UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-Q/A


(Amendment
No. 1)




(Mark
One)




x
            Quarterly
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the quarterly period ended June 30,
2009




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 000-51200




Yongye
International, Inc.


(Exact
name of registrant as specified in its charter)





Nevada
            20-8051010(State
      or other jurisdiction of
              incorporation
      or organization)
            (I.R.S.
      Employer
              Identification
      No.)6th Floor, Suite 608,
      Xue Yuan International Tower,
              No.
      1 Zhichun Road, Haidian District Beijing, PRC
              (Address
      of principal executive offices)





Yongye
Biotechnology International, Inc.


(Former
name, former address and former fiscal year, if changed since last
report)




+86 10
8232 8866


(Registrant’s
telephone number, including area code)




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





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Date File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). * Yeso  Noo  *The
registrant has not yet been phased into the interactive data
requirements.




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 filero
            Accelerated
      fileroNon-accelerated
      filero
        (Do not check if a smaller reporting company)
            Smaller
      reporting companyx




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




As of
August 18, 2009, there were 32,781,065 shares of common stock, par value $.001
per share, issued and outstanding.




EXPLANATORY
NOTE
  We are
filing this Quarterly Report on Form 10-Q/A (the “Amendment”) to amend Part I,
Item 1, Financial Statements and Item 2, Management’s Discussion and Analysis of
Financial Condition and Results of Operations, in the original Quarterly Report
on Form 10-Q, filed with the Securities and Exchange Commission (“SEC”). This
Amendment has been filed to correct an error in the manner in which we
calculated the number of shares outstanding in determining earnings per share,
and another error in which we should have reclassified warrants issued as a
derivative liability, and the financial statements contained herein are being
restated accordingly. Also, in connection with the review of Amendment No. 2 to
the Company’s Registration Statement on Form S-3, this filing contains revisions
to our Quarterly Report on Form 10-Q initially filed with the Securities and
Exchange Commission (the “Commission”) on August 18, 2009 in response to the
Commission’s comment letter dated September 1, 2009.


PagePart
      I: Financial Information:Item
      1 -Financial Statements
                
                3Consolidated
      Balance Sheets
                
                3Consolidated
      Statements of Income and Comprehensive Income
                
                4Statements
      of Changes in Equity
                
                5Consolidated
      Statements of Cash Flows
                
                6Notes
      to Consolidated Financial Statements
                
                7Item
      2 - Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
                
                20Item
      3 – Quantitative and Qualitative Disclosures about Market
    Risk
                
                29Item
      4 - Controls and Procedures
                
                29Item
      4T – Controls and Procedures
                
                30Part
      II. Other InformationItem
      1 - Legal Proceedings
                
                31Item
      1A – Risk Factors
                
                31Item
      2 - Unregistered Sales of Equity Securities and Use of
      Proceeds
                
                31Item
      3 - Defaults Upon Senior Securities
                
                31Item
      4 - Submission of Matters to a Vote of Security Holders
                
                31Item
      5 - Other Information
                
                32Item
      6 – Exhibits
                
                32Signatures
                
                33





2


﻿


Item
1- Financial Statements









YONGYE
INTERNATIONAL, INC. AND SUBSIDIARIES




UNAUDITED
CONSOLIDATED BALANCE SHEETS





June 30, 2009
                      
                      
                      December 31, 2008(Restated - Note 1(C))
                      
                      
                      (Restated - Note 1(C))CURRENT
      ASSETSCash
                      
                      $
                      4,860,814
                      
                      
                      $
                      4,477,477Accounts
      receivable, net - third parties
                      
                      
                      36,562,325
                      
                      
                      
                      2,748,042Accounts
      receivable, net - related party
                      
                      
                      29,219
                      
                      
                      
                      -Inventories
                      
                      
                      26,760,401
                      
                      
                      
                      20,708,193Advance
      payments
                      
                      
                      188,808
                      
                      
                      
                      44,051Due
      from a related party
                      
                      
                      193,046
                      
                      
                      
                      192,741Prepaid
      expenses
                      
                      
                      129,590
                      
                      
                      
                      189,478Other
      receivables
                      
                      
                      418,335
                      
                      
                      
                      680,752Total
      Current Assets
                      
                      
                      69,142,538
                      
                      
                      
                      29,040,734PROPERTY
      AND EQUIPMENT, NET
                      
                      
                      7,091,521
                      
                      
                      
                      5,368,074INTANGIBLE
      ASSETS, NET
                      
                      
                      90,274
                      
                      
                      
                      95,453TOTAL
      ASSETS
                      
                      $
                      76,324,333
                      
                      
                      $
                      34,504,261CURRENT
      LIABILITIESLong-term
      loans - current portion
                      
                      $
                      183,723
                      
                      
                      $
                      167,652Accounts
      payable - related party
                      
                      
                      11,414,741
                      
                      
                      
                      46,739Accounts
      payable - third parties
                      
                      
                      41,158
                      
                      
                      
                      -Income
      tax payable
                      
                      
                      4,771,415
                      
                      
                      
                      219,366Advance
      from customers
                      
                      
                      171,847
                      
                      
                      
                      1,869,400Accrued
      expenses
                      
                      
                      5,324,376
                      
                      
                      
                      583,880Other
      payables
                      
                      
                      869,387
                      
                      
                      
                      774,526Derivative
      liabilities – fair value of warrants
                      
                      
                      7,411,982
                      
                      
                      
                      2,107,931Total
      Current Liabilities
                      
                      
                      30,188,629
                      
                      
                      
                      5,769,494LONG-TERM
      LOANS
                      
                      
                      273,615
                      
                      
                      
                      230,121EQUITYCommon
      stock: par value $.001; 75,000,000 shares authorized; 32,594,341 shares
      issued and outstanding at June 30, 2009 and 26,760,258 shares issued and
      outstanding December 31, 2008
                      
                      
                      32,594
                      
                      
                      
                      26,760Additional
      paid-in capital - Common stock
                      
                      
                      21,540,805
                      
                      
                      
                      13,633,604Retained
      earnings
                      
                      
                      22,661,751
                      
                      
                      
                      13,310,794Accumulated
      other comprehensive income
                      
                      
                      340,577
                      
                      
                      
                      329,445Total
      Equity of the Company’s Shareholders
                      
                      
                      44,575,727
                      
                      
                      
                      27,300,603Noncontrolling
      interest
                      
                      
                      1,286,362
                      
                      
                      
                      1,204,043Total
      Equity
                      
                      
                      45,862,089
                      
                      
                      
                      28,504,646TOTAL
      LIABILITIES AND EQUITY
                      
                      $
                      76,324,333
                      
                      
                      $
                      34,504,261




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




3




YONGYE
INTERNATIONAL, INC. AND SUBSIDIARIES


UNAUDITED
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME





For the Three Months Ended
                                                                    
                                                                    
                                                                    For the Six Months EndedJune 30, 2009
                                                                      (Restated - Note 1(C))
                                                                    
                                                                    
                                                                    June 30, 2008
                                                                      (Restated - Note1(C))
                                                                    
                                                                    
                                                                    June 30, 2009
                                                                      (Restated - Note1(C))
                                                                    
                                                                    
                                                                    June 30, 2008
                                                                      (Restated - Note1(C))SALESExternal
      customers
                                                                    
                                                                    $
                                                                    46,271,544
                                                                    
                                                                    
                                                                    $
                                                                    17,598,671
                                                                    
                                                                    
                                                                    $
                                                                    56,487,236
                                                                    
                                                                    
                                                                    $
                                                                    26,986,639Related
      party
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    2,220,083
                                                                    
                                                                    
                                                                    
                                                                    -TOTAL
      SALES
                                                                    
                                                                    
                                                                    46,271,544
                                                                    
                                                                    
                                                                    
                                                                    17,598,671
                                                                    
                                                                    
                                                                    
                                                                    58,707,319
                                                                    
                                                                    
                                                                    
                                                                    26,986,639COST
      OF SALES
                                                                    
                                                                    
                                                                    21,936,877
                                                                    
                                                                    
                                                                    
                                                                    7,996,521
                                                                    
                                                                    
                                                                    
                                                                    27,839,484
                                                                    
                                                                    
                                                                    
                                                                    12,419,020GROSS
      PROFIT
                                                                    
                                                                    
                                                                    24,334,667
                                                                    
                                                                    
                                                                    
                                                                    9,602,150
                                                                    
                                                                    
                                                                    
                                                                    30,867,835
                                                                    
                                                                    
                                                                    
                                                                    14,567,619SELLING
      EXPENSES
                                                                    
                                                                    
                                                                    6,450,694
                                                                    
                                                                    
                                                                    
                                                                    777,012
                                                                    
                                                                    
                                                                    
                                                                    9,070,992
                                                                    
                                                                    
                                                                    
                                                                    3,997,477RESEARCH
      & DEVELOPMENT EXPENSES
                                                                    
                                                                    
                                                                    1,124,445
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    1,413,017
                                                                    
                                                                    
                                                                    
                                                                    -GENERAL
      AND ADMINISTRATIVE EXPENSES
                                                                    
                                                                    
                                                                    785,565
                                                                    
                                                                    
                                                                    
                                                                    454,697
                                                                    
                                                                    
                                                                    
                                                                    1,130,722
                                                                    
                                                                    
                                                                    
                                                                    812,125INCOME
      FROM OPERATIONS
                                                                    
                                                                    
                                                                    15,973,963
                                                                    
                                                                    
                                                                    
                                                                    8,370,441
                                                                    
                                                                    
                                                                    
                                                                    19,253,104
                                                                    
                                                                    
                                                                    
                                                                    9,758,017OTHER
      EXPENSES/(INCOME)Interest
      Expense/(Income), net
                                                                    
                                                                    
                                                                    10,500
                                                                    
                                                                    
                                                                    
                                                                    (789)
                                                                    
                                                                    
                                                                    
                                                                    16,458
                                                                    
                                                                    
                                                                    
                                                                    (778)Other
      Expenses /(Income), net
                                                                    
                                                                    
                                                                    (13,178)
                                                                    
                                                                    
                                                                    
                                                                    387,198
                                                                    
                                                                    
                                                                    
                                                                    (12,737)
                                                                    
                                                                    
                                                                    
                                                                    386,840Increase
      in fair value of derivative liabilities
                                                                    
                                                                    
                                                                    5,276,958
                                                                    
                                                                    
                                                                    
                                                                    2,154,323
                                                                    
                                                                    
                                                                    
                                                                    5,068,947
                                                                    
                                                                    
                                                                    
                                                                    2,154,323TOTAL
      OTHER EXPENSES, NET
                                                                    
                                                                    
                                                                    5,274,280
                                                                    
                                                                    
                                                                    
                                                                    2,540,732
                                                                    
                                                                    
                                                                    
                                                                    5,072,668
                                                                    
                                                                    
                                                                    
                                                                    2,540,385INCOME
      BEFORE PROVISION FOR INCOME TAXES
                                                                    
                                                                    
                                                                    10,699,683
                                                                    
                                                                    
                                                                    
                                                                    5,829,709
                                                                    
                                                                    
                                                                    
                                                                    14,180,436
                                                                    
                                                                    
                                                                    
                                                                    7,217,632PROVISION
      FOR INCOME TAXES
                                                                    
                                                                    
                                                                    4,591,776
                                                                    
                                                                    
                                                                    
                                                                    219,983
                                                                    
                                                                    
                                                                    
                                                                    4,747,223
                                                                    
                                                                    
                                                                    
                                                                    594,765NET
      INCOME
                                                                    
                                                                    
                                                                    6,107,907
                                                                    
                                                                    
                                                                    
                                                                    5,609,726
                                                                    
                                                                    
                                                                    
                                                                    9,433,213
                                                                    
                                                                    
                                                                    
                                                                    6,622,867LESS:
      NET INCOME ATTRIBUTABLE TO THE NONCONTROLLING INTEREST
                                                                    
                                                                    
                                                                    63,734
                                                                    
                                                                    
                                                                    
                                                                    603,194
                                                                    
                                                                    
                                                                    
                                                                    82,256
                                                                    
                                                                    
                                                                    
                                                                    1,035,005NET
      INCOME ATTRIBUTABLE TO YONGYE INTERNATIONAL, INC.
                                                                    
                                                                    
                                                                    6,044,173
                                                                    
                                                                    
                                                                    
                                                                    5,006,532
                                                                    
                                                                    
                                                                    
                                                                    9,350,957
                                                                    
                                                                    
                                                                    
                                                                    5,587,862OTHER
      COMPREHENSIVE INCOME/(LOSS)Foreign
      Currency Translation Adjustment
                                                                    
                                                                    
                                                                    (36,750)
                                                                    
                                                                    
                                                                    
                                                                    277,101
                                                                    
                                                                    
                                                                    
                                                                    11,195
                                                                    
                                                                    
                                                                    
                                                                    414,771COMPREHENSIVE
      INCOME
                                                                    
                                                                    
                                                                    6,071,157
                                                                    
                                                                    
                                                                    
                                                                    5,886,827
                                                                    
                                                                    
                                                                    
                                                                    9,444,408
                                                                    
                                                                    
                                                                    
                                                                    7,037,638LESS:
      COMPREHENSIVE INCOME ATTRIBUTABLE TO THE NONCONTROLLING
      INTEREST
                                                                    
                                                                    
                                                                    63,528
                                                                    
                                                                    
                                                                    
                                                                    604,580
                                                                    
                                                                    
                                                                    
                                                                    82,319
                                                                    
                                                                    
                                                                    
                                                                    1,037,079COMPREHENSIVE
      INCOME ATTRIBUTABLE TO YONGYE INTERNATIONAL, INC.
                                                                    
                                                                    $
                                                                    6,007,629
                                                                    
                                                                    
                                                                    $
                                                                    5,282,247
                                                                    
                                                                    
                                                                    $
                                                                    9,362,089
                                                                    
                                                                    
                                                                    $
                                                                    6,000,559Net
      income per share:Basic
                                                                    
                                                                    $
                                                                    0.20
                                                                    
                                                                    
                                                                    $
                                                                    0.27
                                                                    
                                                                    
                                                                    $
                                                                    0.33
                                                                    
                                                                    
                                                                    $
                                                                    0.37Diluted
                                                                    
                                                                    $
                                                                    0.20
                                                                    
                                                                    
                                                                    $
                                                                    0.27
                                                                    
                                                                    
                                                                    $
                                                                    0.33
                                                                    
                                                                    
                                                                    $
                                                                    0.37Weighted
      average shares used in computation:Basic
                                                                    
                                                                    
                                                                    30,222,243
                                                                    
                                                                    
                                                                    
                                                                    18,496,093
                                                                    
                                                                    
                                                                    
                                                                    28,500,814
                                                                    
                                                                    
                                                                    
                                                                    14,970,434Diluted
                                                                    
                                                                    
                                                                    30,222,243
                                                                    
                                                                    
                                                                    
                                                                    18,496,093
                                                                    
                                                                    
                                                                    
                                                                    28,500,814
                                                                    
                                                                    
                                                                    
                                                                    14,970,434




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




4




YONGYE
INTERNATIONAL, INC. AND SUBSIDIARIES


UNAUDITED
STATEMENT OF CHANGES IN EQUITY


FOR THE
SIX MONTHS ENDED JUNE 30, 2009 (RESTATED – NOTE 1(C))





Yongye International, Inc. ShareholdersCommon Stock
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      Comprehensive IncomeNumber ofShares
                                                                      
