UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549




FORM
      10-Q




(Mark
      One)


x
            Quarterly
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934




For the quarterly period ended June
      30, 2008




or


 ̈
            Transition
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934




For
      the
      transition period from ____________ to **___________** **.**




Commission
      File Number 000-51200




Yongye
      Biotechnology International, Inc..


(Exact
      Name of Small Business Issuer as Specified in Its Charter)





Nevada(State
                or other Jurisdiction of
              Incorporation
                or Organization)
            (I.R.S.
                Employer
              Identification
                No.)6thFloor, Suite 608, Xue Yuan International Tower,
              No.
                1 Zhichun Road, Haidan District Beijing, PRC
              (Address
                of Principal Executive Office)(Former
                address of Principal Executive Office, if changed since last
                report)


+86
      10
      8231 8626


(Issuer’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 Exchange Act during the preceding 12 months
      (or for such shorter period that the registrant was required to file such
      reports), and (2) has been subject to such filing requirements for the past
      90
      days. Yes x No  ̈




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





Large
                accelerated filer ̈
            Accelerated
                filer ̈Non-accelerated
                filer ̈(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 x No  ̈




As
      of
      August 14 , 2008, 20,000,374 shares of common stock, par value $.0001 per share,
      were issued and outstanding.








PagePart
                I: Financial Information:Item
                1 -Financial Statements (Unaudited):
            3Consolidated
                Balance Sheets
            3Consolidated
                Statements of Operations and Comprehensive Income
            4Consolidated
                Statements of Cash Flows
            5Notes
                to Consolidated Financial Statements
            6Item
                2 - Management’s Discussion and Analysis of Financial Condition and
                Results of Operations
            13Item
                3 – Quantitative and Qualitative Disclosures about Market
                Risk
            22Item
                4 - Controls and Procedures
            22Part
                II. Other InformationItem
                1 - Legal Proceedings
            23Item
                1A – Risk Factors
            23Item
                2 - Unregistered Sales of Equity Securities and Use of
                Proceeds
            23Item
                3 - Defaults Upon Senior Securities
            23Item
                4 - Submission of Matters to a Vote of Security Holders
            23Item
                5 - Other Information
            23Item
                6 – Exhibits
            23Signatures
            24




2


**Item
      1- Financial Statements**




YONGYE
      BIOTECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES




CONSOLIDATED
      BALANCE SHEETS


TheYongye Biotechnology
              
              predecessorInternational, Inc.
              
              Innerand Subsidiaries
              
              MongoliaJUNE 30, 2008
              
              Yongye(Unaudited)
              
              DECEMBER 31, 2007**CURRENT
                  ASSETS**Cash
                  and cash equivalents
              
              $
              1,350,330
              
              $
              376,002Accounts
                  receivable
              
              
              20,613,347
              
              
              1,630,609Inventory
              
              
              5,196,266
              
              
              9,851,788Advance
                  payments
              
              
              65,453
              
              
              -Due
                  from affiliates
              
              
              -
              
              
              978,384Other
                  receivables
              
              
              216,795
              
              
              27,038Total
                  Current Assets
              
              
              27,442,191
              
              
              12,863,821**PROPERTY
                  AND EQUIPMENT, NET**
              
              
              **551,545**
              
              
              **2,486,487****INTANGIBLE
                  ASSETS, NET**
              
              
              **117,610**
              
              
              **3,665,584****LONG-TERM
                  INVESTMENTS**
              
              
              **-**
              
              
              **4,115,764****TOTAL
                  ASSETS**
              
              **$**
              **28,111,346**
              
              **$**
              **23,131,656****CURRENT
                  LIABILITIES**Accounts
                  payable and accrued expenses
              
              $
              1,882,643
              
              
              1,271,852Accounts
                  payable
              
              
              4,889,694
              
              
              -Short-term
                  bank loan
              
              
              -
              
              
              5,484,000Due
                  to shareholders
              
              
              -
              
              
              2,507,371Due
                  to related parties
              
              
              2,411,105
              
              
              -Tax
                  payables
              
              
              406,530
              
              
              893,892Other
                  payables
              
              
              40,424
              
              
              50,916Total
                  Current Liabilities
              
              
              9,630,396
              
              
              10,208,031**LONG-TERM
                  SHAREHOLDER LOANS**
              
              
              **-**
              
              
              **12,153****Minority
                  interest**
              
              
              1,135,005
              
              
              -**STOCKHOLDERS'
                  EQUITY**Capital
                  stock; 20,000,374 shares authorized and issued par value $.001
                  on June 30,
                  2008
              
              
              20,000
              
              
              -Capital
                  contribution
              
              
              -
              
              
              7,260,000Additional
                  paid-in capital
              
              
              9,200,092
              
              
              -Retained
                  earnings
              
              
              6,939,975
              
              
              4,024,111Statutory
                  reserve
              
              
              771,107
              
              
              480,629Accumulated
                  other comprehensive income
              
              
              414,771
              
              
              1,146,732Total
                  Stockholders' Equity
              
              
              17,345,945
              
              
              12,911,472**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              **$**
              **28,111,346**
              
              **$**
              **23,131,656**




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




3


YONGYE
      BIOTECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES




CONSOLIDATED
      STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME


Yongye Biotechnology
                
                
                
                Yongye BiotechnologyInternational, Inc.
                
                The predecessor
                
                International, Inc.
                
                The predecessorand Subsidiaries
                
                Inner Mongolia Yongye
                
                and Subsidiaries
                
                Inner Mongolia YongyeFOR THREE
                  MONTHS
                  ENDED
                
                FOR THREE
                  MONTHS
                  ENDED
                
                FOR SIX
                  MONTHS
                  ENDED
                
                FOR SIX
                  MONTHS
                  ENDEDJUNE 30,
                  2008
                
                JUNE 30,
                  2007
                
                JUNE 30,
                  2008
                
                JUNE 30,
                  2007(Unaudited)
                
                (Unaudited)
                
                (Unaudited)
                
                (Unaudited)**SALES**
                
                $
                17,598,671
                
                $
                7,441,212
                
                $
                26,986,639
                
                $
                8,127,718**COST**
                
                
                7,996,521
                
                
                3,908,020
                
                
                12,419,020
                
                
                4,346,761**GROSS
                    PROFIT**
                
                
                9,602,150
                
                
                3,533,192
                
                
                14,567,619
                
                
                3,780,957**SELLING
                    EXPENSES**
                
                
                777,012
                
                
                62,135
                
                
                3,997,477
                
                
                71,193**GENERAL
                    AND ADMINISTRATIVE EXPENSES**
                
                
                454,697
                
                
                108,350
                
                
                812,125
                
                
                154,986**INCOME
                    FROM OPERATIONS**
                
                
                8,370,441
                
                
                3,362,707
                
                
                9,758,017
                
                
                3,554,778**OTHER
                    INCOME/(EXPENSES)**Interest
                    income
                
                
                789
                
                
                1,278
                
                
                778
                
                
                1,291Other
                    expense
                
                
                (387,198
                )
                
                (51,191
                )
                
                (386,840
                )
                
                (197,641
                )**TOTAL
                    OTHER INCOME/(EXPENSES)**
                
                
                (386,409
                )
                
                (49,913
                )
                
                (386,062
                )
                
                (196,350
                )**INCOME
                    BEFORE PROVISION FOR****INCOME TAXES AND MINORITY
                    INTEREST**
                
                
                7,984,032
                
                
                3,312,794
                
                
                9,371,955
                
                
                3,358,428**PROVISION
                    FOR INCOME TAXES**
                
                
                219,983
                
                
                -
                
                
                594,765
                
                
                -**NET
                    INCOME BEFORE MINORITY INTEREST**
                
                
                7,764,049
                
                
                3,312,794
                
                
                8,777,190
                
                
                3,358,428**PROVISION
                    FOR MINORITY INTEREST**
                
                
                603,194
                
                
                -
                
                
                1,035,005
                
                
                -**NET
                    INCOME**
                
                
                7,160,855
                
                
                3,312,794
                
                
                7,742,185
                
                
                3,358,428Foreign
                    Currency Translation Adjustment
                
                
                277,101
                
                
                127,723
                
                
                414,771
                
                
                174,195**COMPREHENSIVE
                    INCOME**
                
                $
                7,437,956
                
                $
                3,440,517
                
                $
                8,156,956
                
                $
                3,532,623**Net
                    income per share:**Basic
                
                
                0.43
                
                
                0.29
                
                
                0.55
                
                
                0.29Diluted
                
                
                0.41
                
                
                0.29
                
                
                0.54
                
                
                0.29**Weighted
                    average shares used in computation:**Basic
                
                
                16,847,741
                
                
                11,444,775
                
                
                14,146,258
                
                
                11,444,775Diluted
                
                
                17,435,896
                
                
                11,444,775
                
                
                14,265,199
                
                
                11,444,775




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


4




YONGYE
      BIOTECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES




CONSOLIDATED
      STATEMENTS OF CASH FLOWS




Yongye BiotechnologyInternational, Inc.
            
