONSOLIDATED
      STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                      
                      
                      4CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY
                      
                      
                      5CONSOLIDATED
      STATEMENTS OF CASH FLOWS
                      
                      
                      6NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
                      
                      
                      7 –
      30
  
 
 ALBERT
WONG & CO.
 CERTIFIED
PUBLIC ACCOUNTANTS
 7th
Floor, Nan Dao Commercial Building
 359-361
Queen’s Road Central
 Hong
Kong
 Tel :
2851 7954
 Fax: 2545
4086
  ALBERT
WONG
 B.Soc.,
Sc., ACA., LL.B.,
 CPA(Practising)
 
 To:
              The board of directors and
      stockholders of
 Yanglin
Soybean Inc.
 
 Report of Independent
Registered Public Accounting Firm
 
 We have
audited the accompanying consolidated balance sheets of Yanglin Soybean Inc. and
subsidiaries as of December 31, 2008, and 2007 and the related consolidated
statements of income, stockholders' equity and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
 
 We
conducted our audit in accordance with 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. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes 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.
 
 We were
not engaged to examine management’s assertion about the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2008
included in the Company’s Item 9A “Controls and Procedures” in the Annual Report
on Form 10-K and, accordingly, we do not express an opinion
thereon.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Yanglin Soybean
Inc. as of December 31, 2008, and 2007 and the results of its operations and its
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
 
 Hong
      Kong, China
              Albert
      Wong &
      CoApril
      6, 2009
              Certified
      Public Accountants
  1
 
 YANGLIN
SOYBEAN INC.
 
 CONSOLIDATED
BALANCE SHEETS
 AS
AT DECEMBER 31, 2008, AND 2007
 (Stated
in US Dollars)
 
 Notes
                                    
                                    
                                    2008
                                    
                                    
                                    2007ASSETSCurrent
      assetsCash
      and cash equivalents
                                    
                                    2(k)
                                    
                                    
                                    $
                                    30,365,413
                                    
                                    
                                    $
                                    9,210,121Pledged
      deposits
                                    
                                    4
                                    
                                    
                                    
                                    484,000
                                    
                                    
                                    
                                    500,000Trade
      receivables
                                    
                                    2(j)&5
                                    
                                    
                                    
                                    8,043
                                    
                                    
                                    
                                    13,854Inventories
                                    
                                    2(i)&7
                                    
                                    
                                    
                                    3,896,334
                                    
                                    
                                    
                                    17,883,652Advances
      to suppliers
                                    
                                    
                                    
                                    
                                    
                                    
                                    10,597,701
                                    
                                    
                                    
                                    5,736,267Prepaid
      VAT and other taxes
                                    
                                    
                                    
                                    
                                    
                                    
                                    920,083
                                    
                                    
                                    
                                    2,457,137Other
      receivables
                                    
                                    6
                                    
                                    
                                    
                                    114,990
                                    
                                    
                                    
                                    27,896Total
      current assets
                                    
                                    
                                    
                                    
                                    
                                    $
                                    46,386,564
                                    
                                    
                                    $
                                    35,828,927Property,
      plant and equipment, net
                                    
                                    2(g)&8
                                    
                                    
                                    
                                    31,529,936
                                    
                                    
                                    
                                    22,563,196Intangible
      assets, net
                                    
                                    2(e),(f)&9
                                    
                                    
                                    
                                    4,619,716
                                    
                                    
                                    
                                    3,444,081Prepaid
      deposits for equipment and construction
                                    
                                    
                                    
                                    
                                    
                                    
                                    13,021
                                    
                                    
                                    
                                    8,896,327TOTAL
      ASSETS
                                    
                                    
                                    
                                    
                                    
                                    $
                                    82,549,237
                                    
                                    
                                    $
                                    70,732,531LIABILITIES AND STOCKHOLDERS’
      EQUITYCurrent
      liabilitiesShort-term
      bank loans
                                    
                                    
                                    10
                                    
                                    
                                    $
                                    6,711,214
                                    
                                    
                                    $
                                    12,305,000Current
      portion of long-term bank loans
                                    
                                    
                                    12
                                    
                                    
                                    
                                    55,149
                                    
                                    
                                    
                                    47,433Accounts
      payable
                                    
                                    
                                    
                                    
                                    
                                    
                                    13,753
                                    
                                    
                                    
                                    12,921Other
      payables
                                    
                                    
                                    11
                                    
                                    
                                    
                                    683,403
                                    
                                    
                                    
                                    44,380Customers
      deposits
                                    
                                    
                                    
                                    
                                    
                                    
                                    1,187,582
                                    
                                    
                                    
                                    2,656,777Accrued
      liabilities
                                    
                                    
                                    
                                    
                                    
                                    
                                    591,979
                                    
                                    
                                    
                                    521,114Total
      current liabilities
                                    
                                    
                                    
                                    
                                    
                                    $
                                    9,243,080
                                    
                                    
                                    $
                                    15,587,625Long-term
      liabilitiesLong-term
      bank loans
                                    
                                    
                                    12
                                    
                                    
                                    
                                    434,678
                                    
                                    
                                    
                                    457,107TOTAL
      LIABILITIES
                                    
                                    
                                    
                                    
                                    
                                    $
                                    9,677,758
                                    
                                    
                                    $
                                    16,044,732
 
 See notes
to consolidated financial statements
  2


YANGLIN
SOYBEAN INC.





CONSOLIDATED
BALANCE SHEETS (Continued)


AS
AT DECEMBER 31, 2008, AND 2007


(Stated
in US Dollars)





Notes
                      
                      
                      2008
                      
                      
                      2007STOCKHOLDERS’
      EQUITYPreferred
      Stock – Series A $0.001 par  value, 50,000,000 shares
      authorized;  9,999,999 shares issued and outstanding as of
      December 31, 2008 and December 31, 2007
                      
                      
                      13
                      
                      
                      $
                      10,000
                      
                      
                      $
                      10,000Common
      stock - $0.001 par value 100,000,000 shares authorized; 20,000,003 shares
      issued and  outstanding as of  December 31,
      2008  and December 31, 2007
                      
                      
                      14
                      
                      
                      
                      20,000
                      
                      
                      
                      20,000Additional
      paid-in capital
                      
                      
                      14
                      
                      
                      
                      38,389,635
                      
                      
                      
                      38,389,635Statutory
      reserves
                      
                      
                      2(t)
                      
                      
                      
                      5,628,636
                      
                      
                      
                      3,490,834Retained
      earnings
                      
                      
                      
                      
                      
                      
                      21,664,524
                      
                      
                      
                      9,421,860Accumulated
      other comprehensive income
                      
                      
                      2(u)
                      
                      
                      
                      7,158,684
                      
                      
                      
                      3,355,470$
                      72,871,479
                      
                      
                      $
                      54,687,799TOTAL
      LIABILITIES AND  STOCKHOLDERS’ EQUITY
                      
                      
                      
                      
                      
                      $
                      82,549,237
                      
                      
                      $
                      70,732,531





See notes
to consolidated financial statements


3


YANGLIN
SOYBEAN INC.





CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME


FOR
THE YEARS ENDED DECEMBER 31, 2008, AND 2007


(Stated
in US Dollars)





Notes
                                                
                                                2008
                                                
                                                
                                                2007Net
      sales
                                                2(m)&18
                                                
                                                $
                                                250,728,674
                                                
                                                
                                                $
                                                155,206,867Cost
      of sales
                                                2(n)&18
                                                
                                                
                                                (229,838,842
                                                )
                                                
                                                
                                                (142,568,658
                                                )Gross
      profit
                                                
                                                
                                                $
                                                20,889,832
                                                
                                                
                                                $
                                                12,638,209Selling
      expenses
                                                
                                                
                                                
                                                (249,812
                                                )
                                                
                                                
                                                (146,411
                                                )General
      and administrative expenses
                                                
                                                
                                                
                                                (5,552,223
                                                )
                                                
                                                
                                                (1,812,450
                                                )Income
      from operations
                                                
                                                
                                                $
                                                15,087,797
                                                
                                                
                                                $
                                                10,679,348Interest
      income
                                                
                                                
                                                
                                                145,340
                                                
                                                
                                                
                                                64,277Interest
      expenses
                                                
                                                
                                                
                                                (822,355
                                                )
                                                
                                                
                                                (458,982
                                                )Other
      income
                                                
                                                
                                                
                                                797
                                                
                                                
                                                
                                                39,385Other
      expenses
                                                
                                                
                                                
                                                (31,113
                                                )
                                                
                                                
                                                -Income
      from operations before income taxes
                                                
                                                
                                                $
                                                14,380,466
                                                
                                                
                                                $
                                                10,324,028Income
      taxes
                                                2(s)&16
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Net
      income
                                                
                                                
                                                $
                                                14,380,466
                                                
                                                
                                                $
                                                10,324,028Beneficial
      conversion feature on Series A preferred stock
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (7,988,359
                                                )Net
      income attributable to common shareholders
                                                
                                                
                                                $
                                                14,380,466
                                                
                                                
                                                $
                                                2,335,669Foreign
      currency translation adjustment
                                                
                                                
                                                
                                                3,803,214
                                                
                                                
                                                
                                                2,466,280Comprehensive
      income
                                                
                                                
                                                $
                                                18,183,680
                                                
                                                
                                                $
                                                4,801,949Basic
      earnings per share
                                                15
                                                
                                                $
                                                0.72
                                                
                                                
                                                $
                                                0.12Diluted
      earnings per share
                                                15
                                                
                                                $
                                                0.38
                                                
                                                
                                                $
                                                0.07Basic
      weighted average share outstanding
                                                15
                                                
                                                
                                                20,000,003
                                                
                                                
                                                
                                                19,998,473Diluted
      weighted average share outstanding
                                                15
                                                
                                                
                                                37,757,827
                                                
                                                
                                                
                                                34,003,038





See notes
to consolidated financial statements


4


YANGLIN
SOYBEAN INC.





CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY


FOR
THE YEARS ENDED DECEMBER 31, 2008, AND 2007


(Stated
in US Dollars)





AccumulatedCommon
      stock
                                                                          
                                                                          
                                                                          
                                                                          Additional
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          
                                                                          otherNumber
                                                                          
                                                                          
                                                                          
                                                                          Preferred
                                                                          
                                                                          paid-in
                                                                          
                                                                          Statutory
                                                                          
                                                                          Retained
                                                                          
                                                                          
                                                                          comprehensiveof
      share
                                                                          
                                                                          Amount
                                                                          
                                                                          stock
                                                                          
                                                                          capital
                                                                          
                                                                          reserves
                                                                          
                                                                          earnings
                                                                          
                                                                          
                                                                          income
                                                                          
                                                                          
                                                                          TotalBal.,
      1/1/2007
                                                                          
                                                                          
                                                                          18,500,000
                                                                          
                                                                          $
                                                                          18,500
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          12,248,936
                                                                          
                                                                          
                                                                          1,716,827
                                                                          
                                                                          
                                                                          8,860,198
                                                                          
                                                                          
                                                                          
                                                                          889,190
                                                                          
                                                                          
                                                                          
                                                                          23,733,651Net
      income
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          10,324,028
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          10,324,028Reverse
      acquisition
                                                                          
                                                                          
                                                                          1,497,608
                                                                          
                                                                          
                                                                          1,498
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          (88
                                                                          )
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          1,410Addition
      of capital
                                                                          
                                                                          
                                                                          2,395
                                                                          
                                                                          
                                                                          2
                                                                          
                                                                          
                                                                          10,000
                                                                          
                                                                          
                                                                          26,140,787
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          26,150,789Beneficial
      conversion feature on Series A preferred stock
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          (7,988,359
                                                                          )
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          (7,988,359
                                                                          )Appropriations
      to surplus reserves
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          1,774,007
                                                                          
                                                                          
                                                                          (1,774,007
                                                                          )
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -Foreign
      currency adjustment
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          2,466,280
                                                                          
                                                                          
                                                                          
                                                                          2,466,280Bal.,
      12/31/2007
                                                                          
                                                                          
                                                                          20,000,003
                                                                          
                                                                          $
                                                                          20,000
                                                                          
                                                                          
                                                                          10,000
                                                                          
                                                                          
                                                                          38,389,635
                                                                          
                                                                          
                                                                          3,490,834
                                                                          
                                                                          
                                                                          9,421,860
                                                                          
                                                                          
                                                                          
                                                                          3,355,470
                                                                          
                                                                          
                                                                          
                                                                          54,687,799Bal.,
      1/1/2008
                                                                          
                                                                          
                                                                          20,000,003
                                                                          
                                                                          $
                                                                          20,000
                                                                          
                                                                          
                                                                          10,000
                                                                          
                                                                          
                                                                          38,389,635
                                                                          
                                                                          
                                                                          3,490,834
                                                                          
                                                                          
                                                                          9,421,860
                                                                          
                                                                          
                                                                          
                                                                          3,355,470
                                                                          
                                                                          
                                                                          
                                                                          54,687,799Net
      income
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          14,380,466
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          14,380,466Appropriations
      to surplus reserves
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          2,137,802
                                                                          
                                                                          
                                                                          (2,137,802
                                                                          )
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -Foreign
      currency adjustment
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          3,803,214
                                                                          
                                                                          
                                                                          
                                                                          3,803,214Bal.,
      12/31/2008
                                                                          
                                                                          
                                                                          20,000,003
                                                                          
                                                                          $
                                                                          20,000
                                                                          
                                                                          
                                                                          10,000
                                                                          
                                                                          
                                                                          38,389,635
                                                                          
                                                                          
                                                                          5,628,636
                                                                          
                                                                          
                                                                          21,664,524
                                                                          
                                                                          
                                                                          
                                                                          7,158,684
                                                                          
                                                                          
                                                                          
                                                                          72,871,479





See notes
to consolidated financial statements


5


YANGLIN
SOYBEAN INC.





CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE YEARS ENDED DECEMBER 31, 2008, AND 2007


(Stated
in US Dollars)





2008
                                      
                                      
                                      2007Cash
      flows from operating activitiesNet
      income
                                      
                                      $
                                      14,380,466
                                      
                                      
                                      $
                                      10,324,028Depreciation
                                      
                                      
                                      1,860,076
                                      
                                      
                                      
                                      2,028,313Amortization
                                      
                                      
                                      203,374
                                      
                                      
                                      
                                      78,397Loss/(gain)
      on disposal of property, plant and equipment
                                      
                                      
                                      3,185,544
                                      
                                      
                                      
                                      (13,048
                                      )Adjustments
      to reconcile net income to net cash provided by/(used in) operating
      activities:Accounts
      receivable
                                      
                                      
                                      6,636
                                      
                                      
                                      
                                      182,708Inventories
                                      
                                      
                                      14,951,570
                                      
                                      
                                      
                                      (9,712,307
                                      )Advances
      to suppliers
                                      
                                      
                                      (4,407,071
                                      )
                                      
                                      
                                      (5,508,012
                                      )Prepaid
      VAT and other taxes
                                      
                                      
                                      1,675,509
                                      
                                      
                                      
                                      (1,667,452
                                      )Other
      receivables
                                      
                                      
                                      (62,451
                                      )
                                      
                                      
                                      714,295Accounts
      payable
                                      
                                      
                                      (12
                                      )
                                      
                                      
                                      (730,106
                                      )Other
      payables
                                      
                                      
                                      627,034
                                      
                                      
                                      
                                      (698,636
                                      )Customers
      deposits
                                      
                                      
                                      (1,621,890
                                      )
                                      
                                      
                                      152,225Accrued
      liabilities
                                      
                                      
                                      35,698
                                      
                                      
                                      
                                      (16,561
                                      )Net
      cash provided by/(used in) operating activities
                                      
                                      $
                                      30,834,483
                                      
                                      
                                      $
                                      (4,866,156
                                      )Cash
      flows from investing activitiesPayment
      of plant and equipment
                                      
                                      
                                      (135,534
                                      )
                                      
                                      
                                      (386,260
                                      )Sales
      proceeds of plant and equipment
                                      
                                      
                                      129,556
                                      
                                      
                                      
                                      55,138Payment
      of construction in progress
                                      
                                      
                                      (4,176,943
                                      )
                                      
                                      
                                      (11,702,842
                                      )Payment
      of land use right
                                      
                                      
                                      -
                                      
                                      
                                      
                                      120,560Decrease/(increase)
      in restricted cash
                                      
                                      
                                      16,000
                                      
                                      
                                      
                                      (500,000
                                      )Net
      cash used in investing activities
                                      
                                      $
                                      (4,166,921
                                      )
                                      
                                      $
                                      (12,413,404
                                      )Cash
      flows from financing activitiesIssue
      of share capital and warrants
                                      
                                      
                                      -
                                      
                                      
                                      
                                      17,849,093Bank
      borrowings
                                      
                                      
                                      6,607,059
                                      
                                      
                                      
                                      11,815,365Bank
      loan repayments
                                      
                                      
                                      (12,974,669
                                      )
                                      
                                      
                                      (6,737,488
                                      )Net
      cash (used in)/provided by financing activities
                                      
                                      $
                                      (6,367,610
                                      )
                                      
                                      $
                                      22,926,970Net
      cash and cash equivalents sourced
                                      
                                      
                                      20,299,952
                                      
                                      
                                      
                                      5,647,410Effect
      of foreign currency translation on cash and cash
    equivalents
                                      
                                      
                                      855,340
                                      
                                      
                                      
                                      549,191Cash
      and cash equivalents–beginning of year
                                      
                                      
                                      9,210,121
                                      
                                      
                                      
                                      3,013,520Cash
      and cash equivalents–end of year
                                      
                                      $
                                      30,365,413
                                      
                                      
                                      $
                                      9,210,121Supplementary
      cash flow information:Interest
      received
                                      
                                      $
                                      133,828
                                      
                                      
                                      $
                                      64,277Interest
      paid
                                      
                                      
                                      819,882
                                      
                                      
                                      
                                      457,647





See notes
to consolidated financial statements


6


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





1.
            ORGANIZATION
      AND PRINCIPAL ACTIVITIES





Yanglin
Soybean Inc. (the “Company”) was incorporated in the state of Nevada on May 26,
1921. Prior to October 3, 2007 the company had only nominal operations and
assets. The Company currently operates through (1) itself, (2) one directly
wholly-owned subsidiary in the British Virgin Islands: Faith Winner Investments
Limited (“Faith Winner (BVI)”), (3) one directly wholly-owned subsidiary of
Faith Winner (BVI) located in Mainland China: Faith Winner (Jixian) Agriculture
Development Company (“Faith Winner (Jixian)” or “WFOE”) and (4) one operating
company located in Mainland China: Heilongjiang Yanglin Soybean Group Co., Ltd.
(“Yanglin”) which is controlled by the Company through contractual arrangements
between WFOE and Yanglin, as if Yanglin were a wholly-owned subsidiary of the
Company.





