Yongye International, Inc. - FORM 10-K/A

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EX-31.1 - EXHIBIT 31.1 - Yongye International, Inc.	v373659_ex31-1.htm
EX-31.2 - EXHIBIT 31.2 - Yongye International, Inc.	v373659_ex31-2.htm
EX-32 - EXHIBIT 32 - Yongye International, Inc.	v373659_ex32.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________

FORM 10-K/A

Amendment No. 1

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the fiscal year ended December 31, 2013

	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 NO. 001-34444

YONGYE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

NEVADA

20-8051010

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer Identification No.)

6th Floor, Suite 608, Xue Yuan International Tower,

No. 1 Zhichun Road, Haidian District, Beijing, PRC

(Address of principal executive offices)

+86 10 8231 8866

(Issuer’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
Common Stock, par value US$0.001 per share		NASDAQ Global Select Market

Securities Registered Pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨ No x

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

Yes ¨ No x

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No £

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. £

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

Large Accelerated Filer £

Accelerated Filer x

Non-Accelerated Filer £

Smaller Reporting Company £

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

Yes £ No x

The aggregate market value of the 39,573,497 shares of common equity stock held by non-affiliates of the Registrant was approximately US$211,718,209 on the last business day of the Registrant’s most recently completed second fiscal quarter, based on the last sale price of the registrant’s common stock on the most recent date on which a trade in such stock took place prior thereto.

There were a total of 50,685,216 shares of the registrant’s Common Stock, par value US$0.001 per share, outstanding as of April 10, 2014.

EXPLANATORY NOTE

This Amendment No. 1 (“Amendment No. 1”) to the Annual Report on Form 10-K of Yongye International, Inc. (together with its subsidiaries, the “Company,” “Yongye,” “we,” “our” or “us”) for the fiscal year ended December 31, 2013 as originally filed with the Securities and Exchange Commission (“SEC”) on March 17, 2014 (the “2013 Annual Report”), is being filed to (i) amend certain disclosures contained in Item 1. Business regarding our cooperative joint venture in China, (ii) include additional disclosures regarding our proposed going private transaction and new planned manufacturing facilities in Item 1A Risk Factors and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (iii) include in the 2013 Annual Report the information required by certain portions of Part III (Items 10, 11, 12 and 14) of Form 10-K.

This Amendment No. 1 does not affect any other portion of the 2013 Annual Report. Additionally, except as specifically referenced herein, this Amendment No. 1 does not reflect any event occurring after March 17, 2014, the filing date of the 2013 Annual Report.

TABLE OF CONTENTS

PART I

Item 1. Business	3

Item 1A. Risk Factors	17

PART II

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

PART III

Item 10. Directors, Executive Officers and Corporate Governance	52

Item 11. Executive Compensation	57

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	61

Item 14. Principal Accountant Fees and Services	64

PART IV

Item 15. Exhibits and Financial Statement Schedules	67

Signatures	70

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This 2013 Annual Report contains forward-looking statements and information relating to Yongye International, Inc., that is based on the beliefs of our management as well as assumptions made by and information currently available to us. When used in this 2013 Annual Report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. These statements reflect our current view concerning future events and are subject to risks, uncertainties and assumptions, including among many others: a general economic downturn; a downturn in the securities markets; SEC regulations which affect trading in the securities of “penny stocks,” and other risks and uncertainties. Should any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this report as anticipated, estimated or expected. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future. Important factors that may cause actual results to differ from those projected include the risk factors specified above. Notwithstanding the above, Section 27A of the Securities Act and Section 21E of the Securities Exchange Act expressly state that the safe harbor for forward-looking statements does not apply to companies that issue penny stock. Because we may from time to time be considered as an issuer of penny stock, the safe harbor for forward-looking statements may not apply to us at certain times.

All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including statements regarding new and existing products and opportunities; statements regarding market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China; any statements of belief or intention; any of the factors mentioned in the “Risk Factors” section of this 2013 Annual Report; and any statements or assumptions underlying any of the foregoing. Also, forward-looking statements represent our estimates and assumptions only as of the date of this 2013 Annual Report. You should read this report or that we filed as exhibits hereto, completely and with the understanding that our actual future results may be materially different from what we expect.

Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

USE OF CERTAIN DEFINED TERMS

Except as otherwise indicated by the context, references in this report to:

“Yongye,” “we,” “us,” “YONG,” “the Company” or “our Company” are references to Yongye International, Inc.;

“YongyeNongfeng” is a reference to YongyeNongfeng Biotechnology Co., Ltd.;

“YongyeFumin” is a reference to Inner Mongolia YongyeFumin Biotechnology Co., Ltd.;

“Inner Mongolia Yongye” is a reference to Inner Mongolia Yongye Biotechnology Co., Ltd.;

“China” and “PRC” are references to the People’s Republic of China;

“Preferred Shares” are the Company’s Redeemable Series A convertible preferred shares, par value $.001;

“RMB” is a reference to Renminbi, the legal currency of China;

“U.S. dollar,” “$” and “US$” are references to the legal currency of the United States;

“Securities Act” is a reference to Securities Act of 1933, as amended; and

“Exchange Act” is a reference to the Securities Exchange Act of 1934, as amended.

Part I

ITEM 1. Business

Business Overview

We are a leading crop nutrient company in China in term of total sales in 2013. We are primarily engaged in the research, development, manufacturing and sales of fulvic acid based crop and animal nutrient products for the agriculture and stock farming industry. We are headquartered in Beijing with production facilities in Hohhot, Inner Mongolia Autonomous Region of China (“Inner Mongolia”). Our products are sold nationwide in 30 provinces, autonomous regions and centrally-administered municipalities across China.

Currently, our principal product is our liquid crop nutrient products, from which we derived substantially all of our sales for the year ended December 31, 2013. We also produce powder animal nutrient product, which is mainly used for livestock. In 2012, we launched two new crop nutrient products, a crop seed nutrient product and a crop root nutrient product. The crop seed nutrient product helps crop seeds sprout and improves the growth of roots, and the crop root nutrient product improves crop roots’ ability to absorb water and fertilizers and enhance crop resistance against drought, freezing, diseases, and stalk leaning. We believe, by using our regular crop nutrient together with our new products at different stages of crop growth, the combined effectiveness of our products will further enhance crop yield. We market our regular crop and animal products under the trade name “Shengmingsu” (“生命素” in Chinese means “Life Essential”). Our new products for crop seeds and roots are named “Zhongbaosheng” and “Qianggenbao” respectively. We produce our liquid crop nutrient products, including the newly launched crop seed product and crop root product, based on our proprietary formulae utilizing fulvic acid as the primary compound base and combining with various micro nutrients such as zinc and boron, macro nutrients like nitrogen, phosphorous and potassium (“NPK”) and other nutrients that are essential for the crop health. Our crop nutrient’s core fulvic acid compound improves crop yield by enhancing the absorption of fertilizers and micro nutrients. In addition, the micro nutrients and NPK included in our crop nutrient formula serve as supplements during key growth stages of crops. We believe that our crop nutrient products are particularly well-suited for use in China, which generally has highly degraded farming soil as a result of over-farming, decades of over-use of chemical fertilizers and less advanced farming practices compared with more developed nations. Our regular crop nutrient product is most commonly applied by directly spraying onto leaves of crops after dilution with water, and is typically used at certain critical growth stages of crops in addition to normal fertilizer application. Our crop seed nutrient product is used by soaking the seeds in our product after water dilution. Soaking time and proportions of water to product vary among different crops and users should follow our product specifications. At the time that a seeding crop is transplanted, our crop root nutrient is used by applying the product onto the crop roots after water dilution and blending with soil. After the transplant, the water-diluted crop root product is used to irrigate the crops at the roots. Soaking time and water-product proportions during and after transplanting varies and users should follow our product specifications.

The efficacy of fulvic acid for enhancing crop yield is well-documented by over 20 global research reports published by universities and institutions in the United States, China, Europe and other countries. The Inner Mongolia Autonomous Region Scientific and Technology Bureau (“IMARSTB”) conducted an official assessment of our liquid crop nutrient product in 2008 and concluded that our product increases agricultural output, improves the utilization rate of fertilizer, enhances crop resistance to diseases and droughts. In addition, the IMARSTB concluded that large scale experimentation in China has proven that our product can increase overall yields of staple crops, such as wheat and rice by 10-20%, and vegetables and fruits by 15-30%, while also improving product quality. Many other third parties also conducted tests on our product’s efficacy on different crops and geographical locations in China, and they have drawn similar conclusions as documented in the IMARSTB assessment.

Our powder animal nutrient product consists of our fulvic acid compound base, additional nutrients and Chinese herbs. Our animal products are currently targeted at and administered to dairy cows and other livestock through mixture with feeds.

Industry and Market Overview

China Agriculture Industry

Limited Arable Land

The long-term market growth of crop nutrient products in China is primarily driven by the need to improve crop yield to ensure sufficient food supply in view of limited per capita arable land in China. Currently, with only approximately 9% of the world’s arable land, China needs to feed 1.35 billion people, or approximately 19% of the world’s population. According to the National Population and Family Planning Commission of China, China’s population will reach 1.5 billion by 2030. Therefore, the country faces the challenge of producing additional food to feed the additional 200 million people within the next 20 years. This puts great pressure on China’s agricultural system to increase production output.

Over-farming, decades of overuse of chemical fertilizers and less advanced farming practices have led to degraded soil quality in China. Although, according to FAO (Food and Agriculture Organization), China leads the world in fertilizer consumption, applying more fertilizers than the world average on a per hectare basis, nevertheless, the crop yield lags behind most developed countries. This creates a huge demand for crop nutrient products that can help improve fertilizer utilization and increase crop yield. Fulvic acid based crop nutrients are particularly well suited for the market, as it can allow crops to more effectively absorb fertilizers and minerals from the degraded soils.

The market for our crop nutrient product is large and has attractive long-term growth prospects. China has 2.03 billion mu (each mu is equivalent to approximately 667 square meters) of arable land in total. Typically, each mu of arable land averagely requires more than 300 ml of our liquid crop nutrient product for one growing season. For the year of 2013, our crop nutrient product is estimated to have been used in approximately 6% of the arable land in China, assuming there is one and half growing season per annum on average for all the arable land across China.

Increasing Wealth is Expected to Increase Spending on Agricultural Products

As the economy grows and individual purchasing power expands in China, demand for more food products with higher quality is expected to increase. In China, huge reductions in poverty raised national average food consumption substantially, according to World Agriculture: towards 2015/2030, summary report by FAO of 2002. According to the Asian Development Bank, over 50% of China’s population is comprised of low income rural farmers. The government has pledged to narrow income gaps between urban and rural residents to tackle disparities in wealth levels. Farmers’ income achieved 10 consecutive years of fast growth since China’s reform and opening up, according to National Bureau of Statistics. The per-capita net income of rural residents reached RMB 8,896 (US$1,437) in 2013, up by 9.3% in real terms over the previous year. The figure is 1.6 percentage points higher than the GDP growth rate and 2.3 points higher than that of per capita disposable income of urban residents.

Government Support for the Agricultural Industry

According to the 12th Five-Year National Economic and Social Plan (2011-2015) of China, the Chinese government will continue to support the agriculture industry. Increasing agricultural production capacity and developing high-yield, high-quality and high-efficiency agriculture are the focus of the Chinese government. Given our product’s ability to improve fertilizer utilization, increase crop yield, improve product quality, and enhance drought-resistance, we expect that we will further benefit from the Chinese government’s agricultural policy.

In addition, agriculture continues to be a heavily invested sector in China. Brand name investors continue to invest into China’s agriculture industry because they have confidence in China’s long term outlook. The market volume for agricultural products is large, both for domestic sales and exports. This is driven by the growing domestic demand for higher quality food products and increased international reliance on food products from China. The No.1 central document of 2014 stated that, China should improve its national food security system, deepen rural land system reform and improve rural governance, while intensifying support and protection for agriculture and promoting financial support for rural areas.

China Fertilizer Industry

Food safety is a top concern for Chinese shoppers, especially regarding such produce as vegetables, meat, seafood, grain, cooking oils and dairy goods, according to a report from IPSOS, an international research company. The rise of green food industry in China is also increasing the demand for environmental friendly fertilizers. According to the China Green Food Development Center, a governmental agency, China’s domestic sales of green food increased at a compound annual growth rate of 18.1% from RMB60 billion in 2002 to RMB318 billion in 2012, and China’s exports of green food increased at a compound annual growth rate of 12.8%, from US$840 million in 2002 to US$2.8 billion in 2012. In March 2011, our crop nutrient product obtained the certificate of production material for green food which was issued by the China Green Food Development Center. We believe China’s domestic market for green food will continue to expand as individual purchasing power grows in China and our business will benefit from this growth.

China’s Dairy Market

The growth of China’s economy has led to growth in consumer demand for dairy products and China’s government has attached great importance to the development of this industry, particularly after a food safety incident in China involving milk adulterated with melamine was widely reported in the international media during 2008 and 2010. In recent decades, China’s dairy market has matured rapidly. It was recorded by People’s Daily Online on January 31, 2013 that the number of dairy cattle in China was over 14 million as of 2012. However, China’s annual per capita dairy consumption is significantly lower than developed countries. According to Hongbin Gao, the Chairman of Dairy Association of China, China’s annual per capita dairy consumption is 32.4 kilograms, which accounts for less than one third of the average consumption globally.

Notwithstanding current consumption rates, the dairy market in China has great potential. According to China’s 12^th Five-Year National Economic and Social Plan (2011-2015) of China, it is anticipated that the output of dairy raw material will be 50 million tons, and the output of dairy products will be 27 million tons by 2015. The Chinese government has increased efforts to regulate the industry and the industry has significantly increased barriers to entry.

Competitive Advantages

We believe that our competitive advantages include the following:

Unique and scalable distribution model. We employ a multi-tiered distribution model whereby we primarily sell our products to provincial-level distributors who sell to our end-customers either directly or indirectly through county-level and village-level distributors. We currently have 25 provincial-level distributors. For the most part, each distributor covers a single province, while the rest of them cover either multiple provinces or a portion of one province (in the case of Hebei, Inner Mongolia and Xinjiang). We select our provincial-level distributors based on criteria including experience, reputation, network coverage and financial strength, and we usually enter into multi-year distribution contracts with them. All of our contracts with provincial-level distributors include mutual exclusivity provisions whereby the provincial-level distributors are not allowed to distribute competing products, and we grant the distributor exclusive sales rights in the designated territory. We are careful to ensure that the sales territories of our provincial-level distributors do not overlap.

Our provincial-level distributors sell our products directly to county-level distributors, to key accounts, such as large farms, and farmers through promotional events. County-level distributors sell our products to independently owned Branded Retailers, which serve as village-level retailers of our products (“Branded Retailers”), large farms, and farmers through promotional events. Branded Retailers distribute our products directly to farmers in rural villages and towns. Most of them are privately owned individual agriculture stores while some have common ownership or belong to store chains. None of these Branded Retailers is owned or controlled by us. They are typically small in size and distribute a variety of agriculture-related products, including fertilizer, seeds and pesticides to farmers in the surrounding areas.