            The predecessorand Subsidiaries
            
            Inner Mongolia YongyeFOR SIX
              MONTHS
              ENDED
            
            FOR SIX
              MONTHS
              ENDEDJUNE 30,
              2008
            
            JUNE
                30,
              2007(Unaudited)
            
            (Unaudited)**CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                income
            
            $
            7,742,185
            
            $
            3,358,428Adjustments
                to reconcile net income to net cashused
                in operating activitiesDepreciation
                and amortization
            
            
            93,263
            
            
            10,644Loss
                on disposal of fixed assets
            
            
            -
            
            
            146,714Provision
                for minority interest
            
            
            1,035,005
            
            
            -Changes
                in assets and liabilities:Accounts
                receivable, net
            
            
            (20,613,347
            )
            
            (6,557,611
            )Inventories
            
            
            (5,196,266
            )
            
            (319,604
            )Other
                receivables, net
            
            
            (216,795
            )
            
            (1,063,081
            )Advances
                to suppliers
            
            
            (65,453
            )
            
            352,866Prepaid
                expense
            
            
            -
            
            
            (7,271
            )Accounts
                payable and accrued expenses
            
            
            6,772,337
            
            
            288,578Tax
                payable
            
            
            406,530
            
            
            49,894Due
                to related parties
            
            
            2,397,465
            
            
            838,369Other
                payables
            
            
            40,424
            
            
            (1,759,915
            )**Total
                Adjustments**
            
            
            (15,346,837
            )
            
            (8,020,417
            )**Net
                Cash Used in Operating Activities**
            
            
            (7,604,652
            )
            
            (4,661,989
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES**Acquisition
                of property and equipment
            
            
            (639,519
            )
            
            (22,380
            )Additions
                to intangible assets
            
            
            (122,899
            )
            
            -**Net
                Cash Used in Investing Activities**
            
            
            (762,418
            )
            
            (22,380
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES**Proceeds
                from short-term bank loans
            
            
            -
            
            
            4,269,087Proceeds
                from share capital
            
            
            10,100,651
            
            
            -Proceeds
                from shareholder loans
            
            
            -
            
            
            1,413,004Repayment
                of long-term loans
            
            
            -
            
            
            (6,500
            )Payment
                for stock issuance costs
            
            
            (806,159
            )
            
            -**Net
                Cash From Financing Activities**
            
            
            9,294,492
            
            
            5,675,591**EFFECT
                OF FOREIGN CURRENCY TRANSLATION ON CASH**
            
            
            414,771
            
            
            21,787**NET
                INCREASE IN CASH AND CASH EQUIVALENTS**
            
            
            1,342,193
            
            
            1,013,009**CASH
                AND CASH EQUIVALENTS - BEGINNING**
            
            
            8,137
            
            
            89,023**CASH
                AND CASH EQUIVALENTS - ENDING**
            
            $
            1,350,330
            
            $
            1,102,032Supplemental
                cash flow information:Cash
                paid for income taxes
            
            
            417,744
            
            
            -Cash
                paid for interest expense payment
            
            
            -
            
            
            50,920





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


5




YONGYE
      BIOTECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES




NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS




JUNE
      30,
      2008




NOTE
      1
      -ORGANIZATION AND DESCRIPTION OF BUSINESS




On
      April
      17, 2008, Yongye Biotechnology International Inc. (the “Company”) entered into a
      Share Exchange Agreement (the “Exchange Agreement”) with Fullmax Pacific
      Limited, a company organized in May 23, 2007 under the laws of the British
      Virgin Islands (“ Fullmax ”), the shareholders of Fullmax (the “ Shareholders
”), who together own shares constituting 100% of the issued and outstanding
      ordinary shares of Fullmax (the “ Fullmax Shares ”), and the principal
      shareholder of the Company (“ Principal Shareholder ”). Pursuant to the terms of
      the Exchange Agreement, the Shareholders transferred to the Company all of
      the
      Fullmax Shares in exchange for the issuance of 11,444,755 (the “ Shares ”)
      shares of our Common Stock (the “ Share Exchange ”). As a result of the Share
      Exchange, Fullmax became our wholly-owned subsidiary and the Shareholders
      acquired approximately 84.7% of our issued and outstanding Common Stock. The
      transaction is accounted for as a reverse acquisition with a public shell.




The
      unaudited consolidated balance sheet as of June 30, 2008 includes Yongye
      Biotechnology International Inc., Fullmax, Asia Standard Oil Limited (“AOS”,
      subsidiary of Fullmax)and Yongye Nongfeng Biotechnology Co. (“Yongye Nongfeng”)
      and the unaudited consolidated statement of operations for the three months
      ended June 30, 2008 and for the six months ended June 30, 2008 include Yongye
      Nongfeng for the full periods and Fullmax, ASO and Yongye Biotechnology
      International Inc. from April 17, 2008. All the historical financial statements
      prior to January 1, 2008 are solely those of the predecessor, Inner Mongolia
      Yongye Biotechnology Company, Ltd.




Concurrent
      with the Share Exchange, we entered into a securities purchase agreement (the
      “Purchase Agreement”) with certain investors (the “ Investors ”) for the sale of
      an aggregate of 6,495,619 shares of our Common Stock (the “ Investor Shares ”),
      and warrants to purchase 1,623,905 shares of Common Stock (the “Warrants” and,
      together with the Shares, the “Securities”) for aggregate gross proceeds equal
      to $10,000,651 (the “ Offering ”). Expenses of the Offering were $1,162,022
      which includes fees for the issuance of stock at $806,159 which is a reduction
      on Additional Paid In Capital under the Shareholder Equity section on the
      Consolidated Balance Sheet and $355,863 for legal fees for the reverse takeover
      (the “RTO”) transaction which is an expense on the Consolidated Income
      Statement.





In
      connection with the Offering, we also entered into a registration rights
      agreement (the “RRA”) with the Investors, in which we agreed to file a
      registration statement (the “Registration Statement”) with the Securities and
      Exchange Commission (the “SEC”) to register for resale the Investor Shares and
      the shares underlying the warrants (which are further described in Item 3.02),
      within 45 calendar days of the Closing Date of the Offering, and use our best
      efforts to have the registration statement declared effective within 150
      calendar days of the Closing Date of the Offering. We will pay liquidated
      damages of 1% of the dollar amount of the Shares sold in the 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.





Also,
      along with the Closing, the company signed a Make Good Agreement for 2,000,000
      shares of the Company’s Common Stock with the understanding that the Investors’
will receive such shares on a pro rata basis for no consideration in the event
      that the After Tax Net Income as reported in the Annual Report of the Company
      for the fiscal year ending December 31, 2008, as filed with the Commission
      on
      Form 10-K (or such other form appropriate for such purpose as promulgated by
      the
      Commission) (the “2008 Annual Report”), is less than $10,263,919.