On
October 3, 2007, the Company executed a reverse-merger with Faith Winner
Investments Limited (“Faith Winner (BVI)”) by an exchange of shares whereby the
Company issued 18,500,000 common shares at $0.001 par value in exchange for all
Faith Winner (BVI) shares. As a result of the shares exchange, Faith Winner
(BVI) became a wholly-owned subsidiary of the Company.





The
exchange transaction was accounted for as a reverse acquisition in accordance
with Statements of Financial Accounting Standards (“SFAS”) No. 141. “Business
Combinations”. The 1,494,173 shares of Yanglin Soybean Inc. outstanding prior to
the stock exchange transaction were accounted for at the net book value at the
time of the transaction, which was a deficit of $1,410. Accordingly, the
consolidated statements of income include the results of operations of
Heilongjiang Yanglin Soybean Group Co., Ltd from the acquisition date through
December 31, 2007.





Faith
Winner (BVI) entered into a series of agreements with Yanglin and as a result of
such arrangements WFOE gained control of all of Yanglin’s assets, management and
business as if Yanglin were a wholly-owned subsidiary of WFOE. However, the
shareholders of Yanglin, Mr. Shulin Liu with his wife, Mrs. Huanqin Ding, also
have effective control over Faith Winner (BVI) and WFOE as our subsidiaries,
because they beneficially own approximately 91% of our common stock through
their 100% holding in Winner State (BVI) and thus have a controlling interest in
us. These contractual arrangements included a loan agreement, a consigned
management agreement, two consignment agreements of equity interests, an
exclusive purchase option agreement, a registered trademark transfer contract
and a trademark licensing agreement. The Consignment Agreement was entered into
on September 1, 2007, and the other agreements were all signed on September 24,
2007. The
exclusive purchase option agreement and the consigned management agreement were
amended as of April 3, 2009.


7


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





1.
            ORGANIZATION
      AND PRINCIPAL ACTIVITIES
(Continued)





Pursuant
to those agreements, Faith Winner made a loan of $17 million and covenanted to
satisfy Yanglin’s working capital in future to Yanglin (the “Loan”). In return,
the Company obtained the management control and an exclusive right to acquire
all of the equity of Yanglin. The rights of existing shareholders of Yanglin are
assigned by the consignment of equity interests to Faith Winner (BVI). The
exclusive purchase agreement and the loan agreement restrict both Yanglin and
its shareholders from significant decisions including but not limited to any
amendments of articles of association or rules of the Company, any change in
registered capital, any transfer, mortgage or disposal of Yanglin’s assets or
income in a way that would affect WFOE’s security interest, entering any
material contract (exceeding RMB5 million in value) and distributing any
dividends to the shareholders. Pursuant to the consigned management agreement
between WFOE and Yanglin, Yanglin agreed to entrust the business operations of
Yanglin and its management to WFOE until WFOE formally acquires all equity or
substantially all the assets of Yanglin. Under the consigned management
agreement as amended on April 3, 2009, WFOE will provide financial, technical
and human resources management services to Yanglin which will enable WFOE to
control Yanglin's operations, assets and cash flows. In turn, it will be
entitled to 5% of Yanglin’s revenue on a yearly basis.
 
 Under the
Registered Trademark Transfer Agreement, Yanglin agreed to transfer to WFOE all
of its rights in connection with the two trademarks, including without
limitation the title of the trademarks and right to license ( the “Transferred
Trademark”) for a purchase price of $1,000,000, which is subject to a purchase
price adjustment based on the minimum appraised value on intellectual property
(“IP”) rights allowed under PRC laws and regulations for such transfer. Under
the Trademark Licensing Agreement, WFOE agreed to grant an exclusive license to
Yanglin, for a term of 10 years, to use the Transferred Trademark for an annual
licensing fee equal to 1% of Yanglin’s revenue of that year. The license fee and
the management fee aforesaid –total of 6% of the revenue of Yanglin-entitled by
WFOE are designed to approximate Yanglin’s  annual net profit before
tax. Any excess profit in Yanglin will not be distributed as dividend according
to the contractual arrangements until WFOE exercises the Option Agreement to
acquire all shareholders’ equity interest of Yanglin.
 
 According
to the exclusive purchase option agreement, the WFOE has the exclusive purchase
option to purchase all or part of Yanglin’s shareholders’ equity interest in
Yanglin when and as permitted under PRC laws and regulations and any other party
has no right to purchase any equity from the shareholders of Yanglin. The
agreement provides that, unless otherwise required under PRC laws and
regulations, the consideration for the equity transfer or the asset transfer
under the agreement will be $17 million or such greater amount as required by
the then applicable Chinese law and regulations (the “Option Price”). Under the
loan agreement and the exclusive purchase option agreement, the money received
as the Option Price by the shareholders of Yanglin upon execution of the option
shall be used to satisfy the repayment of the Loan, that is, any amount of money
received by Yanglin’s shareholders shall be paid back to WFOE as the repayment
of Loan. Therefore, the actual consideration of the investment in Yanglin is
exactly the amount of the Loan. Under such contractual arrangements, all of
assets and equity including any residual profits of Yanglin are totally
controlled by WFOE and will be formally captured upon exercise of the exclusive
purchase option.


8


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





1.
            ORGANIZATION
      AND PRINCIPAL ACTIVITIES
(Continued)




The loan
of $17 million to Yanglin is considered as an investment in Yanglin by the
Company through a series of contractual arrangements by way of the Loan. As a
result of entering into the abovementioned agreements, WFOE  is deemed
to control Yanglin as a Variable Interest Entity as required by FASB
Interpretation No. 46 (revised December 2003) Consolidation of Variable Interest
Entities, and Interpretation of ARB No. 51. The reverse-merger also included an
equity financing of $21,500,000 by the issuance of 10,000,000 Series A
Convertible Preferred Stock at $2.15 per share to 10 accredited
investors.





The
Company, through its subsidiaries and Yanglin, (hereinafter, collectively
referred to as “the Group”), is now in the business of manufacturing,
distribution, and selling of non-genetically modified soybean products,
including soybean oil, soybean salad oil, and soybean
meal,  throughout the Province of Heilongjiang and other parts of
China.





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





(a)
            Method
      of accounting





The
Company maintains its general ledger and journals with the accrual method of
accounting for financial reporting purposes.  The financial statements
and notes are representations of management.  Accounting policies
adopted by the Company conform to generally accepted accounting principles in
the United States of America and have been consistently applied in the
presentation of financial statements.





The share
exchange transaction has been accounted for as a recapitalization of Yanglin
Soybean Inc. where the Company (the legal acquirer) is considered the accounting
acquiree and Faith Winner (BVI) (the legal acquiree) is considered the
accounting acquirer. As a result of this transaction, the Company is deemed to
be a continuation of the business of Faith Winner (BVI).





Accordingly,
the accompanying financial statements are those of the accounting acquirer:
Faith Winner (BVI). The historical stockholders’ equity of the accounting
acquirer prior to the share exchange has been retroactively restated as if the
share exchange transaction occurred as of the beginning of the first period
presented.





(b)
            Principles
      of consolidation





The
consolidated financial statements, which include the Company and its
subsidiaries, are completed in accordance with, and are compliant with,
generally accepted accounting principles in the United States of America. All
significant inter-company accounts and transactions have been eliminated. The
consolidated financial statements include 100% of assets, liabilities, and net
income or loss of those wholly-owned subsidiaries.




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


*Deemed
variable interest entity member




9


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(c)
            Use
      of estimates





The
preparation of the financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting periods.  Management made these estimates using
the best information available at the time the estimates were made; however
actual results could differ materially from those estimates.





(d)
            Economic
      and political risks





The
Group’s operations are conducted in the PRC. Accordingly, the Company’s
business, financial condition and results of operations may be influenced by the
political, economic and legal environment in the PRC, and by the general state
of the PRC economy.





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





(e)
            Land
      use rights





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





(f)
            Railway
      use rights





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


10


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(g)
            Property,
      plant and equipment





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





Buildings
                  10
      - 35 yearsMachinery
      and equipment
                  3.5 - 30
      yearsOffice
      equipment
                  4 -
      20 yearsMotor
      vehicles
                  6 -
      10 years





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





(h)
            Accounting
      for the impairment of long-lived
assets





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





If such
assets are considered to be impaired, the impairment losses to be recognized are
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less estimated costs of disposal.