As of December 31, 2013, we sold our products primarily through 25 provincial-level distributors. There are 810 county-level distributors and 36,100 independently owned Branded Retailers across almost all provinces of China.

We believe that our unique distribution model has the following benefits:

We leverage our distributors’ local knowledge and resources to enable quicker entry into new markets, to more efficiently reach potential Branded Retailers and to better communicate with farmers.

We have a highly scalable and replicable distribution model that can be replicated in new markets. We are thus uniquely situated amongst our competitors to take advantage of China’s growing market for agriculture nutrients. The significant expansion of our distribution network since 2008 has paralleled our robust growth in sales during the same period.

Our “Branded Retailer” concept creates a highly synergistic partnership among Yongye, our distributors and our Branded Retailers. We believe Branded Retailer owners embrace the Branded Retailer concept because they typically experience higher customer traffic and generate more sales as their stores become more prominent from the promotional displays and technical support we provide to them. We believe that our advertising campaign also effectively develops sales for distributors by attracting store owners to join our Branded Retailer network. With satisfied distributors and Branded Retailers, we are able to quickly scale up our distribution network and provide better service to our end-customers.

Brand name recognition supported by integrated marketing campaign. Both of our regular crop and animal nutrient products are marketed under the name “Shengmingsu” and we believe that our integrated marketing campaign has led to widespread recognition of our brand name by our end-customers.

Our strategy is to build the Yongye brand by getting closer to farmers through both media channels as well as indoor and outdoor displays. We work with our distributors to coordinate advertisements on local television channels and in local newspapers. From 2009, we began running promotional campaign on CCTV-7, which is the national agriculture channel in China. Our Branded Retailers are decorated with our signature color and banners, and prominently display our products alongside promotional display materials that we provide. Working together with our distributors, we create posters with village-specific case studies that demonstrate a farmer’s incremental revenue, original investment and harvesting time saved from using our products. We believe these case studies have been a highly effective manner of marketing as they translate our product efficacy directly into dollar terms and are communicated through real stories which are connected with our end-customers.

In addition, we support our distributors and farmers by providing product training courses, conferences and seminars, product demonstrations, and educational pamphlets, magazines and infomercials.

Patented formulae and proprietary manufacturing processes for high-quality fulvic acid based nutrients backed by strong research and development platform. Our products are based on patented formulae that combine a fulvic acid base with other macro and micro nutrients. Our crop nutrient formula was designed to enhance crop yield by increasing absorption of fertilizer and micro nutrients and providing key micro nutrients and NPK in key growth stages of crops. In addition, our engineers designed our manufacturing process to overcome technical barriers associated with the extraction of fulvic acid and the blending of our products on an industrial scale so that micro and macro nutrients in our products are water soluble and can be easily absorbed by crops after being sprayed on the leaves. We have been granted nine 20-year invention patents by the State Intellectual Property Office in the PRC since 2005, which cover formulae for our various liquid crop nutrient products and powder animal nutrient product, as well as the manufacturing process for extraction and blending of our products. In addition to seeking patent protection, we maintain proprietary know-how related to extraction and blending processes as trade secrets. Both of our crop and animal nutrient products are protected by invention patents in China. They also won the top award for consecutive years at China Yangling Agricultural Hi-Tech Fair, one of the most prestigious agriculture trade fairs in China.

In addition to our internal research and development team with extensive experience in the agricultural research fields, we have established project partnerships with certain prestigious national and local agricultural universities and research institutes, including Chinese Academy of Agricultural Sciences, Beijing University of Agriculture, Inner Mongolia Agricultural University, and Inner Mongolia Academy of Agricultural Sciences.

Compelling value proposition of return on investment for farmers. Our patented crop product and animal product formulae are the results of large scale experimentation. Our internal experimentation on our products demonstrates increased production yields, shorter harvest times, extended life cycles, and enhanced crop taste, nutrition and appearance. As mentioned earlier, the IMARSTB concluded that our product can increase overall yields of staple crops, such as wheat and rice, and vegetables by 10 - 20% and 15 - 30%, respectively, while improving product quality.

Strength and experience of management team. We believe that our management team collectively has a great deal of experience in our relatively new market for agricultural nutrient products in China. Our chief executive officer, Mr. Zishen Wu, in particular, is considered a very successful entrepreneur in our industry. Additionally, our senior management team has many years of experience and strong education background in the Chinese agricultural industry, marketing and distribution, finance and general management.

Growth Strategies

Our strategic growth plan for 2014 consists of the following key elements.

Geographic expansion and higher penetration of our distribution and Branded Retailer network. We believe that there is significant market potential for our products across China and we plan to continue to enhance our coverage and penetration of the Chinese market in order to increase our market share and commercial opportunities. We believe this will further expand our immediate and long term revenue base. We believe that we can benefit from the growing market demand resulting from the increased need to boost agricultural productivity. In addition to driving further penetration in our existing markets, we plan to expand our distribution network in new geographic markets. We will also work to ensure continued successful replication of our Branded Retailer model in new markets by continuing to provide our distributors with value-added technical product and sales leadership training, and our integrated marketing campaigns support.

Enhance brand recognition on national and local levels. We will invest more resources on marketing efforts to enhance our brand image and increase our exposure in target markets, such as advertisement on national and local media and providing training and technical support to various levels of distributors, Branded Retailers and farmers.

Diversify product offering. We expect to offer new products in our distribution network, leveraging the strength of our channel and brand. In 2014, we are introducing a new water soluble humic acid product to diversify our product mix.

Share Exchange

We were incorporated in the State of Nevada on December 12, 2006 under the corporate name “Golden Tan, Inc.” At that time, we were engaged in the business of offering sunless tanning services and selling tanning lotions. In 2008, we began to pursue an acquisition strategy, whereby we sought to acquire an undervalued business with a history of operating revenues in markets that provide room for growth.

On April 17, 2008, we entered into a share exchange agreement with Fullmax Pacific Limited, a company organized under the laws of the British Virgin Islands (“Fullmax”), the shareholders of Fullmax, who together owned 100% of the equity of Fullmax, and our principal shareholder. Pursuant to the share exchange agreement, the Fullmax shareholders transferred to us 100% of Fullmax’s equity in exchange for 11,444,755 shares of our common stock (the “Share Exchange”). As a result of the Share Exchange, Fullmax became our wholly owned subsidiary.

Restructuring

At the time we acquired Fullmax, it had acquired certain assets that form the basis of our trading business from Inner Mongolia Yongye Biotechnology Co., Ltd., a company organized under the laws of the PRC (“Inner Mongolia Yongye”), and owned and controlled by Zishen Wu, our chairman, chief executive officer and president. The first step in this process occurred in November 2007, when Fullmax’s wholly-owned subsidiary, Asia Standard Oil Limited, a Hong Kong company (“Asia Standard”) entered into a Sino-foreign cooperative joint venture agreement with Inner Mongolia Yongye (the “2007 CJV Agreement”). The CJV which was formed was Yongye Nongfeng Biotechnology Co., Ltd (“Yongye Nongfeng”).

In connection with a September 2008 private placement of our common stock, we agreed with the investors participating in the transaction to complete the remaining steps necessary for acquiring the assets that form the basis of our operations from Inner Mongolia Yongye. We completed these remaining steps, which we refer to as the “Restructuring” in the Annual Report on Form 10-K, in October 2009. Prior to the Restructuring, Inner Mongolia Yongye owned and operated the principle assets of our business and had been in the business of researching, producing and selling its own fulvic acid based crop and animal products since 2003. Until Yongye Nongfeng obtained the required license to produce our products in May 2009, Inner Mongolia Yongye manufactured such products exclusively for us.

As part of the Restructuring and pursuant to the 2007 CJV Agreement, Inner Mongolia Yongye transferred to Yongye Nongfeng its management and other personnel, and the land, buildings and equipment comprising its manufacturing facility. In addition, Inner Mongolia Yongye assisted with obtaining the necessary governmental approvals required for these transfers, as well as with the issuance in May 2009 by the PRC Ministry of Agriculture of a fertilizer license, the patented technology under which was formerly held in the name of Inner Mongolia Yongye, to Yongye Nongfeng.

All of our operations are conducted through Yongye Nongfeng, and its 100% owned subsidiary Yongye Fumin. Pursuant to the 2007 CJV Agreement, among other things, (i) Asia Standard Oil was entitled to 90% of the profits distribution of Yongye Nongfeng and Inner Mongolia Yongye was entitled to 10%; (ii) upon the liquidation of Yongye Nongfeng and after its liquidation committee pays up all of its outstanding debts, the remaining properties were to belong to Inner Mongolia Yongye; and (iii) the board of Yongye Nongfeng shall consist of three directors, one of whom was to be appointed by Asia Standard Oil and two of whom were to be appointed by Inner Mongolia Yongye.

On December 1, 2007, Asia Standard Oil entered into a letter agreement (the“2007 Letter Agreement”) with Inner Mongolia Yongye, pursuant to which Inner Mongolia Yongye unconditionally and irrevocably granted Asia Standard Oil the right to nominate one of the two directors of Yongye Nongfeng that Inner Mongolia Yongye was entitled to appoint under the 2007 CJV Agreement and agreed to appoint such director at Asia Standard Oil’s nomination and request. Asia Standard Oil and Inner Mongolia Yongye have complied with the terms of the 2007 Letter Agreement, which still remains effective.

On June 5, 2009, Asia Standard Oil and Inner Mongolia Yongye entered into an amended cooperative joint venture contract to revise the profit-sharing percentage such that Asia Standard Oil and Inner Mongolia Yongye were entitled to 99.5% and 0.5% of Yongye Nongfeng’s profits distribution respectively.

On October 10, 2009, Asia Standard Oil and Inner Mongolia Yongye entered into the restated cooperative joint venture contract dated October 10, 2009 (the “2009 CJV Agreement”). Pursuant to the terms of the 2009 CJV Agreement, we are entitled to 95% of the profits of Yongye Nongfeng and Inner Mongolia Yongye is entitled to 5%. The 2009 CJV Agreement also provides that upon the liquidation of Yongye Nongfeng and after its liquidation committee pays up all of its outstanding debts, the remaining properties shall be distributed to its shareholders according to their respective profit distribution proportions of Yongye Nongfeng (thus, under the 2009 CJV Agreement, Asia Standard Oil would receive 95% of the assets).

Zishen Wu, our chairman, president and chief executive officer, owns 95.0% of the outstanding equity interests of Inner Mongolia Yongye and, therefore, is entitled to a portion of the profits of Yongye Nongfeng that are attributed to Inner Mongolia Yongye. Mr. Wu is the chairman of Inner Mongolia Yongye.

The following chart reflects our current organizational structure as of the date hereof. The ownership percentages of Yongye Nongfeng are approximations.

Pursuant to the terms of the 2009 CJV Agreement we are entitled to 95% of the profits distribution of Yongye Nongfeng and Inner Mongolia Yongye is entitled to 5%. In preparing the consolidated financial statements, Inner Mongolia Yongye was noncontrolling interest holder as of December 31, 2011, 2012 and 2013.

The Articles of Association of Yongye Nongfeng provide that the termination and dissolution of Yongye Nongfeng shall be unanimously approved by its board of directors. In addition, subject to PRC law, each shareholder has the right to terminate Yongye Nongfeng in certain circumstances, such as the inability of Yongye Nongfeng to continue operations due to the failure of the other shareholder’s failure to fulfill its obligations under the 2009 CJV Agreement and the Articles of Association of Yongye Nongfeng.

On July 20, 2010, Yongye Nongfeng set up a wholly-owned subsidiary, Inner Mongolia Yongye Fumin Biotechnology Co., Ltd. (“Yongye Fumin”), with the paid in capital of US$14,731,880 (equivalent to RMB100 million). Yongye Fumin is engaged in the manufacturing and sales of fulvic acid based liquid and powder nutrient compounds. Yongye Fumin expands our production capacity for fulvic acid based liquid and powder nutrient compounds. Yongye Fumin became fully operational since the first quarter of 2011.

Recent Developments

On September 23, 2013, the Company entered into an agreement and plan of merger (the “Merger Agreement”) with Full Alliance International Limited, a British Virgin Islands company (“Holdco”), Yongye International Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands and a wholly-owned subsidiary of Holdco (“Parent”), and Yongye International Merger Sub Limited, a Nevada corporation and a wholly owned subsidiary of Parent (“Merger Sub”, together with the Company, Holdco and Parent, the “Parties” and any one of them a “Party”). Pursuant to the Merger Agreement, upon the terms and subject to the conditions thereof, at the effective time of the merger, Merger Sub will be merged with and into the Company, the Company will become a wholly-owned subsidiary of Parent and each of the Company’s shares of common stock issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive US$6.69 in cash without interest, except for (i) shares owned by Holdco, Parent and Merger Sub, including shares of common stock and Preferred Shares to be contributed to Parent by Holdco, Mr. Zishen Wu, Prosper Sino Development Limited and MSPEA, immediately prior to the effective time of the merger pursuant to a contribution agreement, dated as of September 23, 2013, among Parent, Holdco, Mr. Zishen Wu, Prosper Sino Development Limited and MSPEA (except that, with respect to Prosper Sino, only such shares designated as “Prosper Sino rollover shares” in the preliminary proxy statement in connection with the special meeting of stockholders will be contributed), and (ii) shares of common stock held by the Company or any subsidiary of the Company ((i) and (ii) collectively, the “Excluded Shares”), which will be cancelled for no consideration and cease to exist as of the effective time of the merger. Currently, Holdco, Mr. Zishen Wu, Prosper Sino Development Limited and MSPEA, collectively beneficially own approximately 33.1% of the Company’s outstanding shares of common stock, on an as converted basis.

The Merger Agreement contained representations and warranties of the Parties that are, in general, customary for a transaction of this type. The assertions embodied in those representations and warranties were made solely for purposes of the contract among the Parties and may be subject to important qualifications and limitations agreed to by the Parties in connection with the negotiated terms. Moreover, some of those representations and warranties may not be accurate or complete as of any specified date, may be subject to a contractual standard of materiality different from those generally applicable to investors or may have been used for purposes of allocating risk among the Parties rather than establishing matters as facts.

The Parties have also agreed to certain covenants, including covenants requiring the Company to conduct its business in the ordinary course of business consistent with past practice in all material respects and use commercially reasonable efforts to preserve substantially intact its business organization and relationships with governmental authorities, customers, suppliers and other persons with which it has material business relations and keep available the services of its current officers and key employees through the effective time of the merger, except as expressly provided in the Merger Agreement.

The Merger Agreement also included customary termination provisions for both the Company and Parent. In specified circumstances, if the Merger Agreement is terminated, the Company shall pay Parent a termination fee in the amount of $4,000,000 or $2,000,000, as applicable, or receive from Parent a termination fee in the amount of $10,000,000. The Merger Agreement also provides that if the required stockholder approvals shall not have been obtained at the stockholders’ meeting, Parent shall reimburse the Company’s expenses up to $2,000,000.