6




Upon
      closing, we also entered into an escrow agreement with ROTH Capital Partners,
      LLC, a representative of the Investors (“ Roth ”), Tri-State Title & Escrow
      LLC (the “ Escrow Agent ”) and one of the Shareholders (the “ Escrow Agreement
”), pursuant to which 2,000,000 of the Shares (the “ Escrow Shares ”) were
      delivered to the Escrow Agent. The Escrow Shares are being held as security
      for
      the achievement of $10,263,919 in net income for the year ended December 31,
      2008 (the “ Net Income Threshold ”). If we achieve the Net Income Threshold, the
      Escrow Shares will be released back to the Principal Shareholder. If the Net
      Income Threshold is not achieved, the Escrow Shares will be distributed pro-rata
      to the Investors.





The
      Company’s Predecessor, Inner Mongolia Yongye Biotechnology Co., Ltd (the
“Predecessor”) was formed on September 16, 2003, also under the corporate laws
      of PRC. Its primary business is to research, manufacture, and sell biological
      products for use in plants and animal growth. The Company is located in the
      City
      of Hohhot, Inner Mongolia Autonomous Region., People’s Republic of China
      (‘PRC”).




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 and include the financial statements of the Company and its
      majority-owned subsidiaries. All significant intercompany transactions and
      balances are eliminated on consolidation.





The
      accompanying unaudited consolidated financial statements as of June 30, 2008
      and
      for the three and six months ended June 30, 2008 and 2007 have been prepared
      in
      accordance with generally accepted accounting principles for interim financial
      information and with the instructions to Form 10-Q and Regulation S-X applicable
      to small business issuers. In the opinion of management, these unaudited
      consolidated interim financial statements include all adjustments considered
      necessary to make the financial statements not misleading. The results of
      operations for the three and six months ended June 30, 2008 are not necessarily
      indicative of the results for the full fiscal year ending December 31, 2008.
      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, 2007 as reported in Form
      S-1.





USE
      OF
      ESTIMATES




The
      preparation of financial statements in conformity with GAAP requires management
      to make estimates and assumptions that affect the reported amounts of assets,
      liabilities, revenues, expenses, and related disclosures at the date of the
      financial statements and during the reporting period. Actual results could
      differ from those estimates.




CASH
      AND
      CASH EQUIVALENTS




In
      accordance with Statement of Financial Accounting Standards No. 95, “Statement
      of Cash Flows,” the Company and the Predecessor considers all highly liquid
      instruments with original maturities of three months or less to be cash and
      cash
      equivalents.




ACCOUNTS
      RECEIVABLE AND BAD DEBT RESERVE




The
      Company performs certain credit evaluation procedures and does not require
      collateral for financial instruments subject to credit risk. The Company
      believes that credit risk is limited because the Company routinely assesses
      the
      financial strength of its customers and, based upon factors surrounding the
      credit risk of its customers, establishes an allowance for uncollectible
      accounts receivable. As a consequence, the Company believes that its accounts
      receivable credit risk exposure beyond such allowances is limited. The Company
      recognizes an allowance for doubtful accounts to ensure accounts receivable
      are
      not overstated due to uncollectibility and are maintained for all customers
      based on a variety of factors, including the length of time the receivables
      are
      past due, significant one-time events and historical experience. Based on the
      age of the receivables, the Company reserves 10% of accounts receivable balances
      that have been outstanding for more than 6 months but less than one year, 20%
      of
      accounts receivable balances that have been outstanding between one year and
      two
      years, 50% of receivable balances that have been outstanding between two year
      and three years, and 100% of receivable balances that have been outstanding
      for
      more than three years. An additional reserve for individual accounts is recorded
      when the Company becomes aware of a customer's inability to meet its financial
      obligation, such as in the case of bankruptcy filings or deterioration in the
      customer's operating results or financial position. If circumstances related
      to
      customers change, estimates of the recoverability of receivables would be
      further adjusted. No allowance for doubtful accounts was provided as of June
      30,
      2008.




7




INVENTORY




Inventory
      is stated at the lower of weighted average cost or market, which takes into
      account historical prices on a continuing basis, or market.




PROPERTY
      AND EQUIPMENT




Property
      and equipment other than leasehold improvements are stated at cost and
      depreciated using the straight-line method, over the estimated useful lives
      of
      the assets. Leasehold improvements are stated at cost and depreciated using
      the
      straight-line method over the estimated useful life or lease period, whichever
      is shorter. Estimated useful lives are as follows:




**Estimated Useful Life**





Yongye
                Biotechnology International, Inc.Office
                equipment and furniture
            
            
            5
                yearsLeasehold
                improvements
            
            
            15
                monthsThe
                Predecessor- Inner Mongolia YongyeBuildings
            
            
            50
                yearsMachinery
                and equipment
            
            
            10-20
                yearsTransportation
                equipment
            
            
            10
                years





REVENUE
      RECOGNITION




Revenue
      from product sales is recognized when title has been transferred, the risks
      and
      rewards of ownership have been transferred to the customer, the fee is fixed
      and
      determinable, and the collection of the related receivable is probable which
      is
      generally at the time of shipment.




ADVERTISING
      COSTS




Advertising
      costs are expensed as incurred. Advertising costs for three months ended June
      30, 2008 and 2007 were $480,457 and $4,738, respectively. Advertising costs
      for
      the six months ended June 30, 2008 and 2007 were $2,057,032 and $8,594,
      respectively.




IMPAIRMENT
      OF LONG-LIVED ASSETS




The
      Company follows Statement of Financial Accounting Standards No. 144, “Accounting
      for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), which
      addresses financial accounting and reporting for the impairment or disposal
      of
      long-lived assets. Per SFAS 144, the Company is required to periodically
      evaluate the carrying value of long-lived assets and to record an impairment
      loss when indicators of impairment are present and the undiscounted cash flows
      estimated to be generated by those assets are less than the asset’s carrying
      amounts.




In
      that
      event, a loss is recognized based on the amount by which the carrying amount
      exceeds the fair market value of the long-lived assets. Loss on long-lived
      assets to be disposed of is determined in a similar manner, except that fair
      market values are reduced for the cost of disposal. Based on its review, the
      Company and the Predecessor concluded that as of June 30, 2008 and December
      31,
      2007 there were no significant impairments of its long-lived assets.




INCOME
      TAXES




Deferred
      income taxes are computed using the asset and liability method, such that
      deferred tax assets and liabilities are recognized for the expected future
      tax
      consequences of temporary differences between financial reporting amounts and
      the tax basis of existing assets and liabilities based on currently enacted
      tax
      laws and tax rates in effect in the People’s Republic of China for the periods
      in which the differences are expected to reverse. Income tax expense is the
      tax
      payable for the period plus the change during the period in deferred income
      taxes.




8




A
      valuation allowance is provided when it is more likely than not that some
      portion or all of the deferred tax assets will not be realized. No differences
      were noted between the book and tax bases of the Company and the Predecessor’s
      assets and liabilities, respectively, therefore, there are no deferred tax
      assets or liabilities for the three months period ended June 30, 2008 and 2007
      and the six months period ended June 30, 2008 and 2007. The Company’s
      Cooperative Joint Venture subsidiary Yongye Nongfeng Biotechnology Co., (“Yongye
      Nongfeng”) is subject to PRC Enterprise Income Tax at a rate of 25% of net
      income from its foundation on January 4, 2008, and 1.25% of gross revenue since
      April 2008. Since the Predecessor is located in the economic development area
      in
      Inner Mongolia Autonomous Region, the Predecessor is exempt from income tax
      according to the tax law in China.




FOREIGN
      CURRENCY TRANSLATION AND TRANSACTIONS




The
      financial position and results of operations of the Company’s Chinese
      subsidiaries are determined using local currency (Chinese Yuan) as the
      functional currency, while the reporting currency is 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 shareholders’ equity. Gains and losses resulting from foreign currency
      transactions denominated in other than the functional current are included
      in
      operations as incurred. Such gains and losses were immaterial for the periods
      ended June 30, 2008 and 2007.




In
      the
      opinion of management, these unaudited interim financial statements include
      all
      adjustments and disclosures considered necessary to a fair statement of the
      results for the interim periods presented. All adjustments are of a normal
      recurring nature.





FAIR
      VALUE OF FINANCIAL INSTRUMENTS




The
      carrying amounts of cash and cash equivalents, term deposits, trade receivables,
      and accounts payable approximate their fair value due to the short-term nature
      of these instruments.