During
the reporting years, there were no impairment losses.





(i)
            Inventories





Inventories
consist of finished goods, and raw materials, and are stated at the lower of
cost or market value. Substantially all inventory costs are determined using the
weighted average basis. Finished goods are comprised of direct materials, direct
labor and an appropriate proportion of production overheads.





(j)
            Trade
      receivables





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


11


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(k)
            Cash
      and cash equivalents





The
Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.





2008
                      
                      
                      2007Cash
      on hand
                      
                      $
                      40,298
                      
                      
                      $
                      18,362Industrial
      And Commercial Bank of China
                      
                      
                      520
                      
                      
                      
                      -Agricultural
      Development Bank of China
                      
                      
                      409,323
                      
                      
                      
                      1,362,651Agricultural
      Bank of China
                      
                      
                      29,903,662
                      
                      
                      
                      7,829,108Hongkong
      and Shanghai Banking Corp.
                      
                      
                      11,610
                      
                      
                      
                      -Total
      cash and cash equivalents
                      
                      $
                      30,365,413
                      
                      
                      $
                      9,210,121





(l)
            Foreign
      currency translation





The
accompanying financial statements are presented in United States
dollars.  The reporting currency of the Group is the U.S. dollar
(USD). Faith Winner (Jixian) and Yanglin use its local currency, Renminbi (RMB),
as its functional currency. Results of operations and cash flow are translated
at average exchange rates during the period, and assets and liabilities are
translated at the end of period exchange rates. Translation adjustments
resulting from this process are included in accumulated other comprehensive
income in stockholders’ equity. Transaction gains and losses that arise from
exchange rate fluctuations from transactions denominated in a currency other
than the functional currency are included in the results of operations as
incurred.





The PRC
government imposes significant exchange restrictions on fund transfers out of
the PRC that are not related to business operations. These restrictions have not
had a material impact on the Group because it has not engaged in any significant
transactions that are subject to the restrictions.





The
exchange rates used to translate amounts in RMB into USD for the purposes of
preparing the consolidated financial statements were as follows:





2008
                    
                    
                    2007Year
      end RMB : USD exchange rate
                    
                    
                    6.8542
                    
                    
                    
                    7.3141Average
      yearly RMB : USD exchange rate
                    
                    
                    6.9623
                    
                    
                    
                    7.6172




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


12


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(m)
            Revenue
      recognition





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





(n)
            Costs
      of sales





Cost of
sales consists primarily of direct material costs, direct labor cost, direct
depreciation and related direct expenses attributable to the production of
products.  Write-down of inventory to lower of cost or market value is
also reflected in cost of revenues.





(o)
            Advertising





The Group
expenses all advertising expenses as incurred.  Advertising expenses
included in selling expenses were $4,546 and $9,167 for the years ended December
31, 2008 and 2007 respectively.





(p)
            Shipping
      and handling





All
shipping and handling costs are expensed as incurred.  The allocation
of shipping and handling expenses between selling expenses and general and
administrative expenses is shown as follows:




2008
                      
                      
                      2007Selling
      expenses
                      
                      $
                      96,997
                      
                      
                      $
                      75,347General
      and administrative expenses
                      
                      
                      2,653
                      
                      
                      
                      -Total
      shipping and handling expenses
                      
                      $
                      99,650
                      
                      
                      $
                      75,347




(q)
            Research
      and development





All
research and development costs are expensed as incurred. The research and
development costs included in general and administrative expenses were $23,829
and $11,815 for the years ended December 31, 2008, and 2007
respectively.





(r)
            Retirement
      benefits





Retirement
benefits in the form of contributions under defined contribution retirement
plans to the relevant authorities are charged to the statements of income as
incurred. The retirement benefit funds included in general and administrative
expenses were $184,006 and $168,535 for the years ended December 31, 2008 and
2007 respectively.


13


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(s)
            Income
      taxes





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





(t)
            Statutory
      reserves





As
stipulated by the PRC’s Company Law and as provided in the Faith Winner
(Jixian), and Yanglin’s Articles of Association, Faith Winner and Heilongjiang
Yanglin’s net income after taxation can only be distributed as dividends after
appropriation has been made for the following:





(i)
            Making
      up cumulative prior years’ losses, if any;(ii)
            Allocations
      to the “Statutory surplus reserve” of at least 10% of net income after
      taxation, as determined under PRC accounting rules and regulations, until
      the fund amounts to 50% of the Company's registered capital, which is
      restricted for set off against losses, expansion of production and
      operation or increase in registered
capital;


(iii)
            Allocations
      of 5-10% of income after tax, as determined under PRC accounting rules and
      regulations, to the Company's “Statutory common welfare fund”, which is
      restricted for capital expenditure for the collective benefits of the
      Company's employees; and(iv)
            Allocations
      to the discretionary surplus reserve, if approved in the shareholders’
      general meeting.





On
December 31, 2001, Heilongjiang Yanglin established a statutory surplus reserve
as well as a statutory common welfare fund and commenced to appropriate 10% and
5%, respectively of the PRC net income after taxation to these reserves. The
amounts included in the statutory reserves consisted of surplus reserve of
$3,752,424 and common welfare fund of $1,876,212 as of December 31,
2008.





(u)
            Comprehensive
      income





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


14


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(v)
            Recent
      accounting pronouncements





In
      December 2007, the Financial Accounting Standards Board issued Statement
      of Financial Accounting Standard (“SFAS”) No. 160, "Noncontrolling
      Interests in Consolidated Financial Statements, an amendment of ARB No.
      51”.  SFAS 160 establishes accounting and reporting standards
      for the noncontrolling interest in a subsidiary and for the
      deconsolidation of a subsidiary.  SFAS 160 is effective for
      fiscal years, and interim periods within those fiscal years, beginning on
      or after December 15, 2008.  As such, the Company is required to
      adopt these provisions at the beginning of the fiscal year ended December
      31, 2009.  The Company is currently evaluating the impact of
      SFAS 160 on its consolidated financial statements but does not expect it
      to have a material effect





In
      December 2007, the Financial Accounting Standards Board issued Statement
      of Financial Accounting Standard (“SFAS”) No. 141(R), "Business
      Combinations”. SFAS 141(R) establishes principles and requirements for how
      the acquirer recognizes and measures in its financial statements the
      identifiable assets acquired, the liabilities assumed, any noncontrolling
      interest in the acquiree, recognizes and measures the goodwill acquired in
      the business combination or a gain from a bargain purchase, and determines
      what information to disclose to enable users of the financial statements
      to evaluate the nature and financial effects of the business combination.
      SFAS 141(R) is effective for fiscal years, and interim periods within
      those fiscal years, beginning on or after December 15, 2008. As such, the
      Company is required to adopt these provisions at the beginning of the
      fiscal year ended December 31, 2009. The Company is currently evaluating
      the impact of SFAS 141(R) on its consolidated financial statements but
      does not expect it to have a material
effect.





In March
2008, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard (“SFAS”) No. 161 “Disclosures about Derivative Instruments
and Hedging Activities”. SFAS 161 is intended to improve financial reporting
about derivative instruments and hedging activities by requiring enhanced
disclosures to enable investors to better understand their effects on an
entity’s financial position, financial performance, and cash flows. It is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, with early application encouraged. The
Company is currently evaluating the impact of SFAS 161 on its consolidated
financial statements but does not expect it to have a material
effect.





In
      May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally
      Accepted Accounting Principles. SFAS 162 identifies the sources of
      accounting principles and the framework for selecting the principles to be
      used in the preparation of financial statements of nongovernmental
      entities that are presented in conformity with GAAP. SFAS 162 directs the
      GAAP hierarchy to the entity, not the independent auditors, as the entity
      is responsible for selecting accounting principles for financial
      statements that are presented in conformity with GAAP. SFAS 162 is
      effective 60 days following the SEC's approval of the Public Company
      Accounting Oversight Board amendments to remove the GAAP hierarchy from
      the auditing standards. SFAS 162 is not expected to have a material impact
      on the Company’s financial
statements.




15


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





3.
            CONCENTRATIONS
      OF CREDIT RISK AND MAJOR CUSTOMERS





Financial
instruments which potentially expose the Group to concentrations of credit risk,
consists of cash and accounts receivable as of December 31, 2008 and 2007. The
Group performs ongoing evaluations of its cash position and credit evaluations
to ensure sound collections and minimize credit losses exposure.





As of
December 31, 2008 and 2007, the Group’s bank deposits were all conducted with
banks in the PRC where there is currently no rule or regulation mandated on
obligatory insurance of bank accounts.





For the
years ended December 31, 2008 and 2007, all of the Group’s sales were generated
from the PRC. In addition, all accounts receivable as of December 31, 2008 and
2007 also arose in the PRC.





The
maximum amount of loss exposure due to credit risk that the Group would bear if
the counter parties of the financial instruments failed to perform represents
the carrying amount of each financial asset in the balance sheet.