The Company’s Board of Directors, acting upon the unanimous recommendation of a special committee of the Board of Directors comprised solely of independent and disinterested directors (the “Special Committee”), approved and adopted the Merger Agreement and recommended that the Company’s shareholders vote to approve the Merger Agreement. The Special Committee negotiated the terms of the Merger Agreement with the assistance of legal and financial advisors to the Special Committee.

The merger is subject to closing conditions including, but not limited to: (a) adoption of the Merger Agreement by the (i) affirmative vote of the holders of at least a majority of the issued and outstanding shares of common stock and preferred shares of the Company, voting together as a single class, with the number of votes the holders of preferred shares were entitled to vote equal to the number of shares of common stock into which such preferred shares were convertible, as determined in accordance with the articles of incorporation of the Company, (ii) affirmative vote or consent of the holders of at least a majority of the issued and outstanding preferred shares of the Company and (iii) affirmative vote of the holders of at least a majority of the issued and outstanding shares (other than the Excluded Shares); (b) the absence of any order, injunction or decree preventing or making illegal the consummation of the merger; (c) the truth and correctness of each Party’s representations and warranties at closing (subject to materiality qualifiers); (d) the compliance of each Party with its covenants in all material respects, and (e) the absence of any material adverse effect on the Company.

On January 3, 2014, the Company issued a press release announcing that it has established the close of business on January 10, 2014 as the record date for its special meeting of stockholders entitled to receive notice of and to vote at its upcoming special meeting of stockholders.

In connection with the special meeting of stockholders to approve the Merger Agreement, the Company filed a definitive proxy statement with the Securities and Exchange Commission (the "SEC") on January 9, 2014, and mailed the definitive proxy statement to its stockholders.

The Company’s special meeting of stockholders was held on February 19, 2014, and the stockholders approved the adjournment of the special meeting and the special meeting was adjourned until 2:00 p.m. China time, on March 5, 2014 at Jinshan Economic Development Zone, Hohhot City, Inner Mongolia, the People’s Republic of China. The special meeting was adjourned to provide the Company with additional time to solicit proxies from its stockholders in favor of the proposal to approve the Merger Agreement.

Subsequently, the adjourned special meeting of stockholders was held on March 5, 2014, and the proposal to approve the Merger Agreement did not receive approval from holders of at least a majority of the issued and outstanding shares of the Company (other than the Excluded Shares). The Merger Agreement was therefore not approved by the Company’s stockholders.

On April 9, 2014, the Parties entered into an amendment (the “Amendment”) to the Merger Agreement (the Merger Agreement as so amended, the “Amended Merger Agreement”).

The Amendment provides for an increase in the per share merger consideration to be paid to holders of shares of common stock of the Company under the Amended Merger Agreement, other than the Excluded Shares, from $6.69 per Share to $7.10 per Share.

The Amendment revises the requirement that the Merger Agreement be approved by the affirmative vote of the holders of at least a majority of the issued and outstanding shares of common stock of the Company (other than the Excluded Shares) to instead require that the Amended Merger Agreement be approved by the affirmative vote of the holders of at least a majority of the issued and outstanding shares of common stock of the Company (other than the Excluded Shares) that are present in person or by proxy and voting for or against approval of the Amended Merger Agreement at the stockholders’ meeting.

The Amendment also provides for an increase in the maximum amount of the Company’s expenses in connection with the transactions contemplated by the Merger Agreement reimbursable by Holdco and Parent under certain circumstances in which the Amended Merger Agreement is terminated from US$2,000,000 to US$3,000,000 and extends the termination date from June 23, 2014 to September 22, 2014 such that, subject to certain conditions, the Amended Merger Agreement may be terminated and the merger may be abandoned by either the Company (upon the approval of the special committee of the Company’s Board of Directors) or Parent if the proposed merger is not consummated on or before September 22, 2014.

Other than as expressly modified by the Amendment, the Merger Agreement remains in full force and effect as originally executed on September 23, 2013.

Our Principal Products and Services

The base of our products is our own fulvic acid base compound, which is extracted from humic acid. Fulvic acid binds itself to and strengthens the cell walls of crop and cell membranes of animals, thereby increasing the ability of cells to retain vitamins and minerals and to fight sickness and disease. Fulvic acid also acts as a transport agent by delivering nutrients that stimulate cell growth, increasing oxygen intake into cells, and binding with and removing toxins such as heavy metals and other pollutants. These help with better nutrient uptake in crop and digestion in animals.

Liquid Crop Nutrient Product

Our liquid crop nutrient product consists of our fulvic acid compound base and nutrients that crops need to grow, and can be applied to various types of crops by spraying the liquid product directly on the crops after dilution with water, typically in conjunction with fertilizers and pesticides. We primarily sell our crop product by 100 milliliter bottle and 10 liter container. In 2012, we launched two new crop nutrient products, a crop seed nutrient product and a crop root nutrient product. The crop seed nutrient product helps crop seeds sprout and improves the growth of roots, and the crop root nutrient product improves crop roots’ ability to absorb water and fertilizers and enhance crop resistance against drought, freezing, diseases, and stalk leaning. Our new products for crop seeds and roots are named “Zhongbaosheng” and “Qianggenbao” respectively. We are also examining market opportunities for introducing diversified crop nutrient products targeted at corn, peppers, wheat, rice, cucumbers, tomatoes, cotton, potatoes, sunflowers, grapes, tropical fruits and flowers. We believe that when used correctly, our product can help farmers more efficiently use fertilizers and pesticides, which may reduce the farmers’ overall input costs and environmental damage to the farmers’ land.

Powder Animal Product

Our animal nutrient product is a powder which consists of our fulvic acid compound base and additional nutrients and Chinese herbs that reduce inflammation. Our animal products are currently targeted at and administered to dairy cows through mixture with feeds. We sell our animal product, which are mainly packaged in bags, with each bag containing twenty, 300 gram packets.

Our animal product’s ability to reduce inflammation makes it attractive to Chinese farmers because of the prevalence of mastitis among dairy cows, an inflammation of the teats that slows down milk production, which is common in the global dairy industry. The Chinese Journal of Veterinary Medicine has reported that, in China, 50-80% of the cows have some form of mastitis, which is typically treated with antibiotics according to the “Handbook of Organic Food Safety and Quality” (International Standard Book Number 0849391547). Although antibiotics can clear up bacterial infections when used correctly, overuse of antibiotics can lead to drug-resistant strains of bacteria and antibiotics kill healthy gut bacteria which is vital to a healthy immune system. Our animal product can help Chinese farmers reduce costs and problems associated with the use of antibiotics to treat mastitis.

Our internal studies show that administration of our animal product to cows’ increases milk production and milk quality, improves cows’ immunity, reduces mastitis, decreases the need for antibiotics, and improves cows’ digestion and growth rate.

We are evaluating the prospects for introducing animal products designed for other livestock.

Production

Raw Materials

Our product’s core compound, fulvic acid, is extracted from humic acid. Humic acid is formed by the biodegradation of dead organic matter which is buried and compressed under soil, and humic acid is mostly contained in peat, lignite coal, leonardite coal, etc. Our production process primarily involves the extraction of fulvic acid and then the blending of fulvic acid with macro and micro nutrients based on our patented formulae. The molecular structure of fulvic acid is smaller than humic acid, which enables fulvic acid to be more easily absorbed by crop leaves.

Currently, our key raw materials for fulvic acid are lignite coal and humic acid purchased from third party suppliers, and the prices of lignite coal and humic acid are affected by factors such as market demand, quality and transportation cost. We also outsource fulvic acid extraction work to third party factories that use our raw materials and follow our manufacturing procedures. The humic acid we use comes from top grade lignite coal which is mined in Inner Mongolia and is typically sold on a per ton basis. We currently procure lignite coal from independent third party suppliers in Inner Mongolia for our manufacturing needs. Prior to 2011, the key raw material for our products was humic acid which was procured from third party suppliers. Upon the completion of our Wuchuan Facility at the end of 2010, we have been able to produce our products by extracting fulvic acid in-house from lignite coal and no longer completely rely on humic acid from intermediaries. Other raw materials used in our products include chemicals used in our extraction and blending processes as well as macro and micro nutrients.

Fluctuations in raw material costs will affect our cost of sales and gross profit margin, and we may not be able to pass such increased costs on to our distributors and then to our end customers.

Intellectual Property

Our products are based on patented formulae that combine a fulvic acid base with other macro and micro nutrients. Our crop nutrient product formula was designed to enhance crop yield by increasing absorption of fertilizer and micro nutrients and providing key micro nutrients and NPK in key growth stages of crops. In addition, our engineers designed our manufacturing process to overcome technical barriers associated with the extraction of fulvic acid and the blending of our products on an industrial scale so that micro and macro nutrients in our products are water soluble and can be easily absorbed by crops after being sprayed on the leaves. We have been granted nine 20-year invention patents by the State Intellectual Property Office in the PRC since 2005, which cover formulae for our various liquid crop nutrient products and powder animal nutrient product, as well as the manufacturing process for extraction and blending of our products. In addition to seeking patent protection, we maintain proprietary know-how related to extraction and blending processes as trade secrets.

Packaging and Shipment

Our liquid crop product is primarily packaged in 100 milliliter bottles and 10 liter containers. Our powder animal product is mainly packaged in bags, with each bag containing twenty 300 gram packets. Each type of packaging material, along with packaging labels, are purchased from several separate manufacturers as these packaging materials are readily available in the market.

After packaging our products at our manufacturing facility, we engage third parties to ship them to our distributors and we bear the risk of loss until our products are received by our distributors.

Quality Control

We have implemented and maintain strict quality control procedures. In July 2007, Inner Mongolia Yongye received ISO 9001:2000 accreditation after a third party audit of its quality control procedures at its manufacturing facility. In the Restructuring, Inner Mongolia Yongye transferred its manufacturing facility and personnel to Yongye Nongfeng. Yongye Nongfeng and Yongye Fumin both received ISO 9001:2000 accreditation following a similar third party audit.

Production Facility

Our product’s core compound fulvic acid is extracted from humic acid, which is in turn derived from lignite coal. Our production process primarily involves the extraction of fulvic acid and then blending it with macro and micro nutrients based on our patented formula. The molecular structure of fulvic acid is smaller than humic acid, which enables fulvic acid to be more easily absorbed by crop leaves.

We have two production facilities in Hohhot City, Inner Mongolia, with one located in Jinshan Industrial Park (the “Jinshan Facility”) and one in Wuchuan County (the “Wuchuan Facility”). Prior to the fourth quarter of 2010, the Jinshan Facility was our sole manufacturing facility and the Jinshan Facility uses purchased humic acid as the key raw material to produce our products. Our Wuchuan Facility was completed in the fourth quarter of 2010 and directly utilizes lignite coal as the key raw material to produce fulvic acid and bypasses intermediaries from whom we used to purchase humic acid. Our Wuchuan Facility also use fulvic acid from third party factories to which we outsourced extraction work. Those third party factories perform extraction work by using our raw materials and following our manufacturing instructions.

Currently, we procure lignite coal from independent third party suppliers in Inner Mongolia. In March 2010, in order to secure a long-term supply of humic acid, we entered into an agreement to acquire a mineral resource project in Wuchuan County, Inner Mongolia. In August 2011, Yongye Fumin, our wholly-owned subsidiary, obtained a Mineral Resource Exploration Permit for this project site in Wuchuan County, Inner Mongolia, which was issued by the Inner Mongolia Ministry of Land and Resources. Such approval granted us exclusive exploration rights for this project site for an initial period of three years beginning August 2, 2011. We are in the process of applying for the governmental approval for the Mineral Right and are preparing for the relevant reports, including but not limited to a Geological Report and a Geological Exploration Report. In June 2012, we commenced a detailed exploration process to obtain a Geological Exploration Report. The detailed exploration process has not been completed. If we cannot receive the report before the exploration right expires, we would apply for an extension from the local authority. We believe the costs to be incurred in completing the remaining administrative procedures and obtaining government approvals are not significant. Upon the granting of the Mineral Right, we will be able to further vertically integrate our operations.

In the third quarter of 2012, our Wuchuan Facility increased its manufacturing capacity. After the capacity expansion, we now have a total of approximately 70,000 tons of combined annual design production capacity at our Wuchuan and Jinshan Facilities.

Because of the proprietary nature of our products and manufacturing processes, we customized the core production components of our manufacturing facilities to enable capacity flexibility. Our design capacity is calculated by us based on key assumptions, including 300 days of operation in a year and normal manufacturing conditions. Under actual manufacturing conditions and based on the seasonality in our business, our production facilities have the flexibility to adjust actual production to levels higher than our stated theoretical design capacities. For instance, during the past several years, our production output during the peak second and third quarters have consistently exceeded the design capacity.

Marketing and Branding

Our end-customers make their purchase decisions primarily based on actual demonstrations of the efficacy of our product, typically over an entire growing season. Accordingly, our sales and marketing strategies primarily focus on local demonstration sites at which locally-grown crops are planted side-by-side with and without our liquid crop nutrient applied. In executing our marketing strategy, Branded Retailers play a key role in setting up these demonstration sites, marketing our products and providing technical support to farmers. Branded Retailers are typically trained by our distributors who receive regular and ongoing guidance from our sales and marketing and research and development teams. In addition, we hold large-scale training programs in various locations annually where we invite Branded Retailers from around China to directly receive product, sales and marketing training.

In addition, our internal sales team frequently organizes presentations and seminars targeted at provincial-level and county-level distributors in order to convey our sales strategy effectively to them. We also designed a series of incentive programs to motivate our distributors to drive performance and enhance their loyalty to our Company, including sending selected distributors to a Yongye-sponsored executive training program at Tsinghua University, one of China’s most prestigious academic institutions.

At the national level, we have been conducting a variety of marketing and branding campaigns to enhance our brand recognition among not only our end-customers but also our existing and potential distributors and Branded Retailers. We are amongst the very few companies in our industry that actively sponsor CCTV (China national TV channel) agricultural programs. We also use local TV stations, agricultural publications and newspapers to carry our advertisements. In addition, we are currently working with a national celebrity, Wang Baoqiang, as our spokesperson, to enhance our product image.

Distribution & Sales Network

We employ a multi-tiered distribution model whereby we primarily sell our products to provincial-level distributors who in turn sell to our end-customers either directly or indirectly through county-level distributors and independently owned Yongye branded stores (village-level distributors) (“Branded Retailers”). We currently have 25 provincial-level distributors, most of which cover a single province, with the remaining distributors covering either multiple provinces or a portion of one province (in the case of Hebei, Inner Mongolia and Xinjiang). We select our provincial-level distributors based on criteria including experience, reputation, network coverage and financial strength, and we usually enter into multi-year distribution contracts with them. All of our contracts with provincial-level distributors include mutual exclusivity provisions whereby the provincial-level distributors are not allowed to distribute competing products, and we grant the distributor exclusive sales rights in the designated territory. We are careful to ensure that the sales territories of our provincial-level distributors do not overlap.