NOTE
      3-INVENTORY




Inventory
      at June 30, 2008 and December 31, 2007 consisted of the following:




Yongye Biotechnology
            
            The PredecessorInternational, Inc. and Subsidiaries
            
            Inner Mongolia YongyeJUNE 30, 2008
            
            DECEMBER
                31, 2007Raw
                materials
            
            
            -
            
            
            384,361Packing
                supplies
            
            
            -
            
            
            195,127Work-in
                process
            
            
            -
            
            
            4,969,350Finished
                goods
            
            
            5,195,760
            
            
            4,302,950Consumables
            
            
            506
            
            
            -Total
            
            
            5,196,266
            
            
            9,851,788





NOTE
      4-DUE FROM AFFILIATES




The
      balance due from the Predecessor’s affiliated entity, Huimin Biotechnology Co.,
      Ltd., at December 31, 2007 was $978,384. The balance had no stated terms for
      repayment and was not interest-bearing.




9




NOTE
      5-PROPERTY AND EQUIPMENT




Property
      and equipment at June 30, 2008 and December 31, 2007 consisted of the
      following:





Yongye Biotechnology
            
            The PredecessorInternational, Inc. and Subsidiaries
            
            Inner Mongolia YongyeJUNE 30, 2008
            
            DECEMBER
                31, 2007Buildings
            
            
            -
            
            
            1,560,251Manufacturing
                equipment
            
            
            -
            
            
            788,641Office
                equipment and furniture
            
            
            35,005
            
            
            33,724Construction-in-process
            
            
            386,231
            
            
            1,797Vehicles
            
            
            -
            
            
            419,529Leasehold
                improvement
            
            
            218,283
            
            
            -639,519
            
            
            2,803,942Less:
                Accumulated depreciation
            
            
            87,974
            
            
            317,455Total
            
            
            551,545
            
            
            2,486,487




Depreciation
      expense for the three months period ended June 30, 2008 and 2007 was
      $45,190  and $3,927, respectively. Depreciation expense for the six months period ended
      June 30, 2008 and 2007 was $87,974 and $5,333, respectively.




NOTE
      6-
      INTANGIBLE ASSETS




Net
      intangible assets at June 30, 2008 and December 31, 2007 were as follows:





Yongye Biotechnology
            
            The PredecessorInternational, Inc. and Subsidiaries
            
            Inner Mongolia YongyeJUNE 30, 2008
            
            DECEMBER
                31, 2007Rights
                to use land
            
            
            -
            
            
            4,028,099Patent
            
            
            105,787
            
            
            -Software
            
            
            17,112122,899
            
            
            4,028,099Less:
                accumulated amortization
            
            
            5,289
            
            
            362,515Total
            
            
            117,610
            
            
            3,665,584




Product
      patent was acquired by the Company in March 2008 with an estimated useful life
      of 10 years. It is amortized using the straight-line method over its useful
      life
      commencing on April 1, 2008. Computer software was acquired by the Company
      in
      June 2008 with an estimated useful life of 10 years. It is amortized using
      the
      straight-line method over its useful life commencing on July 1, 2008.
      Amortization expense for the three months period ended June 30, 2008 and 2007
      amounted to $5,289 and $2,486, respectively. Amortization expense for the six
      months period ended June 30, 2008 and 2007 amounted to $5,289 and $5,311,
      respectively. Accumulated amortization at June 30, 2008 and December 31, 2007
      was $5,289 and $362,515, respectively.




NOTE
      7 -
      LONG-TERM INVESTMENTS




Long-term
      investments of the Predecessor as of December 31, 2007 consist of medicinal
      plants and trees which the Predecessor purchased in conjunction with the right
      to use land. These medicinal plants and trees are to be used for human medical
      treatments and the Predecessor intends to sell them in future years as they
      mature.




10




NOTE
      8 -
      RELATED PARTY TRANSACTIONS




The
      Predecessor company is a 1.15% shareholder of the Company’s main operating
      subsidiary, Yongye Nongfeng, and is Yongye Nongfeng’s only vendor that provided
      $8,537,112  (100%) of the Company’s purchased finished goods for the three months period
      ended June 30, 2008 and $17,468,749  for the six months period ended June 30. As of June 30, 2008 accounts payable
      to
      shareholder represents the credit the Company used as of June 30, 2008 in
      purchasing inventory from the Predecessor. According to the contract, the
      Predecessor sells to us at fixed prices of RMB 350 per case for plant products
      and RMB 120 per case for animal products.





As
      of
      June 30, 2008, the Company has borrowed $762,524 from Inner Mongolia Yongye
      Nongfeng’s 1.15% shareholder Inner Mongolia Yongye (the Predecessor), $1,638,581 in
      loan
      from Ms. Yin, the wife of CEO Mr. Zishen Wu of Inner Mongolia Yongye Nongfeng,
      and $10,000 from a director of the Company. These funds are interest free with
      no specific terms of repayment. As of December 31, 2007, the Predecessor has
      $2,507,371 in loans from stockholders. These loans are short term in nature,
      unsecured and non-interest bearing. Also, at December 31, 2007 the Predecessor
      has $12,153 of long-term, unsecured and non-interest bearing loans from
      shareholders.




NOTE
      9-NET INCOME PER SHARE




Basic
      net
      income per share is computed by dividing net income attributable to common
      shareholders by the weighted average number of common shares outstanding during
      the period, but excluding the 2,000,000 “Make Good Shares” according to the
“Make Good Escrow Agreement” (see Note 1). 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.




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





Yongye
            
            
            
            Yongye
              BiotechnologyBiotechnology
            
            
            
            International, Inc.
            
            The predecessorInternational, Inc.
            
            The predecessor
            
            and Subsidiaries
            
            Inner Mongoliaand Subsidiaries
            
            Inner Mongolia Yongye
            
            FOR SIX
            
            YongyeFOR THREE
              MONTHS ENDED
            
            FOR THREE
              MONTHS ENDED
            
            MONTHS
              ENDED
            
            FOR SIX
              MONTHS ENDEDJUNE 30, 2008
            
            JUNE 30, 2007
            
            JUNE 30, 2008
            
            JUNE 30, 2007Numerator
                used in basic net income per share:Net
                income
            
            
            7,160,855
            
            
            3,312,794
            
            
            7,742,185
            
            
            3,358,428Shares
                (denominator):Weighted
                average ordinary sharesOutstanding
            
            
            16,847,741
            
            
            11,444,775
            
            
            14,146,258
            
            
            11,444,775Plus: weighted average incremental shares from
                assumed exercise of warrants
            
            
            588,155
            
            
            -
            
            
            118,941
            
            
            -Weighted
                average ordinary shares outstanding used in computing diluted 
                 net income per ordinary share
            
            
            17,435,896
            
            
            11,444,775
            
            
            14,265,199
            
            
            11,444,775Net
                income per ordinary share - basic
            
            
            0.43
            
            
            0.29
            
            
            0.55
            
            
            0.29Net
                income per ordinary share-diluted
            
            
            0.41
            
            
            0.29
            
            
            0.54
            
            
            0.29




11




NOTE
      10
      -CONCENTRATIONS AND CREDIT RISKS




Five
      major customers accounted for 80% and one major customer accounted for 26%
      of
      the Company’s net revenue for the three months period 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 period ended June 30, 2008. Five
      major customers accounted for 98% and one major customer accounted for 51%
      of
      the Predecessor’s net revenue for the three months period ended June 30, 2007.
      Five major customers accounted for 98% and one major customer accounted for
      46%
      of the Predecessor’s net revenue for the six months period ended June 30, 2007.
      The Company and the Predecessor’s total sales to five major customers were
      $14,062,646 and $7,276,561, for the three months period ended June 30, 2008
      and
      2007, respectively. The Company and the Predecessor’s total sales to five major
      customers were $ 24,068,529 and
      $7,961,977, for the six months period ended June 30, 2008 and 2007,
      respectively.


Yongye
        International Inc.
 