                                                                      
                                                                      Amount
                                                                      
                                                                      
                                                                      AdditionalPaid-inCapital – CommonStock
                                                                      
                                                                      
                                                                      AccumulatedOtherComprehensiveIncome
                                                                      
                                                                      
                                                                      RetainedEarnings
                                                                      
                                                                      
                                                                      NoncontrollingInterest
                                                                      
                                                                      
                                                                      Total
                                                                      
                                                                      
                                                                      Attributable toYongyeInternational,Inc. Shareholders
                                                                      
                                                                      
                                                                      Attributable toNoncontrollingInterests
                                                                      
                                                                      
                                                                      TotalNote
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      $
                                                                      
                                                                      
                                                                      $
                                                                      
                                                                      
                                                                      $
                                                                      
                                                                      
                                                                      $
                                                                      
                                                                      
                                                                      $
                                                                      
                                                                      
                                                                      $
                                                                      
                                                                      
                                                                      $
                                                                      
                                                                      
                                                                      $
                                                                      
                                                                      
                                                                      $Balance
      as of December 31, 2008 (Restated)
                                                                      
                                                                      1(C)
                                                                      
                                                                      
                                                                      
                                                                      26,760,258
                                                                      
                                                                      
                                                                      
                                                                      26,760
                                                                      
                                                                      
                                                                      
                                                                      13,633,604
                                                                      
                                                                      
                                                                      
                                                                      329,445
                                                                      
                                                                      
                                                                      
                                                                      13,310,794
                                                                      
                                                                      
                                                                      
                                                                      1,204,043
                                                                      
                                                                      
                                                                      
                                                                      28,504,646Net
      income (Restated)
                                                                      
                                                                      1(C)
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      9,350,957
                                                                      
                                                                      
                                                                      
                                                                      82,256
                                                                      
                                                                      
                                                                      
                                                                      9,433,213
                                                                      
                                                                      
                                                                      
                                                                      9,350,957
                                                                      
                                                                      
                                                                      
                                                                      82,256
                                                                      
                                                                      
                                                                      
                                                                      9,433,213Foreign
      currency exchange translation adjustment, net of nil income
      taxes
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      11,132
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      63
                                                                      
                                                                      
                                                                      
                                                                      11,195
                                                                      
                                                                      
                                                                      
                                                                      11,132
                                                                      
                                                                      
                                                                      
                                                                      63
                                                                      
                                                                      
                                                                      
                                                                      11,195Comprehensive
      income (Restated)
                                                                      
                                                                      1(C)
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      
                                                                      9,362,089
                                                                      
                                                                      
                                                                      
                                                                      82,319
                                                                      
                                                                      
                                                                      
                                                                      9,444,408Common
      stock issued for cash May 8, 2009 (Restated)
                                                                      
                                                                      7
                                                                      
                                                                      
                                                                      
                                                                      5,834,083
                                                                      
                                                                      
                                                                      
                                                                      5,834
                                                                      
                                                                      
                                                                      
                                                                      7,907,201
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      7,913,035Balance
      as of June 30, 2009(Restated)
                                                                      
                                                                      1(C)
                                                                      
                                                                      
                                                                      
                                                                      32,594,341
                                                                      
                                                                      
                                                                      
                                                                      32,594
                                                                      
                                                                      
                                                                      
                                                                      21,540,805
                                                                      
                                                                      
                                                                      
                                                                      340,577
                                                                      
                                                                      
                                                                      
                                                                      22,661,751
                                                                      
                                                                      
                                                                      
                                                                      1,286,362
                                                                      
                                                                      
                                                                      
                                                                      45,862,089




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





5




YONGYE
INTERNATIONAL, INC. AND SUBSIDIARIES


UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS




For the Six Months Ended
                                
                                
                                For the Six Months EndedJune 30, 2009
                                
                                
                                June 30, 2008(Restated - Note 1(C))
                                
                                
                                (Restated - Note 1(C))CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income
                                
                                $
                                9,433,213
                                
                                
                                $
                                6,622,867Adjustments
      to reconcile net income to net cash used in operating
      activitiesDepreciation
      and amortization
                                
                                
                                244,805
                                
                                
                                
                                93,263Reversal
      of bad debt provision
                                
                                
                                (305,338
                                )
                                
                                
                                -Increase
      in fair value of derivative liabilities
                                
                                
                                5,068,947
                                
                                
                                
                                2,154,323Changes
      in assets and liabilities:Accounts
      receivable - third parties
                                
                                
                                (33,525,463
                                )
                                
                                
                                (20,613,347
                                )Accounts
      receivable - related party
                                
                                
                                (29,212
                                )
                                
                                
                                -Inventories
                                
                                
                                (6,026,638
                                )
                                
                                
                                (5,196,266
                                )Advance
      payments
                                
                                
                                -
                                
                                
                                
                                (65,453
                                )Due
      from a related party
                                
                                
                                33
                                
                                
                                
                                2,397,465Prepaid
      expenses
                                
                                
                                60,096
                                
                                
                                
                                -Other
      receivables
                                
                                
                                263,126
                                
                                
                                
                                (216,795
                                )Accounts
      payable- related party
                                
                                
                                11,376,007
                                
                                
                                
                                4,889,694Accounts
      payable- third parties
                                
                                
                                41,187
                                
                                
                                
                                -Income
      tax payable
                                
                                
                                4,562,992
                                
                                
                                
                                243,007Advance
      from customers
                                
                                
                                (1,699,588
                                )
                                
                                
                                -Accrued
      expenses
                                
                                
                                4,742,049
                                
                                
                                
                                1,882,643Other
      payables
                                
                                
                                85,887
                                
                                
                                
                                203,947Net
      Cash Used in Operating Activities
                                
                                
                                (5,707,897
                                )
                                
                                
                                (7,604,652
                                )CASH
      FLOWS FROM INVESTING ACTIVITIESAcquisition
      of property and equipment
                                
                                
                                (2,100,266
                                )
                                
                                
                                (639,519
                                )Addition
      to intangible assets
                                
                                
                                -
                                
                                
                                
                                (122,899
                                )Net
      Cash Used in Investing Activities
                                
                                
                                (2,100,266
                                )
                                
                                
                                (762,418
                                )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from bank loans
                                
                                
                                129,593
                                
                                
                                
                                -Repayment
      of bank loans
                                
                                
                                (70,591
                                )
                                
                                
                                -Proceeds
      from common stock and warrants issued
                                
                                
                                8,984,595
                                
                                
                                
                                10,100,651Payment
      for common stock issuance costs
                                
                                
                                (836,456
                                )
                                
                                
                                (806,159
                                )Net
      Cash Provided by Financing Activities
                                
                                
                                8,207,141
                                
                                
                                
                                9,294,492EFFECT
      OF FOREIGN CURRENCY TRANSLATION ON CASH
                                
                                
                                (15,641
                                )
                                
                                
                                414,771NET
      INCREASE IN CASH
                                
                                
                                383,337
                                
                                
                                
                                1,342,193CASH–
      BEGINNING
                                
                                
                                4,477,477
                                
                                
                                
                                8,137CASH
      - ENDING
                                
                                $
                                4,860,814
                                
                                
                                $
                                1,350,330Supplemental
      cash flow information:Cash
      paid for income taxes
                                
                                
                                192,357
                                
                                
                                
                                417,744Cash
      paid for interest expense
                                
                                
                                21,384
                                
                                
                                
                                -Noncash
      investing and financing activities:





During
the six months ended June 30, 2008, the non-controlling shareholder of Yongye
Nongfeng contributed a patent valued at $100,000 to Yongye
Nongfeng.





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




6




YONGYE
INTERNATIONAL, INC. AND SUBSIDIARIES




NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




FOR THE
SIX MONTHS ENDED JUNE 30, 2009




NOTE 1
-ORGANIZATION AND DESCRIPTION OF BUSINESS




A.
Organization




Yongye
International, Inc. (the “Company”, formerly known as “Golden Tan, Inc.” or
“Yongye Biotechnology International, Inc.”) was incorporated in the State of
Nevada on December 12, 2006. On April 17, 2008, the Company entered into a share
exchange agreement (the “Exchange Agreement”) with Fullmax Pacific Limited, a
privately held investment holding company organized on May 23, 2007 under the
laws of the British Virgin Islands (“Fullmax”) and the shareholders of Fullmax
(the “ Fullmax Shareholders”), who collectively owned all the issued and
outstanding ordinary shares of Fullmax. Pursuant to the terms of the Exchange
Agreement, the Fullmax Shareholders transferred to the Company all of their
shares in exchange for 11,444,755 (the “Shares”) shares of the Company’s common
shares (the “Share Exchange”). As a result of the Share Exchange, Fullmax became
a wholly-owned subsidiary of the Company and the Fullmax Shareholders received
approximately 84.7% of the Company’s issued and outstanding common shares.
Immediately prior to the date of the Share Exchange, the Company was a publicly
listed shell entity with no operations and had a nominal amount of cash and,
Fullmax, through its wholly-owned subsidiary, Asia Standard Oil Limited (“ASO”)
and indirect subsidiary, Yongye Nongfeng Biotechnology (“Yongye Nongfeng”), was
engaged in the sale of fulvic acid based liquid and powder nutrient compounds
for plant and animal feed used in the agriculture industry. The Share Exchange
was accounted for as a reverse recapitalization, equivalent to the issuance of
stock by Fullmax for the net monetary assets of the Company accompanied by a
recapitalization.




In
November 2007, ASO a Hong Kong investment holding company, entered into a
Sino-Foreign cooperative joint venture contract (“Contract”) with Inner Mongolia
Yongye Biotechnology Co., Ltd. (“Inner Mongolia Yongye”) to form a cooperative
joint venture, Yongye Nongfeng, pursuant to which, Inner Mongolia Yongye and ASO
is to own 10% and 90% of the equity interests in Yongye Nongfeng, respectively.
Inner Mongolia Yongye was formed on September 16, 2003 in the People’s Republic
of China (the “PRC”). Mr. Zishen Wu, Chief Executive Officer, President and
Chairman of the Company, owns a controlling 91.67% of the equity interest in
Inner Mongolia Yongye. Inner Mongolia Yongye’s primary business is the research,
manufacturing, and sale of biochemical products for use in plants and animal
growth.  Inner Mongolia Yongye is located in the City of Hohhot, Inner
Mongolia Autonomous Region PRC.




On
January 4, 2008, the incorporation and establishment of Yongye Nongfeng was
approved by the Inner Mongolia Department of Commerce and the Inner Mongolia
Administration for Industry and Commerce. The scope of business of Yongye
Nongfeng is the distribution and sale of products of Inner Mongolia
Yongye.  The period of the cooperative joint venture is ten years and
may be extended by a written application submitted to the relevant government
authority for approval no less than six months prior to the expiration of the
cooperative joint venture. Prior to the legal establishment of Yongye Nongfeng,
both Fullmax and ASO were non substantive holding companies with no assets and
operations and were primarily designed and used as legal vehicles to facilitate
foreign participation in the business conducted by Inner Mongolia
Yongye.




In May
2008, upon the agreement among Inner Mongolia Yongye, ASO and Yongye Nongfeng,
the ownership of Yongye Nongfeng was revised, pursuant to which Inner Mongolia
Yongye and ASO became 0.5% and 99.5% equity interests owner of Yongye Nongfeng,
respectively. ASO did not fully inject its share of the capital into Yongye
Nongfeng until May 31, 2009. Based upon actual capital injection into Yongye
Nongfeng, Inner Mongolia Yongye and ASO were 0.6% and 99.4% owner of Yongye
Nongfeng as of December 31, 2008.




B. Nature
of Business




The
Company, through its primary operating subsidiary, Yongye Nongfeng, is engaged
in the sale of fulvic acid based liquid and powder nutrient compounds used in
the agriculture industry in the PRC. In January 2008, upon receiving
governmental approval of the establishment of Yongye Nongfeng, the management of
Yongye Nongfeng anticipated that Yongye Nongfeng would not be able to obtain the
fertilizer licensee in the near future, and therefore, Yongye Nongfeng entered
into an agreement ( the “Agreement”) with Inner Mongolia Yongye, pursuant to
which Yongye Nongfeng agreed to purchase finished goods products that are to be
manufactured by Inner Mongolia Yongye at a fixed price of RMB 350 per case for
fulvic acid plant based products and RMB 120 per case for fulvic acid animal
based products .  The term of the Agreement is for the period from
January 15, 2008 to January 14, 2013. Pursuant to the Agreement, the Company can
terminate this by giving one month notice to Inner Mongolia Yongye. The Company
is in the process of terminating the Agreement after obtaining the fertilizer
license referred to in the following paragraph.




7




On June
1, 2009, Yongye Nongfeng obtained the approval from Ministry of Agricultural for
the fertilizer license to produce fulvic acid based products to be held
under its name, which was previously held in the name of Inner Mongolia Yongye.
As a result, starting from June 1, 2009, Yongye Nongfeng began to manufacture
and produce its own fulvic acid based products for sale.  In addition,
on June 1, 2009, Yongye Nongfeng purchased all of the inventories of Inner
Mongolia Yongye relating to fulvic acid based products for $12,258,000 in
cash.




In March
2009, in anticipation of commencement of its own production, Yongye Nongfeng
purchased production equipment, vehicle and office equipment from Inner Mongolia
Yongye for approximately US$577,000, US$351,000 and US$12,000, respectively,
which represent the estimated fair value of the assets based on an appraisal by
independent valuers.




Yongye
Nongfeng and Inner Mongolia Yongye also entered into certain lease-exchange
arrangements related to land-use rights, buildings and equipment. (See Note
11)




C.
Restatement of Financial Statements




In
connection with the April Offering and September Offering in 2008 and the May
Offering in 2009, the Company issued the “April Warrants”, “September Warrants”
and “Roth May Warrants”, respectively, to certain investors and Roth (See Note
7).  According to the terms of these warrants, the Company could be
required to pay cash to the warrant holders under certain events that are not
within the control of the Company.  Specifically, upon the occurrence
of certain “fundamental transactions” as defined, the warrant holders (but not
the shareholders of the Company’s common stock) are entitled to receive cash
equal to the value of the warrants to be determined based on an option pricing
model and certain specified assumptions set forth in the warrant
agreement.  In accordance with Emerging Issues Task Force Issue (EITF)
No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company’s Own Stock, such potential cash payments that
are not within the Company’s control would preclude equity classification and
therefore the warrants should have been classified as a liability and adjusted
to fair value through earnings at each reporting date starting from the issuance
date.  In addition, the terms of the warrants include a “down-round”
provision under which the exercise price could be affected by future equity
offerings undertaken by the Company.  Upon the adoption of EITF Issue
No. 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to
an Entity’s Own Stock, effective January 1, 2009, these warrants are no longer
considered to be indexed to the Company’s own stock and should be classified as
a liability.




For the
three and six months ended June 30, 2008, the increase in fair value of the
April Warrants of $2,154,323 should have been recorded as a charge to earnings.
As of December 31, 2008, a liability of $2,107,931 representing the fair value
of the April Warrants and the September Warrants should have been recorded and
the retained earnings should have been increased by $2,118,797 representing the
net decrease in fair value of these warrants through December 31, 2008 from
their respective dates of issuance. For the three and six months ended June 30,
2009, the aggregate fair value of the April Warrants and September Warrants
increased by $4,999,717 and $4,791,706, respectively, and the fair value of the
Roth May Warrants increased by $277,241 since the date of issuance through June
30, 2009.  These fair value adjustments should have been recorded
through earnings as appropriate in the respective interim
periods.




The
restatement adjustments, as summarized below, had no impact on the Company’s
previously reported income tax amounts because the changes in fair value of the
warrants issued to the investors are not expected to result in future income tax
consequences.




The
following table presents the effect of correcting this error on the accompanying
unaudited consolidated financial statements.