Normally
the Group does not require collateral from customers or debtors.





No
customer accounted for 10% or more of the Group’s revenue in 2008.





Details
of customer account for 10% or more of the Group’s accounts receivable are as
follows:





December
      31,2008
                      
                      
                      2007Customer
      A
                      
                      $
                      9,352
                      
                      
                      $
                      -Customer
      B
                      
                      
                      -
                      
                      
                      
                      7,927Customer
      C
                      
                      
                      -
                      
                      
                      
                      7,140




16


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





4.
            PLEDGED
      DEPOSITS





Pledged
deposits are restricted cash kept in a trust account maintained in the United
States for the purpose of investor and public relation affairs.





5.
            TRADE
      RECEIVABLES, NET





Details
of trade receivables are as follows:





2008
                        
                        
                        2007Trade
      receivables, gross
                        
                        $
                        9,352
                        
                        
                        $
                        15,067Provision
      for doubtful debts
                        
                        
                        (1,309
                        )
                        
                        
                        (1,213
                        )Net
      balance at end of year
                        
                        $
                        8,043
                        
                        
                        $
                        13,854





All of
the above trade receivables are due within 12 months of aging.





An
analysis of the allowance for doubtful accounts for the years ended December 31,
2008 and 2007 is as follows:





2008
                        
                        
                        2007Balance
      at beginning of year
                        
                        $
                        1,213
                        
                        
                        $
                        1,689Addition/(reduction)
      of bad debt expense
                        
                        
                        14
                        
                        
                        
                        (569
                        )Foreign
      exchange adjustment
                        
                        
                        82
                        
                        
                        
                        93Balance
      at end of year
                        
                        $
                        1,309
                        
                        
                        $
                        1,213





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


17


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





6.
            OTHER
      RECEIVABLES





Details
of other receivables are as follows:





2008
                      
                      
                      2007Advances
      to employees for purchasing materials
                      
                      $
                      32,271
                      
                      
                      $
                      14,108Advances
      for traveling
                      
                      
                      11,417
                      
                      
                      
                      -Loans
      to employees
                      
                      
                      57,902
                      
                      
                      
                      9,777Sundry
                      
                      
                      13,400
                      
                      
                      
                      4,011Balance
      at end of year
                      
                      $
                      114,990
                      
                      
                      $
                      27,896





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





7.
            INVENTORIES





Inventories
comprise the followings:





2008
                      
                      
                      2007Finished
      goods
                      
                      $
                      904,375
                      
                      
                      $
                      537,360Raw
      materials
                      
                      
                      2,991,959
                      
                      
                      
                      17,346,292Balance
      at end of year
                      
                      $
                      3,896,334
                      
                      
                      $
                      17,883,652




18


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





8.
            PROPERTY,
      PLANT AND EQUIPMENT, NET





Property,
plant and equipment comprise the followings:




2008
                          
                          
                          2007At
      costBuilding
                          
                          $
                          5,908,205
                          
                          
                          $
                          7,060,690Machinery
      and equipment
                          
                          
                          15,826,005
                          
                          
                          
                          17,900,662Office
      equipment
                          
                          
                          130,512
                          
                          
                          
                          134,060Motor
      vehicles
                          
                          
                          1,165,410
                          
                          
                          
                          1,054,995$
                          23,030,132
                          
                          
                          $
                          26,150,407Less:
      accumulated depreciation
                          
                          
                          (7,725,246
                          )
                          
                          
                          (5,931,919
                          )$
                          15,304,886
                          
                          
                          $
                          20,218,488Construction
      in progress
                          
                          
                          16,225,050
                          
                          
                          
                          2,344,708Balance
      at end of year
                          
                          $
                          31,529,936
                          
                          
                          $
                          22,563,196





As of
December 31, 2008, building with net book value of $1,239,396 and machinery and
equipment with net book value of $6,335,754 of the Company were pledged as
collateral under certain loan arrangements. These loans were primarily obtained
for general working capital.





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





2008
                      
                      
                      2007Cost
      of sales
                      
                      $
                      1,378,837
                      
                      
                      $
                      1,686,129General
      and administrative expenses
                      
                      
                      481,239
                      
                      
                      
                      342,184Total
      depreciation expenses
                      
                      $
                      1,860,076
                      
                      
                      $
                      2,028,313





Construction
in progress mainly comprises capital expenditures for construction of the
Group’s corporate campus, including offices, factories and staff dormitories. It
represents direct costs of construction and design fees incurred. Capitalization
of these costs ceases and the construction in progress is transferred to plant
and equipment when substantially all the activities necessary to prepare the
assets for their intended use are completed. No depreciation is provided until
it is completed and ready for intended use.  There is no capital
commitment of these projects as at December 31, 2008.


19


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





9.
            INTANGIBLE
      ASSETS, NET





Intangible
assets are as follows:





2008
                      
                      
                      2007Land
      use rights, at cost
                      
                      $
                      3,994,597
                      
                      
                      $
                      3,743,422Railway
      use rights, at cost
                      
                      
                      1,151,125
                      
                      
                      
                      -Less:
      accumulated amortization
                      
                      
                      (526,006
                      )
                      
                      
                      (299,341
                      )Balance
      at end of year
                      
                      $
                      4,619,716
                      
                      
                      $
                      3,444,081





Amortization
expenses included in the costs of sales for the years ended December 31, 2008
and 2007 were $85,772 and $78,397, respectively. Amortization expenses included
in selling expenses for the years ended December 31, 2008 and 2007 were $117,602
and nil respectively. Total amortization expenses for the years ended December
31, 2008 and 2007 amounted to $203,374 and $78,397 respectively.





As of
December 31, 2008, land use rights with net book value of $ 1,293,076 of the
Group were pledged as collateral under certain loan arrangements. These loans
were primarily obtained for general working capital.





10.
            SHORT-TERM
      BANK LOANS





Short-term
bank loans are as follows:





2008
                      
                      
                      2007Loans
      from Agricultural Development  Bank of China, interest rates at
      6.66% per annum, due October 29, 2009
                      
                      $
                      6,711,214
                      
                      
                      $
                      -Loans
      from Agricultural Development  Bank of China, interest rates at
      7.02% per annum, due August 29, 2008
                      
                      
                      -
                      
                      
                      
                      8,203,333Loans
      from Agricultural Development  Bank of China, interest rates at
      7.29% per annum, due November 21, 2008
                      
                      
                      -
                      
                      
                      
                      4,101,667Balance
      at end of year
                      
                      $
                      6,711,214
                      
                      
                      $
                      12,305,000





Interest
paid for the years ended December 31, 2008 and 2007 were $771,555 and $415,632,
respectively.


20


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





11.
            OTHER
      PAYABLES





Other
payables are as follows:





2008
                      
                      
                      2007Due
      for construction
                      
                      $
                      670,368
                      
                      
                      $
                      -Due
      for employees
                      
                      
                      35
                      
                      
                      
                      10,670Sundry
                      
                      
                      13,000
                      
                      
                      
                      33,710Balance
      at end of year
                      
                      $
                      683,403
                      
                      
                      $
                      44,380





Due for
employees are unsecured, interest-free, and repayable on demand. They are travel
and expenses reimbursements.





12.
            LONG-TERM
      BANK LOANS





Long-term
bank loans are as follows:





2008
                      
                      
                      2007Loans
      from Industrial And Commercial Bank of China, interest rates at 9.405% and
      8.892% per annum respectively, with various installments,
      final  due October 28, 2016
                      
                      $
                      489,827
                      
                      
                      $
                      504,540Current
      portion due within one year
                      
                      
                      (55,149
                      )
                      
                      
                      (47,433
                      )$
                      434,678
                      
                      
                      $
                      457,107





All of
the installments due in 2008 were paid on their due dates.  Interest
paid for the years ended December 31, 2008 and 2007 were $48,327 and $42,015,
respectively.





The
future principal payments under the bank loans as of December 31, 2008 are as
follows:





Year
                      
                      20082009
                      
                      $
                      55,1492010
                      
                      
                      61,2762011
                      
                      
                      62,4432012
                      
                      
                      54,4192013
                      
                      
                      59,0882014
                      
                      
                      64,194Thereafter
                      
                      
                      133,258Total
                      
                      $
                      489,827




21


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





13.
            PREFERRED
      STOCK AND WARRANTS





On
October 3, 2007, the Company sold 10,000,000 shares of Series A Preferred Stock
and various stock purchase warrants for cash consideration totaling $21.5
million dollars. The exercise price, expiration date and number of share
eligible to be purchased with the warrants are summarized in the following
table:





Series
      of warrant
                        
                        Number
      of shares
                        
                        
                        Exercise
      price
                        
                        Contractual
                          termSeries
      A
                        
                        
                        10,000,000
                        
                        
                        $
                        2.75
                        
                        5.00
      yearsSeries
      B
                        
                        
                        5,000,000
                        
                        
                        $
                        3.50
                        
                        5.00
      yearsSeries
      J
                        
                        
                        7,801,268
                        
                        
                        $
                        2.37
                        
                        1.50
      yearsSeries
      C
                        
                        
                        7,801,268
                        
                        
                        $
                        3.03
                        
                        5.00
      yearsSeries
      D
                        
                        
                        3,900,634
                        
                        
                        $
                        3.85
                        
                        5.00
      years





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





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





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





The
agreement also provides that if the Company doesn’t file, or if the registration
statements aren’t declared effective throughout the required period, or if the
company ceases to trade on certain exchanges as defined, the Company shall pay
damages equal to 1.5% of the amount invested for each calendar month capped at a
cumulative damage payment amount of 15%.  Further, if the Company
fails to obtain a listing on NASDAQ or the New York Stock Exchange, then
1,000,000 shares of common stock of the company will be given to the
investors.  The company is accounting for these penalties in
accordance with FAS 5 - Accounting for Contingencies, whereby the penalty will
not be recorded as a liability until and if it is probable the penalty will be
incurred. No penalty has been recorded in the accompanying consolidated
financial statements for this instance.