 Three
                  Months Ended
                JUNE
                  30, 2008
              
              Six
                  Months Ended
                JUNE
                  30, 2008**Largest**
                **Customers**
              
              
              **Amount
                  of Sales**
              
              **% Total**
                **Sales**
              
              **Largest**
                **Customers**
              
              **Amount
                  of Sales**
              
              **% Total**
                **Sales**Wuwei
                  Liangzhou
              
              $
              4,643,127
              
              26
              %
              Hebei
              
              7,045,357
              
              26
              %Xinjiang
                  Tianfeng
              
              $
              3,980,159
              
              23
              %
              Xingjiang
                  Bazhou
              
              5,334,140
              
              20
              %Xinjiang
                  Bazhou
              
              $
              2,618,526
              
              15
              %
              Wuwei
                  Liangzhou
              
              4,960,050
              
              18
              %Hebei
              
              $
              1,780,598
              
              10
              %
              Xinjiang
                  Tianfeng
              
              3,922,162
              
              15
              %Bameng
              
              $
              1,040,236
              
              6
              %
              Bameng
              
              2,806,820
              
              10
              %**Total**
              
              **$**
              **14,062,646**
              
              **80**
              **%**
              Total
              
              24,068,529
              
              89
              %


Inner
        Mongolia Yongye Predecessor
 Inner
        Mongolia
 Yongye


Three Months Ended
                  JUNE
                    30, 2007
                
                Six Months Ended
                  JUNE
                    30, 2007Largest
                  Customers
                
                
                Amount of Sales
                
                % Total
                  Sales
                
                Largest
                  Customers
                
                
                Amount of Sales
                
                % Total
                  SalesXinjiang
                    Bazhou
                
                $
                3,797,598
                
                51
                %
                Xinjiang
                    Bazhou
                
                $
                3,777,495
                
                46
                %Hebei
                
                $
                1,329,159
                
                18
                %
                Hebei
                
                $
                1,772,318
                
                22
                %Dalian
                
                $
                1,082,055
                
                15
                %
                Dalian
                
                $
                1,192,757
                
                15
                %Mengrui
                
                $
                689,290
                
                9
                %
                Mengrui
                
                $
                810,609
                
                10
                %Jiangsu
                
                $
                378,459
                
                5
                %
                Jiangsu
                
                $
                408,798
                
                5
                %**Totals**
                
                **$**
                **7,276,561**
                
                **98**
                **%**
                **Totals**
                
                **$**
                **7,961,977**
                
                **98**
                **%**




The
      Predecessor is the Company’s only vender who provided 100% of the Company
      purchased finished goods for the three months period and six months period
      ended
      June 30, 2008. The Predecessor had two major vendors who provided 79% and 93%
      of
      the Predecessor raw materials for the three months period ended June 30, 2008
      and 2007. The Predecessor had two major vendors who provided 76% and 93% of
      the
      Predecessor raw materials for the six months period ended June 30, 2008 and
      2007. Total purchases from these vendors were $5,822,666 and $2,258,627 for
      the
      three months period ended June 30, 2008 and 2007, respectively. Total purchases
      from these vendors were $6,581,012 and $2,290,895 for the six months period
      ended June 30, 2008 and 2007, respectively.




12




The
      Company and the Predecessor’s operations are carried out in the PRC.
      Accordingly, the Company and the Predecessor’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.




NOTE
      11-Commitments





On
      (June
      2, 2008), Yongye Nongfeng signed two construction contracts with two
      Construction Companies (Hainan No. 4 Construction Engineer Company and Hohhot
      Saihan District Art & Landscape) to begin construction of a new 8,000 Tons
      Per Annum (TPA) plant on its current contracted location. The value of these
      contracts is approximately RMB 25,000,000. This addition, when added to the
      current 2,000TPA capacity of Inner Mongolia Yongye Biotechnology Company, Ltd.,
      will increase total production capacity to 10,000TPA and is critical to our
      ability to keep up with future anticipated demand. In July 2008, the
      construction contractor gave notice that it forecasts the in-service date of
      the
      facility to be the end of September 2008, which will be sufficient to avoid
      any
      weather-related delays. We do not anticipate any other delays.




**Item
      2- Management Discussion & Analysis**








**MANAGEMENT
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**





**Forward-Looking
      Statements:**





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. The following discussion contains forward-looking statements.
      Yongye Biotechnology International, Inc. is referred to herein as “we” or “our.”
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.





**Our
      Business**





Yongye
      Biotechnology International, Inc. is a holding company whose direct subsidiaries
      are engaged in the research, development, and sales of fulvic acid based liquid
      and powder nutrient compounds used in the agriculture industry. Our CJV, Inner
      Mongolia Yongye Nongfeng Biotechnology Company, Ltd., has its headquarters
      in Beijing, China and we sell our products domestically into 10 different
      provinces. Currently, we sell two lines of product based on our fulvic acid
      base: plant nutrition liquid compound and animal nutrition food additive. The
      product lines are called “Shengmingsu” for plants and “Shengmingsu” for animals.




13




Our
      products start with a highly concentrated base of Fulvic Acid which is
      manufactured according to the exact specifications required by our patent
      pending process design. Each product has additional natural elements added
      which
      then customizes the fulvic acid base for use on plants or in animal feed. Our
      plant product contains naturally occurring macro and micro nutrients such as
      nitrogen, phosphorus, potassium, boron and zinc. Our animal product adds natural
      herbs which provide antibiotic type properties. Based
      on
      industry research and government testing, we believe our proprietary technology
      for fulvic acid extraction creates some of the purest and most bioactive fulvic
      acid and thus some of the most effective plant and animal nutrients on the
      market in China.





Our
      competitive advantage begins with the core intellectual property owned by our
      CJV which we are then able to commercialize via cost effective, flat fee,
      contractual agreement with our selected manufacturers. Our chief scientist
      has
      been working specifically on our products for the last five (5) years and has
      over forty (40) years of experience in the industry. This has led to two (2)
      Invention Patents pending held by our CJV which are used to design the
      manufacturing process. These patents cover the formulation of Shengmingsu for
      plants and animals nutrient products and two (2) technology patents which covers
      its extraction of the Fulvic Acid and the stabilization of the product for
      addition of the proprietary nutrient formulas. The finished goods we sell are
      approved and certified by the PRC Ministry of Agriculture.





We
      sell
      our products through our unique sales channels which more resemble the sales
      characteristics of the Pharmaceutical or IT industry here in China and is
      comprised of distributors who purchase our product directly and then sell it
      through various downstream sales points, including our Yongye Branded Stores,
      and ultimately to retail customers. These “Branded Stores” sell agricultural
      products and in conjunction with the private owner, and our local distributor,
      we brand them with our name outside, our banners and headline products inside
      and also provide a computer and monitor to display our advertising and
      educational programs. We support our entire distribution network with sales
      and
      support staff who are trained to work with our distributors, branded stores,
      and
      end users to ensure they receive proper after-sales technical support. Each
      sales and support staff manager oversees approximately 3 - 10 stores each.





**Overview
      of 2** **nd** **Quarter**




Agriculture
      Outlook




China
      is
      already one of the world’s leading countries for agricultural production.
      China’s Minister of Agriculture, Sun Zhengcai, told a UN FAO hosted world summit
      that China is a major contributor to world food security by feeding nearly
      a
      quarter of the global population and being involved in distributing aid to
      other
      countries. He also said, "China has managed to feed 1.3 billion people, mostly
      relying on domestic production, which in itself is a major contribution to
      the
      world food security," He also reported that since 2004, food production in
      China
      has increased for four consecutive years and the total grain output exceeded
      500
      million tons last year and he expects China to have a big summer harvest this
      year, with grain output set to rise for the fifth consecutive year. In the
      first
      five months of 2008, Agenese France Presse reported that China's exports
      increased by 12% to US$16.18 billion and that China is self-sufficient in most
      staple crops, but relies on imports of some agricultural products, such as
      soybeans, to meet rising domestic demand.




Supply
      of Finished Goods


Currently,
      we purchase our finished goods from our main supplier, Inner Mongolia Yongye
      Biotechnology Company, Ltd and then sell it 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
      and this will extend over the next five years. Each quarter we will go through
      a
      review process with our supplier to adjust the fixed rate for the next quarter.
      Thus far, in 2008, we have not received any rate increases.