CONSOLIDATED
BALANCE SHEETS


June 30, 2009
                          
                          
                          December 31, 2008As PreviouslyReported
                          
                          
                          As Restated
                          
                          
                          As PreviouslyReported
                          
                          
                          As RestatedDerivative
      liabilities
                          
                          
                          -
                          
                          
                          
                          7,411,982
                          
                          
                          
                          -
                          
                          
                          
                          2,107,931Total
      current liabilities
                          
                          
                          22,776,647
                          
                          
                          
                          30,188,629
                          
                          
                          
                          3,661,563
                          
                          
                          
                          5,769,494Additional
      paid-in capital-Common stock
                          
                          
                          21,799,562
                          
                          
                          
                          21,540,805
                          
                          
                          
                          13,976,900
                          
                          
                          
                          13,633,604Additional
      paid-in capital-Warrant
                          
                          
                          4,203,075
                          
                          
                          
                          -
                          
                          
                          
                          3,883,432
                          
                          
                          
                          -Retained
      earnings
                          
                          
                          25,611,901
                          
                          
                          
                          22,661,751
                          
                          
                          
                          11,191,997
                          
                          
                          
                          13,310,794Total
      Stockholders' Equity
                          
                          
                          51,989,364
                          
                          
                          
                          44,575,727
                          
                          
                          
                          29,410,189
                          
                          
                          
                          27,300,603Total
      Equity
                          
                          
                          53,274,071
                          
                          
                          
                          45,862,089
                          
                          
                          
                          30,612,577
                          
                          
                          
                          28,504,646




8




CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME





Three months ended June 30, 2009
                                
                                
                                Six months ended June 30, 2009As
      Previously
                                  Reported
                                
                                
                                As
      Restated
                                
                                
                                As
      Previously
                                  Reported
                                
                                
                                AsRestatedIncrease
      in fair value of derivative liabilities
                                
                                
                                -
                                
                                
                                
                                5,276,958
                                
                                
                                
                                -
                                
                                
                                
                                5,068,947Total
      other expenses/(income), net
                                
                                
                                (2,678
                                )
                                
                                
                                5,274,280
                                
                                
                                
                                3,721
                                
                                
                                
                                5,072,668Income
      before provision for income taxes
                                
                                
                                15,976,641
                                
                                
                                
                                10,699,683
                                
                                
                                
                                19,249,383
                                
                                
                                
                                14,180,436Net
      income
                                
                                
                                11,384,865
                                
                                
                                
                                6,107,907
                                
                                
                                
                                14,502,160
                                
                                
                                
                                9,433,213Net
      income attributable to Yongye International, Inc.
                                
                                
                                11,321,131
                                
                                
                                
                                6,044,173
                                
                                
                                
                                14,419,904
                                
                                
                                
                                9,350,957Comprehensive
      income
                                
                                
                                11,348,115
                                
                                
                                
                                6,071,157
                                
                                
                                
                                14,513,355
                                
                                
                                
                                9,444,408Comprehensive
      income attributable to Yongye International, Inc.
                                
                                
                                11,284,587
                                
                                
                                
                                6,007,629
                                
                                
                                
                                14,431,036
                                
                                
                                
                                9,362,089Net
      income per ordinary share-basic
                                
                                $
                                0.37
                                
                                
                                $
                                0.20
                                
                                
                                $
                                0.51
                                
                                
                                $
                                0.33Net
      income per ordinary share-diluted
                                
                                $
                                0.37
                                
                                
                                $
                                0.20
                                
                                
                                $
                                0.50
                                
                                
                                $
                                0.33




CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME





Three months ended June 30, 2008
                      
                      
                      Six months ended June 30, 2008As Previously
                        Reported
                      
                      
                      As Restated
                      
                      
                      As Previously
                        Reported
                      
                      
                      AsRestatedIncrease
      in fair value of derivative liabilities
                      
                      
                      -
                      
                      
                      
                      2,154,323
                      
                      
                      
                      -
                      
                      
                      
                      2,154,323Total
      other expenses, net
                      
                      
                      386,409
                      
                      
                      
                      2,540,732
                      
                      
                      
                      386,062
                      
                      
                      
                      2,540,385Income
      before provision for income taxes
                      
                      
                      7,984,032
                      
                      
                      
                      5,829,709
                      
                      
                      
                      9,371,955
                      
                      
                      
                      7,217,632Net
      income
                      
                      
                      7,764,049
                      
                      
                      
                      5,609,726
                      
                      
                      
                      8,777,190
                      
                      
                      
                      6,622,867Net
      income attributable to Yongye International, Inc.
                      
                      
                      7,160,855
                      
                      
                      
                      5,006,532
                      
                      
                      
                      7,742,185
                      
                      
                      
                      5,587,862Comprehensive
      income
                      
                      
                      7,437,956
                      
                      
                      
                      5,886,827
                      
                      
                      
                      8,156,956
                      
                      
                      
                      7,037,638Net
      income per ordinary share-basic
                      
                      $
                      0.39
                      
                      
                      $
                      0.27
                      
                      
                      $
                      0.52
                      
                      
                      $
                      0.37Net
      income per ordinary share-diluted
                      
                      $
                      0.38
                      
                      
                      $
                      0.27
                      
                      
                      $
                      0.51
                      
                      
                      $
                      0.37Weighted
      average ordinary shares outstanding used in computing diluted net income
      per ordinary share
                      
                      
                      19,084,248
                      
                      
                      
                      18,496,093
                      
                      
                      
                      15,089,375
                      
                      
                      
                      14,970,434




9




CONSOLIDATED
STATEMENTS OF CASH FLOWS





Six months ended June 30, 2009
                      
                      
                      Six months ended June 30, 2008As Previously
                        Reported
                      
                      
                      As Restated
                      
                      
                      As Previously
                        Reported
                      
                      
                      AsRestatedNet
      income
                      
                      
                      14,502,160
                      
                      
                      
                      9,433,213
                      
                      
                      
                      8,777,190
                      
                      
                      
                      6,622,867Increase
      in fair value of derivative liabilities
                      
                      
                      -
                      
                      
                      
                      5,068,947
                      
                      
                      
                      -
                      
                      
                      
                      2,154,323




NOTE 2
-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




PRINCIPLES
OF CONSOLIDATION AND BASIS OF PRESENTATION




The
accompanying consolidated financial statements of the Company have been prepared
in accordance with generally accepted accounting principles in the United States
of America (“U.S. GAAP”) and include the financial statements of the Company and
its subsidiaries. The accompanying unaudited consolidated balance sheet as of
June 30, 2009, unaudited consolidated statements of income and comprehensive
income for the three months and six months ended June 30, 2009 and unaudited
consolidated statements of changes in equity and cash flows for the six months
ended June 30, 2009 include Yongye International, Inc. and its directly and
indirectly owned subsidiaries, Fullmax, ASO and Yongye Nongfeng. The Company’s
unaudited consolidated statements of income and comprehensive income and cash
flows for the three months and six months ended June 30, 2008 consist of the
financial results of Yongye Nongfeng for such periods and the financial results
of Fullmax and ASO from the period April 17, 2008 to June 30,
2008.  For the period from January 1, 2008 to April 17, 2008, the
financial results of Fullmax and ASO are not material.




All
significant intercompany transactions and balances are eliminated on
consolidation.





The
accompanying unaudited consolidated financial statements as of June 30, 2009 and
for the three months and six months ended June 30, 2009 and 2008 have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 8-03 of
Regulation S-X applicable to smaller reporting companies. In the opinion of
management, the accompanying unaudited consolidated interim financial statements
include all adjustments considered necessary to ensure the financial statements
are not misleading. Management has evaluated subsequent events through August
19, 2009, which was the date the interim financial statements as of and for the
three months and six months ended June 30, 2009, before
the restatement adjustments described in Note 1(C), were originally issued, and
also through October 19, 2009, the date of issuance of the accompanying restated
interim financial statements.





The
Company's business is subject to seasonal variations; thus, the results of
operations for the three and six months ended June 30, 2009 and 2008 are not
necessarily indicative of the results for the full fiscal year ending December
31, 2009. Generally, the second and third quarters are peak sales periods, and
first and fourth quarters are low sales periods for the Company.





10


The
unaudited consolidated interim financial statements should be read in
conjunction with the Company's audited consolidated financial statements and
notes thereto for the year ended December 31, 2008 that are included in the
Company’s 2008 annual report on 10-K/A filed with the Securities and Exchange
Commission on October 19, 2009.





NET
INCOME PER SHARE




Basic net
income per share is computed by dividing net income attributable to common
shareholders of the Company by the weighted average number of common shares
outstanding during the period. Diluted net income per share reflects the
potential dilution that would occur upon the exercise of outstanding warrants.
Common share equivalents are excluded from the computation of the diluted net
income per share in periods when their effect would be
anti-dilutive.




RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS




In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement No. 157, “Fair Value Measurement” (SFAS No. 157). While this statement
does not require new fair value measurements, it provides guidance on applying
fair value and expands required disclosures. SFAS No. 157 is effective for
the Company beginning in fiscal 2008, for fair value measurements of financial
assets and financial liabilities and for fair value measurements of nonfinancial
items that are recognized or disclosed at fair value in the financial statements
on a recurring basis, and is effective beginning in fiscal 2009, for fair value
measurements of nonfinancial assets and nonfinancial liabilities that are
recognized or disclosed at fair value in the financial statements on a
nonrecurring basis. The disclosure
of the Company’s fair value measurement required under SFAS No. 157is
included in Note 7 to consolidated interim financial
statements.




11




In
December 2007, the FASB issued FASB Statement No. 141(R),Business Combinations, and
FASB Statement No. 160,Noncontrolling Interests in
Consolidated Financial Statements – an amendment to ARB No. 51 . SFAS No.
141(R) and No. 160 require most identifiable assets, liabilities, noncontrolling
interests, and goodwill acquired in a business combination to be recorded at
“full fair value” and require noncontrolling interests (previously referred to
as minority interests) to be reported as a component of equity, which changes
the accounting for transactions with noncontrolling interest holders. Both
Statements are effective for periods beginning on or after December 15, 2008,
and earlier adoption is prohibited. SFAS No. 141(R) will be applied to business
combinations occurring after the effective date. SFAS No. 160 will be applied
prospectively to all noncontrolling interests, including any that arose before
the effective date.  In April 2009, the FASB issued FSP FAS
141(R)-1,Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination That Arise from
Contingencies , which amends and clarifies FAS141(R) to address
application issues on initial recognition and measurement, subsequent
measurement and disclosure of assets and liabilities arising from contingencies
in a business combination. Other than the change in presentation of
noncontrolling interests, the adoption of FAS 141(R) and FAS 160 has no impact
on the Company’s financial statement.





In
March 2008, the FASB issued SFAS No.161,
“Disclosures
about Derivative Instruments and Hedging Activities—an
amendment of FASB Statement No.133”(“SFAS
No.161”), which
required enhanced disclosures about an entity’s
derivative and hedging activities and was intended to improve the
transparency
of financial reporting.  SFAS No. 161 applies to all derivative
instruments, including bifurcated derivative instruments and related hedging
items accounted for under SFAS No. 133 and its related
interpretations.  SFAS No. 161 amends and expands the
disclosure requirements of SFAS No. 133 with the intent to provide users of
financial statements with an enhanced understanding of:  (i) how and
why an entity uses derivative instruments; (ii) how derivative instruments
and related hedged items are accounted for
under SFAS No. 133 and its related interpretations; and (iii) how
derivative instruments and related hedged items affect an entity’s
financial position, financial performance and cash flows.  The provisions
of this standard do not require disclosures for
earlier periods presented for comparative purposes at initial adoption. 
SFAS No. 161 was effective for fiscal years and interim periods beginning
after November 15, 2008.  The Company adopted this new standard
effective January 1, 2009.  SeeNote7to
consolidated interim financial statements for disclosure required under SFAS No.
161.




In May
2009, the FASB issued Statement No. 165, “Subsequent Events” (SFAS No. 165). The
statement established general standards of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. SFAS No. 165 requires the disclosure
of the date through which an entity has evaluated subsequent events and the
basis for that date, that is, whether that date represents the date the
financial statements were issued or were available to be issued. SFAS No. 165 is
effective for the Company beginning in this second quarter of fiscal
2009.




NOTE
3-ACCOUNTS RECEIVABLE




Net
accounts receivable at June 30, 2009 and December 31, 2008 consisted of the
following:





June
      30, 2009
                
                
                December
      31, 2008Accounts
      receivable-third parties
                
                $
                36,562,325
                
                
                $
                3,053,380Accounts
      receivable-related party
                
                
                29,219
                
                
                
                -Less:
      allowance for doubtful accounts
                
                
                -
                
                
                
                (305,338
                )Total
                
                $
                36,591,544
                
                
                $
                2,748,042





A bad
debt provision of $232,010 was reversed for the three months ended June 30,
2009, and $305,338 was reversed for the six months ended June 30, 2009 as the
total amount of the related accounts receivable, which was previously provided
for as of December 31, 2008 was repaid by the customer during the six months
ended June 30, 2009. No bad debt expense provision was required for the three
and six months ended June 30, 2009 as management believes no accounts are
uncollectible as of June 30, 2009.





The
Company’s normal credit terms to customers with well-established trading records
are three months while the Company generally requests other customers to pay
either in advance or upon delivery.





NOTE
4-INVENTORIES




Inventories
at June 30, 2009 and December 31, 2008 consisted of the following:




June
      30, 2009
                        
                        
                        December
      31, 2008Finished
      goods
                        
                        $
                        19,548,221
                        
                        
                        $
                        20,664,930Semi-finished
      goods
                        
                        
                        6,669,587
                        
                        
                        
                        -Packing
      supplies
                        
                        
                        81,103
                        
                        
                        
                        -Raw
      materials
                        
                        
                        401,705
                        
                        
                        
                        -Consumables
                        
                        
                        59,785
                        
                        
                        
                        43,263Total
                        
                        $
                        26,760,401
                        
                        
                        $
                        20,708,193




12




NOTE
5-PROPERTY AND EQUIPMENT




Property
and equipment at June 30, 2009 and December 31, 2008 consisted of the
following:





June 30, 2009
                  
                  
                  December 31, 2008Buildings
      and structures
                  
                  $
                  3,662,014
                  
                  
                  $
                  3,656,992Machinery
      and equipment
                  
                  
                  1,508,349
                  
                  
                  
                  673,480Office
      equipment and furniture
                  
                  
                  212,946
                  
                  
                  
                  85,087Vehicles
                  
                  
                  1,409,910
                  
                  
                  
                  824,013Software
                  
                  
                  17,180
                  
                  
                  
                  17,156Leasehold
      improvements
                  
                  
                  219,144
                  
                  
                  
                  218,844Construction-in-process
                  
                  
                  409,049
                  
                  
                  
                  -7,438,592
                  
                  
                  
                  5,475,572Less:
      Accumulated depreciation
                  
                  
                  347,071
                  
                  
                  
                  107,498Total
                  
                  $
                  7,091,521
                  
                  
                  $
                  5,368,074




Depreciation
expense for the three months ended June 30, 2009 and 2008 was $134,912 and
$45,190, respectively.  Depreciation expense for the six months ended June
30, 2009 and 2008 was $239,494 and $87,974, respectively. Vehicles with an
original carrying amount of $996,827 were pledged as security for the long-term
banks loans of $571,237 which were provided by the banks for the purchase of the
vehicles (See Note 6).





NOTE 6 –
LONG-TERM LOANS




From
August 2008 to June 2009, the Company financed the purchase of seventeen
vehicles with bank loans of $571,237. The Company pledged the seventeen vehicles
with an initial carrying amount of $996,827 as security for the bank loans. The
loans all have three-year terms and are paid in monthly installments. Interest
rates on the loans range from 5.57% to 14.80% annually. The bank loans were
initially obtained by individual employees of the Company on behalf of the
Company. The Company and the individual employees entered into trust agreements
whereby the Company is entitled to all the risk and ownership of the vehicles
and assumes all the responsibility and obligations for making the monthly
payments on the bank loans. The aggregate amount of such required payments at
June 30, 2009 is as follows:




2009
                  
                  $
                  110,0652010
                  
                  
                  220,1312011
                  
                  
                  174,7082012
                  
                  
                  9,432Total
                  
                  
                  514,336Less:
      Amount representing interest
                  
                  
                  (56,998
                  )Total
      at present value
                  
                  $
                  457,338




At June
30, 2009, the current portion of bank loans was $183,723 which is scheduled to
be repaid on or before June 30, 2010, while the long-term portion of the bank
loans is $273,615. The Company made total payments of $54,414, which
included interest expense of $11,551, during the three months ended June 30,
2009.