Our provincial-level distributors sell our products directly to county-level distributors, to key accounts, such as large farms, and farmers through promotional events. County-level distributors sell our products to independently owned Branded Retailers, large farms, and farmers through promotional events. Branded Retailers distribute our products directly to farmers in rural villages and towns. Most of the Branded Retailers are privately owned individual agriculture stores while some have common ownership or belong to store chains. None of these Branded Retailers are owned or controlled by us. They are typically small in size and distribute a variety of agriculture-related products, including fertilizer, seeds and pesticides to farmers in the surrounding areas.

The following chart illustrates our multi-tiered distribution model:

To ensure consistent pricing and channel margins nationwide, Branded Retailers are typically granted exclusive sales rights for our products in their authorized territory at the village or town level. We also provide the Branded Retailers with our distinct signage with the “Yongye Shengmingsu” logo which typically comprises the entire exterior storefront of Branded Retailers. Branded Retailers normally display our products in prominent shelf spaces and they are responsible for providing technical support to farmers and setting up demonstration sites for our products.

As of December 31, 2013, our products were sold in 30 provinces, autonomous regions and centrally-administered municipalities across China. We sell our products to 25 provincial-level distributors, who then sell our products to 810 county-level distributors and 36,100 Branded Retailers. Our multi-tiered distribution model allows us to penetrate the vast and highly fragmented rural area of China by utilizing our internal sales team to manage and leverage thousands of sales personnel at our provincial-level distributors, county-level distributors and Branded Retailers. Our internal sales team actively manages our multi-tier distribution network by participating in major distributor sales activities and providing training presentations and seminars.

Below is a table setting forth the expansion of our Branded Retailer network.

Branded Retailer by Region	Year End 2013		Year End 2012		Year End 2011

Hebei/Beijing/Tianjin		4,660		4,578		3,935
Inner Mongolia		1,255		1,136		765
Shandong		3,455		3,434		3,358
Guangdong/Hainan		1,414		1,306		941
Henan		2,991		2,889		2,456
Heilongjiang/Jilin/Liaoning		2,599		2,533		2,180
Xinjiang		2,556		2,437		2,097
Hubei/Hunan		3,240		3,240		2,978
Gansu/Qinghai		869		865		920
Jiangsu		2,492		2,447		1,936
Shanxi		1,803		1,745		1,310
Anhui		1,508		1,494		1,420
Shaanxi		1,766		1,691		1,491
Sichuan/Chongqing		1,125		1,105		1,044
Jiangxi/Fujian		1,417		1,346		1,006
Yunnan/Guizhou		1,535		1,418		1,076
Zhejiang		519		510		252
Guangxi		520		508		472
Ningxia		368		368		441
Shanghai		8		8		8
Total		36,100		35,058		30,086

Customers

Since our inception, we have worked to build and maintain our sales and distribution networks. We have established good relationships with capable agricultural products distributors.

We usually sign three year contracts with distributors that we identify and choose based upon their overall business strength, credit worthiness and proven ability to develop their local markets. We generally renew those contracts with distributors before expiration.

Competition

While we compete with both nationwide and local manufacturers of humic or fulvic acid crop nutrients, we believe that we are a clear market leader. The Chinese agriculture industry and the retail market for agricultural goods are highly fragmented. As at the end of January 2014, there were more than 5,600 fertilizer products registered in the PRC Ministry of Agriculture’s registry. We mainly compete directly with producers of humic or fulvic acid based products, of which there were around 1,200 registered as at the end of January 2014.

In addition to humic or fulvic acid based crop nutrient products, our nutrient products also compete with other liquid fertilizers applied on crop leaves, such as amino acid-based nutrients and other liquid fertilizers containing NPK or minerals as many farmers view such liquid fertilizers as a single product category.

We believe that with our proven product efficacy, premium brand and nation-wide distribution network, we are well positioned to maintain our leadership position in this market.

Research and Development

Our research and development process begins with an internal evaluation of market demand for new types of products. After we initially identify market opportunities for new products, we will, either alone or in cooperation with our research partners, conduct research activities and develop new products. Once our research and development activities are complete, we make a final judgment regarding whether and when to bring the new product to market based upon a second evaluation of market demand, an estimate of the time and expense that will be required to obtain any necessary governmental approvals, the desirability for obtaining patents or feasibility of protecting our intellectual property by other means, and the results of market testing. The entire process normally takes anywhere from one to five years, depending on the product.

We are currently researching and market testing various customized products for crop and animals and our research and development expenses mainly consisted of field test expenses for new products, tests on different crops and tests in various geographic markets. We have already officially introduced two new products to the market in the first quarter of 2012. One new product is to help crop seeds to sprout and grow, and the other is to improve crop roots’ ability to absorb water and fertilizers and to enhance crop resistance against drought, freezing, diseases, and stalk leaning. We are market testing a new water soluble humic acid product to help improve crop yield. We are also examining market opportunities for introducing liquid crop nutrient products specifically targeted at corn, peppers, wheat, rice, cucumbers, tomatoes, cotton, potatoes, sunflowers, grapes, tropical fruits and flowers, though no assurance can be given that we will ultimately bring to market the products that we are currently researching or market testing. As to animal products, we are market testing the products used for livestock such as pig, chickens and sheep.

Intellectual Property

Our products are based on patented formulae that combine a fulvic acid base with other macro and micro nutrients. Our formulations were designed to enhance crop yield by increasing absorption of fertilizer and micro nutrients and providing key micro nutrients and NPK in key growth stages of crops. In addition, our engineers designed our manufacturing process to overcome technical barriers associated with the extraction of fulvic acid and the blending of our products on an industrial scale so that micro and macro nutrients in our products are water soluble and can be easily absorbed by crops after being sprayed on the leaves. We have been granted nine 20-year invention patents by the State Intellectual Property Office in the PRC since 2005, which cover formulae for our liquid crop nutrient product and powder animal nutrient product, as well as the manufacturing processes for extraction and blending of our products. In addition to seeking patent protection, we maintain proprietary know-how related to extraction and blending processes as trade secrets.

We have obtained a registered trademark for “Yongye”,“Shengmingsu”, “Zhongbaosheng” and “Qianggenbao” from the Trademark Bureau of the State Administration of Industry and Commerce of the PRC, which is valid till October 2017, April 2020, July 2023, and July 2023, respectively.

In addition to trademark and patent protection law in China, we rely on contractual confidentiality and non-competition provisions to protect our intellectual property rights and brand. We also take further steps to limit the number of people involved in the production process and refer to each ingredient by number rather than name when collecting and preparing them for mixture.

Employees

The table below presents the number of our employees as of the end of the periods indicated.

Category	2013		2012		2011

Administration		85		91		86
Manufacturing		326		325		302
Research & Development		36		38		43
Sales & Supporting		105		117		140
Total		552		571		571

Compared with 2012, the number of administration and sales & supporting staff decreased by 6 and 12 respectively at the year end of 2013, as we optimized administration structure during 2013 and kept less temporary sales staff during the non-peak season at year end 2013.

Governmental Regulation

Our products and services are subject to regulation by central and provincial governmental agencies in the PRC, which require us to obtain licenses and certifications. We are required to renew, pass an examination or make a filing in connection with these licenses and certifications on a regular basis.

Business License

Yongye Nongfeng’s business license enables it to research, develop, process, manufacture, market and sell fulvic acid based crop and animal nutrient products. The business license is valid till January 4, 2018 and is subject to annual examination. In September 2011, Yongye Nongfeng increased its registered capital to US$123,200,000. Yongye Fumin’s business license enables it to research, develop, process, manufacture, market and sell fulvic acid based crop and animal nutrient products, and soil conditioner. The business license is valid till July 19, 2020.

Fertilizer Registration

All fertilizers produced in the PRC must be registered with the PRC Ministry of Agriculture or its local branches at a provincial level. No fertilizer can be manufactured without such registration. As part of the Restructuring process, Yongye Nongfeng applied for its initial fertilizer registration certificate in May 2009 and received it on June 1, 2009. On November 4, 2009, the long-term certificate with a five-year term was issued to Yongye Nongfeng which is expected to be renewed in 2014. Fumin obtained temporary certificate which is expected to be renewed in September 2014.

Additive Pre-mixed Feed Certificate

With respect to manufacturing of our animal nutrient products in the PRC, Yongye Nongfeng is required to obtain an Additive Pre-mixed Feed Certificate. Yongye Nongfeng was granted this certificate in April 2010 by the Ministry of Agriculture, which is valid for a period of five years.

Environmental, Health and Safety Laws

We are in compliance in all material respects with the various laws, regulations, rules, specifications and permits, approvals and registrations relating to human health and safety and the environment, except where noncompliance would not have a material adverse effect on our business, financial condition and results of operations.

Legal Proceedings

On May 26, 2011 and June 3, 2011, we and three of our officers and directors were named in putative class action lawsuits filed in the US Federal District Court for the Southern District of New York alleging, among other things, that we and such officers and directors issued false and misleading information to investors about our financial and business condition. These securities class action complaints generally allege that Yongye’s business was not growing at the rate represented by the defendants and that Yongye’s financial results as reported to the Securities and Exchange Commission were inconsistent with its production capabilities. On December 12, 2011, the securities class actions were consolidated and a consolidated class action complaint was filed alleging we and our officers and directors issued false and misleading information to investors about our financial and business conditions. On March 5, 2012, the plaintiffs voluntarily dismissed this action with prejudice as to themselves as named plaintiffs.

On July 19, 2011 we and certain of our officers and directors were named in a derivative suit filed in the First Judicial District Court of the State of Nevada and for Carson City alleging, among other things, that such directors and officers breached their fiduciary duties to us, misrepresented our earnings, wasted corporate assets and unjustly enriched themselves at the expense of us. After we filed a motion to dismiss the complaint, the plaintiffs voluntarily dismissed the action without prejudice on September 6, 2012. The Court signed the stipulation of dismissal and closed the case on September 7, 2012.

On or about October 18, 2012 and October 22, 2012, five shareholder class action complaints were filed against the Company and certain officers and directors thereof in connection with the preliminary, non-binding proposal letter dated October 15, 2012, from Mr. Zishen Wu, MSPEA and Abax Global Capital (Hong Kong) Limited, to acquire all outstanding shares of common stock of the Company not already owned by those parties, in a going private transaction for $6.60 per share of common stock in cash, subject to certain conditions (the “ Wu Proposal ”). The five complaints are captioned, respectively, Doherty v. Yongye International, Inc., et al., A-12-670343-C; Kirby v. Zishen Wu, et al. , A-12-670468-C; Calisti v. Zishen Wu, et al., Case No. A-12-670758-B; Kong, et al. v. Zishen Wu, et. al., Case No. A-12-670874-B; and Harris v. Yongye International, Inc., et al. , Case No. A-12-670817-B. Each of the complaints was filed in Nevada state court in the District Court, Clark County, and each challenged the Wu Proposal, alleging among other things, that the consideration to be paid in such proposal was inadequate, as was the process by which the proposal was being evaluated. The complaints sought, among other relief, to enjoin defendants from consummating the Wu Proposal and to direct defendants to exercise their fiduciary duties to obtain a transaction that is in the best interests of all of the Company’s shareholders. On or about March 5, 2013, the plaintiff in the Doherty case filed a notice of voluntary dismissal. By stipulation and order, filed on April 23, 2013, the remaining cases were consolidated for all purposes under the caption In re Yongye International, Inc. Shareholders’ Litigation, Case No. A-12-670468-B (the “Consolidation Order”). Under the Consolidation Order, the plaintiffs were directed to file a consolidated complaint within 20 days of the announcement of a definitive merger agreement entered into in connection with any proposed going private transaction. On October 18, 2013 the parties stipulated, and the Court ordered, that the plaintiffs would file the consolidated complaint within 14 days of the filing of the preliminary proxy statement (the “Consolidation Stipulation”). The preliminary proxy statement was filed on October 28, 2013, and the consolidated complaint was filed on November 7, 2013. The consolidated complaint alleges, among other things, that consideration to be paid under the merger agreement is inadequate, that the process leading to the merger agreement was flawed, and that the defendants failed to include all material information in the proxy statement.

By stipulation and order filed on December 13, 2013, the defendants’ time to answer or otherwise respond to the consolidated complaint was adjourned until if and after the transaction contemplated in the merger agreement were to close. On December 23, 2013, the plaintiffs filed a motion to preliminarily enjoin the stockholder vote. The motion was heard on January 27, 2014, and on February 19, 2014 the court issued an order denying the plaintiffs’ motion.

We have reviewed the allegations contained in the complaints and believe they are without merit. We intend to defend the litigations vigorously. As such, based on the information known to us to date, we do not believe that it is probable that a material judgment against us will result.

Property

Our principal executive offices is located at 6^th floor, Xue Yuan International Tower, No. 1 Zhichun Road, Haidian District, Beijing PRC and the telephone number is 86-10-8232-8866. The office space is approximately 1,000 square meters in area. Our manufacturing facilities and the adjacent greenhouses and open field, which serve as a research and product demonstration sites, are in the High Tech Economic Development Zone in Hohhot, Inner Mongolia and Economic Development Zone in Wuchuan County, Inner Mongolia.

There is no private ownership of land in China. All land ownership is held by the government of the PRC, its agencies and collectives. Land use rights can be transferred upon approval by the land administrative authorities of the PRC (the State Land Administration Bureau) upon payment of the required land transfer fee. Yongye Nongfeng owns the land use rights for the land on which our manufacturing facilities, greenhouses and open field are situated, which have a term of 50 years that expires in 2057. We lease our principal executive offices under a lease that provides for one year term.

Executive Office

Our principal executive office is located on the 6^th Floor, Suite 608, at Xue Yuan International Tower, No. 1 Zhichun Road, Haidian District, Beijing, the PRC. Our telephone number at that address is 86-10-8232-8866. Our corporate website is www.yongyeintl .com.

Executive Officers of Our Company

Set forth below is information with respect to our executive officers:

Name	Age	Position
Zishen Wu	45	Chief Executive Officer, President and Chairman
Sam (Yue) Yu	38	Chief Financial Officer

Zishen Wu, Chief Executive Officer, President and Chairman

Mr. Wu is CEO and Chairman of the Board of Directors of the Company and Yongye Nongfeng. Mr. Wu began his career as an official at the State Planning Department in Inner Mongolia from 1984 to 1988. From 1989 to 2000, Mr. Wu worked at Inner Mongolia Constructional Consulting and Investment Co., Ltd., a business entity managing state-owned assets in Inner Mongolia. He also served as directors on the boards of several state-owned companies in textile, dairy and agriculture industries. In 2001, Mr. Wu founded Yongye Technology Company in Inner Mongolia, an entity that distributed consumer electronics. In 2003, Mr. Wu founded Inner Mongolia Yongye Biotechnology Co., Ltd, an entity that engages in business in agriculture industry. Mr. Wu was General Manager of Inner Mongolia Yongye Biotechnology Co., Ltd. from January 2003 to December 2007. Mr. Wu currently is Vice Chairman of Inner Mongolia Federation of Industry and Commerce. Mr. Wu has an EMBA degree from School of Management of Fudan University. We believe that Mr. Wu’s knowledge of the nutrient industry in the PRC brings a unique expertise to the Board of Directors.

