First Quarter 2009 Results:

‘We are pleased to report another quarter of growth for the three month period ended March 31, 2009. The first quarter of every year is normally one of the slowest periods of the year for our product sales. However, an expanded sales network and lower operating expenses allowed us to begin 2009 with revenue and earnings growth,’ stated Zishen Wu, chief executive officer of Yongye Biotechnology.

There was a 32.0% increase in plant product revenue and a 22.0% increase in animal product revenue in the quarter.

In the first quarter of 2009, the company’s sales network consisted of about 2,000 Yongye branded retail independent network stores, compared to 350 Yongye branded stores in the first quarter of 2008. About 1,500 stores were brought into the network on a trial basis at the end of 2008 and beginning of 2009, bringing the total number of stores selling Shengmingsu plant nutrient products to about 3,500 retail stores by the end of the quarter.

Gross profit was $6.5 million in the first quarter of 2009, a 29.5% increase from $5 million in the first quarter of 2008. Gross margin was 52.5% compared to 52.9% in the same period of 2008. Gross margin was relatively unchanged primarily because the company’s fixed rate contract with its finished goods supplier has remained at a constant price since it was established.

Operating expenses were $3.3 million in the three months ended March 31, 2009, compared to $3.5 million in the three months ended March 31, 2008. These expenses as a percentage of sales were 26.0%, compared to 37.0% in the first quarter of 2008. Operating expenses were lower in the first quarter of 2009 compared to the first quarter of 2008 because there were large one-time expenses associated with becoming a public company in the first quarter of 2008. During the first quarter of 2009, the company incurred $0.3 million in research and development expenses, part of its planned increase in business scope.

Income from operations was $3.3 million in the first quarter of 2009, with operating margin of 26.4%, compared to $1.5 million, with operating margin of 15.7%, in the first quarter of 2008.

The diluted weighted average number of shares outstanding increased from 11,444,775 in the first quarter of 2008 to 22,760,258 in the quarter ended March 31, 2009 because of additional shares being issued in private placements in April and September 2008.

Financial Condition:

As of March 31, 2009, the company had total assets of $37.3 million, compared to $34.5 million as of December 31, 2008. Working capital was $27.3 million, total current liabilities were $3.2 million and the company had $291,498 in long-term liabilities. Stockholders’ equity was $32.6 million as of March 31, 2009, compared to $29.4 million at the end of 2008.

As of March 31, 2009, cash totaled $1.4 million, compared to $4.5 million on December 31, 2008. Cash decreased primarily because of higher accounts receivable, inventory accumulation, and payment for production equipment associated with the company’s September financing. As of March 31, 2009, accounts receivable totaled $6.1 million, up from $2.7 million as of December 31, 2008, due to sales growth in the period. Accounts receivable as of March 31, 2009 includes $2.2 million remitted by a customer on March 30, 2009 but not received by the company until April 1, 2009 due to an elongated cross bank transfer process.

Inventory increased 7.2% to $22.2 million in the first quarter of 2009 from the first quarter of 2008. Based on past experience, the company expects strong demand for its plant and animal nutrient products from distributors in the second quarter of 2009, and has accumulated inventory to ensure it is able to meet distributors’ growing needs.

As previously disclosed in the September 2008 financing, the company is restructuring itself by acquiring manufacturing equipment and facilities from its independently controlled predecessor company. The company acquired the 2,000 Tonnes Per Annum manufacturing equipment from the predecessor company which increased its Property and Equipment balance by 25.0% to $6.7 million in the first quarter of 2009. The company expects to complete its restructuring process in late 2009, dependent upon receiving necessary approvals from the PRC government.

Recent Events:

On March 25, 2009, Yongye Biotechnology appointed Sam Yu to serve as its chief financial officer.

On April 10, 2009, Yongye Biotechnology appointed Sean Shao to serve as an independent director on the company’s board of directors and as chairman of company’s Audit Committee.

On May 1, 2009, one of the independently owned Yongye branded retail stores in its sales network set a new record for single day sales. A Yongye branded retail store in Qianjiang City in Hubei Province sold 15,310 bottles of Shengmingsu plant nutrient product on April 30, 2009 for $30,000 in sales. This was the highest single day sales for a Yongye branded retail store in Yongye Biotechnology’s history.

On May 8, 2009, Yongye Biotechnology closed a private placement financing with institutional and other accredited investors, which included many of the same investors from its April and September 2008 financings. Gross proceeds of about $9.0 million were generated through the issuance of 5.83 million shares of common stock.

Business Outlook:

‘This was a productive quarter for Yongye, in which our financial operational results improved along with our levels of financial oversight and corporate governance,’ stated Wu. ‘The outlook for China’s agricultural industry is favorable, drought conditions have improved significantly, and we expect China’s economic stimulus package to have a positive impact on the economy in the coming months.’

‘Our community based marketing strategy is a unique driver of our business growth. By stepping up our marketing efforts in existing sales regions, we have been able to increase local farmers’ awareness of the benefits provided by our ‘Shengmingsu’ products and seen a direct impact on demand. Combined with our rapidly growing sales network of independent stores, we anticipate our business will continue to grow at a rapid pace in the rest of 2009.’

Revised Guidance:

As a result of anticipated increased sales and in conjunction with its May 8, 2009 private placement, Yongye Biotechnology revised its revenue and net income guidance. Due to the company’s expected ability to fulfill additional orders from the working capital provided by the private placement, the company revised its previously announced 2009 revenue guidance from $66 million to a range from $82 to $84 million, and its previously announced net income guidance from $15.8 million to a range from $23 to $24 million.