According
to the trust agreements, while the vehicles are registered under the
individuals’ name, the Company receives the full risk and ownership of the
vehicles, including the rights of official use of the vehicles and the rights to
retain the legal title of the vehicles at the time of termination of the
employment relationship with the individual. The Company assumes the risk of
loss, damage, penalty and other obligations related to the operation and
ownership of the vehicle, including repairs and maintenance. The Company is also
required to make the initial down payment at the date of purchase and repay the
bank loans. The individuals have no right to sell, lease, lend or pledge the
vehicles to any other person. Consequently, the Company has recognized the cost
of the vehicles as assets and the bank loans as liabilities in its consolidated
balance sheet.




13




NOTE 7 -
CAPITAL STOCK





Capital
stock





Concurrent
with the “Share Exchange”, the Company entered into a securities purchase
agreement on April 17, 2008 with certain investors (the “ April Investors ”) for
the sale in a private placement of an aggregate of 6,495,619 shares of the
Company’s common stock, par value $0.001 per share (the “ April Investor Shares
”) for aggregate gross proceeds equal to $10,000,651 (the “ April Offering
”).





On
September 5, 2008, the Company entered into a securities purchase agreement,
with certain investors (the “September Investors ”), for the sale in a private
placement of an aggregate of 6,073,006 shares of the Company’s common
stock, par value $0.001 per share (the “ September Investor Shares ”) for
aggregate gross proceeds equal to approximately $9,350,000 (the “ September
Offering ”).





On May 8,
2009, the Company entered into a securities purchase agreement with certain
investors (the “May Investors ”), for the sale in a private placement of an
aggregate of 5,834,083 shares of the Company common stock, par value $0.001 per
share (the“ May Shares ”) for a aggregate gross proceeds equal to $8,984,488
(the “ May Offering ”).





In
connection with the May Offering, the Company entered into a registration rights
agreement with the investors, in which the Company agreed to file a registration
statement with the SEC to register for resale the shares, including the shares
to be issued under the warrants (see below), within 45 calendar days of the
closing date of the May Offering, and to use its best efforts to have the
registration statement declared effective within 150 calendar days of the
closing date of the May Offering.  The Company is obligated to pay
liquidated damages of 1% of the dollar amount of the shares sold in the May
Offering per month, payable in cash, up to a maximum of 10%, if the registration
statement is not filed and declared effective within the foregoing time periods.
 Offering expenses for the issuance of the shares were $836,456, which were
recorded as a reduction of Additional Paid-in Capital on the June 30, 2009
Consolidated Balance Sheet.





Warrants





Concurrent
with the “April Investor Shares”, the Company issued 1,623,905 warrants to
purchase 1,623,905 shares of the Company’s common stock (the “April Warrants”)
to the “April Investors” as an
inducement to the April offering. The warrants issued have a 5 years
exercise period with an initial exercise price of $1.848. In addition, 649,562
warrants were issued to Roth Capital Partners LLC (“Roth”) as the placement
agent with terms and exercise price identical to the warrants issued to the
April Investors.





Concurrent
with the “September Investor Shares”, the Company issued 1,518,253 warrants to
purchase 1,518,253 shares of the Company’s common stock (the “September
Warrants”) to the “September Investors” as an
inducement to the September offering. The warrants issued have a 5
years exercise period with an initial exercise price of $1.848. In addition,
607,301 warrants were issued to Roth as the placement agent with terms and
exercise price identical to the warrants issued to the September
Investors.





On
September 12, 2008 Roth Capital executed an irrevocable cashless exercise of its
warrants and was issued 686,878 shares of common stock of the Company pursuant
to the April 17, 2008 and September 5, 2008 warrants issued to Roth as placement
agent. In exchange for the issuance of 354,987 shares, Roth surrendered 649,562
warrants received in the April Offering; and in exchange for the issuance of
331,891 shares, Roth surrendered 607,301 warrants received in the September
Offering.





Concurrent
with the offering of “May Shares”, the Company issued to Roth as the placement
agent, 246,224 warrants (“Roth May Warrants).  The warrants have a 5
years exercise period and an initial exercise price of $1.848.





In
accordance with the warrant agreements, if the Company, at any time the warrants
are outstanding, issues any common stock or common stock equivalents, as
defined, at an effective price less than the then warrant exercise price, the
exercise price of warrants will be reduced to the effective price of newly
issued common stock or common stock equivalents.  In the “May
Offering”, the Company issued new common stock at a price of $1.54 per share and
accordingly, the exercise price of the April Warrants and the September Warrants
was reduced to $1.54 per share.  The exercise price of Roth May
Warrants ($1.848) was not affected but will be subject to potential down-round
adjustments in future periods. As of June 30, 2009, there were 3,388,382
warrants outstanding, of which 1,623,905, 1,518,253, 246,224 warrants will
expire if unexercised by April 2013, September 2013 and May 2014,
respectively.





The
Company measures the fair value of the warrants in accordance with SFAS No. 157,
which requires




Level
1—quoted
prices (unadjusted) in active markets for identical assets or liabilities that a
company has the ability to access at the measurement
date.




Level
2—inputs
other than quoted prices included within Level 1 that are observable for similar
assets or liabilities, either directly or
indirectly.




Level
3—unobservable
inputs for the asset or liability. Unobservable inputs are used to measure fair
value to the extent that observable inputs are not available, thereby allowing
for situations in which there is little, if any, market activity for the asset
or liability at the measurement date.




14




The
estimated fair values ofthe
Company’sInvestor
Warrantsand Roth
Warrantswere
determined at June 30, 2008,June 30,
2009 andDecember 31,
2008 usingBinominal
Option Pricing Model withLevel2inputs.




The
following table sets forth, by level within the fair value hierarchy, the
Company’s financial liabilities that were measured on a recurring basis at fair
value as of June 30, 2008,June 30,
2009 andDecember 31,
2008.





Fair
      Value Measurements Using:Total
                        
                        
                        Quoted Prices in
                          Active Markets for
                          Identical
      Financial
                          Assets and Liabilities
                        
                        
                        Significant Other
                          Observable Inputs
                        
                        
                        Significant
                          Unobservable InputsJune 30,
      2009
                        
                        
                        
                        
                        Level
      1
                        
                        
                        Level
      2
                        
                        
                        Level
      3Liabilities
      at fair value:Derivative
      liabilities—warrants
                        
                        
                        7,411,982
                        
                        
                        
                        —
                        
                        
                        
                        7,411,982
                        
                        
                        
                        —





Fair
      Value Measurements Using:Total
                        
                        
                        Quoted Prices in
                          Active Markets for
                          Identical
      Financial
                          Assets and Liabilities
                        
                        
                        SignificantOther
                          ObservableInputs
                        
                        
                        Significant
                          Unobservable InputsDecember 31,
      2008
                        
                        
                        
                        
                        Level
      1
                        
                        
                        Level
      2
                        
                        
                        Level
      3Liabilities
      at fair value:Derivative
      liabilities—warrants
                        
                        
                        2,107,931
                        
                        
                        
                        —
                        
                        
                        
                        2,107,931
                        
                        
                        
                        —


Fair
      Value Measurements Using:Total
                          
                          
                          Quoted Prices in
                            Active Markets for
                            Identical
      Financial
                            Assets and Liabilities
                          
                          
                          Significant Other
                            Observable Inputs
                          
                          
                          Significant
                            Unobservable InputsJune 30,
      2008
                          
                          
                          
                          
                          Level
      1
                          
                          
                          Level
      2
                          
                          
                          Level
      3Liabilities
      at fair value:Derivative
      liabilities—warrants
                          
                          
                          4,578,517
                          
                          
                          
                          —
                          
                          
                          
                          4,578,517
                          
                          
                          
                          —
 As of
June 30, 2009 the fair value of the derivative liability related to
the outstanding warrants is $7,411,982. The changes in the fair value of the
warrants are recorded through earnings and amounted to $5,276,958 and $5,068,947
for the three and six months ended June 30, 2009,
respectively.





The fair
values of the warrants are summarized as follows:





Fair
      value of Warrant per share (US$) at:
                    
                    April Warrants
                    
                    
                    September
      Warrants
                    
                    Roth
      May WarrantsDate
      of Issuance
                    
                    
                    1.07
                    
                    
                    
                    2.08
                    
                    0.95December
      31, 2008
                    
                    
                    0.66
                    
                    
                    
                    0.68
                    
                    N/AMarch
      31, 2009
                    
                    
                    0.59
                    
                    
                    
                    0.62
                    
                    N/AJune
      30, 2009
                    
                    
                    2.19
                    
                    
                    
                    2.20
                    
                    2.08





The fair values of the warrants as of
June 30, 2009 were determined based on the Binominal option pricing model, using
the following key assumptions:





April
      Offering
                                
                                
                                September
                                  Offering
                                
                                
                                May
      OfferingExpected
      volatility
                                
                                
                                63.5
                                %
                                
                                
                                62.0
                                %
                                
                                
                                60.0
                                %Expected
      dividends yield
                                
                                
                                0
                                %
                                
                                
                                0
                                %
                                
                                
                                0
                                %Time
      to maturity
                                
                                3.8
      years
                                
                                
                                4.19
      years
                                
                                
                                4.86
      yearsRisk-free
      interest rate per annum
                                
                                
                                2.218
                                %
                                
                                
                                2.218
                                %
                                
                                
                                2.218
                                %Fair
      value of underlying Common Shares (per share)
                                
                                
                                3.61
                                
                                
                                
                                3.61
                                
                                
                                
                                3.61Exercise
      multiple
                                
                                
                                2.4
                                
                                
                                
                                2.4
                                
                                
                                
                                2.4




15




Escrow
shares





In
connection with the April Offering, the Company entered into an escrow agreement
with Roth as a representative of the April Investors, Tri-State Title &
Escrow LLC (the “Escrow Agent”) and Full Alliance, one of the Company’s
shareholders (the “April Escrow Agreement”), pursuant to which 2,000,000 shares
of the Company held by Full Alliance (the “April Escrow Shares”) were delivered
to the Escrow Agent. The Escrow Shares were held for the Company’s achievement
of $10,263,919 after tax net income (“ATNI”) for the year ended December 31,
2008 (the “2008 Net Income Threshold”). As reported in the Company’s 2008 Form
10-K, the ATNI threshold has been achieved. The Escrow Shares were released in
full back to Full Alliance as of June 30, 2009.





In
connection with the September Offering, the Company entered into an escrow
agreement with Roth, the Escrow Agent and Full Alliance (the “September Escrow
Agreement”), pursuant to which 4,000,000 shares of the Company issued to Full
Alliance in the Share Exchange (the “September Escrow Shares”) were delivered to
the Escrow Agent. Of the September Escrow Shares, 2,000,000 shares (the “Make
Good Escrow Shares”) are being held for the Company’s achievement of 2008 and
2009 financial targets described below:





If the
Company achieves (i) the 2008 Net Income Threshold, and (ii) fully
diluted earnings per share reported in the Company’s 2008 Annual Report on
Form 10-K filed with the SEC (the “2008 Annual Report”) of no less than $0.42
(the “2008 Guaranteed EPS”), then the provisions described in the following
sentence apply with respect to the achievement of 2009 net income and fully
diluted earnings per share targets and the Make Good Escrow Shares will be
retained in escrow for the achievement of certain net income and fully diluted
earnings per share targets for the year ending December 31, 2009. In the event
that (i) the 2009 ATNI is less than $12,649,248, or the fully diluted earnings
per share reported in 2009 Annual Report on Form 10-K filed with the SEC (the
“2009 Annual Report”) is less than $0.42, all of the 2,000,000 Make Good Escrow
Shares shall be distributed to the September Investors on a pro-rata basis, (ii)
the 2009 ATNI equals or exceeds $12,649,248 and is less than $15,811,560, or the
fully diluted earnings per share reported in the 2009 Annual Report, equals or
exceeds $0.42 and is less than $0.53, then the Make Good Shares equal to the
product of  (i)(A) $15,811,560 minus the 2009 ATNI, divided by (B)
$15,811,560, and (ii) the Make Good Escrow Shares, shall be transferred to the
September Investors on a pro-rata basis, and the remaining share shall be
returned to Full Alliance, (iii) the 2009 ATNI exceeds $15,811,560, the
2,000,000 Make Good Escrow Shares will be released back to Full
Alliance.





If the
Company does not achieve (i) the 2008 Net Income Threshold, or (ii) 2008
Guaranteed EPS, the Make Good Escrow Shares will be released pro-rata to the
September Offering investors. As shown in the 2008 Form 10-K, the 2008 Net
Income Threshold and 2008 Guaranteed EPS have been achieved.





The
remaining 2,000,000 escrow shares are being held for the timely approval
obtained from Ministry of Agriculture of Inner Mongolia in relation to the
transfer of fertilizer license to Yongye Nongfeng from Inner Mongolia Yongye and
completion of Yongye Nongfeng’s restructuring (the “Restructuring Make Good
Shares”). The fertilizer license is issued by the Ministry of Agriculture and
provides the holder the right to manufacture and sell fertilizer products in the
PRC.  The Company is undergoing a restructuring process under which
the Company will purchase the land, buildings and equipment which comprised of
the 10,000 tonnes per annum capacity of the fulvic acid based products (“Yongye
Nongfeng Restructuring”).





In the
event that (1) the fertilizer license has not been issued to Yongye Nongfeng by
June 30, 2009, or such later date as agreed to by the Company and the September
Investors holding a majority of the September Investor Shares at such time (the
“ License Grant Date ”), or (2) the fertilizer license has been issued by the
License Grant Date, but the Yongye Nongfeng Restructuring is not completed by
the Restructuring Completion Date, the Restructuring Make Good Shares shall be
transferred in accordance with the September Escrow Agreement to the September
Investors on a pro-rata basis for no consideration. The “Restructuring
Completion Date” shall be the date that is 132 calendar days after the License
Grant Date. The fertilizer license was issued on June 1, 2009 by the Ministry of
Agriculture to Yongye Nongfeng in accordance with the deadline, however Yongye
Nongfeng Restructuring is required to be completed by the Restructuring
Completion Date, if the Restructuring Make Good Shares shall be returned to Full
Alliance. The Company is in the process of completing the legal procedures for
obtaining the land and building from Inner Mongolia Yongye.




16




The
purpose of the April Escrow Arrangement and September Escrow Arrangement was an
inducement made to facilitate the respective offerings, and not part of a
compensatory arrangement to management. The escrow shares will not be released
or cancelled due to the discontinued employment of any management of the
Company.





NOTE 8 –
STATUTORY RESERVE





The
Company’s subsidiary, Yongye Nongfeng, was required to allocate at least 10% of
its after tax profits as determined under generally accepted accounting
principal in the PRC to a statutory surplus reserve until the reserve balance
reaches 50% of their registered capital. For the six months ended June 30, 2009
and 2008, Yongye Nongfeng made appropriations to this statutory reserve of
$1,412,592 and $771,107, respectively. The accumulated balance of the statutory
reserve at Yongye Nongfeng as of June 30, 2009 and December 31, 2008 were
$2,620,504 and $1,207,912, respectively.





In
accordance with the PRC laws and regulations, Yongye Nongfeng is restricted in
its ability to transfer a portion of its net assets to Yongye International,
Inc. in the form of dividends, which amounted to $2,620,504 as of June 30,
2009.