Sam Yu, Chief Financial Officer

Mr. Sam (Yue) Yu joined our Company as Chief Financial Officer on March 25, 2009. Before joining our Company, Mr. Yu provided capital market consulting services for Chinese companies listed on NASDAQ. Prior to that, Mr. Yu had served as Chief Operating Officer of Lionax International Investment Holding Ltd., a Chinese company listed on NYSE Euronext, from 2007 to 2008. Mr. Yu also previously held positions with Underwriters Laboratories Inc. in Asia and its Chicago headquarters from 2002 to 2007, including General Manager, Fire and Security Sector, Asia Pacific; General Manager, Suzhou Branch; Business Development Manager; and Manager of Financial Analysis. Mr. Yu also worked at Shenzhen Development Bank. Mr. Yu was awarded a B.S. in Accounting at the University of International Business and Economics in China. He then earned an M.B.A. in General Management from the Stanford Graduate School of Business.

ITEM 1A. Risk Factors

Investing in our securities involves risk. Before making an investment decision, you should carefully consider the following risk factors as well as the risks described in this Annual Report on Form 10-K, or any updates to our risk factors in our Quarterly Reports on Form 10- Q, together with all of the other information appearing in or incorporated by reference into this Annual Report, in light of your particular investment objectives and financial circumstances. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The trading price of our securities could decline due to any of these risks, and you may lose all or part of your investment.

Risks Related to Our Business

We rely on a single product for a substantial portion of our sales and any changes in the market for this product could have a material adverse effect on our business, financial condition and results of operations.

In 2013, 2012 and 2011, sales of our liquid crop nutrient product represented 99%, 99% and 99% of our total sales, respectively. If there is any disruption in the demand for our liquid crop nutrient product, whether as a result of alternative nutrient or fertilizer products being developed, the entry of significant competitors to the marketplace or otherwise, our business, financial condition and results of operations could be materially and adversely affected.

The limited operating history and early stage development of Yongye Nongfeng, and Yongye Fumin may make it difficult to evaluate our business and future prospects.

We established our cooperative joint venture, Yongye Nongfeng, on January 4, 2008, with the intention of carrying out the business of marketing and distributing, and the ultimate goal of manufacturing of our fulvic acid based crop and animal nutrient products. In October 2009, we completed the transfer of manufacturing business of our products from Inner Mongolia Yongye (which is under the control of Mr. Zishen Wu), to Yongye Nongfeng (Mr. Wu is also the CEO of Yongye Nongfeng), including all assets related to the manufacturing, distribution and sales as well as all applicable licenses and titles (the “Restructuring”). On October 10, 2009, the cooperative joint venture contract and Yongye Nongfeng’s articles of association were revised, and the profit distribution percentage and the post-dissolution remaining asset distribution percentage of Inner Mongolia Yongye in Yongye Nongfeng increased to 5% from the previous 0.5%. On July 20, 2010, Yongye Nongfeng set up a wholly-owned subsidiary, Yongye Fumin to expand the production capacity for fulvic acid based liquid and powder nutrient compounds.

The limited operating history and the early stage of development of Yongye Nongfeng and Yongye Fumin may make it difficult to evaluate our business and future prospects. We cannot assure you that Yongye Nongfeng and Yongye Fumin will continue to maintain such profitability or that they will not incur net losses in the future. We expect that our operating expenses will increase as we pursue our growth strategies.

Failure to manage our recent dramatic growth could strain our management, operational and other resources, which could materially and adversely affect our business and prospects.

We have been expanding our operations dramatically and believe we will continue to do so. To meet the demand of our customers, we expect to expand our distribution network in terms of numbers and locations. The rapid growth of our business has resulted in, and if we continue to grow at this rate, will continue to result in, substantial demands on our management, operational and other resources. In particular, the management of our growth will require, among other things:

sufficient working capital and stringent cost controls;

increased sales and sales support activities;

improved administrative and operational systems;

continued responsibility for disclosure of material facts relating to our business;

strengthening of financial and management controls; and

hiring and training of new personnel.

As we continue this effort, we may incur substantial costs and expend substantial resources. We may not be able to manage our current or future operations effectively and efficiently or compete effectively in new markets we enter. If we are not able to manage our growth successfully, our business and prospects may be materially and adversely affected.

In particular, we expect to have a shortage of manufacturing capacity to meet our sales projections and plan to start construction of new manufacturing facilities in the second half of 2014 to address such shortage and seek to meet such sales projections. We expect the capital expenditure requirements for the new manufacturing facilities to be significant and we intend to finance such new manufacturing facilities primarily from existing cash resources of the Company, cash from operations and, to the extent necessary, external debt or equity financing. However, there can be no assurance that the new manufacturing facilities will be completed within the timeframe that we anticipate or at all. If we are unable to complete the new manufacturing facilities, our business and prospects, as well as our results of operations, may be materially and adversely affected.

We do not own 100% of the equity interests in Yongye Nongfeng, which may not be as stable and effective in providing operational control as 100% ownership and we may have conflicts of interests with our joint venture partner.

We operate our business through Yongye Nongfeng. If there are disagreements between us and our cooperative joint venture partner, Inner Mongolia Yongye, regarding the business and operations of Yongye Nongfeng, we cannot assure you that we will be able to resolve them in a manner that will be in our best interests. In addition, our joint venture partner may (i) have economic or business interests or goals that are inconsistent with ours; (ii) take actions contrary to our instructions, requests, policies or objectives; (iii) be unable or unwilling to fulfill their obligations; (iv) have financial difficulties; or (v) have disputes with us as to the scope of their responsibilities and obligations. Any of these and other factors may materially and adversely affect the performance of Yongye Nongfeng, which may in turn materially and adversely affect our financial condition and results of operations.

We rely on the cooperative joint venture contract with Inner Mongolia Yongye to operate our business. If Inner Mongolia Yongye fails to perform its obligations under the cooperative joint venture contract, we may have to incur substantial costs and resources to enforce such arrangements and rely on legal remedies under PRC laws, including seeking specific performance or injunctive relief and damages, and we cannot assure you that such remedies would be effective. Accordingly, it may be difficult for us to change our corporate structure or to bring claims against Inner Mongolia Yongye if it does not perform its obligations under the cooperative joint venture contract.

The cooperative joint venture contracts are governed under PRC law. Accordingly, this agreement would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce the cooperative joint venture contract. In the event we are unable to enforce the cooperative joint venture contract, we may not be able to exert effective control over our operating entities, and our ability to conduct our business may be negatively affected.

Mr. Zishen Wu, our president and CEO, owns a controlling interest in Inner Mongolia Yongye. There could be conflicts of interests between his duties to us and his ownership interests in Inner Mongolia Yongye. We can provide no assurance that if conflicts of interests arise, these conflicts will not result in a significant loss in corporate opportunities for us or a diversion of our resources to Inner Mongolia Yongye, which may not be in our best interest.

We may experience difficulty in collecting our accounts receivables, which could have a material and adverse effect on our liquidity, financial condition and results of operations.

We derive our revenues from the sale of products through our distributors and are subject to counterparty risks such as our distributors’ inability to pay. We provide credit terms of six months to all of our approved distributors. The credit period we grant and our credit policies are generally in line with market practice. Under our payment terms, we typically allow our distributors to pay the total purchase price within six months after the receipt of our products. Our peak selling seasons are normally the second quarter and the third quarter, accounting for 70%-80% of our full year sales. Payments for most of our sales made during peak seasons are generally collected in the fourth quarter and the first quarter of the following year. As of December 31, 2013 and 2012, our accounts receivable amounted to US$334.1 million and US$293.6 million, respectively.

Past due balances are reviewed individually for collectability. During the year ended December 31, 2013, the entire accounts receivable as of December 31, 2012, including all the past due accounts as of December 31, 2012, were collected. We determine the adequacy of the allowance for doubtful accounts by considering the amount of historical losses adjusted to take into account current market conditions and the distributors’ financial condition, the amount of receivables in dispute and past due, the accounts receivables aging and distributors’ repayment patterns. Of the US$343.5 million of our gross accounts receivable as of December 31, 2013, US$124.1million of our accounts receivable were past our six-month credit term, representing 36.2% of total gross account receivable balance as of December 31, 2013 and 18.7% of our sales in 2013. We provided for allowance for doubtful accounts in the amount of US$9.3million, taking into account current market conditions, customers’ financial condition, the accounts receivable ageing and the customers’ repayment patterns.

There can be no assurance that we will be able to improve our collection of accounts receivable from our distributors. The significant amount of accounts receivable and the increased accounts receivable turnover days may expose us to increasing risks associated with shortage of working capital, which may result in delay or difficulty in the delivery of our products and services and, in turn, our liquidity, financial condition and results of operations could be materially and adversely affected.

For certain distributors where we believe collectability is not reasonably assured, we do not recognize revenue upon shipment. Revenues from sale of products to these distributors are not recognized until collectability is reasonably assured, which is demonstrated by sufficient period of historical collection experience. Revenues for product sales to these distributors are recognized when full payment is received. Since the payment ability of our distributors directly affects our revenue recognition, the deteriorating payment ability of our distributors will result in delays to revenue recognition until collectability can be reasonably assured, which is generally upon cash receipt and, thus, will have a material and adverse effect on our financial condition and results of operations.

One or more of our distributors and retailers could engage in activities that are harmful to our brand and to our business.

Due to our reliance on a distribution network that is comprised of provincial-level distributors, country-level distributors and Branded Retailers to sell our products, we are susceptible to our distributors and Branded Retailers engaging in activities that are harmful to our brand and business. If our distributors or Branded Retailers do not implement our branding strategy properly, including failure to use appropriate signage at Branded Retailers, our brand name may be damaged. In addition, if our distributors or Branded Retailers sell our products under another brand, purchasers will not be aware of our brand name. Moreover, our ability to provide appropriate customer service to these purchasers will be negatively affected, and we may be unable to develop our local knowledge of the needs of these customers. Furthermore, if any of our distributors or Branded Retailers sell inferior products produced by other companies under our brand name, our brand and reputation could be harmed, which could make marketing of our products more difficult.

If we are not able to obtain the requisite government approval to complete the mineral resources project or if the project renders fewer resources than expected, our vertical integration strategy could fail.

In 2010, we entered into an agreement with WuchuanShuntong to acquire the permit for the rights to explore, develop and produce mineral resources in a certain area of Wuchuan County. The cash consideration of the permit was approximately RMB240 million or US$35 million. The permit allows us to complete all necessary administrative procedures and obtain government approvals to acquire the permit for the rights to explore, develop and produce humic acid bearing resources (“Mineral Rights”). We believe that the Mineral Rights will allow us to secure a long term supply of humic acid, which is a major raw material used in the manufacture of our products. In August 2011, Yongye Fumin, our wholly-owned subsidiary, obtained a Mineral Resource Exploration Permit for this project site in Wuchuan County, Inner Mongolia, which was issued by the Inner Mongolia Ministry of Land and Resources. Such approval granted us exclusive exploration rights for this project site for an initial period of three years beginning August 2, 2011. We are in the process of applying for the governmental approval for the Mineral Rights to develop and produce the mineral resources and are preparing for the relevant reports, including but not limited to a Geological Report and Geological Exploration Report. We engaged a third party mineral exploration institute to assist us in obtaining the Geological Exploration Report which is still in progress. However, we cannot assure you that we can obtain the Mineral Rights to develop and produce the mineral resources in a timely manner, if at all. Factors outside our control include adverse weather and timing of obtaining governmental approvals. Furthermore, the nature and amount of the mineral resources in the Wuchuan project may not be the same as analyzed in the third-party preliminary reports obtained by us in 2009, and our supply of humic acid will be dependent upon market availability. If we are unable to obtain adequate quantities of raw materials at economically viable prices which meet our specifications, our financial condition and results of operation could be adversely affected.

If we cannot renew our fertilizer registration certificate, we will be unable to sell our products which will cause our sales revenues to significantly decrease.

All fertilizers produced in the PRC must be registered with the PRC Ministry of Agriculture or its local branches at a provincial level. No fertilizer can be manufactured without such registration. As part of the Restructuring process, Yongye Nongfeng applied for its initial fertilizer registration certificate in May 2009 and received it on June 1, 2009. On November 4, 2009, the long-term certificate with a five-year term was issued to Yongye Nongfeng. In June, 2013, Yongye Fumin obtained temporary certificate which is expected to be renewed in September, 2014.

While we expect it to be renewed based on our historical experience and industry practice, there is no guarantee that the PRC Ministry of Agriculture will further renew our fertilizer registration certificate. If we cannot obtain the necessary renewal, we will not be able to manufacture and sell our fertilizer products in China, which will cause the termination of our commercial operations.

Our patent protected formulae, fulvic acid extraction and blending processes may become obsolete which could materially and adversely affect the competitiveness of our products.

The production of our crop and animal nutrient products is based on our patented crop and animal product mixture processes and nutrient formulae. Our future success will depend upon our ability to address the increasingly sophisticated needs of our customers by supporting existing and emerging fulvic acid products and by developing and introducing new products and enhancements to our existing products on a timely basis that keep pace with evolving industry standards and changing customer requirements. If our patented crop and animal nutrient product mixture processes and formulae become obsolete as our competitors develop better products, our future business and financial results could be adversely affected. In addition, although we entered into confidentiality agreements with our key employees, we cannot assure you if there would not be any breach of such agreement in which case our rights over such patented formulae would be adversely affected.

We may not possess all the licenses required to operate our business, or may fail to maintain the licenses we currently hold. This could subject us to fines and other penalties, which could have a material adverse effect on our results of operations.

In addition to a fertilizer registration certificate, we are required to hold a variety of other permits, licenses and certificates to conduct our business in China. We may not possess or receive all the permits, licenses and certificates required for our business or for which application has been made. In addition, there may be circumstances under which the approvals, permits, licenses or certificates granted by the governmental agencies are subject to change without substantial advance notice, and it is possible that we could fail to obtain the approvals, permits, licenses or certificates that are required to expand our business as we intend. If we fail to obtain or to maintain such permits, licenses or certificates or renewals are granted with onerous conditions, we could be subject to fines and other penalties and be limited in the number or the quality of the products that we would be able to offer. As a result, our business, result of operations and financial condition could be materially and adversely affected.

Zishen Wu, our chairman, chief executive officer and president, has played an important role in the growth and development of our business since its inception, and a loss of his services in the future could severely disrupt our business and negatively affect investor confidence in us, which may also cause the market price of our common stock to go down.