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 because of sufficient stockpiles and a big harvest
      ahead.”




14







Seasonality





The
      second quarter of the year is typically our strongest and this year was no
      exception with approximately 87 %
      growth
      over the first quarter in 2008. Which such strong seasonal growth in our plant
      line, our Shengmingsu for animal product sales, which doesn’t experience the
      same seasonal tapering which our plant product does, mirrored Q1 sales and
      we
      expect this to continue in Q3. As for our plant product, we will see some
      tapering off of sales in Q3 due to the beginning of the ending of the harvest
      season.





**RESULTS
      OF OPERATIONS**





**THREE
      MONTHS ENDED JUNE 30, 2008 AND JUNE 30, 2007**





*Three
      months ended June 30, 2008 (Yongye Nongfeng) compared with three months ended
      June 30, 2007 (Predecessor)*





The
      following table shows, for the periods indicated, information derived from
      our
      consolidated statements of income.





For
                the three months ended
            
            IncreaseJUNE
                30, 2008
            
            JUNE
                30, 2007
            
            /(decrease)Net
                Sales
            
            $
            17,598,671
            
            $
            7,441,212
            
            
            137
            %Gross
                Profit
            
            $
            9,602,150
            
            $
            3,533,192
            
            
            172
            %Operating
                Income
            
            $
            8,370,441
            
            $
            3,362,707
            
            
            149
            %Net
                Income
            
            $
            7,160,855
            
            $
            3,312,794
            
            
            116
            %*Gross
                Margins*
            
            
            54.56
            %
            
            47.48
            %
            
            7.08
            %*Net
                Margins*
            
            
            44.12
            %
            
            44.52
            %
            
            -0.4
            %EPS-
                Basic
            
            $
            0.43
            
            $
            0.29
            
            
            48
            %EPS-
                Diluted
            
            $
            0.41
            
            $
            0.29
            
            
            41
            %





Financial
      position at quarter ended June 30, 2008 (unaudited) and the year ended December
      31, **** 2007:


PredecessorInner MongoliaYongye Nongfeng
              
              Yongye**JUNE
                    30, 2008**
              
              **DECEMBER
                  31, 2007**
              
              Increase**Unaudited**
              
              **Unaudited**
              
              /(decrease)Cash
              
              $
              1,350,330
              
              $
              376,002
              
              
              259
              %Accounts
                  Receivable, net
              
              $
              20,613,347
              
              $
              1,630,609
              
              
              1164
              %PP&E,
                  net
              
              $
              551,545
              
              $
              2,486,487
              
              
              (78)
              %Total
                  assets
              
              $
              28,111,346
              
              $
              23,131,656
              
              
              22
              %Short-term
                  Bank Loan
              
              
              -
              
              $
              5,484,000
              
              
              (100)
              %Long-term
                  Shareholder Loan
              
              $
              -
              
              $
              12,153
              
              
              (100)
              %Total
                  stockholders’ equity
              
              $
              17,345,945
              
              $
              12,911,472
              
              
              34
              %




Our
      financial condition continues to improve as shown by an increase of 34% in
      shareholders’ equity during the second quarter of 2008 increasing by $4,434,473
      to $17,345,945 at the end of June 30, 2008 from $12,911,472 at the end of
      December 31, 2007. Cash increased by 259% during the quarter and our accounts
      receivable increased by 1164% as a result of increased sales volume and longer
      than anticipated collections on some key accounts. Property, plant and equipment
      decreased by 78% during the quarter ended June 30, 2008 compared to the prior
      year end December 31, 2007 because our new business model, after the Reverse
      Takeover, is as a distribution and sales company and we carved out the 2,000TPA
      manufacturing facility from our financial structure and it remains with the
      predecessor company.


15





Sales
      Revenue and Gross Profit





*Three
      months ended June 30, 2008 (Yongye Nongfeng) compared with three months ended
      June 30, 2007 (Predecessor)*


PredecessorInner MongoliaYongye Nongfeng
              
              Yongye**JUNE
                    30, 2008**
              
              **JUNE
                    30, 2007**
              
              **Increase/****Unaudited**
              
              **Unaudited**
              
              **(Decrease)**Sales
              
              $
              17,598,671
              
              $
              7,441,212
              
              
              137
              %Gross
                  Profit
              
              $
              9,602,150
              
              $
              3,533,192
              
              
              172
              %





Sales
      revenue for the quarter ended June 30, 2008 was $17,598,671, which was an
      increase of $10,157,459, or 137%, compared with the corresponding period in
      2007. This was also a decrease of 21% from estimated Q2 revenues of $22,205,888
      which represents our quarterly seasonal sales estimates of 45% of total 2008
      revenue generated in Q2.





Gross
      profit for the Quarter ending June 30, 2008 was $9,602,150, and represented
      55%
      of sales. This was an increase of $6,068,958, or 172%, when compared with the
      corresponding period in 2007 which ended at $3,533,192. When compared as a
      percentage of revenues, Gross Profit Margin increased by 8% from 47% to 55%
      from
      2007 to 2008. The overall increase in margin was largely due to our ability
      to
      control Cost of Goods Sold through our contract manufacturing agreement as
      explained above..





Overall,
      compared with our results in 2007, we have increased our sales exponentially
      in
      Q2 of 2008 and we have already exceeded our expectations in building our network
      for all of 2008 by increasing the number of branded stores from 350 in Q1 of
      2008 to 775 in Q2 of 2008, which is an overall increase of 19% compared
      to our initial estimation of 650 stores. When looking at the increase from
      the
      end of 2007, we have increased stores by 575, which is a 288% increase.
      Additionally, average same store sales are approximately the same which means
      our branding process has been successful across the network and is stable.
      This
      is due in large part to our efforts to standardize the branding process and
      provide service and support to all store owners and distributors.


End
                  of 2007
              
              End
                  of Q1 2008
              
              End
                  of Q2 2008Number
                  of Branded Stores
              
              
              200
              
              
              350
              
              
              775





Sales
      by
      Product Line:




Yongye
                    International Inc.**JUNE
                      30, 2008****Units
                    Shipped**
                
                **%
                    of Total Sales******Plant
                
                
                159,216
                
                
                99.96
                %Animals
                
                
                58
                
                
                0.04
                %Total
                
                
                159,274
                
                
                100.00
                %


16





Sales
      by
      product and province are listed below:





Province
                
                Animal
                    Product
                
                Plant
                    ProductUnits
                    Shipped
                
                %
                    Shipped
                
                Units
                    Shipped
                
                %
                    ShippedGansu
                
                
                0
                
                
                0
                %
                
                40,010
                
                
                25
                %Hebei
                
                
                0
                
                
                0
                %
                
                17,000
                
                
                11
                %Inner
                    Mongolia
                
                
                0
                
                
                0
                %
                
                20,500
                
                
                13
                %Others
                
                
                58
                
                
                100
                %
                
                10,506
                
                
                7
                %Shandong
                
                
                0
                
                
                0
                %
                
                8,200
                
                
                5
                %Xinjiang
                
                
                0
                
                
                0
                %
                
                63,000
                
                
                39
                %**Totals**
                
                
                **58**
                
                
                100
                %
                
                **159,216**
                
                
                100
                %




We
      are
      continuing to expand our markets beyond just our plant product sales as
      evidenced by the growth of our animal product.





Customers





*Three
      months ended June 30, 2008 (Yongye Nongfeng) compared with three months ended
      June 30, 2007 (Predecessor)*





Our
      customer base is made up of the distributors working for us in each province;
      these are not end users of the products. Five major customers accounted for
      80%
      and one major customer accounted for 26% of the Company’s net revenue for the
      three months period ended June 30, 2008. Five major customers accounted for
      98%
      and one major customer accounted for 51% of the Predecessor’s net revenue for
      the three months period ended June 30, 2007. The Company and the Predecessor’s
      total sales to five major customers were $14,062,646 **** and
      $7,276,561, for the three months period ended June 30, 2008 and 2007,
      respectively.