NOTE 9 –
INCOME TAXES





The
Company’s effective income tax rate was 28.74% and 2.76% for the three-month
periods ended June 30, 2009 and 2008, respectively and 24.66% and 6.35% for the
six-month periods ended June 30, 2009 and 2008, respectively. Income tax expense
mainly consists of foreign income tax at statutory rates and the effects of
permanent differences. According to the approval from the tax authority in the
city level of Hohhot in Inner Mongolia Autonomous Region, Yongye Nongfeng was
assessed to use the deemed profit method to determine the amount of income tax
provision for the year ended December 31, 2008 which was based on 1.25% on its
gross revenue. The deemed profit method is not applicable to Yongye Nongfeng for
the year ending December 31, 2009. With effective from January 1, 2009, Yongye
Nongfeng applied the statutory income tax rate of 25% on its assessable income
in accordance with the relevant income tax rules and regulations of the
PRC. The income tax rate applied by Yongye Nongfeng to determine the income
tax provision for the three and six month periods ended June 30, 2009 is
consistent with the tax notice issued by the State Administration of Taxation in
the PRC on July 14, 2009.





Deferred tax asset and
allowance





The
Company has a deferred tax asset of approximately $97,034 as of June 30,
2009 primarily relating to the loss from the change in fair value of warrants
issued to Roth as placement agent available to offset future taxable
income.




The
ultimate realization of deferred tax assets depends on the generation of future
taxable income during the periods in which those net operating losses are
available. The Company considers projected future taxable income and tax
planning strategies in making its assessment. At present, the Company does not
have a sufficient operation in the United Statement of America to conclude that
it is more-likely-than-not that the Company will be able to realize all of its
tax benefits in the near future and therefore a valuation allowance of $97,034
was established for the full value of the deferred tax asset.




A
valuation allowance will be maintained until sufficient positive evidence exists
to support the reversal of any portion or all of the valuation allowance. Should
the Company start operation in the United States of America in future periods
with supportable trend, the valuation allowance will be reversed
accordingly.




NOTE 10 –
LEASE COMMITMENTS





The
Company entered into an operating lease to secure an office space in Beijing,
PRC. The lease term for the Beijing office is from January 1, 2008 to
December 31, 2010. The lease expense for the Beijing office was $49,677 and
$107,539 for the three and six months ended June 30, 2009, respectively. The
lease expense for the Beijing office was $56,842 and $96,429 for the three and
six months ended June 30, 2008, respectively. Future minimum lease payments
under non-cancellable operating lease agreement at June 30, 2009 are as
follows:





December
      31, 2009
                  
                  $
                  115,756December
      31, 2010
                  
                  
                  231,512Total
                  
                  $
                  347,268




NOTE 11 –
RELATED PARTY TRANSACTIONS AND BALANCES




For the
three months and six months ended June 30, 2009, the Company's subsidiary,
Yongye Nongfeng purchased inventories from Inner Mongolia Yongye amounting to
$30,559,654 and $37,923,422, respectively. For the three months and six months
ended June 30, 2008, the Company's subsidiary, Yongye Nongfeng purchased
inventories from Inner Mongolia Yongye amounting to $8,537,112 and $17,468,749,
respectively.





As of
June 30, 2009 and December 31, 2008, accounts payable related party were
$11,414,741 and $46,739, respectively, and represented the payable for the
purchases of inventories from Inner Mongolia Yongye. Due from related party was
$193,046 and $192,741 as of June 30, 2009 and December 31, 2008 which
represented the payment the Company made on behalf of Inner Mongolia Yongye for
audit fees and research and development fees in the year ended December 31,
2008. As of June 30, 2009, accounts receivable related party was $29,219 and
represented the receivable from Hubei Longshangxing Xinnongcun Fuwu
Youxiangongsi, which is 51% owned by Inner Mongolia Yongye, for the
sale of fulvic acid plant based products. For the six months ended
June 30, 2009, the Company sold products of $2,220,083 to Hubei Longshangxing
Xinnongcun Fuwu Youxiangongsi.





For the
six months ended June 30, 2008, the Company borrowed $1,638,581 from Yin
Ping, the wife of CEO Mr. Zishen Wu, $762,524 from Inner Mongolia Yongye and
$10,000 from Kim McElroy, a director of the Company who resigned in April 2008.
The amounts are unsecured and non-interesting bearing, and were repaid in full
as of December 31, 2008.





In March
2009, Yongye Nongfeng purchased machinery and equipment, vehicles and office
equipment in the amount of $940,531 from Inner Mongolia Yongye (See Note
1).


17




Yongye
Nongfeng and Inner Mongolia Yongye entered a series of lease-exchange
arrangement to lease land, buildings and equipment to and from each other as
follows:





·
            On
      June 1, 2008, a land lease agreement was entered into in which Yongye
      Nongfeng would lease land of 74,153 square meters from Inner Mongolia
      Yongye from June 1, 2008 to May 31,
2009.




·
            On
      September 28, 2008, a building lease agreement and an equipment lease
      agreement were entered into in which Inner Mongolia Yongye would lease a
      building occupied area of 3,967 square meters and certain equipment from
      Yongye Nongfeng from September 28, 2008 to September 27,
    2009.




·
            On
      March 15, 2009, an equipment lease agreement was entered into in which
      Inner Mongolia Yongye would lease a set of production equipment from
      Yongye Nongfeng from March 15, 2009 to May 31,
  2009.




·
            On
      June 1, 2009, a land lease agreement and a building lease agreement were
      entered into in which Yongye Nongfeng would lease buildings occupied area
      of 5,767 square meters and land of 79,920 square meters from Inner
      Mongolia Yongye from June 1, 2009 to October 10,
  2009.





Pursuant
to these agreements, both Yongye Nongfeng and Inner Mongolia Yongye did not
charge any rental to each other for the lease.  Additionally, the
estimated rental income to be received and the rental expense to be paid by the
Yongye Nongfeng are not material to the Company’s 2009 and 2008 results of
operations and therefore have not been included.





NOTE 12 -
NET INCOME PER SHARE




The
following table sets forth the computation of basic and diluted income per share
for the periods indicated:





Three months ended
                  
                  
                  Six months endedJune 30, 2009
                  
                  
                  June 30, 2008
                  
                  
                  June 30, 2009
                  
                  
                  June 30, 2008As restated -
                    Note 1(C)
                  
                  
                  As restated -
                    Note 1(C)
                  
                  
                  As restated -
                    Note 1(C)
                  
                  
                  As restated -
                    Note 1(C)Numerator
      used in basic net income per share:Net
      income attributable to Yongye International, Inc.
                  
                  
                  6,044,173
                  
                  
                  
                  5,006,532
                  
                  
                  
                  9,350,957
                  
                  
                  
                  5,587,862Shares
      (denominator):Weighted
      average ordinary shares outstanding-basic and diluted
                  
                  
                  30,222,243
                  
                  
                  
                  18,496,093
                  
                  
                  
                  28,500,814
                  
                  
                  
                  14,970,434Net
      income per ordinary share-basic and diluted
                  
                  $
                  0.20
                  
                  
                  $
                  0.27
                  
                  
                  $
                  0.33
                  
                  
                  $
                  0.37




As of
June 30, 2009, the Company had 3,388,382 ordinary shares equivalents outstanding
that could potentially dilute basic income per share in the future, but which
were excluded in the computation of diluted income per share in the periods
presented, as their effect would have been anti-dilutive.





NOTE 13 -
CONCENTRATIONS AND CREDIT RISKS




At June
30, 2009 and December 31, 2008, the Company had a credit risk exposure of cash
in banks of approximately $4,860,814 and $4,477,477, respectively that is
uninsured by the government authority. To limit exposure to credit risk relating
to deposits, the Company primarily places cash deposits only with large
financial institution in the PRC with acceptable credit rating.





Five
major customers accounted for 94% and one major customer accounted for 40% of
the Company’s net revenue for the three months ended June 30, 2009. Five major
customers accounted for 89% and one major customer accounted for 40% of the
Company’s net revenue for the six months ended June 30, 2009. Five major
customers accounted for 80% and one major customer accounted for 26% of the
Company’s net revenue for the three months ended June 30, 2008. Five major
customers accounted for 89% and one major customer accounted for 26% of the
Company’s net revenue for the six months ended June 30, 2008. The Company’s
total sales to five major customers were $43,700,271 and $52,061,902 for the
three and six months ended June 30, 2009, respectively. The Company’s total
sales to five major customers were $14,062,646 and $24,068,529 for the three and
six months ended June 30, 2008, respectively. In addition, all these major
customers are distributors in the PRC agriculture industry.


18





Three months ended June 30, 2009
                                  
                                  
                                  Six months ended June 30, 2009Largest
                                    Customers
                                  
                                  Province
                                  
                                  Amount of
                                    Sales
                                  
                                  % Total
                                    Sales
                                  
                                  
                                  Largest
                                    Customers
                                  
                                  Province
                                  
                                  Amount of
                                    Sales
                                  
                                  % Total
                                    SalesCustomer A
                                  
                                  Hebei
                                  
                                  
                                  18,705,448
                                  
                                  
                                  40
                                  %
                                  
                                  Customer A
                                  
                                  Hebei
                                  
                                  
                                  23,557,490
                                  
                                  
                                  40
                                  %Customer
      B
                                  
                                  Inner
                                    Mongolia
                                  
                                  
                                  9,548,312
                                  
                                  
                                  21
                                  %
                                  
                                  Customer
      B
                                  
                                  Inner
                                    Mongolia
                                  
                                  
                                  11,287,969
                                  
                                  
                                  19
                                  %Customer
      C
                                  
                                  Xinjiang
                                  
                                  
                                  8,698,201
                                  
                                  
                                  19
                                  %
                                  
                                  Customer
      C
                                  
                                  Xinjiang
                                  
                                  
                                  9,775,088
                                  
                                  
                                  17
                                  %Customer
      D
                                  
                                  Xinjiang
                                  
                                  
                                  4,338,428
                                  
                                  
                                  9
                                  %
                                  
                                  Customer
      D
                                  
                                  Xinjiang
                                  
                                  
                                  4,978,162
                                  
                                  
                                  9
                                  %Customer
      E
                                  
                                  Gansu
                                  
                                  
                                  2,409,882
                                  
                                  
                                  5
                                  %
                                  
                                  Customer
      E
                                  
                                  Gansu
                                  
                                  
                                  2,463,193
                                  
                                  
                                  4
                                  %Total
                                  
                                  
                                  
                                  
                                  43,700,271
                                  
                                  
                                  94
                                  %
                                  
                                  Total
                                  
                                  
                                  
                                  
                                  52,061,902
                                  
                                  
                                  89
                                  %





Three months ended June 30, 2008
                                              
                                              
                                              Six months ended June 30, 2008Largest
                                                Customers
                                              
                                              Provinces
                                              
                                              Amount of
                                                Sales
                                              
                                              % Total
                                                Sales
                                              
                                              
                                              Largest
                                                Customers
                                              
                                              Provinces
                                              
                                              Amount of
                                                Sales
                                              
                                              % Total
                                                SalesCustomer E
                                              
                                              Gansu
                                              
                                              4,643,127
                                              
                                              
                                              26
                                              %
                                              
                                              Customer A
                                              
                                              Hebei
                                              
                                              7,045,357
                                              
                                              26
                                              %Customer
      C
                                              
                                              Xinjiang
                                              
                                              3,980,159
                                              
                                              
                                              23
                                              %
                                              
                                              Customer
      D
                                              
                                              Xinjiang
                                              
                                              5,334,140
                                              
                                              20
                                              %Customer
      D
                                              
                                              Xinjiang
                                              
                                              2,618,526
                                              
                                              
                                              15
                                              %
                                              
                                              Customer
      E
                                              
                                              Gansu
                                              
                                              4,960,050
                                              
                                              18
                                              %Customer
      A
                                              
                                              Hebei
                                              
                                              1,780,598
                                              
                                              
                                              10
                                              %
                                              
                                              Customer
      C
                                              
                                              Xinjiang
                                              
                                              3,922,162
                                              
                                              15
                                              %Customer
      B
                                              
                                              Inner
                                                Mongolia
                                              
                                              1,040,236
                                              
                                              
                                              6
                                              %
                                              
                                              Customer
      B
                                              
                                              Inner
                                                Mongolia
                                              
                                              2,806,820
                                              
                                              10
                                              %Total
                                              
                                              
                                              
                                              14,062,646
                                              
                                              
                                              80
                                              %
                                              
                                              Total
                                              
                                              
                                              
                                              24,068,529
                                              
                                              89
                                              %




The
Company’s operations are carried out in the PRC. Accordingly, the Company’s
business, financial condition and results of operations may be influenced by the
political, economic and legal environments in the PRC as well as by the general
state of the PRC’s economy. The business may be influenced by changes in
governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversion and remittance abroad, and rates and methods of
taxation, among other things.


19


Item
2. Management’s Discussion and Analysis of Operations and Financial
Conditions.





The
following discussion of the financial condition and results of operations should
be read in conjunction with the consolidated financial statements and related
notes thereto. Except as otherwise indicated or as the context may otherwise
require, all references to “we”, “the Company”, “us” and “our” refer to Yongye
International, Inc. (f/k/a Yongye Biotechnology International, Inc.) and its
consolidated subsidiaries.  The following discussion contains
forward-looking statements. The words or phrases “would be,” “will allow,”
“expect to”, “intends to,” “will likely result,” “are expected to,” “will
continue,” “is anticipated,” “estimate,” or similar expressions are intended to
identify forward-looking statements. Such statements include those concerning
our expected financial performance, our corporate strategy and operational
plans. Actual results could differ materially from those projected in the
forward-looking statements as a result of a number of risks and uncertainties,
including: (a) those risks and uncertainties related to general economic
conditions in China, including regulatory factors that may affect such economic
conditions; (b) whether we are able to manage our planned growth efficiently and
operate profitable operations, including whether our management will be able to
identify, hire, train, retain, motivate and manage required personnel or that
management will be able to successfully manage and exploit existing and
potential market opportunities; (c) whether we are able to generate sufficient
revenues or obtain financing to sustain and grow our operations; and (d) whether
we are able to successfully fulfill our primary requirements for cash which are
explained below under “Liquidity and Capital Resources”. Unless otherwise
required by applicable law, we do not undertake, and we specifically disclaim
any obligation, to update any forward-looking statements to reflect occurrences,
developments, unanticipated events or circumstances after the date of such
statement.





Restatement
of Financial Statements





In
connection with the April Offering and September Offering in 2008 and the May
Offering in 2009, the Company issued the “April Warrants”, “September Warrants”
and “Roth May Warrants”, respectively to certain investors and Roth (See
Financial Statements Note 7).  According to the terms of these
warrants, the Company could be required to pay cash to the warrant holders under
certain events that are not within the control of the
Company.  Specifically, upon the occurrence of certain “fundamental
transactions” as defined, the warrant holders (but not the shareholders of the
Company’s common stock) are entitled to receive cash equal to the value of the
warrants to be determined based on an option pricing model and certain specified
assumptions set forth in the warrant agreement.  In accordance with
EITF No. 00-19, such potential cash payments that are not within the Company’s
control would preclude equity classification and therefore the warrants should
have been classified as a liability and adjusted to fair value through earnings
at each reporting dates starting from the issuance date.  In addition,
the terms of the warrants include a “down-round” provision under which the
exercise price could be affected by future equity offerings undertaken by the
Company.  Upon the adoption of EITF Issue No. 07-5, effective January
1, 2009, these warrants are no longer considered to be indexed to the Company’s
own stock and should be classified as a liability.