To date, we have relied heavily on Mr. Wu’s expertise in, and familiarity with, our business operations, his relationships within the industries in which we operate, his reputation and experience. In addition, Mr. Wu has been primarily responsible for formulating our overall business strategies and spearheading the growth of our operations. If Mr. Wu were unable or unwilling to continue in his present positions, we may not be able to easily replace him and may incur additional expenses to identify and train his successor. In addition, if Mr. Wu were to join a competitor or form a competing business, it could severely disrupt our business and negatively affect our financial condition and results of operations. Although Mr. Wu is subject to certain noncompetition restrictions during and after termination of his employment with us, we cannot assure you that such non-competition restrictions will be effective or enforceable under PRC law. Moreover, even if the departure of Mr. Wu from our Company would not have any actual impact on our operations and the growth of our business, it could create the perception among investors or the marketplace that his departure could severely damage our business and operations and could negatively affect investor confidence in us, which may cause the market price of our common stock to go down. In the event Mr. Wu ceases to be our chief executive officer or ceases to be engaged or to perform his duties on a full-time basis prior to December 31, 2014 (unless as a result of his death, disability or incapacity or events beyond our control or is approved by the holders of a majority of the shares of the convertible preferred stock then outstanding), the holders of our convertible preferred stock will be able to redeem all or a portion of the outstanding shares of convertible preferred stock at a redemption price equal to the original purchase price thereof, plus a premium designed to generate a 30% internal rate of return to such holders. We do not maintain key man insurance for Mr. Wu.

We depend heavily on our skilled personnel, and any loss of such personnel or the failure to continue to attract such personnel in the future could harm our business.

Our business is specialized and requires the employment of personnel with significant scientific and operational experience in the industry. Accordingly, we must attract, recruit and retain a workforce of technically and scientifically competent employees. Due to the intense market competition for highly skilled workers and experienced senior management, we have faced difficulties locating personnel that have the necessary scientific, technical and operational skills and experience with the fertilizer industry. Our ability to effectively implement our business strategy will depend upon, among other factors, the successful recruitment and retention of qualified management and our key personnel. These individuals are difficult to find in the PRC and we may not be able to retain such skilled employees and replace them within a reasonable period of time, or at all. Our business may be severely disrupted, our financial condition and results of operations may be materially and adversely affected, and we may incur additional expenses in recruiting and training additional personnel. Although our employees and senior management members are subject to certain non-competition restrictions during and after termination of their employment, we cannot assure you that such non-competition restrictions will be effective or enforceable under PRC law. If any of our key personnel joins a competitor or forms a competing business, our business may be severely disrupted. We have no key man insurance with respect to our key personnel that would provide insurance coverage payable to us for loss of their employment due to death or other reasons.

The markets in which we operate are highly competitive and fragmented and we may not be able to maintain market share.

We operate in highly competitive markets and compete with numerous local PRC humic or fulvic acid crop nutrient manufacturers, as well as other foliar-applied liquid fertilizer manufacturers and we expect competition to persist and intensify in the future. Our competitors are mainly local fertilizer companies who may have better access in certain local markets, stronger ability to customize products to a particular region or locality and more established local distribution channels within a specific region. In the future, we may also compete with large PRC state-owned enterprise national competitors, and they may have competitive advantages over us in certain areas such as access to capital, technology, product quality, economies of scale and brand recognition and may also be better positioned than us to develop superior product features and technological innovations and to exploit and adapt to market trends. Additionally, we may not be able to conduct in-depth research and analysis on our current or new markets due to the lack of enough public or third-party sources of information on our industry and competitors. Therefore, we may not have a clear estimate of the current number of our direct competitors or such competitors' revenues or market share.

In addition, China’s entry into the World Trade Organization may lead to increased foreign competition for us. If our international competitors are localized and establish their market recognition in China, we may face additional competition. If we are not successful in our marketing and advertising efforts to increase awareness of our brands, our revenues could decline, which could have a material adverse effect on our business, financial condition, results of operations and share price. We cannot assure you that additional competitors will not enter our existing markets, or that we will be able to compete successfully against existing or new competition.

MSPEA Agriculture Holding Limited (“MSPEA”) has significant influence over our affairs.

MSPEA currently owns 100% of the outstanding convertible preferred stock and approximately 4.4% of our common stock. In addition, pursuant to certain rights granted to it under the Certificate of Designation, so long as MSPEA and its affiliates continue to own 25% of the convertible preferred stock initially issued to it, the holders of at least a majority of the shares of the convertible preferred stock have the right to designate one of the directors on our board of directors and have the ability to veto certain of our corporate actions or material transactions under some circumstances. As a result, MSPEA has significant influence over our business.

If we do not meet performance targets specified in the securities purchase agreement with MSPEA or if we issue equity securities at a price per share less than the then-applicable conversion price, the conversion price of the convertible preferred stock would decrease.

Pursuant to the terms of the convertible preferred stock, if our net income (as adjusted for exclusion of certain items) for the period from fiscal year 2011 (inclusive) to the latest fiscal year with respect to which audited consolidated financial statements are available is below the net income targets of US$84 million for fiscal year 2011, US$210 million for the cumulative period of fiscal year 2011 through fiscal year 2012, US$399 million for the cumulative period of fiscal year 2011 through fiscal year 2013 and US$682.5 million for the cumulative period of fiscal year 2011 through fiscal year 2014 (the “Income Targets,” which Income Targets may be adjusted upwards in the event we issue any equity securities in the future without the prior written approval of the holders of the convertible preferred stock), the conversion price for the convertible preferred stock will decrease and the holders of our common stock could suffer significant dilution in the event of a conversion of any shares of convertible preferred stock. In addition, if we have not achieved any such Income Target and have engaged in certain additional issuances of our equity securities that are not approved in writing by holders of a majority of the convertible preferred stock then outstanding (subject to certain exceptions) but for which no adjustment was made to the Income Targets, Full Alliance has agreed to transfer to MSPEA or its affiliates for total consideration of US$1.00 an amount of shares of our common stock held by Full Alliance that MSPEA would otherwise receive upon conversion of the purchased shares, had the Income Target been so increased. As a result, MSPEA could acquire up to an additional 5,600,000 shares of our common stock currently held by Full Alliance, which shares have been pledged by Full Alliance to support the foregoing obligation. Additionally, as a result of a “full ratchet” anti-dilution provision in favor of holders of our convertible preferred stock, any future issuances of equity securities at a price per share less than the then-applicable conversion price that are not approved by a majority of such holders (subject to certain exceptions) will result in the conversion price being adjusted to the price at which such equity securities are issued.

Upon the occurrence of certain events, we may be required to redeem all or a portion of the convertible preferred stock.

Upon the occurrence of certain events, including, but not limited to, (i) a breach by us or Full Alliance of certain provisions of the financing documents, which breach gives rise to a material adverse effect on us or which materially diminishes the value of the convertible preferred stock, (ii) our failure to timely file our annual and quarterly reports on Forms 10-K and 10-Q, (iii) our failure to obtain certain mineral exploration rights without any additional material consideration, following which we fail to recover all of the proceeds for the original purchase of such mining rights on or prior to June 30, 2012 and (iv) Mr. Zishen Wu ceasing to be our chief executive officer or ceasing to be engaged or to perform his duties on a full time basis in that capacity prior to December 31, 2014 (unless as a result of his death, disability or incapacity or events beyond our control or is approved by the holders of a majority of the shares of the convertible preferred stock then outstanding), the holders of the convertible preferred stock have the right to require us to redeem all or a portion of their convertible preferred stock at a redemption price equal to the original purchase price, plus a premium designed to generate a 30% internal rate of return to the holders thereof.

In addition, the holders of the convertible preferred stock have the right to require us to redeem all or a portion of their convertible preferred stock if (i) the quotient of the aggregate amount of the earnings per share of any six (6) rolling consecutive quarters commencing from the first quarter of the fiscal year 2010 onwards divided by the aggregate amount of the earnings per share of the corresponding six (6) quarter period one year preceding thereto is less than one hundred and twenty percent (120%), and (ii) the actual net income (as adjusted for exclusion of certain items) of any fiscal year from 2011 to 2014 (both inclusive) is lower than US$75 million in fiscal year 2011, US$101 million in fiscal year 2012, US$121 million in fiscal year 2013 and US$145 million in fiscal year 2014, in each case at a redemption price equal to the original purchase price, plus a premium designed to generate a 20% internal rate of return to the holders thereof. The foregoing earnings targets are subject to adjustment in certain circumstances including if we have engaged in certain additional issuances of our equity securities that are not approved in writing by holders of a majority of the convertible preferred stock then outstanding (subject to certain exceptions).

If we are required to redeem the convertible preferred stock, we would need cash available, and to the extent that we do not have sufficient cash available and do not have access to bank debt, might have to liquidate assets to fund such redemptions. Any such liquidation may yield proceeds lower than might otherwise be the case.

If we need additional financing, we may not be able to find such financing on satisfactory terms or at all.

Our capital requirements may be accelerated as a result of many factors, including the growth and timing of our business development activities, including the planned construction of our new manufacturing facilities, budget shortfalls, unanticipated expenses or capital expenditures, future product opportunities, future licensing opportunities and future business combinations. Consequently, we may need to seek additional debt or equity financing, which may not be available on favorable terms, or at all, and which may be dilutive to our stockholders.

We may seek to raise additional capital through public or private equity offerings, debt financings or additional corporate collaboration and licensing arrangements. To the extent we raise additional capital by issuing equity securities, our stockholders may experience dilution and, so long as MSPEA and its affiliates hold at least 1,420,455 shares of convertible preferred stock, we would need to obtain the approval of a majority of the shares of convertible preferred stock then outstanding (subject to certain exceptions). To the extent that we raise additional capital by issuing debt securities, we may incur substantial interest obligations, may be required to pledge assets as security for the debt and may be constrained by restrictive financial and/or operational covenants. Any provider of debt financing would also be superior to our stockholders’ interest in bankruptcy or liquidation. To the extent we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies or product candidates, or grant licenses on unfavorable terms.

If we fail to adequately protect or enforce our intellectual property rights, the value of our intellectual property rights could diminish.

Our success, competitive position and future revenues will depend in part on our ability to obtain and maintain patent protection for our products, methods, processes and other technologies, to preserve our trade secrets, to prevent third parties from infringing on our proprietary rights and to operate without infringing the proprietary rights of third parties.

To date, we have received nine patents for our crop and animal products with the State Intellectual Property Office of the PRC. We have obtained a registered trademark for “Yongye” from the Trademark Office of the State Administration of Industry and Commerce of the PRC (“CTMO”). We have obtained CTMO approval for the trademark “Shengmingsu”,“Zhongbaosheng” and“Qianggenbao” which is valid till April 2020 July 2023, and July 2023, respectively. In addition, we rely on trade secret protection for our proprietary process of extracting fulvic acid from humic acid and creating the base fulvic acid compound used in both our crop (liquid form) and animal nutrient (powder form) products. However, we cannot predict the degree and range of protection patents, trademarks and trade secrets will afford us against competitors. Third parties may find ways to invalidate or otherwise circumvent our patents, proprietary technology and trademark. Third parties may attempt to obtain patents claiming aspects similar to our patent and trademark applications. If we need to initiate litigation or administrative proceedings to protect our rights, such actions may be costly and may divert management attention as well as expend other resources which could otherwise have been devoted to our business. An adverse determination in any such litigation will impair our intellectual property rights and may harm our business, prospects and reputation. In addition, historically, implementation of PRC intellectual property-related laws has been lacking, primarily because of ambiguities in the PRC laws and difficulties in enforcement. Accordingly, intellectual property rights and confidentiality protections in China may not be as effective as in the United States or other countries, which increases the risk that we may not be able to adequately protect our intellectual property rights.

If we infringe upon the rights of third parties, we could be subject to disputes or lawsuits and we could be prevented from selling products, forced to pay damages and compelled to defend against litigation.

If our products, formulae, methods, processes and other technologies infringe upon proprietary rights of other parties, we could be subject to disputes and lawsuits and could incur substantial costs, and may have to obtain licenses (which may not be available on commercially reasonable terms, if at all), redesign our products or processes, stop using the subject matter claimed in the asserted patents, pay damages, or defend litigation or administrative proceedings, which may be costly whether we win or lose. All of the above could result in a substantial diversion of valuable management resources.

We have taken reasonable steps, including comprehensive internal and external prior intellectual property right searches, to ensure we have freedom to operate and that our development and commercialization efforts can be carried out as planned without infringing others’ proprietary rights. However, we cannot guarantee that we will infringe upon no third-party intellectual property right, and we may be subject to a third-party infringement claim. Resolving such issues has traditionally resulted, and could in our case result, in lengthy and costly legal proceedings, the outcome of which cannot be predicted accurately.

A severe or prolonged downturn in the global economy could materially and adversely affect our business and results of operations.

The global market and economic conditions during the years 2008 through 2011 were unprecedented and challenging, with recessions occurring in most major economies. Continued concerns about the systemic impact of potential long-term and wide-spread recession, energy costs, geopolitical issues, and the availability and cost of credit have contributed to increased market volatility and diminished expectations for economic growth around the world. The difficult economic outlook has negatively affected businesses and consumer confidence and contributed to volatility of unprecedented levels.

The PRC economy also faces challenges. The PRC government has implemented various measures recently to curb inflation. If economic growth slows or an economic downturn occurs, our business and results of operations may be materially and adversely affected.

We currently rely upon third-party suppliers for raw materials.

We currently are dependent upon third parties for our supply of lignite coal, chemical components and other raw materials. Should any of our suppliers terminate their supply relationships with us, or if our suppliers have inadequate amounts of lignite coal or any such other raw materials to meet our needs, we may be unable to procure sufficient amounts of lignite coal or any such other raw materials on acceptable terms in a timely manner that meet our specifications or that meet the demands of our customers and our profitability may be limited. In addition, these suppliers may not perform their obligations, and it may not be possible to specifically enforce the relationships we have formed with such suppliers. If we are unable to obtain adequate quantities of lignite coal or any such other raw materials at economically viable prices which meet our specifications, our financial condition and results of operations could be adversely affected.

Any significant fluctuation in our production costs may have a material adverse effect on our operating results.

The prices for the raw materials and other inputs to manufacture our products are subject to market factors largely beyond our control, including the price of lignite coal, chemical components, our energy costs and freight costs. The costs for these inputs may fluctuate significantly based upon changes in the economy and markets. We may not be able to pass any increase of such costs through to our customers and we could incur significant losses.

Disruptions in the supply of raw materials used in our products could cause us to be unable to meet customer demand, which could result in the loss of customers and sales.

Currently, the lignite coal is the primary raw material that we use to manufacture our products. If there are any business interruptions at our key suppliers and we are unable to locate alternative supply in a timely manner, we may not be able to meet customer demand, which could result in the loss of customers and sales.

Our reliance on third party vendors for certain production capacity could harm our business by adversely affecting product availability, delivery, reliability, and cost.

From time to time, we outsource certain aspects of our product manufacturing to third party factories. While these relationships generate cost efficiencies, they reduce our direct control over production. Our increasing reliance on these vendors subjects us to a greater risk of product shortages and reduced control over delivery schedules of products, as well as a greater risk of increases in costs. Any disruption in product availability from these third parties could harm our financial performance and our ability to satisfy customer and distributor needs. In addition, defective parts and products from these vendors could reduce product reliability and harm our reputation.

We may be subject to more stringent governmental regulation on our products.

