Yayi International Reports Fourth Quarter and
Fiscal Year 2011 Financial Results

TIANJIN, CHINA – June 29, 2011 – Yayi International Inc. (OTC Bulletin Board: YYIN) ("Yayi International" or "the Company"), the first mover and a leading producer and distributor of premium goat milk formula products for infants, toddlers, young children, and adults in the People’s Republic of China (“China”), today announced its financial results for the fourth quarter and full year of fiscal 2011 ended March 31, 2011.

Fourth Quarter Highlights

• Net sales increased 66.6% to $6.2 million from $3.7 million in the prior year period
• Gross profit doubled to $4.1 million from $2.0 million in the prior year period
• Gross margin rose to 66.9% compared to 55.5% in the prior year period
• Adjusted net loss was $0.9 million, or $0.03 per diluted share, compared to a net loss of $2.0 million in the prior year period

Ms. Li Liu, Chief Executive Officer of Yayi International, commented, "Our 2011 fiscal year has been a productive and noteworthy first step towards our goal of becoming a leading national producer of goat milk formula products. Our portfolio has been streamlined to feature 14 product varieties under the MilkGoat brand as well as 12 additional product varieties targeting infant-maternity stores to better fit the diverse needs of our consumers. We are confident that this dual-pronged strategy will drive our nationwide presence as well as diversify our sales channels.”

“We recognize that our strategy realignments coincided with a challenging time in our industry,” Ms. Liu continued. “China’s infant formula market continues to present a turbulent and challenging competitive landscape. In the past year, the negative publicity of cow milk dairy products has spread to also affect the goat milk industry and for the broader dairy industry, we have seen imported brands gain market share from domestic brands to account for the majority of the market. In the near term, this means that our shift in strategy towards supermarket sales has encountered a rather hostile environment. Furthermore, due to recent nationwide, government-mandated manufacturing license renewals, we also noticed that distributors were reluctant to work with a new entrant until the renewal process was complete. We expected our supermarket centered strategy to gain Yayi nationwide brand recognition and, in turn, provide a platform to support greater long term growth. Unfortunately, due to high slotting fees, distinct distributor challenges, higher marketing costs, regulatory uncertainty and overall lack of consumer confidence in domestic brands, we have found the market penetration process to be lengthier than expected.”

“We have seen China’s dairy industry experience a similar trend before with the melamine crisis. Thus, we are confident that as consumer confidence returns, domestic brands will regain consumer recognition and market share. Due to the various challenges of the past year, Yayi struggled to maintain its historical growth trajectory and needed to revise its near term financial performance expectations. As the industry rebounds, we are confident that Yayi will also regain its historical growth momentum,” Ms. Liu concluded.

Fourth Quarter Fiscal 2011 Financial Performance

For the three months ended March 31, 2011, net sales increased 66.6% to $6.2 million from $3.7 million in the prior year period. The increase was driven by a 59.1% increase in unit sales price to $27 per kilogram from $17 per kilogram due to a revenue shift towards premium formula products along with an increase in sales volume of 4.7% .

Gross profit for the fourth fiscal quarter of 2011 increased 100.7% to $4.1 million from $2.1 million in the prior year period. Gross margin rose to 66.9% from 55.5% in the prior year period, reflecting a more normalized level of in-store promotions, such as “buy two get one free” offers.

Income from operations was $1.7 million compared to a loss from operations of $2.1 million for the prior year period. Operating expenses for the fourth fiscal quarter decreased to $2.5 million from $4.2 million for the prior year period primarily as a result of a shift in advertising spending. Sales and marketing expense decreased by 52.8% to $1.5 million from $3.2 million in the prior year period, reflecting the Company’s decision to realign its marketing efforts. From January through June of 2010, the Company advertised during primetime on CCTV’s premier news channel in China. After evaluating the effectiveness and efficiency of its marketing dollars, the Company chose to shift its marketing spending to ads on CCTV’s finance, arts and entertainment and music channels to more directly reach the Company’s target, high-end consumer base. General and administrative expense remained flat at $0.9 million, reflecting a normalized level of spending.

Net income was $0.7 million, or $0.01 per diluted share, compared to a net loss of $2.0 million for the prior year period. This primarily reflects a gain from the change in fair value of derivative liabilities of $2.0 million.

Adjusted net loss available to common shareholders was $0.9 million, or $0.03 per diluted share compared to $2.0 million for the prior year period. Adjusted net loss available to common shareholders excludes non-cash measures including stock-based compensation expense, amortization of deferred debt issuance costs, change in fair value of derivative liabilities and make good provision expenses. Please refer to the reconciliation table at the end of the release for more details.

Fiscal Year 2011 Financial Performance

Net sales for the fiscal year of 2011 increased 26.0% to $26.9 million from $21.4 million for fiscal year 2010. Gross profit increased 19.4% to $16.8 million from $14.1 million from the prior year period. Income from operations was $0.2 million compared to $3.7 million in the prior year period. Net loss attributable to common shareholders was $1.3 million, or $0.05 per diluted share, compared to net income of $1.5 million for the prior year period. Adjusted net loss available to common shareholders was $1.8 million, or $0.07 per diluted share for the fiscal year of 2011 compared to adjusted net income of $1.8 million for the prior year period.