22


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





13.
            PREFERRED
      STOCK AND WARRANTS (Continued)





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




Although
the registration statement has not yet been declared effective, pursuant to a
Waiver and Release dated December 31, 2008, the Holders have waived their
right to the liquidated damages for the Company’s failure to have the
registration statement declared effective on or prior to the Effectiveness
date under Registration Rights Agreement.





In
exchange for the waiver and release of the liquidated damages, the Company
entered into an Agreement dated December 31, 2008 (the Agreement). Under the
Agreement, the Company agreed to hire and engage, by February 28, 2009, three
(3) independent directors as defined by NASDAQ Rule 4200(a)(15) and who are
acceptable to the Holders. Further, the Company shall comply with all of the
provisions of NASDAQ Rule 4350 by February 28, 2009. If these requirements are
not met, the Company shall pay to each Holder five percent (5%) of its initial
investment under the Securities Purchase Agreement by and among the Company and
the Holders dated October 3, 2007. On February 27, we signed an addendum to the
Agreement with the Holders, which extended the deadline for hiring and engaging
three (3) independent directors to March 13, 2009. On March 9, 2009, the Company
adopted a form of new Bylaws, appointed three (3) independent directors,
established three (3) standing committees under the Board of Directors (audit
committee, compensation committee and governance and nominating committee), and
approved the articles of the three (3) abovementioned standing committees and
the Code of Conduct and Ethics, thus has been compliant with the provisions of
NASDAQ Rule 4350. In addition, the Company agreed to effect and announce,
no later than June 30, 2009, a change to the Company’s current independent audit
firm and engage a new independent audit firm listed as a Top 10 audit firm
according to Public Accounting Report’s 2008 Annual Audit Rankings to audit the
2009 financial statements and review the interim financial statements as of June
30, 2009.  If these requirements are not met, the Company shall pay to
each Holder ten percent (10%) of its initial investment under the Securities
Purchase Agreement. Furthermore, the Company and the Holders agreed to extend
the required Effectiveness date of the Company’s Registration Statement filed
with the Securities and Exchange Commission to June 30, 2009.


23


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





14.
            CAPITALIZATION





As a
result of the Group’s reverse-merger on October 3, 2007, the Group’s capital
structure has been changed. The number of common stock was 20,000,003 after
reverse-merger. The common stock is $20,000 with paid-in capital
$38,389,635.








15.
            EARNINGS
      PER SHARE





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





2008
                          
                          
                          2007Net
      income
                          
                          $
                          14,380,466
                          
                          
                          $
                          10,324,028Beneficial
      conversion feature on Series A preferred stock
                          
                          
                          -
                          
                          
                          
                          (7,988,359
                          )Net
      income attributable to common shareholders
                          
                          $
                          14,380,466
                          
                          
                          $
                          2,335,669Earnings:Earnings
      for the purpose of basic earnings per share
                          
                          $
                          14,380,466
                          
                          
                          $
                          2,335,669Effect
      of dilutive potential common stock
                          
                          
                          -
                          
                          
                          
                          -Earnings
      for the purpose of dilutive earnings per share
                          
                          $
                          14,380,466
                          
                          
                          $
                          2,335,669Number
      of shares:Weighted
      average number of common stock for the purpose of basic earnings per
      share
                          
                          
                          20,000,003
                          
                          
                          
                          19,998,473Effect
      of dilutive potential common stock - conversion of convertible
      preferred  stock
                          
                          
                          9,999,999
                          
                          
                          
                          9,999,999Effect
      of dilutive potential common stock - conversion of
warrants
                          
                          
                          7,757,825
                          
                          
                          
                          4,004,566Weighted
      average number of common stock for the purpose of dilutive earnings per
      share
                          
                          
                          37,757,827
                          
                          
                          
                          34,003,038Earnings
      per shareBasic
      earnings per share
                          
                          $
                          0.72
                          
                          
                          $
                          0.12Dilutive
      earnings per share
                          
                          $
                          0.38
                          
                          
                          $
                          0.07




24


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





16.
            INCOME
      TAXES





(a)
            The
      Company is registered in the State of Nevada whereas its subsidiary, Faith
      Winner (BVI) being incorporated in the British Virgin Islands is not
      subject to any income tax and conducts all of its business through its PRC
      subsidiary, Faith Winner (Jixian) and VIE, Yanglin (see note
      1).





Faith
Winner (Jixian), and Yanglin, being registered in the PRC, are subject to PRC’s
Enterprise Income Tax. Under applicable income tax laws and regulations, an
enterprise located in PRC, including the district where our operations are
located, is subject to a 25% enterprise income tax (“EIT”).





However,
Yanglin has been named as a leading enterprise in the agricultural area and
awarded with a tax exemption for the years up to 2009.  After 2009,
review is required for the extension of the tax exemption status.





A
reconciliation between the income tax computed at the U.S. statutory rate and
the Group’s provision for income tax is as follows:





2008
                        
                        
                        2007U.S.
      statutory rate
                        
                        
                        34
                        %
                        
                        
                        34
                        %Foreign
      income not recognized in the U.S.
                        
                        
                        (34
                        )%
                        
                        
                        (34
                        )%PRC
      Enterprise Income Tax
                        
                        
                        25
                        %
                        
                        
                        33
                        %Tax
      exemption
                        
                        
                        (25
                        )%
                        
                        
                        (33
                        )%Provision
      for income tax
                        
                        
                        -
                        
                        
                        
                        -





(b)
            For
      2008, the PRC corporate income tax rate was 25%. Heilongjiang Yanglin
      Soybean Group Co., Ltd are entitled to tax exemptions (tax holidays) for
      2008.





Income
before income tax expenses of $14,380,466, and $10,324,028 for the years ended
December 31, 2008, and 2007 respectively, were attributed to subsidiaries with
operations in China. Income tax (benefit) expense related to China income for
the years ended December 31, 2008 and 2007 are nil, and nil,
respectively.





The
combined effects of the income tax expense exemptions and reductions available
to the Company for the years ended December 31, 2008, and 2007 are as
follows:





2008
                    
                    
                    2007Tax
      holiday effect
                    
                    $
                    3,595,117
                    
                    
                    $
                    3,406,929Basic
      net income per share effect
                    
                    
                    0.18
                    
                    
                    
                    0.17





(c)
            No
      deferred tax has been provided as there are no material temporary
      differences arising during the years ended December 31, 2008 and
      2007.




25


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





17.
            FAIR
      VALUE OF FINANCIAL INSTRUMENTS





The fair
value of a financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties.  The
carrying amounts of financial assets and liabilities, such as cash and cash
equivalents, accounts receivable, other receivables, accounts payable, and other
payables, approximate their fair values because of the short maturity of these
instruments and market rates of interest available to the Group.





18.
            SALES
      BY PRODUCTS





The
Company operates in one business segment, manufacturing, distribution, and
selling of non-genetically modified soybean products, including soybean oil,
soybean salad oil, and soybean meal, throughout the Province of Heilongjiang and
other parts of China.