The manufacture and sale of our products in the PRC is regulated by the PRC and the provincial government. The legal and regulatory regime governing our industry is evolving, and we may become subject to different, including more stringent, requirements than those currently applicable to us. While we believe a more stringent standard will have a bigger impact on those manufacturers with poor quality products, we cannot assure you any regulatory change will not adversely affect our business.

We have limited insurance coverage and may incur losses due to business interruptions resulting from natural and man-made disasters, and our insurance may not be adequate to cover liabilities resulting from accidents or injuries that may occur.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited commercial insurance products. While we carry property insurance on our office building, production facility, raw materials and inventories in our Hohhot facilities, and carry auto insurance on our vehicles and maintain workers compensation insurance for our full-time workers, we do not carry any product liability insurance. We believe that current facilities are adequate for our current and immediately foreseeable operating needs. We have determined that balancing the risks of disruption or liability from our business, the cost of insuring for these risks on the one hand, and the difficulties associated with acquiring such insurance on commercially reasonable terms on the other hand, it is not economically practical for us to have such insurance.

Should any natural catastrophes such as earthquakes, floods, or any acts of terrorism occur in Inner Mongolia, where our primary operations are located and most of our employees are based, or elsewhere, we might suffer not only significant property damage, but also loss of revenues due to interruptions in our business operations.

The occurrence of a significant event for which we are not fully insured or indemnified, and/or the failure of a party to meet its underwriting or indemnification obligations, could materially and adversely affect our operations and financial condition. Moreover, no assurance can be given that we will be able to maintain adequate insurance in the future at rates we consider reasonable.

Any disruption of the operations in our production facility would damage our business.

All of our crop and animal nutrient products are currently manufactured in our production facility in Inner Mongolia, China. Our operations could be interrupted by fire, drought, flood, earthquake and other events beyond our control. In addition, in recent months there has been increasing social unrest in Inner Mongolia. This social unrest has led to protests, demonstrations and violence. Any disruption of the operations in our production facility, due to environmental causes, social unrest or other events beyond our control, would have a significant negative impact on our ability to manufacture and deliver products. We could be unable to outsource our production on terms favorable to us, if at all. Failure to replace any lost production capability would cause a potential diminution in sales, the cancellation of orders, loss of valuable employees, damage to our reputation and potential lawsuits.

The crop and animal nutrient products that we manufacture pose safety risks and could expose us to product liability claims.

Defects in, or unknown harmful effects caused by, organic and inorganic chemicals and elements in our products could subject us to potential product liability claims that our products cause some harm to the human body or the crop and animals. Although we have adopted safety measures, which we believe meet industry standards, in our research, development and manufacturing processes, accidents may still occur. We do not carry any product liability insurance and any accident, either at the manufacturing phase or during the use of our products, may subject us to significant liabilities. Negative publicity about the safety of our products, whether justified or not, could damage our reputation, involve us in litigation, and damage our brand name and our business. As of the date of this report, no product liability claim has ever been brought against us. However, if we are involved in litigation in the future, our business, financial conditions and results of operations could be materially and adversely affected.

An outbreak of food scares in China would materially and adversely affect our business.

Any major outbreak of food scares, such as the milk contamination scandal in the PRC in 2008, may result in significant disruptions to our business operations. A major food scare could result in considerable decreases in the demand for the products in which our products are used, which would materially and adversely affect our business and our profitability. Adverse publicity and concerns resulting from such a food scare may discourage consumers from purchasing products in which our products are used. Such a reduction in demand would adversely impact our financial performance and results of operations.

Because we may rely on dividends and other distributions on equity paid by our current and future Chinese subsidiaries for our cash requirements, restrictions under Chinese law on their ability to make such payments could materially and adversely affect our ability to grow, make investments or acquisitions, pay dividends to our investors, and otherwise fund and conduct our businesses.

We have adopted a holding company structure, and we rely on dividends and other distributions on equity paid by our current and future PRC subsidiaries for their cash requirements, including the funds necessary to service any debt we may incur or financing we may need for operations other than through our PRC subsidiaries. PRC legal restrictions permit payments of dividends by our PRC subsidiaries only out of their accumulated after-tax profits, if any, determined in accordance with PRC GAAP. Our PRC subsidiaries are also required under PRC laws and regulations to allocate at least 10% of their after-tax profits determined in accordance with PRC GAAP to statutory reserves until such reserves reach 50% of the company’s registered capital. Allocations to these statutory reserves and funds can only be used for specific purposes and are not transferable to us in the form of loans, advances or cash dividends. Any limitation on the ability of our current or future PRC subsidiaries to transfer funds to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends and otherwise fund and conduct our business.

If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our common stock.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We maintain a system of internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal executive officer and principal financial officer, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

As a public company, we have significant additional requirements for enhanced financial reporting and internal controls. We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over financial reporting. The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that we will not, in the future, identify areas requiring improvement in our internal control over financial reporting. We cannot assure you that the measures we will take to remediate any areas in need of improvement will be successful or that we will implement and maintain adequate controls over our financial processes and reporting in the future as we continue our growth. If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our common stock.

Lack of experience as officers of publicly traded companies of our management team may hinder our ability to comply with the Sarbanes-Oxley Act.

It may be time consuming, difficult and costly for us to develop and implement the appropriate internal controls and reporting procedures required by the Sarbanes-Oxley Act of 2002. We may need to hire additional financial reporting, internal controls and other finance staff in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with the Sarbanes-Oxley Act’s internal controls requirements, our auditor could not issue an unqualified opinion of our internal control over financial reporting.

We have incurred increased costs as a result of being a public company.

As a public company, we have incurred significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as the related rules and regulations subsequently implemented by the SEC, has required changes in corporate governance practices of public companies. These rules and regulations have increased our legal, accounting and financial compliance costs and made certain corporate activities more time-consuming and costly.

Risks Associated With Doing Business in China

Adverse changes in PRC economic and political policies could have a material adverse effect on the overall economic growth of China, which could reduce the demand for our products and materially and adversely affect our business.

Substantially all of our assets are located in China. Substantially all of our revenue is derived from our operations in China and we anticipate that sales of our products in the PRC will continue to represent a substantial proportion of our total sales in the near future. Accordingly, our results of operations and prospects are subject, to a significant extent, to the economic, political and legal developments in China. The PRC economy differs from the economies of most developed countries in many aspects, including:

the level of government involvement;

the level of development;

the growth rate;

the level and control of capital investment;

the control of foreign exchange; and

the allocation of resources.

While the Chinese economy has grown significantly in the past two decades, the growth has been uneven geographically, among various sectors of the economy and during different periods. We cannot assure you that the Chinese economy will continue to grow or at the pace that has prevailed in recent years, or that if there is growth, such growth will be steady and uniform. Any measures taken by the PRC government, even if they benefit the overall Chinese economy in the long-term, may have a negative effect on us. For example, our financial condition and results of operations may be materially and adversely affected by government control over capital investments. Although the Chinese economy has been transitioning from a planned economy to a more market-oriented economy, a substantial portion of the productive assets in China is still owned by the PRC government. The continued control of these assets and other aspects of the national economy by the PRC government could materially and adversely affect our business. The PRC government also exercises significant control over Chinese economic growth through allocating resources, controlling payment of foreign currency denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Any adverse change in the economic conditions or government policies in China could have a material adverse effect on the overall economic growth and the level of investments and expenditures in China, which in turn could lead to a reduction in consumer demand for our products and consequently have a material adverse effect on our business and financial condition.

The PRC legal system embodies uncertainties that could limit the legal protections available to us.

Unlike common law systems, the PRC legal system is based on written statutes and decided legal cases have little precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. Our PRC operating subsidiary is subject to laws and regulations applicable to foreign investment in China. Yongye Nongfeng is subject to laws and regulations governing the formation and conduct of domestic PRC companies. Relevant PRC laws, regulations and legal requirements may change frequently, and their interpretation and enforcement involve uncertainties. For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings. Such uncertainties, including the inability to enforce our contracts and intellectual property rights, could materially and adversely affect our business and operations. Accordingly, we cannot predict the effect of future developments in the PRC legal system, particularly with respect to the fertilizer and feed sector, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the legal protections available to us.

Currency fluctuations may adversely affect our business.

Our reporting currency is the U.S. dollar and our operating subsidiaries in China use RMB as their functional currency. Substantially all of our revenue and expenses are in Renminbi. We are subject to the effects of exchange rate fluctuations with respect to any of these currencies. For example, the value of the Renminbi depends to a large extent on Chinese government policies and China’s domestic and international economic and political developments, as well as supply and demand in the local market. From 1994 to 2005, the official exchange rate for the conversion of Renminbi to the U.S. dollar had generally been stable and the Renminbi had appreciated slightly against the U.S. dollar. However, on July 21, 2005, the PRC Government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi may fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy has resulted in an approximately 36% appreciation of the Renminbi against the U.S. dollar between July 21, 2005 and December 31, 2013.

It is possible that the PRC Government could adopt a more flexible currency policy, which could result in more significant fluctuations of the Renminbi against the U.S. dollar. We can offer no assurance that the Renminbi will be stable against the U.S. dollar or any other foreign currency.

To the extent the U.S. dollar strengthens against the Renminbi, the translation of foreign currency denominated transactions will result in reduced revenue, operating expenses and net income for our PRC operations. Similarly, to the extent the U.S. dollar weakens against the Renminbi, the translation of the foreign currency denominated transactions will result in increased revenue, operating expenses and net income for our PRC operations. We are also exposed to foreign exchange rate fluctuations as we translate the financial statements of Yongye Nongfeng and Yongye Fumin into U.S. dollars in consolidation. If there is a change in foreign currency exchange rates, the translation of our foreign subsidiaries’ financial statements into U.S. dollars will lead to a translation gain or loss which is recorded as a component of other comprehensive income. In addition, we may have certain monetary assets and liabilities that are denominated in currencies other than the relevant entity’s functional currency. Changes in the functional currency value of these assets and liabilities result in foreign exchange gain or loss. We have not entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in the future. The availability and effectiveness of any hedging transaction may be limited and we may not be able to successfully hedge our exchange rate risks.

We must comply with the Foreign Corrupt Practices Act.

We are required to comply with the United States Foreign Corrupt Practices Act, which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in mainland China. If our competitors engage in these practices, they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. Although we inform our personnel and other agents that such practices are illegal, we cannot assure you that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

Changes in foreign exchange regulations in the PRC may affect our ability to pay dividends in foreign currency or conduct other foreign exchange business.

The Renminbi is not currently a freely convertible currency, and the restrictions on currency exchanges may limit our ability to use revenues generated in Renminbi to fund our business activities outside the PRC or to make dividends or other payments in U.S. dollars. The PRC government strictly regulates conversion of Renminbi into foreign currencies. Over the years, foreign exchange regulations in the PRC have significantly reduced the government’s control over routine foreign exchange transactions under current accounts. In the PRC, the State Administration for Foreign Exchange, or the SAFE, regulates the conversion of the Renminbi into foreign currencies. Pursuant to applicable PRC laws and regulations, foreign invested enterprises incorporated in the PRC are required to apply for “Foreign Exchange Registration Certificates”. Currently, conversion within the scope of the “current account” (e.g. remittance of foreign currencies for payment of dividends, etc.) can be effected without requiring the approval of SAFE. However, conversion of currency in the “capital account” (e.g. for capital items such as direct investments, loans, securities, etc.) still requires the approval of SAFE.

In addition, on October 21, 2005, SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Fundraising and Reverse Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies (“Notice 75”), which became effective as of November 1, 2005. Notice 75 replaced the two rules issued by SAFE in January and April 2005. According to Notice 75:

prior to establishing or assuming control of an offshore company for the purpose of obtaining overseas equity financing with assets or equity interests in an onshore enterprise in the PRC, each PRC resident, whether a natural or legal person, must complete the overseas investment foreign exchange registration procedures with the relevant local SAFE branch;

an amendment to the registration with the local SAFE branch is required to be filed by any PRC resident that directly or indirectly holds interests in that offshore company upon either (1) the injection of equity interests or assets of an onshore enterprise to the offshore company, or (2) the completion of any overseas fund raising by such offshore company; and

an amendment to the registration with the local SAFE branch is also required to be filed by such PRC resident when there is any material change in the capital of the offshore company that does not involve any return investment, such as (1) an increase or decrease in its capital, (2) a transfer or swap of shares, (3) a merger or division, (4) a long term equity or debt investment, or (5) the creation of any security interests.

Moreover, Notice 75 applies retroactively. As a result, PRC residents who have established or acquired control of offshore companies that have made onshore investments in the PRC in the past are required to complete the relevant overseas investment foreign exchange registration procedures by March 31, 2006. Under the relevant rules, failure to comply with the registration procedures set forth in Notice 75 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including the payment of dividends and other distributions to its offshore parent or affiliate and the capital inflow from the offshore entity, and may also subject relevant PRC residents to penalties under PRC foreign exchange administration regulations.

In addition, SAFE has, from time to time, issued updated internal implementing rules, or Implementing Rules, in relation to Notice 75. New Implementing Rules became effective on July 1, 2011. Such Implementing Rules provide more detailed provisions and requirements regarding the overseas investment foreign exchange registration procedures. However, even with the promulgation of the new Implementing Rules there still exist uncertainties regarding the SAFE registration for PRC residents’ interests in overseas companies.

On December 25, 2006, the People’s Bank of China promulgated the Administrative Measures for Individual Foreign Exchange. On January 5, 2007, SAFE issued the Implementation Rules of the Administrative Measures for Individual Foreign Exchange, or the Individual Foreign Exchange Rules, which, among other things, specify approval requirements for a PRC citizen’s participation in the employee stock ownership plans or stock option plans of an overseas publicly-listed company. In February 2012, SAFE promulgated the Notice on Issues concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly-Listed Company, or the Stock Option Rules, which replaced and substituted the Application Procedures of Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Ownership Plan or Stock Option Plan of Overseas Publicly-Listed Company issued by SAFE in March 2007. According to the Stock Option Rules, if a PRC resident participates in any stock incentive plan of an overseas publicly-listed company, a qualified PRC domestic agent must, among other things, file on behalf of such participant an application with SAFE to conduct the SAFE registration with respect to such stock incentive plan and obtain approval for an annual allowance with respect to the purchase of foreign exchange in connection with the exercise or sale of stock options or stock such participant holds. Such participating PRC resident’s foreign exchange income received from the sale of stock and dividends distributed by the overseas publicly-listed company must be fully remitted into a specific domestic foreign currency account opened and managed by such PRC agent first, before distribution to such participants. We are an offshore listed company and, as a result, any Chinese employee, or foreign employee who resides in PRC more than one year consecutively, of Yongye Nongfeng or Yongye Fumin, including without limitation, directors, supervisors and other senior management staffs of Yongye Nongfeng or Yongye Fumin, who have been granted share options or shares under our 2010 Omnibus Securities and Incentive Plan are subject to the Stock Option Rules. If Yongye Nongfeng, Yongye Fumin or their qualified employees fail to comply with these regulations, they may be subject to fines or other legal sanctions imposed by SAFE or other Chinese government authorities.