For the
three and six months ended June 30, 2008, the increase in fair value of the
April Warrants of $2,154,323 should have recorded as a charge to earnings for
the respective periods. As of December 31, 2008, a liability of $2,107,931
representing the fair value of the April Warrants and the September Warrants
should have been recorded and the retained earnings should have been increased
by $2,118,797 representing the net decrease in fair value of these warrants
through December 31, 2008 from their respective dates of issuance. For the three
and six months ended June 30, 2009, the aggregate fair value of the April
Warrants and September Warrants increased by $4,999,717 and $4,791,706,
respectively and the fair value of the Roth May Warrants increased by $277,241
since the date of issuance through June 30, 2009.  These fair value
adjustments should have been recorded through earnings as appropriate in the
respective interim periods.  Refer to Note 1(C) to the accompanying
consolidated financial statements for details.




Company
Overview





On April
17, 2008, we entered into a share exchange agreement (the “Exchange Agreement”)
with Fullmax Pacific Limited, a company organized under the laws of the British
Virgin Islands (“Fullmax”), the shareholders of Fullmax (the “Shareholders”),
who together owned shares constituting 100% of the issued and outstanding
ordinary shares of Fullmax (the “Fullmax Shares”), and our principal shareholder
(the “Principal Shareholder”). Pursuant to the terms of the Exchange Agreement,
the Shareholders transferred to us all of the Fullmax Shares in exchange for the
issuance of 11,444,755 (the “Exchange Shares”) shares of our Common Stock (the
“Share Exchange”). As a result of the Share Exchange, Fullmax became our wholly
owned subsidiary and at that time, the Shareholders acquired approximately 84.7%
of our issued and outstanding common stock. As a result of the Share
Exchange, we are now engaged in the sales of fulvic acid based plant and animal
nutrients in China.





Prior to
the Share Exchange, we were a public “shell” company with nominal assets. We
were incorporated in the State of Nevada on December 12, 2006 and engaged in the
business of offering sunless tanning services and selling tanning lotions. In
2008, we began to pursue an acquisition strategy, whereby we sought to acquire
an undervalued business with a history of operating revenues in markets that
provide room for growth.





As a
result of the Share Exchange, we changed our name to Yongye Biotechnology
International, Inc. and through our Company’s Cooperative Joint Venture
subsidiary, Yongye Nongfeng Biotechnology Co. Ltd. (“Yongye Nongfeng”), are now
engaged in the research, development, and sales of fulvic acid based liquid and
powder nutrient compounds used in the agriculture industry.





We are
engaged in the research, development and sales of fulvic acid based liquid and
powder nutrient compounds used in the agriculture industry. Our headquarters is
in Beijing, China and additional administrative offices and our manufacturing
unit are located in Hohhot, Inner Mongolia, China. Currently, we sell two lines
of products, both based on our fulvic acid compound base: a plant nutrition
liquid compound and animal nutrition powder which is a food additive. Our
products start with our proprietary fulvic acid base which is extracted from
humic acid, and to which we add other natural substances to customize the base
for use in our plant and animal product lines. Based on industry research and
government testing, we believe our proprietary technology for fulvic acid
extraction creates some of the purest and most effective fulvic acid base on the
market in China today. Our fulvic acid has a very light weight molecular
composition, which improves the overall permeability of cell walls, thus it
allowing more complete transport of nutrients across plant membranes,
effectively strengthening the overall health of plants. We believe our
proprietary process for extracting fulvic acid from humic acid and our patented
process for mixing our plant nutrient and patent pending process for mixing our
animal nutrient are key differentiators in the market and help us ensure that we
have a high quality product that we can control from procurement of raw
materials to final production. This also ensures our products provide reliable
and predictable results from season to season.





We are
headquartered in Beijing, China and Inner Mongolia Yongye’s manufacturing plant
is located in the Inner Mongolia province of China. Currently, we sell two lines
of product based on our fulvic acid base: plant nutrition liquid compound and
animal nutrition food additive. Our products start with our fulvic acid base
then, in addition, we add other natural substances to customize the base for use
in our plant or animal lines of products. Our plant products add naturally
occurring macro and micro nutrients such as nitrogen, phosphorus, potassium,
boron and zinc. Our animal products add natural herbs which help to reduce
bacterial inflammation (mastitis) in cows. It also assists most animals digest
food more completely and thus be more healthy.


20


In 2008,
we sold approximately 5,100 tons of plant product (427,200 units), which
represented 93% of revenue at USD $44.8M. We also sold approximately 6 tons of
our animal product (approximately 98,000 units). This represented 7% of revenue
at USD $3.25M. In its highly concentrated form, based on internal sales
data and readily available government data, our plant product was sprayed on
approximately 2% of all available arable land in our 10 provinces and in our
largest province, Xinjiang, it was applied to 5% of the land available for
cultivation. Yongye’s top 3 provinces by revenue for 2008 represented 82% of
sales and were Hebei at $20,541,267 (43%), Xinjiang at $13,177,694 (27%) and
Gansu at $ 5,663,011 (12%). By the end of 2008, our manufacturing partner’s
capacity enabled us to produce approximately 10,000 ton per annum of Shengmingsu
product. These facilities run at almost full capacity to meet peak season
demands and store inventory for next year. On average, our Shengmingsu products
sell for approximately $10,000 per ton.





Recent
Developments





On June
11, 2009, we caused to be formed a corporation under the laws of the State of
Nevada called “Yongye International, Inc.” (“Merger Sub”) and Yongye
Biotechnology International, Inc. acquired one hundred of the shares of Merger
Sub’s common stock for nominal cash. On June 23, 2009, Merger Sub was merged
with and into Yongye Biotechnology International, Inc. As a result of the
merger, Merger Sub ceased to exist and our corporate name was changed from
“Yongye Biotechnology International, Inc.” to “Yongye International, Inc.”
Except for the name change provided for in the Agreement and Plan of Merger,
there was no change in our directors, officers, ownership structure or
business.





By
September, 2008, Inner Mongolia Yongye Biotechnology Co., Ltd., a company
controlled by our Principal Shareholder and a noncontrolling shareholder of
Yongye Nongfeng, had completed the transfer of all Shengmingsu related sales
contracts, intellectual property and patents, and non-manufacturing personnel to
Yongye Nongfeng. For further details, please refer to Note 11 to the
accompanying unaudited interim consolidated financial statements of the
Company.




On May 8,
2009, we entered into a securities purchase agreement (the “May Purchase
Agreement”), with certain “accredited investors” (the “May Investors”) as such
term is defined in the Securities Act of 1933, as amended (the “Securities
Act”), for the issuance and sale of an aggregate of 5,834,083 shares of our
Common Stock (the “May Shares”) for aggregate gross proceeds of
approximately $8,984,488 (the “May Offering”). In connection with the May
Offering, we entered into a registration rights agreement with the May
Investors, in which we agreed to file a registration statement with the SEC to
register for resale the May Shares and the Warrant Shares issuable upon the
exercise of warrants issued to Roth as placement agent of the offering to
purchase up to 246,224 shares of Common Stock (the “May Warrant Shares”), within
45 calendar days of the closing date of the May Offering, and to use our best
efforts to have the registration statement declared effective within 150
calendar days of the closing date of the May Offering.  We are
obligated to pay liquidated damages of 1% of the dollar amount of the May Shares
sold in the May Offering per month, payable in cash, up to a maximum of 10%, if
the registration statement is not filed and declared effective within the
foregoing time periods.





The May
Shares and May Warrant Shares were issued in reliance upon the private placement
exemption from registration, Section 4(2) of the  Securities
Act, due to the limited number of offerees and subsequent purchasers, the
nature of activity by our placement agent, the availability and extent of
information available to the offerees and subsequent purchasers, and the
representations obtained by such subsequent purchasers regarding their financial
sophistication and intent with respect to future transfers of such
securities.


21


Factors
affecting our operating results





Demand
for Our Products




One major
tenet of the PRC government’s 11th Five-Year National Economic and Social Plan
(the “NESDP”) (2006-2010) is the focus towards developing China’s western
region. This is one of the top-five economic priorities of the nation. The goal
is to increase rural income growth which will in turn increase demand for more
food and agriculture products. Currently, a large majority of our products are
sold in this western region and we hope that this government focus will increase
our opportunity to sell more plant and animal nutrients to farmers who have to
keep up with the demand for higher quantity and higher quality of
products.




According
to the Asian Development Bank statistics, well over 60% of the nation’s total
population of 1.3 billion people is comprised of low-income, rural farmers.
According to the NESDP (2006-2010), raising the level of rural income is a top
economic and social goal for the country. Many government initiatives, including
removal of certain agricultural and local product taxes, have been implemented
to spur rural income development. The government expects annual rural income to
grow between 5% and 10% through 2010 (according to a study issued by the Chinese
Academy of Sciences, in April 2009). Additionally, according to the National
Population and Family Planning Commission, China's population will reach 1.5
billion by 2030. Therefore, the country has the challenge of producing
approximately 100 million more tons of crops needed to feed the additional 200
million people, which has put pressure on the agricultural system to increase
production capacity.




Supply of
Finished Goods




Before
June 1, 2009, we purchased our finished goods from our main supplier, Inner
Mongolia Yongye and then sold them through our distribution system. In order to
generate greater profit margins, we set out to control our cost of goods sold
and have put into place a fixed rate contract with our main supplier. Each
quarter we will go through a review process with our supplier to adjust the
fixed rate for the next quarter. We have not received any rate increases in
2008, or to date in 2009. Starting from June 1, 2009, we commenced the
manufacturing of our product as part of the restructuring process whereby we are
in the process of purchasing the property and the land use right from Inner
Mongolia Yongye.





Earthquake
in Sichuan





The
earthquake in Sichuan was a devastating event in the recent history of China.
While the impact was felt all the way to Beijing, the disruption of business and
the ensuing relief efforts were largely contained to the province itself and
mainly to the areas nearest the epicenter. Because of this, the impact to our
business was minimal. China’s Agriculture Minister Sun Zhengcai said in an
interview with Xinhua that, “The earthquake will not change the nation-wide
situation of agricultural production this year since local output of the
affected area is quite small compared to that of the whole country,” Sun
acknowledged that, “The damage was mainly to planted crops and livestock,” he
said, adding an urgent harvesting and planting effort has helped minimize the
impact and which had no national implications.” Furthermore, he said that “food
security remains guaranteed.”





Seasonality





We
typically face the seasonal demand patterns similar to other companies in our
sector. In general, the first and fourth quarters are typically our slowest
quarters and in 2008 we brought in approximately 20% and 6% respectively of our
total net sales in these quarters. The second and third quarters drive the
bulk of our overall sales with 36% and 38% respectively of the year’s net sales.
Our Shengmingsu plant line faces the most seasonality of our two product
lines with our Shengmingsu for animals experiencing less fluctuation during the
year due to seasonal buying patterns.


Drought





In the
last half year of 2008, it was widely reported that China faced substantial
drought conditions in important agricultural areas (as noted by The Economist in
its “China’s Dry Patch” article dated February 6, 2009). This led many to the
conclusion that this weather condition would have an overall negative impact on
China’s annual agricultural output for 2008 and potentially for 2009 which would
then have an impact on our company’s revenue. At the time, we did not believe
this to be the case and set out to corroborate this with related government
agencies, our sales and support staff, distributors, and branded store network
owners in our provincial locations. We then gathered localized information about
ways the drought might impact our distributors, their customers and our end
users and found that they believed it would not create an impact on their sales
and thus on our revenue for 2008. We also do not believe it will impact our
sales activities in 2009 at this point in time.


22


In the
ensuing months after the initial reports, there were several key events which
occurred to mitigate some of the impact of the drought conditions faced by the
farmers such as additional governmental spending on increased efforts to
irrigate land using other water sources and additional rainfall which fell on
once drought impacted areas in northern China, as reported in Xinhua on February
9, 2008. The State Flood Control and Drought Relief Headquarters reported that
there was a reduction of farmland affected because of these key events (Xinhua
February 9, 2008). The government has also begun their stimulus injections into
the agriculture community to help ward off the affects of any drought induced
financial hardships (as reported in USA Today, February 8, 2009).





Additionally,
we believe that several market conditions also bode well for us in the sales of
our plant product during this time. Overall, the drought has impacted northern
China and primarily large field crop growers such as wheat, corn and soy bean.
Currently, our distributors concentrate on selling to farmers who grow economic
crops such as tomatoes, celery, turnips, and carrots though in Xinjiang province
our product is used on larger farms where field crops are grown such as Lajiao
peppers. Additionally, in all drought situations, we believe that the drought
resistant nature of our plant product will actually benefit crops because of the
increased water retention characteristics of our product. Internal research has
shown that fulvic acid has the ability to strengthen plant cells and root
systems which then allows plants to retain water more effectively and use it
more efficiently. This, along with other mitigating factors discussed above,
should help us ward off the impacts of the 2008 fall and winter drought on our
sales in our current market area.





Agriculture
Sector





Agriculture
continues to be a heavily invested sector in China. Brand name investors
continue to invest into China’s agriculture space because they have confidence
in China’s long term outlook. The market volume for agriculture products is
large, both for domestic sales and export and there is no set threshold for
foreign investment into the sector as opposed to other industries, such as
energy, finance, mining, and telecommunications. This is driven by the growing
demand for higher quality food products domestically and international reliance
on food products from China. Currently, China is the world’s biggest grower and
consumer of grains and yet must boost crop yields by at least 1 percent a year
to ensure the country has enough food to feed its 1.3 billion people, according
to the Minister of Agriculture, Sun Zhengcai (China Economic Net, July 21,
2008). Additional policy changes will include protecting farmland and working to
increase rural incomes to retain farming interest.





The goal
is to maintain self-sufficiency in food production because no other country can
feed the world’s biggest population, according to Sun.  “Our strategy
must be based on stable farmland, and seeking ways to improve yields,” Sun said
in a speech to local officials, outlining the government’s near- and long-term
agriculture policy and objectives. China, which harvested more summer crops,
aims also to boost grain and oilseed output this year, Sun said. To ensure next
year’s crops, officials must “stabilize” area planted in winter wheat and use
idle land in the off season to grow rapeseed, Sun said.





This
growth, however, does not come without challenges and China has faced many of
these with regards to the continued concern over the quality of milk and eggs
sold both domestically and internationally in the dairy industry.  We
believe that the government is making every effort to bring back consumer
confidence in these domestically produced products and overall this will bring
about an even stronger industry once planned new licensing and safety procedures
have been put into place.