For the
years ended December 31, 2008 and 2007, the Group’s net sales and cost of sales
from these three product types, namely soybean meal, soybean oil and salad oil,
are shown as follows:





2008
                      
                      Soybean
                      
                      
                      Soybeanmeal
                      
                      
                      oil
                      
                      
                      Salad
      oil
                      
                      
                      ConsolidatedNet
      sales
                      
                      $
                      154,526,888
                      
                      
                      $
                      70,374,106
                      
                      
                      $
                      25,827,680
                      
                      
                      $
                      250,728,674Cost
      of sales
                      
                      
                      (141,924,170
                      )
                      
                      
                      (64,571,952
                      )
                      
                      
                      (23,342,720
                      )
                      
                      
                      (229,838,842
                      )Product
      result
                      
                      $
                      12,602,718
                      
                      
                      $
                      5,802,154
                      
                      
                      $
                      2,484,960
                      
                      
                      $
                      20,889,832





2007
                        
                        Soybean
                        
                        
                        Soybeanmeal
                        
                        
                        oil
                        
                        
                        Salad
      oil
                        
                        
                        ConsolidatedNet
      sales
                        
                        $
                        92,563,442
                        
                        
                        $
                        47,071,641
                        
                        
                        $
                        15,571,784
                        
                        
                        $
                        155,206,867Cost
      of sales
                        
                        
                        (86,654,275
                        )
                        
                        
                        (42,075,631
                        )
                        
                        
                        (13,838,752
                        )
                        
                        
                        (142,568,658
                        )Product
      result
                        
                        $
                        5,909,167
                        
                        
                        $
                        4,996,010
                        
                        
                        $
                        1,733,032
                        
                        
                        $
                        12,638,209




26


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





19.
            RELATED
      PARTIES TRANSACTIONS





The
following material transactions with related companies, during the periods were
opinion of the directors, carried out in the ordinary course of business and on
normal commercial terms:





On
October 3, 2007, we entered into a consulting agreement (“Consulting Agreement”)
with our ex-President, Chief Executive Officer and Chief Financial Officer,
Glenn A. Little. Pursuant to the Consulting Agreement, the services to be
performed by Mr. Little include providing advice, information and true and
correct copies of documents regarding our historical records and operations to
our auditors, attorneys, officers and directors, and signing such documents as
they may reasonably request and providing information to the extent the
requested information is reasonably available to Mr. Little. In consideration
thereof, Mr. Little will be paid the sum of $550,000; provided, however, that as
a condition to the making of the foregoing payment, he shall have: (i) delivered
a resignation from all officer positions effective upon delivery, (ii) delivered
a resignation as director which shall be effective on the tenth (10th) day
after we mail a Schedule 14f-1 to our shareholders of record; and (iii)
appointed Mr. Shulin Liu as our director and Chief Executive Officer and Mr.
Shaocheng Xu as our Chief Financial Officer. Mr. Little completed the provision
of the services and was paid $550,000 as provided in the Consulting Agreement on
October 4, 2007.





On
November 2, 2006, Yanglin entered into a Financial Consulting Agreement (the
“MHA Agreement”) with Mass Harmony Asset Management Limited (“MHA”). Pursuant to
the MHA Agreement, Yanglin is to pay MHA an aggregate of RMB 300,000
(approximately US$ 39,891), half of which is payable within five business days
upon the execution of the MHA Agreement, and the balance is due within five
business days after the closing of a reverse merger.





Additionally
MHA is also to receive 1% of the issued and outstanding common stock of the
Company post-private placement (including the underlying common stock of the
Series A Preferred Stock) and warrants to purchase common stock of the Company
valued at 5% of the dollar amount of private placement at an exercise price of
140% of the Series A Preferred Stock price. i.e. 500,000 warrants.





The
services MHA shall render, pursuant to the MHA Agreement, include initial due
diligence on Yanglin, preparing Yanglin’s business plan and assisting in the
corporate restructuring and financial documentation. Our incumbent director,
Yang Miao is the Managing Director and a shareholder of MHA.


27


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





20.
            PARENT-ONLY
      FINANCIAL STATEMENTS





YANGLIN
SOYBEAN INC.





BALANCE
SHEETS


AS
AT DECEMBER 31, 2008, AND 2007


(Stated
in US Dollars)





2008
                                        
                                        
                                        2007ASSETSCurrent
      assetsCash
      and cash equivalents
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        15,472Pledged
      deposits
                                        
                                        
                                        484,000
                                        
                                        
                                        
                                        500,000Receivables
      from subsidiaries (restated)
                                        
                                        
                                        17,551,928
                                        
                                        
                                        
                                        17,551,928Total
      current assets (restated)
                                        
                                        $
                                        18,035,928
                                        
                                        
                                        $
                                        18,067,400Investment
      in a subsidiary (restated)
                                        
                                        
                                        50,000
                                        
                                        
                                        
                                        50,000TOTAL
      ASSETS
                                        
                                        $
                                        18,085,928
                                        
                                        
                                        $
                                        18,117,400LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilitiesAccounts
      payable
                                        
                                        $
                                        350
                                        
                                        
                                        $
                                        350Other
      payables
                                        
                                        
                                        13,000
                                        
                                        
                                        
                                        13,000Accrued
      liabilities
                                        
                                        
                                        20,528
                                        
                                        
                                        
                                        712Total
      current liabilities
                                        
                                        $
                                        33,878
                                        
                                        
                                        $
                                        14,062TOTAL
      LIABILITIES
                                        
                                        $
                                        33,878
                                        
                                        
                                        $
                                        14,062




28


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





20.
            PARENT-ONLY
      FINANCIAL STATEMENTS (Continued)




YANGLIN
SOYBEAN INC.





BALANCE
SHEETS (Continued)


AS
AT DECEMBER 31, 2008, AND 2007


(Stated
in US Dollars)





2008
                          
                          
                          2007STOCKHOLDERS’
      EQUITYPreferred
      Stock – Series A $0.001 par value, 50,000,000 shares
      authorized;  9,999,999 shares issued and outstanding as of
      December 31, 2008 and December 31, 2007
                          
                          $
                          10,000
                          
                          
                          $
                          10,000Common
      stock - $0.001 par value 100,000,000 shares authorized; 20,000,003 shares
      issued and outstanding as of  December 31, 2008  and
      December 31, 2007
                          
                          
                          20,000
                          
                          
                          
                          20,000Additional
      paid-in capital
                          
                          
                          26,272,194
                          
                          
                          
                          26,272,194Statutory
      reservesAccumulated
      losses
                          
                          
                          (8,250,144
                          )
                          
                          
                          (8,198,856
                          )$
                          18,052,050
                          
                          
                          $
                          18,103,338TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                          
                          $
                          18,085,928
                          
                          
                          
                          18,117,400




29


YANGLIN
SOYBEAN INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





20.
            PARENT-ONLY
      FINANCIAL STATEMENTS (Continued)




YANGLIN
SOYBEAN INC.





STATEMENTS
OF INCOME AND COMPREHENSIVE INCOME


FOR
THE YEARS ENDED DECEMBER 31, 2008, AND 2007


(Stated
in US Dollars)





2008
                                                                
                                                                
                                                                2007Net
      sales
                                                                
                                                                $
                                                                -
                                                                
                                                                
                                                                $
                                                                -General
      and administrative expenses
                                                                
                                                                
                                                                (35,816
                                                                )
                                                                
                                                                
                                                                (9,871
                                                                )Loss
      from operation
                                                                
                                                                $
                                                                (35,816
                                                                )
                                                                
                                                                $
                                                                (9,871
                                                                )Interest
      income
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                92Interest
      expenses
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                (226
                                                                )Other
      expenses
                                                                
                                                                
                                                                (15,472
                                                                )
                                                                
                                                                
                                                                -Loss
      from operations before income taxes
                                                                
                                                                $
                                                                (51,288
                                                                )
                                                                
                                                                $
                                                                (10,005
                                                                )Income
      taxes
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -Net
      loss
                                                                
                                                                $
                                                                (51,288
                                                                )
                                                                
                                                                $
                                                                (10,005
                                                                )Beneficial
      conversion feature on Series A preferred stock
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                (7,988,359
                                                                )Net
      loss attributable to common shareholders
                                                                
                                                                $
                                                                (51,288
                                                                )
                                                                
                                                                $
                                                                (7,998,364
                                                                )Foreign
      currency translation adjustment
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -Comprehensive
      loss
                                                                
                                                                $
                                                                (51,288
                                                                )
                                                                
                                                                $
                                                                (7,998,364
                                                                )Basic
      earnings per share
                                                                
                                                                $
                                                                0.00
                                                                
                                                                
                                                                $
                                                                (0.40
                                                                )Diluted
      earnings per share
                                                                
                                                                $
                                                                0.00
                                                                
                                                                
                                                                $
                                                                (0.24
                                                                )Basic
      weighted average share outstanding
                                                                
                                                                
                                                                20,000,003
                                                                
                                                                
                                                                
                                                                19,998,473Diluted
      weighted average share outstanding
                                                                
                                                                
                                                                37,757,827
                                                                
                                                                
                                                                
                                                                34,003,038




30


(3)
Exhibits





The
exhibits listed on the Exhibit Index (following the signatures section of this
report) are included, or incorporated by reference, in this annual
report.





SIGNATURES





In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





YANGLIN
      SOYBEAN, INC(Registrant)Dated:
      May 8, 2009
                
                /s/
      Shulin
      LiuShulin
      LiuChief
      Executive Officer,Chairman
      of the Board





In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.





