Full Year 2008 Highlights:

Completed a share exchange transaction to become a publicly traded company in April 2008;

Raised $19.4 million in gross proceeds through private placement financings in April and September 2008;

Opened new production facility in Hohhot, increasing annual capacity from 2,000 metric tons (MT) to 10,000 MT.

”2008 was a historic year in Yongye’s development, in which we aggressively expanded our sales network to become a leading plant nutrient product supplier in our sales regions and significantly increased production capacity,” stated Zishen Wu, chief executive officer of Yongye. ”We successfully completed a share exchange to become a publicly traded company and achieved record financial performance.”

Fourth Quarter 2008 Results:

Revenue was $2.9 million in the fourth quarter of 2008, an increase of 21.7% from $2.4 million in the fourth quarter of 2008. The fourth quarter of the year is traditionally the seasonally slowest quarter of the year. The year-over-year revenue growth in the fourth quarter of 2008 resulted from the rapid expansion of the company’s sales network in 2008. During the three months ended December 31, 2008, Yongye opened 350 trial stores in its sales regions. Trial stores are evaluated according to region specific performance goals, and stores that meet these goals then become branded Yongye stores. The company expects to brand all 350 trial stores in the first half of 2009. In the fourth quarter of 2008, the company sold 10,887 plant units and 50,464.75 animal units of which plant nutrient products accounted for 44% of the sales.

Gross profit was $1.4 million in the fourth quarter of 2008, a 200.0% increase from $0.5 million in the fourth quarter of 2007. Gross margin was 49.4% compared to 20.1% in the fourth quarter of 2007.

Selling, general and administrative expenses were $2.5 million in the fourth quarter of 2008, compared to $0.3 million in the fourth quarter of 2007. The significant increase in selling expenses was primarily the result of the sales network expansion in 2008. In addition, both advertisement expenses and freight costs increased significantly as the company marketed its products in ten provinces in the fourth quarter of 2008 compared with four provinces in the same period last year. Administrative expenses increased from $0.13 million in the fourth quarter of 2007 to $1.3 million in the fourth quarter of 2008 due to increased staff and expenses related to becoming a public company, including expenses to third party professional consultants. The predecessor company that existed in 2007 had a similar cost structure to Yongye’s current cost structure, but on a much smaller scale.

Loss from operations was $1.1 million compared to income from operations of $0.1 million in the fourth quarter of 2007.

Net loss was $1.0 million in the fourth quarter of 2008, or a loss of $0.05 per fully diluted share, compared to a net loss of $0.2 million, or a loss of $0.01 per fully diluted share, in the fourth quarter of 2007.

The diluted weighted average number of shares outstanding increased from 11,444,775 in the fourth quarter of 2007 to 21,401,822 in the fourth quarter of 2008 because additional shares were issued in private placements in April and September 2008.

Full Year 2008 Results:

Gross profit was $24.9 million with a gross margin of 51.8%, compared to gross profit of $5.9 million with a gross margin of 44.6% for the twelve months ended December 31, 2007. Operating income was $13.7 million with an operating margin of 28.5%, compared to $4.9 million with an operating margin of 37.6% in the twelve months ended December 31, 2007.

Financial Condition:

On December 31, 2008, cash totaled $4.5 million, compared to $0.4 million as of December 31, 2007. The increase in cash of $4.1 million is due mostly to two financings and increased sales capability in 2008. Accounts receivable was $2.7 million and inventory totaled $20.7 million, compared with $1.6 million and $9.9 million, respectively, on December 31, 2007. Working capital was $25.5 million, a $22.8 million increase from the year ended 2007. Total current liabilities were $3.5 million and the company had $0.4 million in long-term liabilities. Stockholders’ equity totaled $29.4 million as of December 31, 2008, compared to $12.9 million at the end of 2007.

Based on past experience, the company expects strong demand for its ‘Shengmingsu’ products from its distributors in the first half of 2009. Therefore the company significantly increased inventory in the fourth quarter of 2008 in order to effectively meet distributors’ needs in 2009. The $22.8 million increase of working capital was primarily due to an increase in inventory of $10.8 million in 2008, reflecting Yongye Nongfeng’s current business model of purchasing only finished goods as inventory from its predecessor company.

Key Events and Changes:

In the quarter ended December 31, 2008, the company added 350 stores to its trial process through which stores are evaluated according to region-specific performance goals. When added to the existing 775 stores, this brought the network total to 1,125 stores at the end of 2008.

As previously disclosed, the company is in the process restructuring its operations to transition manufacturing operations from its predecessor company to Yongye Nongfeng. This will enable Yongye Nongfeng to centralize and better manage the company’s product research and development, manufacturing, marketing and distribution. The company hopes to become a more tightly integrated business with greater control over product quality and intellectual property. The company expects to complete this process in 2009, depending on the receipt of necessary approvals from the PRC government.

Business Outlook:

”As we enter 2009, the global and domestic economic environment has dramatically changed compared to the same time in 2008. We understand that China has pledged to stimulate the economy and specifically the agriculture sector in order to continue the long-standing growth in China’s agricultural productivity. In this scenario, our products become even more important to Chinese farmers and China and this gives us greater opportunity,” says Wu. ”Along with a series of favorable government policies in China’s agriculture sector, and based on our achievements in 2008, we believe that our newly completed production facility and unique sales model will allow Yongye to continue its rapid growth for the foreseeable future although we remain cautious in view of the global financial crisis.

”We plan to improve the quality of our corporate governance and actively seek a senior exchange listing in 2009,” Wu added. ”As part of the private placement financing which took place in April and September 2008, we entered into a ‘make good’ agreement that set revenue and net income good targets for 2008 and 2009. We have exceeded our ‘make good’ target for 2008 and we expect to exceed our 2009 ‘make good’ targets of $66 million in revenue and $15.8 million in net income.”