New Land
Reform Policy





Farmland
in China is owned by the local government, but given to local farmers under 30
year use contracts. With the allure of higher incomes and better living
conditions in the city, farmers have abandoned the land and no others farmers
have stepped in to bring it back into production. This has created a shortage of
a key raw material in the agricultural supply chain productive land. The
government has acknowledged this issue and recently enacted a new land use
reform policy which liberalizes the exchange of land among the nation’s farmers.
This creates a new model for China’s 730 million farmers with the idea being to
create more stable farmland by shifting the country away from the single
household farm plot model to the amalgamation of larger-scale operations which
should be more productive due to technology and economies of scale. Farmers will
be able to transfer their land-use rights to others through a new market system
for rural land-use rights. Chinese authorities commented that, “Without
modernizing agriculture, China cannot modernize; without stability and
prosperity in rural areas, China cannot have stability and prosperity. These
changes are enacted to “ensure national food security and the supply of major
agricultural products, and promote increases in agricultural production, farm
incomes and rural prosperity.” (China’s Ongoing Agriculture Modernization, USDA,
April 2009)


23


RESULTS
OF OPERATIONS




Summary
Statement of Income Data





For the Three
      Months Ended
                              
                              For the Six Months
      EndedJune 30, 2009
                                (Restated –Financial
                                StatementNote 1(C))
                              
                              June 30, 2008
                                (Restated –Financial
                                Statement Note1(C))
                              
                              June 30, 2009
                                (Restated –Financial
                                Statement Note1(C))
                              
                              June 30, 2008
                                (Restated –
                                Financial
                                Statement Note
                                1(C))SALESExternal
      customers
                              
                              $
                              46,271,544
                              
                              $
                              17,598,671
                              
                              $
                              56,487,236
                              
                              $
                              26,986,639Related
      party
                              
                              
                              -
                              
                              
                              -
                              
                              
                              2,220,083
                              
                              
                              -TOTAL
      SALES
                              
                              
                              46,271,544
                              
                              
                              17,598,671
                              
                              
                              58,707,319
                              
                              
                              26,986,639COST
      OF SALES
                              
                              
                              21,936,877
                              
                              
                              7,996,521
                              
                              
                              27,839,484
                              
                              
                              12,419,020GROSS
      PROFIT
                              
                              
                              24,334,667
                              
                              
                              9,602,150
                              
                              
                              30,867,835
                              
                              
                              14,567,619SELLING
      EXPENSES
                              
                              
                              6,450,694
                              
                              
                              777,012
                              
                              
                              9,070,992
                              
                              
                              3,997,477RESEARCH
      & DEVELOPMENT EXPENSES
                              
                              
                              1,124,445
                              
                              
                              -
                              
                              
                              1,413,017
                              
                              
                              -GENERAL
      AND ADMINISTRATIVE EXPENSES
                              
                              
                              785,565
                              
                              
                              454,697
                              
                              
                              1,130,722
                              
                              
                              812,125INCOME
      FROM OPERATIONS
                              
                              
                              15,973,963
                              
                              
                              8,370,441
                              
                              
                              19,253,104
                              
                              
                              9,758,017OTHER
      EXPENSES/(INCOME)Interest
      Expense/(Income), net
                              
                              
                              10,500
                              
                              
                              (789
                              )
                              
                              16,458
                              
                              
                              (778
                              )Other
      Expenses /(Income), net
                              
                              
                              (13,178
                              )
                              
                              387,198
                              
                              
                              (12,737
                              )
                              
                              386,840Increase
      in fair value of derivative liabilities
                              
                              
                              5,276,958
                              
                              
                              2,154,323
                              
                              
                              5,068,947
                              
                              
                              2,154,323TOTAL
      OTHER EXPENSES, NET
                              
                              
                              5,274,280
                              
                              
                              2,540,732
                              
                              
                              5,072,668
                              
                              
                              2,540,385INCOME
      BEFORE PROVISION FOR INCOME TAXES
                              
                              
                              10,699,683
                              
                              
                              5,829,709
                              
                              
                              14,180,436
                              
                              
                              7,217,632PROVISION
      FOR INCOME TAXES
                              
                              
                              4,591,776
                              
                              
                              219,983
                              
                              
                              4,747,223
                              
                              
                              594,765NET
      INCOME
                              
                              
                              6,107,907
                              
                              
                              5,609,726
                              
                              
                              9,433,213
                              
                              
                              6,622,867LESS:
      NET INCOME ATTRIBUTABLE TO THE NONCONTROLLING INTEREST
                              
                              
                              63,734
                              
                              
                              603,194
                              
                              
                              82,256
                              
                              
                              1,035,005NET
      INCOME ATTRIBUTABLE TO YONGYE INTERNATIONAL, INC.
                              
                              
                              6,044,173
                              
                              
                              5,006,532
                              
                              
                              9,350,957
                              
                              
                              5,587,862OTHER
      COMPREHENSIVE INCOME/(LOSS)Foreign
      Currency Translation Adjustment
                              
                              
                              (36,750
                              )
                              
                              277,101
                              
                              
                              11,195
                              
                              
                              414,771COMPREHENSIVE
      INCOME
                              
                              
                              6,071,157
                              
                              
                              5,886,827
                              
                              
                              9,444,408
                              
                              
                              7,037,638LESS:
      COMPREHENSIVE INCOME ATTRIBUTABLE TO THE NONCONTROLLING
      INTEREST
                              
                              
                              63,528
                              
                              
                              604,580
                              
                              
                              82,319
                              
                              
                              1,037,079COMPREHENSIVE
      INCOME ATTRIBUTABLE TO YONGYE INTERNATIONAL, INC.
                              
                              $
                              6,007,629
                              
                              $
                              5,282,247
                              
                              $
                              9,362,089
                              
                              $
                              6,00,559Net
      income per share:Basic
                              
                              $
                              0.20
                              
                              $
                              0.27
                              
                              $
                              0.33
                              
                              $
                              0.37Diluted
                              
                              $
                              0.20
                              
                              $
                              0.27
                              
                              $
                              0.33
                              
                              $
                              0.37Weighted
      average shares used in computation:Basic
                              
                              
                              30,222,243
                              
                              
                              18,496,093
                              
                              
                              28,500,814
                              
                              
                              14,970,434Diluted
                              
                              
                              30,222,243
                              
                              
                              18,496,093
                              
                              
                              28,500,814
                              
                              
                              14,970,434




24


THREE
MONTHS ENDED JUNE 30, 2009 COMPARED WITH THREE MONTHS ENDED JUNE 30,
2008




Our
business for the three months ended June 30, 2009 remained on track with our May
8, 2009 increased guidance which resulted from the May Offering. On May 8, 2009,
we raised guidance from $66 million to $82 to $84 million, and previously
announced net income guidance from $15.8 million to $23 to $24 million. This
represented growth in revenue for 2009 to be 70-75% over that of fiscal
year 2008 and net income to be a 90-95% increase over that of 2008. Thus far, in
the three months of 2009 we have seen an increase of 163% in net sales over
the same period in 2008 and an overall growth of net income of 21% over the same
period in 2008. The sales in the second quarter of 2009 represents the highest
quarterly sales in the company’s history. This demonstrates that our efforts to
raise additional financing to purchase finished goods were met with increased
orders by our distributors and increased growth in the market overall. This
increase in revenue was primarily due to our fast expanding distribution network
and the availability of additional working capital raised from the May
Offering.




Net
Sales





Sales of
$46,271,544 in the second quarter of 2009 was an increase of $28,672,873 from
$17,598,671 in the same period in 2008, which was an overall increase of 163% in
revenue. This increase was driven by increased end-user demand throughout our
ten province market area which then pulled a greater volume of plant and animal
nutrient products through our distribution channels and ultimately our direct
customers which are regional level distributors.





Gross
Profit





Gross
profit increased 153% over the prior period, which was an increase to
$24,334,667 from $9,602,150, or $14,732,517, over the period ended June 30,
2008. Gross Margin decreased between the two periods to 53% from 55%, which was
due to an increase in provincial distributors during six months ended June 30,
2009 than the same period in 2008, as our market share significantly increased.
The cost of goods sold as percentage of revenue for the second quarter of 2009
increased because we worked with more provincial level distributors and provided
them preferential pricing during the second quarter of 2009 as opposed to the
same period in 2008. While we significantly increased our sales, the
corresponding discounts offered also increased our costs to a small
degree.




Cost
of Goods Sold




Three months endedJune 30, 2009
                      
                      
                      June 30, 2008
                      
                      
                      IncreaseCost
      of Goods Sold
                      
                      $
                      21,936,877
                      
                      
                      $
                      7,996,521
                      
                      
                      
                      174
                      %Percentage
      of Sales
                      
                      
                      47
                      %
                      
                      
                      45
                      %




Cost of
goods sold for the three months ended June 30, 2009 was $21,936,877 which is 47%
of revenues. This is an increase of $13,940,356 over the previous period which
represents a 174% increase overall. As a percent of revenue, this represented an
increase of 2% when compared with the corresponding period in 2008, which was
45%. The cost of goods sold as percentage of revenue for the second quarter of
2009 increased because we worked with more provincial level distributors and
provided them preferential pricing during the second quarter of 2009 as opposed
to the same period in 2008. While we significantly increased our sales, the
corresponding discounts offered also increased our costs to a small
degree.





Sales by
Product Line





The
revenue of our plant product increased to $46,178,850 from $17,597,078 or 162%
in the three months ended June 30, 2009 and the revenue of our animal product
increased to $92,694 from $1,593 in the three months ended June 30, 2009
compared to the same period in 2008.





Selling,
General and Administrative Expenses





Selling,
general and administrative (“SG&A”) expenses increased by $6,004,550 to
$7,236,259 in the three months ended June 30, 2009 from $1,231,709 in the
previous period in 2008. As a percentage of sales for the three months ended
June 30, 2009, SG&A increased to 16% as compared to 7% of net sales in the
three months ended June 30, 2008. This increase was due primarily to the
increase in selling expenses of $5,673,682 to $6,450,694 from $777,012. The
majority of the increase in selling expense was due to growth in our costs for
advertising ($3,404,179), salaries ($316,406), freight ($576,898) and business
travel and training ($1,428,272) associated with the increased volume of
sales.





Research
and Development





Additionally,
we incurred $1,124,445 of research and development fees in the three
months ended June 30, 2009 as compared to $0 in the three months ended June
30, 2008. This is a planned increase in the scope of our business as
contemplated in the cooperation agreement when the Cooperative Joint Venture was
established and will enable the Company to further develop the Shengmingsu brand
of products.





Loss on
change in fair value of warrants





The
Company accounts for the warrants issued in April Offering and September
Offering in year 2008 and warrants issued to Roth as placement agent in May
Offering in year 2009 as a derivative liability measured at fair value through
earnings. The change in fair value during the three months ended June 30, 2009
resulted in a charge to Consolidated Statement of Income of
$5,276,958.  The increase in fair value of the warrants was primarily
due to the increase in our stock price from $1.50 per share at March 31, 2009 to
$3.61 at June 30, 2009.  Such loss for the three months ended June 30,
2008 was $2,154,323.


25


Income
Tax





The
Company did not carry on any business and did not maintain any branch office in
the United States during the three months ended June 30, 2009 and 2008.
Therefore, no provision for withholding or U.S. federal income taxes or tax
benefits on the undistributed earnings and/or losses of the Company has been
made.




The
Company’s effective income tax rate was 28.74% and 2.76% for the three months
ended June 30, 2009 and 2008, respectively. According to the approval from the
local tax authority, Yongye Nongfeng was assessed to use the deemed profit
method to determine the amount of income tax provision for the year ended
December 31, 2008 which was based on 1.25% on its gross revenue. The deemed
profit method is not applicable to Yongye Nongfeng for the year ending December
31, 2009. With effective from January 1, 2009, Yongye Nongfeng applied the
statutory income tax rate of 25% on its assessable income in accordance with the
relevant income tax rules and regulations of the PRC. The income tax rate
applied by Yongye Nongfeng to determine the income tax provision for the three
and six months ended June 30, 2009 is consistent with the tax notice issued by
the State Administration of Taxation in the PRC on July 14, 2009. For the three
months ended June 30, 2009, the Company’s income tax expense was $4,591,776 and
income tax payable as of June 30, 2009 was $4,771,415 as compared to $219,983
and $406,314 for the three months ended June 30, 2008.





Net
income





Net
income for the three months ended June 30, 2009 increased by $1,037,641 to
$6,044,173 from $5,006,532 in the same period ended June 30, 2008, which was a
21% increase. This also represented an overall decrease in net margin of 15% in
the three months ended June 30, 2009 to 13% as compared to 28% in the same
period ended 2008. The decrease in our net margin is due to the combining effect
of the improvement in our gross profit, but offset by the loss on change in fair
value of warrants issued, the increase of our income tax expenses, the addition
of R&D into our business scope and the increase in selling expenses, as
described above.





SIX
MONTHS ENDED JUNE 30, 2009 COMPARED WITH SIX MONTHS ENDED JUNE 30,
2008




Our
business for the six months ended June 30, 2009 remained on track with our
estimates due to the growth in revenue of 118% and the overall growth of net
income of 67% over the same period in 2008. Much of the growth in revenue was
seen in the second quarter of 2009 when we had 163% increase in sales compared
to same period of 2008. For the period ended March 31, 2009 we had a growth of
31% in revenue. The significant growth in revenue was primarily driven by
increasing demand of our product as result of expanding distribution network and
higher brand recognition.





Net
Sales





Sales of
$58,707,319 in the six months ended June 30, 2009 was an increase of $31,720,680
from $26,986,639 in the same period in 2008, which was an overall increase of
118% in revenue. This increase was driven by an increase in end-user demand
throughout our market area which was is in large part created by the large scale
advertising campaign which creates pull from the branded stores through our
distribution channels and through our major distributors who are our
customers.





Gross
Profit





Gross
profit also increased 112% over the prior period, which was an increase from
$14,567,619 to $30,867,835, or $16,300,216, over the six months ended June 30,
2008. Our gross margin stayed relatively flat between the two periods and
decreased slightly to 53% in the six months ended June 30, 2009 from 54% in the
same period ended June 30, 2008.




Cost
of Goods Sold





Six months endedJune 30, 2009
                  
                  
                  June 30, 2008
                  
                  
                  IncreaseCost
      of Goods Sold
                  
                  $
                  27,839,484
                  
                  
                  $
                  12,419,020
                  
                  
                  
                  124
                  %Percentage
      of Sales
                  
                  
                  47%
                  
                  
                  
                  46%





Cost of
goods sold for the six months ended June 30, 2009 was $27,839,484 which is 47%
of revenues. This is an increase of $15,420,464 over the previous period which
represents a 124% increase overall. However, as a percent of revenue, this
represented an increase of 1% when compared with the corresponding period in
2008, which was 46%. This was mainly due to our growing percentage of provincial
level distributors and some preferential pricing they received. Over the six
months ended June 30, 2009, the number of distributors increased at a greater
rate than in the same period of 2008 which increased our market share due to
number of goods sold. This, in conjunction with offering them some preferred
discounts, increased our cost of goods sold by a small amount as compared to the
same period in 2008.


26




Sales by
Product Line
 
 The
revenue of our plant product increased 116% and the revenue of our animal
product increased 23% in the six months ended June 30, 2009 compared to the same
period in 2008.
 
 Selling,
General and Administrative Expenses
 
 SG&A
expenses increased by $5,392,112 to $10,201,714 in the six months ended June 30,
2009 from $4,809,602 in the previous period in 2008, which was a 112% increase.
As a percentage of sales for this six months ended June 30, 2009, SG&A
decreased 1% to 17% of net sales as compared to 18% in the six months ended June
30, 2008. This increase was due primarily to additional costs brought on by
increased expenses in the areas of advertising ($3,916,104), salaries ($590,332)
and freight ($607,813) which can be associated with the increased volume of
sales which resulted from the additional product purchased from the proceeds of
the May Offering.
 
 Research
and Development
 
 Additionally,
we incurred $1,413,017 of research and development fees in the six months ended
June 30, 2009 as compared to $0 in the six months ended June 30, 2008. This is a
planned increase in the scope of our business as contemplated in the cooperation
agreement when the Cooperative Joint Venture was established and will enable the
Company to further develop the Shenmingsu brand of products.
 
 Loss on
change in fair value of warrants
 
 The
Company has accounted for the warrants issued in April Offering and September
Offering in year 2008 and warrants issued to Roth as placement agent in May
Offering in year 2009 as a derivative liability measured at fair
value through earnings.  The change in fair value during the six
months ended June 30, 2009 resulted in a charge to Consolidated Statement of
Income of $5,068,947.  The increase in fair value of the warrants was
primarily due to the increase in our stock price from $1.60 per share at
December 31, 2008 to $3.61 at June 30, 2009.  Such loss for the six
months ended June 30, 2008 was $2,154,323.
 
 Income
Tax
 
 The
Company did not carry on any business and did not maintain any branch office in
the United States during the six months ended June 30, 2009 and 2008. Therefore,
no provision for withholding or U.S. federal income taxes or tax benefits on the
undistributed earnings and/or losses of the Company has been made.
 