Cost
      of Sales





*Three
      months ended June 30, 2008 (Yongye Nongfeng) compared with three months ended
      June 30, 2007 (Predecessor)*





Inner
                Mongolia
            
            PredecessorYongye
                Nongfeng
            
            Inner
                MongoliaYongye
                Biotechnology**JUNE
                  30, 2008**
            
            **JUNE
                  30, 2007**
            
            **Change**Cost
                of Sales
            
            $
            7,996,521
            
            $
            3,908,020
            
            
            105
            %Percentage
                of Sales
            
            
            45
            %
            
            53
            %
            
            -8
            %





Cost
      of
      Sales for the quarter ended June 30, 2008 was $ 7,996,521, which
      is
      45% of revenues. This is an increase of $4,088,501 over the previous period
      which represents an 105% increase overall. As a percent of revenue, this
      represented an overall decrease of 8% when compared with the corresponding
      period in 2007, which was 53%. The overall dollar increase in cost of sales
      was
      primarily due to the increase in our production plan to meet our overall sales
      goals. The decrease in percentage of cost of sales was due to more stable
      pricing from our contract manufacturing agreement.





Suppliers





Inner
      Mongolia Yongye is Yongye Nongfeng’s main contract manufacturer and provided
      100% of Yongye Nongfeng’s purchased finished goods for the three months period
      ended June 30, 2008. We believe this manufacturer will continue to deliver
      the
      finished goods we require at the quality levels we expect. Through our contract,
      we are able to control our prices and Intellectual Property and expect to do
      so
      for the foreseeable future.


17





Selling,
      General and Administrative Expenses





*Three
      months ended June 30, 2008 (Yongye Nongfeng) compared with three months ended
      June 30, 2007 (Predecessor)*





Inner
                Mongolia
              
              PredecessorYongye
                Nongfeng
              
              Inner
                  MongoliaYongye
                BiotechnologyJUNE
                  30, 2008
              
              JUNE
                  30, 2007
              
              **Change**Selling,
                  General and Administrative Expenses
              
              $
              1,231,709
              
              $
              170,485
              
              
              622
              %Percentage
                  of Sales
              
              
              7
              %
              
              2
              %
              
              5
              %





Selling,
      general and administrative expenses for the quarter ended June 30, 2008 were
      $ 1,231,709 ,
      an
      overall increase of $ 1,061,224 ,
      or
      622%, when compared with the corresponding period in 2007. This was 7% of
      revenue which was a 5% increase over the same period last year where these
      expenses were 2% of revenue. The increase in selling, general and administrative
      expenses was primarily due to increased, correlated, sales activities, such
      as
      advertising and increased staffing expenses related to the build up of the
      executive and sales teams. Specifically, as referenced in the footnotes,
      advertising expenses increased $475,719 to $480,457 in June 30, 2008 compared
      to
      the same period in 2007 which was $4,738. This is due to our increased media
      coverage in 6 provinces and print coverage in 10 provinces whereas in the same
      period in 2007 advertising was primarily word of mouth.





Income
      Tax





*Three
      months ended June 30, 2008 (Yongye Nongfeng) compared with three months ended
      June 30, 2007 (Predecessor)*





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, 2008 and 2007.
      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 Cooperative Joint Venture subsidiary, Yongye Nongfeng Biotechnology
      Co., (“Yongye Nongfeng”), is subject to PRC Enterprise Income Tax at a rate of
      25% of net income from its foundation on January 4, 2008 to March 31, 2008,
      and
      1.25% of gross revenue since April 1, 2008. The Predecessor is subject to PRC
      Enterprise Income Tax at a rate of 33% of net income before year 2008 and 25%
      of
      the net income since January 1, 2008. Since the Predecessor is located in the
      economic development area in Inner Mongolia Autonomous Region, the Predecessor
      is exempt from income tax according to the tax law in China.





For
      the
      three months ended June 30, 2008, the Company’s tax expense was $219,983 and
      accrued taxes were $406,530 compared to $0 and $893,892 for the same period
      in
      2007.





Net
      income





*Three
      months ended June 30, 2008 (Yongye Nongfeng) compared with three months ended
      June 30, 2007 (Predecessor)*


18


Yongye Nongfeng Biotechnology
              
              Predecessor
                Inner Mongolia
                Yongye**JUNE
                    30, 2008**
              
              **JUNE
                    30, 2007**
              
              **Increase/****Unaudited**
              
              
              
              **(Decrease)**Net
                  income
              
              $
              7,160,855
              
              $
              3,312,794
              
              
              116
              %





Net
      income was $7,160,855 for the three months ended June 30, 2008 and was 41%
      of
      revenue for the quarter. This was an increase of $3,848,061, or 116%, when
      compared to net income of $3,312,794 for the same period of 2007, and
      represented 45% of revenue for the quarter. This is an overall increase of
      116%,
      which is the result of an increase in sales revenue due to expansion of our
      number of branded stores and distribution network overall. By percentage of
      revenue, however, net income is down 4% over the prior period due largely to
      other expenses of $387,198 and minority interest of $603,194, which is new
      for
      this quarter. These two expenses combined were 6% of revenue for the
      quarter.





**Foreign
      Currency Translation Gains**





The
      reporting currency of the Company is the US dollar. We use our local currency,
      Renminbi (RMB), as our functional currency. Results of operations and cash
      flow
      are translated at average exchange rates during the period, and assets and
      liabilities are translated at the unified exchange rate at the end of the
      period. Translation adjustments resulting from this process are included in
      accumulated other comprehensive income in the statement of shareholders’ equity.
      Transaction gains and losses that arise from exchange rate fluctuations on
      transactions denominated in a currency other than the functional currency are
      included in the results of operations as incurred.


The
      value
      of the USD versus the RMB continued to decline during the second quarter of
      2008. As a result of the appreciation of the RMB, we recognized a foreign
      currency translation gain of $277,101 for the second quarter of 2008 compared
      to
      a gain of $127,723 for the same quarter last year. Given the uncertainty of
      exchange rate fluctuations, we cannot estimate the effect of these fluctuations
      on our future business, product pricing, and results of operations or financial
      condition. All of our revenues and expenses were denominated in RMB Yuan and
      both the income statement accounts and balance sheet amounts were translated
      at
      1 RMB Yuan to 0.1414 USD.





**Liquidity
      and Capital Resources**





Inner
      Mongolia Yongye has historically financed our operations and capital
      expenditures principally through shareholder loans, bank loans, and cash
      provided by operations. We will use the net proceeds of the Q2 PIPE Offering
      of
      approximately $10 million to finance the purchase of raw materials and finished
      inventory from Inner Mongolia Yongye, finishing research and development on
      new
      products ready for launch in 2008, capital equipment and an expansion of our
      facilities and production, build out of our distribution network and increasing
      the number of our branded stores.





As
      is
      customary in the industry, we provide payment terms to most of our distributors
      which typically exceed the terms that we ourselves receive from our finished
      goods suppliers. Therefore, the Company’s liquidity needs have generally
      consisted of working capital necessary to finance receivables and raw material
      inventory. We believe that our existing cash, cash equivalents and cash flows
      from operations and from the 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.





**Financial
      Cash Flow Highlights for Six Months Ended:**





For
                the Six Months Ended
            
            IncreaseJUNE
                  30, 2008
            
            JUNE
                30, 2007
            
            /(decrease)Net
                cash used in operating activities
            
            
            (7,604,652
            )
            
            (4,661,989
            )
            
            63
            %Net
                cash used in investing activities
            
            
            (762,418
            )
            
            (22,380
            )
            
            3307
            %Net
                cash from financing activities
            
            
            9,294,492
            
            
            5,675,591
            
            
            64
            %Effect
                of exchange rate change on cash and cash equivalents
            
            
            414,771
            
            
            21,787
            
            
            1804
            %Net
                increase in cash and cash equivalents
            
            
            1,342,193
            
            
            1,013,009
            
            
            32
            %Cash
                and cash equivalents at beginning of period
            
            
            8,137
            
            
            89,023
            
            
            (91
            )%Cash
                and cash equivalents at end of period
            
            $
            1,350,330
            
            $
            1,102,032
            
            
            23
            %


19





The
      Company's working capital at June 30, 2008, increased to $17,811,795 from
      $2,655,790 on December 31, 2007.  The increase in working capital resulted
      from growth in the Company's overall business and the use of cash earnings
      to
      fund increases in accounts receivable and inventories.  Accounts receivable
      Days Sales Outstanding for the six months ended June 30, 2008 decreased to
      69
      days at June
      30, 2008 from 81 days at June
      30, 2007 and Days Sales in Inventory decreased by 4 days to 75 days at June
      30,
      2008 from 79 days at June
      30, 2007. As
      is
      customary in China’s agriculture industry, we give credit terms which allow our
      distributors to pay over a longer period of time than is traditionally done
      in
      other industries.