As of March 31, 2011, Yayi International held $13.4 million in cash and cash equivalents. Cash flows used in operating activities for the fiscal year of 2011 were $1.2 million.

Recognition of Slotting Fees

On June 1, 2011, the Company announced a restatement of its revenues in relation to a change in recognition of slotting fees, a cost associated with its new supermarket distribution strategy. The Company prepays slotting fees on an annual basis and as such, previously recognized the cost as an asset that would be amortized throughout the year. After discussion with its independent accounting firm, the Company has revised its accounting policies to account for slotting fees as a one-time offset to revenue recognized as they are incurred. For the fourth quarter and full year of fiscal 2011, slotting fees were approximately $0.3 million and $5.7 million, respectively.

Operational Updates

The Company is pleased to announce that it has successfully renewed its production licenses with China’s General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ). Following the media hormone allegations, AQSIQ released a new regulation requiring all domestic dairy producers to reapply for production licenses or face suspension.

Business Outlook

Ms. Liu commented, “Given current market volatility and the rapidly evolving nature our business, we have elected to provide a quantitative outlook at a later date, as greater visibility becomes available. At the same time, we are cautiously optimistic about the upcoming year and have several new initiatives in place to drive future growth.”

Ms. Liu continued, “The primary goal for our supermarket segment will be increasing organic growth. To do so, we have created a team of promoters who will focus on growing same store sales. From a cost perspective, we believe our internal team will be a more efficient allocation of spending as we will be able to tailor salaries and bonuses to performance instead of paying a set fee for promotional activities. Furthermore, as same store sales grow, slotting fees as a percentage of sales will decrease, strengthening margins.

“Our other main focus will be our infant-maternity store segment. In order to streamline the distribution process, we plan to directly contract with infant-maternity store chains with more than 20 stores. This will allow us to sell directly to the chains without an agent. We also hope to shift our revenue mix towards greater infant-maternity stores sales as they have lower slotting fees and higher margins.

“Together, we expect these initiatives to strengthen our distributor relationships, drive higher revenue growth and strengthen margins. Furthermore, as our business growth gains momentum, we also expect unit sales prices to continue to increase. Overall, we are very excited for the market potential of these new initiatives, which will not only further strengthen Yayi’s presence in the marketplace but also enhance our ability to deliver shareholder returns.”

Reconciliation of Adjusted Net Income

To supplement the Company's condensed consolidated financial statements for the period from April 1, 2010 to March 31, 2011 presented on a GAAP basis, the Company provided adjusted financial information in this release that excludes non-cash expenses including a write-off on debt issuance costs and accretion of debt discount from the warrants and embedded derivatives issued in connection with the Company’s reverse merger, an adjustment from the reduction in the exercise price of the Company’s Series A and Series D warrants, and interest expense on convertible notes. The Company's management believes that these adjusted measures, adjusted net income and adjusted diluted earnings per share provide investors with a better understanding of how the results relate to the Company's current and historical performance. The additional adjusted information is not meant to be considered in isolation or as a substitute for GAAP financials. The adjusted financial information that the Company provides also may differ from the adjusted information provided by other companies. Management believes that these adjusted financial measures are useful to investors because they exclude non-cash expenses that management excludes when it internally evaluates the performance of the Company's business and makes operating decisions, including internal budgeting, and performance measurement, as these measures provide a consistent method of comparison to historical periods. As a result, the provision of these adjusted measures allows investors to evaluate the Company's performance using the same methodology and information as that used by the Company's management. Moreover, management believes that these adjusted measures reflect the essential operating activities of the Company. Adjusted measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the adjusted financial measure. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded. A reconciliation of each adjusted measures to the nearest GAAP measure appears in the table below:

About Yayi International

Yayi International is the first mover and a leading producer and distributor of premium goat milk formula products for infants, toddlers, young children and adults in China. Its current formula product lines are targeted at the premium market segment and health-conscious consumers. The Company has a vertically-integrated production process. It sources raw goat milk from its proprietary dairy farms and neighboring goat dairy farmers on a long-term contract basis in milk collection centers, which ensures high quality control of its products. The Company's distribution network comprises of a nationwide footprint across China in 23 provinces and municipalities including domestic and multinational supermarkets, infant-maternity store chains, and drug stores as well as catalogue sales and a dedicated online store at Taobao.com.

Forward-looking Statements:

This press release contains certain statements that may include 'forward-looking statements'. All statements other than statements of historical fact included herein are 'forward-looking statements'. These forward looking statements are often identified by the use of forward-looking terminology such as 'believes,' 'expects' or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website ( http://www.sec.gov ). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

Financial Tables Follow

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Consolidated Statements of Income

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Consolidated Balance Sheets

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Consolidated Balance Sheets

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Consolidated Statements of Cash Flows