Signature
                                
                                Title
                                
                                Date/s/
      Shulin Liu
                                
                                
                                Chief
      Executive Officer,
                                
                                May
      8, 2009Shulin
      Liu
                                
                                
                                Chairman
      of the Board/s/
      Shaocheng Xu
                                
                                
                                Chief
      Financial Officer
                                
                                May
      8, 2009Shaocheng
      Xu/s/  Xiao
      Feng
                                
                                
                                Director
                                
                                May
      8, 2009Xiao
      Feng/s/
      Zongtai Guo
                                
                                
                                Director
                                
                                May
      8, 2009Zongtai
      Guo/s/  Michael
      Marks
                                
                                
                                Director
                                
                                May
      8, 2009Michael
      Marks/s/
      Albert
      McLelland
                                
                                
                                Director
                                
                                May
      8, 2009Albert
      McLelland







EXHIBIT
INDEX





3.1
              
              Restated
      Articles of Incorporation incorporated by reference to the exhibit of the
      same number to our registration statement on Form S-1 filed with the SEC
      on May 12, 2008.3.2
              
              Restated
      Bylaws incorporated by reference to the exhibit of the same number to our
      report on Form 8-K filed with the SEC on March 12,
2009.3.3
              
              Specimen
      of Common Stock certificate incorporated by reference to the exhibit of
      the same number to our report on Form 8-k filed with the SEC on October
      10, 2007.3.4
              
              Certificate
      of Designations authorizing the Series A Convertible Preferred Stock
      incorporated by reference to the exhibit of the same number to our report
      on Form 8-k filed with the SEC on October 10, 2007.3.5
              
              Certificate
      of Designations authorizing the Series B Convertible Preferred Stock
      incorporated by reference to the exhibit of the same number to our report
      on Form 8-k filed with the SEC on October 10, 2007.4.1
              
              Form
      of Series A Warrant incorporated by reference to the exhibit of the same
      number to our report on Form 8-k filed with the SEC on October 10,
      2007.4.2
              
              Form
      of Series B Warrant incorporated by reference to the exhibit of the same
      number to our report on Form 8-k filed with the SEC on October 10,
      2007.4.3
              
              Form
      of Series J Warrant incorporated by reference to the exhibit of the same
      number to our report on Form 8-k filed with the SEC on October 10,
      2007.4.4
              
              Form
      of Series C Warrant incorporated by reference to the exhibit of the same
      number to our report on Form 8-k filed with the SEC on October 10,
      2007.4.5
              
              Form
      of Series D Warrant incorporated by reference to the exhibit of the same
      number to our report on Form 8-k filed with the SEC on October 10,
      2007.4.6
              
              Form
      of Series E Warrant issued to Kuhns Brothers, Inc. incorporated by
      reference to the exhibit of the same number to our report on Form 8-k
      filed with the SEC on October 10, 2007.4.7
              
              Form
      of Series F Warrant issued to Mass Harmony Asset Management Limited
      incorporated by reference to the exhibit of the same number to our report
      on Form 8-k filed with the SEC on October 10, 2007.4.8
              
              Registration
      Rights Agreement dated October 3, 2007, by and among the Company and the
      Purchasers, incorporated by reference to the exhibit of the same number to
      our report on Form 8-k filed with the SEC on October 10,
    2007.4.9
              
              Series
      J Registration Rights Agreement dated October 3, 2007, by and among the
      Company, Vision Opportunity Master Fund Ltd., Sansar Capital Special
      Opportunity Master Fund, LP (Cayman Master) and Vicis Capital Master Fund,
      incorporated by reference to the exhibit of the same number to our report
      on Form 8-k filed with the SEC on October 10,
  2007.










4.10
              
              Lock-Up
      Agreement, dated as of October 3, 2007, by and among the Company and
      Winner State (BVI), incorporated by reference to the exhibit of the same
      number to our report on Form 8-k filed with the SEC on October 10,
      2007.4.11
              
              Share
      Exchange Agreement, dated as of October 3, 2007 between the Company,
      Winner State (BVI), Fang Chen, Yang Miao and Ying Zhang, incorporated by
      reference to the exhibit of the 10.1 to our report on Form 8-k filed with
      the SEC on October 10, 2007.4.12
              
              Series
      A Convertible Preferred Stock Purchase Agreement, dated as of October 3,
      2007 between the Company and the Purchasers, incorporated by reference to
      the exhibit of 10.2 to our report on Form 8-k filed with the SEC on
      October 10, 2007.4.13
              
              Securities
      Escrow Agreement, dated October 3, 2007, by and between the Company,
      Vision Opportunity Master Fund, Ltd as representative of the Purchasers,
      Winner State (BVI) and Loeb & Loeb LLP, as escrow agent, incorporated
      by reference to the exhibit of 10.3 to our report on Form 8-k filed with
      the SEC on October 10, 2007.10.1
              
              Consulting
      Agreement, dated as of October 3, 2007, by and among the Company and Glenn
      A. Little, incorporated by reference to the exhibit of 10.4 to our report
      on Form 8-k filed with the SEC on October 10, 2007.10.2
              
              Engagement
      Letter Agreement, dated December 12, 2006, by and between Yanglin and
      Kuhns Brothers, Inc, incorporated by reference to the exhibit of 10.5 to
      our report on Form 8-k filed with the SEC on October 10,
    2007.10.3
              
              English
      Translation of Consulting Agreement dated Nov. 2, 2006 between the Company
      and Mass Harmony Management Ltd. incorporated by reference to exhibit
      10.15 to our Registration Statement on Form S-1 (Amendment No. 4) filed
      with the SEC on February 17, 2009.10.4
              
              The
      Consignment Agreements, dated as of September 1, 2007, incorporated by
      reference to the exhibit of 10.7 to our report on Form 8-k filed with the
      SEC on October 10, 2007.10.5
              
              Exclusive
      Purchase Option Agreement, dated as of September 24, 2007, incorporated by
      reference to the exhibit of 10.8 to our report on Form 8-k filed with the
      SEC on October 10, 2007.10.6
              
              Registered
      Trademark Transfer Agreement, dated as of September 24, 2007, incorporated
      by reference to the exhibit of 10.9 to our report on Form 8-k filed with
      the SEC on October 10, 2007.10.7
              
              Trademark
      Licensing Agreement, dated as of September 24, 2007, incorporated by
      reference to the exhibit of 10.10 to our report on Form 8-k filed with the
      SEC on October 10, 2007.10.8
              
              Consigned
      Management Agreement, dated as of September 24, 2007, incorporated by
      reference to the exhibit of 10.11 to our report on Form 8-k filed with the
      SEC on October 10, 2007.10.9
              
              Loan
      Agreement, dated as of September 24, 2007, incorporated by reference to
      the exhibit of 10.12 to our report on Form 8-k filed with the SEC on
      October 10, 2007.










10.10
              
              Form
      of soybean purchase contract incorporated by reference to the same number
      to our report on Form 10-k filed with the SEC on March 31,
      200810.11
              
              Form
      of sales contract for soybean product incorporated by reference to the
      same number to our report on Form 10-k filed with the SEC on March 31,
      200810.12
              
              Employment
      Contract-Shulin Liu as of Sept. 24, 2007 incorporated by reference to the
      same number to our report on Form 10-k filed with the SEC on March 31,
      2008.10.13
              
              Employment
      Contract-Shaocheng Xu as of Sept. 24, 2007 incorporated by reference to
      the same number to our report on Form 10-k filed with the SEC on March 31,
      2008.10.14
              
              Employment
      Contract-Zongtai Guo as of Sept. 24, 2007 incorporated by reference to the
      same number to our report on Form 10-k filed with the SEC on March 31,
      2008.10.15
              
              Approval
      of Credit Line from China Agricultural Development Bank  dated
      October 18, 2008 incorporated by reference to exhibit 10.15 to our
      Registration Statement on Form S-1 (Amendment No. 4, file No. 333-150822)
      filed with the SEC on February 17, 2009.10.16
              
              Agreement
      among the Company and Vision Opportunity Master Fund, Ltd. and certain
      other investors dated December 31, 2008  incorporated by
      reference to exhibit 10.1 to our report on Form 8-K filed with the SEC on
      February 10, 2009.10.17
              
              Waiver
      and Release among the Company and Vision Opportunity Master Fund, Ltd. and
      certain other investors dated December 31, 2008 incorporated by reference
      to exhibit 10.2 to our report on Form 8-K filed with the SEC on February
      10, 2009.10.18
              
              Amendment
      to Exclusive Purchase Option Agreement, dated as of April 3,
      200910.19
              
              Amendment
      to Consigned Management Agreement, dated as of April 3,
    200916.1
              
              Letter
      from the Company to Hatfield, incorporated by reference to the exhibit of
      the same number to our report on Form 8-k filed with the SEC on October
      10, 2007.16.2
              
              Letter
      from Hatfield to the SEC, incorporated by reference to the exhibit of the
      same number to our report on Form 8-k filed with the SEC on October 10,
      2007.16.3
              
              Letter
      of Samuel H. Wong & Company, LLP, dated February 26, 2008,
      incorporated by reference to the exhibit of 16.1 to our report on Form
      8-k/A filed with the SEC on February 28, 2008.16.4
              
              Letter
      of Samuel H. Wong & Company, LLP, dated March 17, 2008, incorporated
      by reference to the exhibit of 16.1 to our report on Form 8-k/A filed with
      the SEC on March 28, 2008.21.1
              
              List
      of Subsidiaries incorporated by reference to the exhibit of same number to
      our report on Form 8-k filed with the SEC on October 10,
    200731.1*
              
              Certification
      Pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002.31.2*
              
              Certification
      Pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002.32.1*
              
              Certification
      Pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.32.2*
              
              Certification
      Pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.*
              
              Filed
      herewith.