For
      the
      six months ended June 30, 2008, net cash used in operating activities was
      $7,604,652 .
      Reductions in cash were primarily
      attributable to increases of $5,196,266 in inventories and $20,613,347 in
      accounts receivables, . These were offset to some degree by net income of
      $7,742,185 ,
      an
      adjustment for depreciation of $93,263 and an increase in accounts payable
      and
      accrued expenses of $6,772,337.





For
      the
      six months ended June 30, 2008, net cash used in investing activities was
      $762,418 and was primarily attributable to the build out of the Beijing office
      with improvements of $639,519 over the first six months of 2008 and the purchase
      of intangible assets (patent and accounting software) of $122,899.





For
      the
      six months ended June 30, 2008, gross cash from financing activities was
      $10,100,651 from the PIPE investment received on April 17, 2008. This was offset
      by expenses incurred in issuance of stock to shareholders of $806,159 resulting
      in net cash of $9,294,492.





**SIX
      MONTHS ENDED JUNE 30, 2008 AND JUNE 30, 2007**





**Financial
      Highlights**





In
      summary, we saw the following financial performance over the last six
      months:





For
                the six months ended
            
            IncreaseJUNE
                30, 2008
            
            JUNE
                30, 2007
            
            /(decrease)Sales
            
            $
            26,986,639
            
            $
            8,127,718
            
            
            232
            %Gross
                Profit
            
            $
            14,567,619
            
            $
            3,780,957
            
            
            285
            %Income
                from Operations
            
            $
            9,758,017
            
            $
            3,554,778
            
            
            175
            %Net
                Income
            
            $
            7,742,185
            
            $
            3,358,428
            
            
            131
            %*Gross
                Margins*
            
            
            *54*
            *%*
            
            *47*
            *%*
            
            *7*
            *%**Net
                Margins*
            
            
            *29*
            *%*
            
            *41*
            *%*
            
            *-12*
            *%*





**Net
      Sales**





Sales
      revenue increased by $18,858,921, or 232%, to $26,986,639 for the six months
      ended June 30, 2008 from $8,127,718 for the same period ended on June 30, 2007.
      This can be attributed to our investment in our distribution channels and build
      up of branded stores which put more product in the hands of end users. We have
      increased the number of stores from inception in 2007 to 775 stores by June
      30,
      2008. The Company and the Predecessor’s total sales to our five major customers
      were $24,068,529 and $7,961,977, for the six months period ended June 30, 2008
      and 2007, respectively.


20





**Gross
      Profit Margin**





We
      achieved gross profit of $14,567,619 for the six months ended June 30, 2008,
      up
      285% from gross profit of $3,780,957 for the corresponding period in the prior
      year. Gross profit margin for June 30, 2008 was 54% *,* up
      7%
      from 47% as compared to the corresponding period in 2007. This is largely
      attributed to our fixed price contract for finished goods which has stabilized
      our cost of goods sold.





**Selling,
      General and Administrative ("SG&A") Expenses**





We
      incurred total SG&A expenses of $ 4,809,602 ,
      or 18%,
      of revenue, for the six months ended June 30, 2008. As compared to the same
      period in 2007, this represented an increase of $ 4,583,423
      or 2026% over SG&A expenses of $ 226,179
      which was 3% of revenue. Much of
      this increase is due to increased expenses for operating as a public company,
      hiring additional executive team members and increased advertising expenses
      which, due to the seasonal nature of our business, must be expended in Q1 and
      Q2
      in order to reach customers for the growing season starting early in
      Q2.





**Net
      Income**





Our
      net
      income was $7,742,185 or 29% of revenues for this six month period in 2008
      which
      was $4,383,757 or 12% increase over the same six month period in 2007 which
      was
      $3,358,428 and 41% of revenue. The increase reflected continued expansion in
      sales revenue levels, continued strong demand for our products and sustained
      profitability.





Basic
      and
      diluted earnings per share (EPS) for the six months ended June 30, 2008, were
      $0.55 and $0.54, respectively, compared to $0.29 and $0.29, in the same period
      last year, respectively. The weighted average shares outstanding used to
      calculate basic and diluted EPS for the comparative periods were 14.1 million
      and 14.3 million and 11.4 million and 11.4 million, respectively .





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.





**Related
      Party Transactions**





Inner
      Mongolia Yongye is a 1.15% owner of Inner Mongolia Yongye Nongfeng. Mr. Zishen
      Wu controls Inner Mongolia Yongye and is CEO of Inner Mongolia Yongye Nongfeng
      Biotechnology. He also sits on the boards of both companies as Chairman. During
      the period ended June 30, 2008 Inner Mongolia Yongye Nongfeng entered into
      several intercompany loan transactions with related party entities as described
      in the footnotes to the financial statements above. Additionally, In January
      2008, Inner Mongolia Yongye Nongfeng Biotechnology entered into a Cooperation
      Agreement with Inner Mongolia Yongye providing for the terms of contract
      manufacturing of nutrient product and has also entered into a Sales Agreement
      in
      April 2008 providing for the sale of existing nutrient inventory. The terms
      of
      these agreements have been disclosed in the Joint Venture contract as filed
      with
      the SEC on April 17, 2008.





**Off
      Balance Sheet Arrangements**





We
      do not
      have any off-balance sheet arrangements as defined by standards issued by the
      Financial Accounting Standards Board, 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.


21




**ITEM
      3.**  **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





Not
      required.




**ITEM
      4.CONTROLS AND PROCEDURES.**




**Conclusion
      Regarding the Effectiveness of Disclosure Controls and
      Procedures**




Under
      the
      supervision and with the participation of our management, including our
      principal executive officer and principal financial officer, we conducted an
      evaluation of our disclosure controls and procedures, as such term is defined
      in
      Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based
      on this evaluation, our principal executive officer and principal financial
      officer have concluded that as of June 30, 2008, such disclosure controls and
      procedures were effective to ensure that information required to be disclosed
      in
      reports filed under the Securities Exchange Act of 1934 is recorded, processed,
      summarized, and reported within the time periods specified in SEC rules and
      forms and is accumulated and communicated to management to allow timely
      decisions regarding required disclosures.




**Changes
      in Internal Control over Financial Reporting**




There
      have been no changes in our internal controls over financial reporting that
      occurred during the quarter ended June 30, 2008 that have materially affected,
      or are reasonably likely to materially affect, our internal control over
      financial reporting.




22




**PART
      I.**




**OTHER
      INFORMATION**




**ITEM
                1.**
            **LEGAL
                PROCEEDINGS**




None.




**ITEM 1A**
            **RISK
                FACTORS**




Not
      applicable.




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




Not
      applicable.




**ITEM
                3.**
            **DEFAULTS
                UPON SENIOR SECURITIES**




None.




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




None.




**ITEM
                5.**
            **OTHER
                INFORMATION**




None.




**ITEM
                6.**
            **EXHIBITS**




(a)  Exhibits:




31.1
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.




31.2
            Certification
                of Principal Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.




32
            Certification
                of Chief Executive Officer and Principal Financial Officer pursuant
                to
                Section 906 of the Sarbanes-Oxley Act of 2002.


23




**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.




Dated:
      August 14, 2008





**YONGYE
              BIOTECHNOLOGY INTERNATIONAL, INC.**By:
            /s/
                Zishen WuZishen
                Wu
              President
                and CEOBy:
            /s/
                Larry GilmoreLarry
                Gilmore
              Principal
                Financial Officer


24