 The
Company’s effective income tax rate was 24.66% and 6.35% for the six months
ended June 30, 2009 and 2008, respectively. According to the approval from the
local tax authority, Yongye Nongfeng was assessed to use the deemed profit
method to determine the amount of income tax provision for the year ended
December 31, 2008 which was based on 1.25% on its gross revenue. The deemed
profit method is not applicable to Yongye Nongfeng for the year ending December
31, 2009. With effective from January 1, 2009, Yongye Nongfeng applied the
statutory income tax rate of 25% on its assessable income in accordance with the
relevant income tax rules and regulations of the PRC. The income tax rate
applied by Yongye Nongfeng to determine the income tax provision for the three
and six months ended June 30, 2009 is consistent with the tax notice issued by
the State Administration of Taxation in the PRC on July 14, 2009. For the six
months ended June 30, 2009, the Company’s income tax expense was $4,747,223 and
income tax payable as of June 30, 2009 was $4,771,415 as compared to $594,765
and $406,314 for the six months ended June 30, 2008.
 
 Net
income
 
 Net
income for the six months ended June 30, 2009 increased by $3,763,095 to
$9,350,957 from $5,587,862 in the same period ended June 30, 2008, which was a
67% increase. This also represented a decrease in net margin of 5% in the six
months ended June 30, 2009 to 16% compared to 21% in the same period ended
2008.  This is due to the combining effect of the improvement in our
gross profit, but offset by the loss on change of in fair value of warrants
issued to investors and Roth, the increase of our income tax rate to 25%, the
addition of R&D into our business scope and incremental costs and expenses
for the high volume of sales, as described above.
  Liquidity
and Capital Resources
 
 The
Company has historically financed its operations and capital expenditures
principally through paid-in capital by common stockholders, shareholder loans
and bank loans. As is customary in the industry, we provide payment terms to
most of our distributors which typically exceed the terms that we receive from
our suppliers. Therefore, the Company’s liquidity needs have generally consisted
of working capital necessary to finance receivables and raw material and
finished goods inventory. We believe that our existing cash, cash equivalents
and from the proceeds of the May Offering will be sufficient to meet our
anticipated future cash needs for the remaining growing season. We may, however,
require additional cash resources due to changing business conditions or other
future developments, including any investments or acquisitions we may decide to
pursue. Therefore, there can be no assurance that such additional investment
will be available to us, or if available, that it will be available on terms
acceptable to us.




27




In
summary, our cash flows were:




Net cash
used in operating activities decreased in the six months ended June 30, 2009 by
$1,896,755 to $5,707,897 from $7,604,652 for the period ended June 30, 2008.
These changes were mainly brought by the significant increase of $31,720,680 in
sales resulting in an increase of $2,810,346 in net income; this was offset by
the increase in accounts receivable and inventory by $12,941,328 and $830,372,
respectively. In addition, due to the higher sales, the Company purchased more
from its supplier, resulting in a higher accounts payable by
$6,527,500.





The
changes described above were generally due to the fact that our largest
customers typically pay us in 3 months after we ship products to them which is
according to the terms set in the agreement with them.  Because we are
constrained by the seasonal forces and the elongated payment terms of the
agriculture industry, we slowly build up accounts receivable starting in the
first quarter and more rapidly add to this throughout the peak season of the
second and third quarter. As the end of the year approaches, we typically have
had the ability to collect a great deal of our receivables so as to start the
new year with a much lower balance. Additionally, due to the seasonal nature of
the agriculture industry, the peak season for the sale of our product is in the
second and third quarters of the year.  We normally build up inventory
in the first and fourth quarters to prepare for shipments to customers as they
order product for the peak selling season in the second and third
quarters.  The significant increase in the balance of inventory we
typically experience is in line with our business practices.





Net cash
used in investing activity increased by $1,337,848 in the period ended June 30,
2009 compared to the same period ended in 2008 which is due to our acquisition
of machinery and equipment from Inner Mongolia Yongye and capital expenditures
related to self-constructed equipment.





Net cash
provided by financing activities decreased by $1,087,351 to $8,207,141 in the
period ended June 30, 2009 compared to the same period ended in 2008. This was
due to the May Offering which raised $8,984,488 in proceeds, while April
Offering raised $10,100,651 in proceeds.





Working
capital at June 30, 2009 increased by $25,720,631 to $38,953,909, from
$13,233,278 or 194% over the same period ended June 30, 2008.





Summary
consolidated balance sheet data:




June 30, 2009
                  
                  
                  December 31, 2008(Restated
      – Financial
                    Statement
      Note 1(C))Cash
                  
                  $
                  4,860,814
                  
                  
                  $
                  4,477,477Accounts
      Receivable, net
                  
                  $
                  36,591,544
                  
                  
                  $
                  2,748,042Inventory
                  
                  $
                  26,760,401
                  
                  
                  $
                  20,708,193PP&E,
      net
                  
                  $
                  7,091,521
                  
                  
                  $
                  5,368,074Total
      assets
                  
                  $
                  76,324,333
                  
                  
                  $
                  34,504,261Total
      current liabilities
                  
                  $
                  30,188,629
                  
                  
                  $
                  5,769,494Long
      term debt
                  
                  $
                  273,615
                  
                  
                  $
                  230,121Total
      equity
                  
                  $
                  45,862,089
                  
                  
                  $
                  28,504,646


28





Property,
plant and equipment increased to $7,091,521 at June 30, 2009 from $5,368,074 at
December 31, 2008, which was largely due to the purchase of machinery and
equipment from Inner Mongolia Yongye and expenditures related to
self-constructed equipment.





Total
current liabilities increased by $24,419135 to $30,188,629 at June 30, 2009 from
$5,769,494 at December 31, 2008 or 423% was largely due to the increase in
Derivative liabilities – fair value of, accounts payable and taxes payable, both
of which increases were due to the significant increase in sales and subsequent
increased purchases of inventories and increased taxes payable due to the
increase in the Company’s effective tax rate.





Total
equity increased by $17,357,443 to $45,862,089 at the end of June 30, 2009,
compared to $28,504,646 on December 31, 2008. The increase in our total equity
was due primarily to the Company’s net income and the net proceeds from the May
Offering.





Accounts
receivable Days Sales Outstanding here is defined as average accounts receivable
for the period divided by net sales per day and decreased 30 days
($21,475,950/$508,479) to 42 days ($13,906,702/$193,392) for the three months
ended June 30, 2009 from 72 days in the same period ended 2008, which is due to
our increased efforts to collect accounts receivable and gain more advanced
payments from distributors. Days Sales in Inventory here is defined as average
inventory divided by cost of sales per day and increased to 102 days
($24,480,826/$241,065) in the three months ended June 30, 2009 from 55 days
($4,876,241/$87,874) in the same period ended 2008 due to our build up of
inventory to meet the increased demand for our products which we expect will
continue through the third quarter of 2009.





Foreign
Currency Translation and Transactions





The
financial position and results of operations of the Company’s Chinese
subsidiaries are determined using the local currency (Chinese Yuan) as the
functional currency, while the reporting currency is the US dollar. Assets and
liabilities of the subsidiaries are translated at the prevailing exchange rate
in effect at each period end. Contributed capital accounts are translated using
the historical rate of exchange when capital is injected. Income statement
accounts are translated at the average rate of exchange during the period.
Translation adjustments arising from the use of different exchange rates from
period to period are included in the cumulative translation adjustment account
in equity. Gains and losses resulting from foreign currency transactions
denominated in other than the functional currency are included in operations as
incurred. Such gains and losses were immaterial for the three months ended June
30, 2009 and 2008.





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 Company because it has not engaged in any
significant transactions that are subject to the restrictions.





Impact of
inflation





We are
subject to commodity price risks arising from price fluctuations in the market
prices of the raw materials. We have generally been able to pass on cost
increases through price adjustments. However, the ability to pass on these
increases depends on market conditions influenced by the overall economic
conditions in China. We manage our price risks through productivity improvements
and cost-containment measures. We do not believe that inflation risk is material
to our business or our financial position, results of operations or cash flows
at this time.





Off
Balance Sheet Arrangements





We do not
have any off-balance sheet arrangements and accordingly, no such arrangements
are likely to have a current or future effect on our financial position,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources.




ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Not
required.




ITEM
4.  CONTROLS AND PROCEDURES




Not
required.


29




ITEM
4T. CONTROLS AND PROCEDURES




Evaluation
of Disclosure Controls and Procedures




Disclosure
Controls and Procedures




The
Company maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in reports filed by the Company under
the Securities Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and regulations and that such information is
accumulated and communicated to our management, including its Principal
Executive Officer and Principal Financial Officer, as appropriate, to allow for
timely decisions regarding required disclosure. Our Principal Executive Officer
and Principal Financial Officer evaluated, with the participation of other
members of management, the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act Rule 15d-15(e)), as of the end of the
period covered by this Quarterly Report on Form 10-Q. Based on this evaluation,
our Principal Executive Officer and Chief Financial Officer concluded that the
Company’s disclosure controls and procedures were effective.




Although
the management of our Company, including the Principal Executive Officer and the
Interim Principal Financial Officer, believes that our disclosure controls and
internal controls currently provide reasonable assurance that our desired
control objectives have been met, management does not expect that our disclosure
controls or internal controls will prevent all error and all fraud. A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within our Company have been detected. These
inherent limitations include the realities that judgments in decision-making can
be faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
controls. The design of any system of controls is also based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions.




Changes
in Internal Controls over Financial Reporting




There
were no significant changes in our internal controls over financial reporting
identified in connection with this evaluation that occurred during our last
fiscal quarter that have materially affected, or are reasonably likely to
materially affect, the Company’s internal controls over financial
reporting.


30




There
were no changes in our internal controls over financial reporting (as defined on
Rules 13a-15(f) and 15d-15(f) under the Exchange Act identified in
connection with the evaluation that occurred during the quarter ended June 30,
2009 that has materially affected, or is reasonably likely to materially affect,
our internal controls over financial reporting.




PART
II.




OTHER
INFORMATION




ITEM
      1.
            LEGAL
      PROCEEDINGS




None.





ITEM
      1A.
            RISK
      FACTORS




As a
smaller reporting company, the Company is not required to make disclosures under
this Item 1A.




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




On May 8,
2009, we entered into a securities purchase agreement (the “May Purchase
Agreement”), with certain “accredited investors” (the “ May Investors ”) as such
term is defined in the Securities Act of 1933, as amended (the “ Securities Act
”), for the issuance and sale of an aggregate of 5,834,083 shares of our common
stock, par value $.001 per share (the “ May Shares ”) for aggregate gross
proceeds of approximately $8,984,488 (the “ May Offering ”).  In
connection with the May Offering, we entered into a registration rights
agreement with the May Investors, in which we agreed to file a registration
statement with the SEC to register for resale the May Shares and the Warrant
Shares issuable upon the exercise of warrants issued to Roth as placement agent
of the offering to purchase up to 246,224 shares of Common Stock (the “ May
Warrant Shares  ”), within 45 calendar days of the closing date of the
May Offering, and to use our best efforts to have the registration statement
declared effective within 150 calendar days of the closing date of the May
Offering.  We are obligated to pay liquidated damages of 1% of the
dollar amount of the May Shares sold in the May Offering per month, payable in
cash, up to a maximum of 10%, if the registration statement is not filed and
declared effective within the foregoing time periods.




The May
Shares and May Warrant Shares were issued in reliance upon an exemption from
registration afforded under Section 4(2) of the Securities Act due to the
limited number of offerees and subsequent purchasers, the nature of solicitation
activity by our placement agent, the availability and extent of information
available to the offerees and subsequent purchasers, and the representations
obtained from such subsequent purchasers regarding their financial
sophistication and intent with respect to future transfers of such
securities.




ITEM
      3.
            DEFAULTS
      UPON SENIOR SECURITIES




None.




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




On June
5, 2009, an annual meeting of stockholders of the Company was held to vote upon
the following four items:





-
            Proposal 1: To elect
      seven (7) directors to the board of directors of the Company to serve
      until the next annual meeting of stockholders and until their successors
      are duly elected and qualified.





-
            Proposal 2: To ratify
      the appointment of KPMG LLP as the Company’s independent
      auditors.





-
            Proposal 3: To approve
      an amendment to our Certificate of Incorporation to effect a reverse split
      of our common stock, par value $0.001 per share (“Common Stock”), within a
      range of ratios of 1 for 3 to 1 for
6.





-
            Proposal 4: To approve
      the adoption of amended and restated by-laws of the
    Company.





There
were 28,058,960 shares of Common Stock outstanding on the record date of May 5,
2009. Two holders of record of issued and outstanding shares of the Company were
present at the meeting and thus represented a quorum.





Summary
of Votes with respect to Proposal 1 at the June 5, 2009 Annual Meeting of
Stockholders





Number of
                        Votes “For”
                      
                      
                      Percentage
                      
                      
                      Votes
                        “Against”
                      
                      
                      “Abstain”
                      
                      ResultZishen
      Wu
                      
                      
                      8,044,670
                      
                      
                      
                      100
                      %
                      
                      
                      0
                      
                      
                      
                      0
                      
                      ApprovedSun
      Taoran
                      
                      
                      8,044,670
                      
                      
                      
                      100
                      %
                      
                      
                      0
                      
                      
                      
                      0
                      
                      ApprovedZhao
      Qiang
                      
                      
                      8,044,670
                      
                      
                      
                      100
                      %
                      
                      
                      0
                      
                      
                      
                      0
                      
                      ApprovedGuo
      Xiaochuan
                      
                      
                      8,044,670
                      
                      
                      
                      100
                      %
                      
                      
                      0
                      
                      
                      
                      0
                      
                      ApprovedSean
      Shao
                      
                      
                      8,044,670
                      
                      
                      
                      100
                      %
                      
                      
                      0
                      
                      
                      
                      0
                      
                      ApprovedLi
      Xindan
                      
                      
                      8,044,670
                      
                      
                      
                      100
                      %
                      
                      
                      0
                      
                      
                      
                      0
                      
                      ApprovedZhang
      Rijun
                      
                      
                      8,044,670
                      
                      
                      
                      100
                      %
                      
                      
                      0
                      
                      
                      
                      0
                      
                      Approved


31





Proxies
for the meeting were solicited pursuant to regulation 14A under the
Act.  There was no solicitation in opposition to the management’s
nominees as listed in Schedule 14A filed with the SEC on May 19, 2009, and all
of such nominees were elected.





Summary
of Votes with respect to Proposals 2, 3 and 4, respectively, at the June 5, 2009
Annual Meeting of Stockholders





Number of
                        Votes “For”
                      
                      
                      Percentage
                      
                      
                      Votes
                        “Against”
                      
                      
                      “Abstain”
                      
                      ResultProposal
      2
                      
                      
                      8,044,670
                      
                      
                      
                      100
                      %
                      
                      
                      0
                      
                      
                      
                      0
                      
                      ApprovedProposal
      3
                      
                      
                      8,044,570
                      
                      
                      
                      28.67
                      %
                      
                      
                      100
                      
                      
                      
                      0
                      
                      DisapprovedProposal
      4
                      
                      
                      8,044,670
                      
                      
                      
                      100
                      %
                      
                      
                      0
                      
                      
                      
                      0
                      
                      Approved





ITEM
      5.
            OTHER
      INFORMATION




None.




ITEM
      6.
            EXHIBITS





Exhibit
      No.
                        
                        Description31.1
                        
                        Certification
      of the Chief Executive Officer (Principal Executive Officer) pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.31.2
                        
                        Certification
      of the Chief Financial Officer  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





SIGNATURES




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





Yongye
      International, Inc.Dated:
      October 19, 2009
            By:
            /s/ Zishen
      WuName:
      Zishen WuTitle:
      Chief Executive Officer and President (Principal
              Executive
      Officer)By:
            /s/ Sam
      YuName:
      Sam YuTitle:
      Chief Financial Officer (Principal Financial and
              Accounting
      Officer)





33