PRC regulations relating to mergers and acquisitions of domestic enterprises by foreign investors may increase the administrative burden we face and create regulatory uncertainties.

On August 8, 2006, six PRC regulatory agencies, namely, the PRC Ministry of Commerce, or MOFCOM, the State Assets Supervision and Administration Commission, or SASAC, the State Administration for Taxation, the State Administration for Industry and Commerce, the China Securities Regulatory Commission, or CSRC, and SAFE, jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or New M&A Rule, which became effective on September 8, 2006 and was amended on June 22, 2009. The New M&A Rule purports, among other things, to require offshore special purpose vehicles, or SPVs, formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange.

On September 21, 2006, pursuant to the New M&A Rule and other PRC laws and regulations, the CSRC, in its official website, promulgated relevant guidance with respect to the issues of listing and trading of domestic enterprises’ securities on overseas stock exchanges (the “Related Clarifications”), including a list of application materials with respect to the listing on overseas stock exchanges by SPVs.

There are substantial uncertainties regarding the interpretation and application of the above rules, and CSRC has yet to promulgate any written provisions or formally to declare or state whether the overseas listing of PRC related company similar to the case of us shall be subject to the approval of CSRC. If CSRC approval is required in connection with our listing, our failure to obtain or delay in obtaining such approval could result in penalties imposed by CSRC and other PRC regulatory agencies. These penalties could include fines and penalties on our operations in China, restriction or limitation on remitting dividends outside of China, and other forms of sanctions that may cause a material and adverse effect to our business, operations and financial conditions.

Notwithstanding those provisions, we are advised by our PRC counsel, Han Kun Law Offices, that CSRC approval is not required in the context of our listing because (i) we are not a special purpose vehicle formed or controlled by PRC companies or PRC individuals, (ii) we are owned or substantively controlled by foreigners, and (iii) establishment of Yongye Nongfeng is not subject to the New M&A rules because its establishment is through incorporation of a cooperative joint venture with Inner Mongolia Yongye, rather than through merger or acquisition. However, we cannot assure that the relevant PRC government agencies, including the CSRC, would reach the same conclusion, and we still cannot rule out the possibility that CSRC may deem our listing structure circumvents the New M&A rules, Related Clarifications and PRC Securities Law.

Though the New M&A rules do not have express provisions in terms of penalties against non-procurement of CSRC approval, there are some other penalty provisions in other PRC laws and regulations regulating offshore listing, which can be cited as a reference:

(i) Pursuant to Article 188 of the PRC Securities Law, any entity that issues securities or issues securities in disguised form without verification or examination and approval by the statutory authority shall be ordered to cease issuance and refund the funds thus raised, together with bank deposit interest for the same period, and shall also be fined not less than one percent but not more than five percent of the amount of the proceeds illegally raised. The persons directly in charge and the other persons directly responsible shall be given a disciplinary warning and also be fined not less than RMB30,000 but not more than RMB300,000. However, we believe that this penalty is mainly designed for and targeted at domestic listing because the PRC Securities Law mainly regulate domestic listings, and listing or de-listing of a company’s stock in the US stock market should be subject to the SEC’s regulation, which is beyond the CSRC’s jurisdiction.

(ii) Pursuant to the Circular of the State Council Concerning Further Strengthening the Administration of Overseas Issuance and Listing of Securities, the overseas listing of securities of a PRC related company which violates this Circular shall be deemed an issuance of shares without authorization or approval. Persons in charge of the competent departments responsible for approval of such an overseas issuance could be subject to administrative sanctions if such person in charge is liable for such violation. People heading the issuing entity and other people directly responsible for issuance shall be penalized, including degraded to a lower lever position and termination of employment by the upper level department. If the violation constitutes a crime, criminal liability shall be claimed against relevant responsible persons according to applicable laws. The issuing entity, relevant agencies involved and the responsible people thereof shall be penalized by the CSRC in accordance with the provisions of the Interim Regulations on the Administration of Issuance and Trading of Securities and other relevant provisions.

Government regulations on environmental matters in China may adversely impact on our business.

Our manufacturing operations are subject to numerous laws, regulations, rules and specifications relating to human health and safety and the environment. These laws and regulations address and regulate, among other matters, wastewater discharge, air quality and the generation, handling, storage, treatment, disposal and transportation of solid and hazardous wastes and releases of hazardous substances into the environment. In addition, third parties and governmental agencies in some cases have the power under such laws and regulations to require remediation of environmental conditions and, in the case of governmental agencies, to impose fines and penalties. We make capital expenditures from time to time to stay in compliance with applicable laws and regulations.

We believe that we have obtained all permits and approvals and filed all registrations required for the conduct of our business, except where the failure to obtain any permit or approval or file any registration would not have a material adverse effect on our business, financial condition and results of operations. We believe that we are in compliance in all material respects with the numerous laws, regulations, rules, specifications and permits, approvals and registrations relating to human health and safety and the environment except where noncompliance would not have a material adverse effect on our business, financial condition and results of operations.

The PRC governmental authorities have not revealed any material environmental liability that would have a material adverse effect on us. We have not been notified by any governmental authority of any continuing noncompliance, liability or other claim in connection with any of our properties or business operations, nor are we aware of any other material environmental condition with respect to any of our properties or arising out of our business operations at any other location. However, in connection with the ownership and operation of our properties (including locations to which we may have sent waste in the past) and the conduct of our business, we potentially may be liable for damages or cleanup, investigation or remediation costs. In addition, in connection with environmental certification applications we have filed regarding our existing operations, the PRC governmental authorities could impose significant additional obligations prior to approving such applications, or could determine not to approve such applications. Any such additional obligation, or the denial of such applications could have a material adverse effect on our business, financial conditions and results of operations.

No assurance can be given that all potential environmental liabilities have been identified or properly quantified or that any prior owner, operator, or tenant has not created an environmental condition unknown to us. Moreover, no assurance can be given that (i) future laws, ordinances or regulations will not impose any material environmental liability or (ii) the current environmental condition of the properties will not be affected by the condition of land or operations in the vicinity of the properties (such as the presence of underground storage tanks), or by third parties unrelated to us. State and local environmental regulatory requirements change often.

It is possible that compliance with a new regulatory requirement could impose significant compliance costs on us. Such costs could have a material adverse effect on our business, financial condition and results of operations.

We may have difficulty managing the risk associated with doing business in the Chinese fertilizer and feed sector.

In general, the fertilizer and feed sector in China is affected by a series of factors, including, but not limited to, natural, economic and social such as climate, market, technology, regulation, and globalization, which makes risk management difficult. Fertilizer and feed operations in China face similar risks as present in other countries, however, these can either be mitigated or exacerbated due to governmental intervention through policy promulgation and implementation either in the fertilizer and feed sector itself or sectors which provide critical inputs to fertilizer and feed such as energy or outputs such as transportation. While not an exhaustive list, the following factors could significantly affect our ability to do business:

food, feed, and energy demand including liquid fuels and crude oil;

agricultural, financial, energy and renewable energy and trade policies;

input and output pricing due to market factors and regulatory policies;

production and crop progress due to adverse weather conditions, equipment deliveries, and water and irrigation conditions; and

infrastructure conditions and policies.

Currently, we do not and do not intend to carry insurance to protect revenue which could be lost caused by any of the above factors.

We may have difficulty establishing adequate management, legal and financial controls in the PRC.

The PRC historically has been unaccustomed to and lacking in management and financial reporting concepts and practices as in the United States and other developed countries, as well as in modern banking, computer and other control systems. We may have difficulty in hiring and retaining a sufficient number of qualified employees to work in the PRC. As a result of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that as used in United States and other developed countries. We may have difficulty in establishing adequate management, legal and financial controls in the PRC.

We face risks related to health epidemics and other outbreaks.

Our business could be adversely affected by the effects of swine flu, avian flu, severe acute respiratory syndrome, or SARS, or other epidemics or outbreaks. From 2005 to 2009, there have been reports on the occurrences of avian flu and swine flu in various parts of China and elsewhere in Asia, including a few confirmed human cases and deaths. Any prolonged recurrence of swine flu, avian flu, SARS or other adverse public health developments in China may have a material adverse effect on our business operations. Our operations may be impacted by a number of health-related factors, including, among other things, quarantines or closures of our factories and the facilities of our supplier and customers which could severely disrupt our operations. Any of the foregoing events or other unforeseen consequences of public health problems could adversely affect our business and results of operations. We have not adopted any written preventive measures or contingency plans to combat any future outbreak of swine flu, avian flu, SARS or any other epidemics.

Inflation in the PRC could negatively affect our profitability and growth.

While the PRC economy has experienced rapid growth, it has been uneven among various sectors of the economy and in different geographical areas of the country. Rapid economic growth can lead to growth in the money supply and rising inflation. If prices for our products do not rise at a rate that is sufficient to fully absorb inflation-driven increases in our costs of supplies, our profitability can be adversely affected.

During the past ten years, the rate of inflation in China has been fluctuating quite significantly. The Chinese government, from time to time, has adopted various corrective measures designed to restrict the availability of credit, regulate growth and contain inflation. In order to control inflation, the PRC government has imposed controls on bank credits, limits on loans for fixed assets and restrictions on state bank lending. The implementation of these and other similar policies can impede economic growth and thereby harm the market for our products and our business.

Because our assets and operations are located in PRC, you may have difficulty enforcing civil liabilities against us under the securities and other laws of the United States or any state.

We are a holding company, and most of our assets are located in the PRC. In addition, substantially all of our directors and officers are non-residents of the United States, and all or a substantial portion of the assets of these non-residents are located outside the United States, As a result, it may be difficult for investors to effect service of process within the United States upon these non-residents, or to enforce against them judgments obtained in United States courts, including judgments based upon the civil liability provisions of the securities laws of the United States or any state. There is uncertainty as to whether courts of the PRC would enforce:

judgments of United States courts obtained against us or these non-residents based on the civil liability provisions of the securities laws of the United States or any state; or

in original actions brought in the PRC, liabilities against us or non-residents predicated upon the securities laws of the United States or any state.

Enforcement of a foreign judgment in the PRC also may be limited or otherwise affected by applicable bankruptcy, insolvency, liquidation, arrangement, moratorium or similar laws relating to or affecting creditors’ rights generally and will be subject to a statutory limitation of time within which proceedings may be brought.

We may not receive the preferential tax treatment we previously enjoyed under PRC laws, and our global income and dividends paid to us from our operations in China may become subject to income tax under PRC law.

The rate of income tax on companies in China may vary depending on the availability of preferential tax treatment or subsidies based on their industry or location. The PRC government promulgated on March 16, 2007 the new Enterprise Income Tax Law, (“EIT Law”), and it’s implementing rules, which became effective January 1, 2008. Pursuant to the new law, the enterprise income tax of 25% shall be applied to any enterprise. However, Yongye Nongfeng received a High-Tech Enterprise Certificate which entitles it to a preferential tax rate of 15% for three years starting from January 1, 2010. The certificate was renewed in 2013 which enables it to continue to enjoy the preferential tax rate of 15% from 2013 to 2015. There is no assurance we can further reapply our High-Tech Enterprise Certificate after it expires or if any new law may change the preferential treatment granted to us. Any loss or substantial reduction of the tax benefits enjoyed by us would reduce our net profit and have a material adverse effect on our financial condition and results of operations.

Notwithstanding the foregoing provision, the new EIT Law also provides that dividends paid between “qualified resident enterprises” are exempt from enterprise income tax. Under the new EIT Law and its implementing rules, an enterprise established outside the PRC with its “de facto management body” within the PRC is considered a “resident enterprise” and will be subject to the enterprise income tax at the rate of 25% on its worldwide income. The “de facto management body” is defined as the organizational body that effectively exercises overall management and control over production and business operations, personnel, finance and accounting, and properties of the enterprise. It remains unclear how the PRC tax authorities will interpret such a broad definition. Substantially most of our management members or business operations are based in the PRC. If the PRC tax authorities subsequently determine that we should be classified as a resident enterprise, then it is possible that our worldwide income will be subject to income tax at a uniform rate of 25%.

In addition, under the new EIT law and its implementing rules, dividends paid by a foreign invested enterprise in the PRC to its foreign investor who is a non-resident enterprise will be subject to a 10% PRC withholding income tax (5% for a qualified Hong Kong beneficial owner), unless such tax is eliminated or reduced under an applicable tax treaty. Asia Standard Oil Limited (“ASO”), the 95% shareholder of Yongye Nongfeng, is incorporated in Hong Kong. Therefore, if ASO is considered a non-resident enterprise for purposes of the new EIT law, this new withholding income tax imposed on dividends paid to us by Yongye Nongfeng would reduce our net income in the event we decide to declare a dividend, which may have an adverse effect on our operating results.

It is unclear whether the dividends we receive from Yongye Nongfeng will constitute dividends between “qualified resident enterprises” and would therefore qualify for the tax exemption because it is unclear as to (i) the detailed qualification requirements for such exemption and (ii) whether dividend payments by our PRC subsidiary and investee company to us will meet such qualification requirements, even if we are considered a PRC resident enterprise for tax purposes.

Moreover, since ASO, the 95% shareholder of Yongye Nongfeng, is incorporated in Hong Kong, even if ASO is considered a non-resident enterprise, it is also unclear whether ASO should be considered as a Hong Kong beneficial owner. The beneficial owner means persons who possess ownership and right of control on their proceeds or rights or properties generated from such proceeds. The beneficial owner generally engages in substantive operation activities and may be individuals, companies or any other associations. Agents and companies for tax evasion purposes are not beneficial owner. If ASO is not considered Hong Kong beneficial owner, it will be subject to a 10% PRC withholding income tax.

Since our inception, we have benefitted from an exemption to the collection of Value Added Tax ("VAT") in the PRC. If there is a change in applicable tax laws in the PRC or if local tax authorities require us to pay VAT, we might not have the ability to pass the VAT on to our distributors and our margin would be negatively impacted.

Dividends payable to our non-PRC investors and any gain on the sale of our shares may be subject to taxes under PRC tax laws.

If our dividends payable to our shareholders are treated as income derived from sources within China, then those dividends, and any gain on the sale or transfer of our shares, may be subject to taxes under PRC tax laws.

Under the EIT Law and its implementing rules, a withholding income tax at the rate of 10% is applicable to dividends paid by us to our investors that are non-resident enterprises so long as (i) any such non-resident enterprise investor does not have an establishment or place of business in China, or (ii) despite the existence of an establishment or place of business in China, the relevant income is not effectively connected with such an establishment or place of business in China and (iii) such dividends are derived from sources within PRC. Similarly, any gain realized on the transfer of our shares by such investors is also subject to a 10% income tax if such gain is regarded as income derived from sources within China and we are considered a resident enterprise domiciled in China for tax purposes. If we are required under the EIT Law to withhold PRC income tax on our dividends paid to our foreign shareholders or investors who are non-resident enterprises, or if you are required to pay PRC income tax on the transfer of our shares under the circumstances mentioned above, the value of your investment in our shares may be materially and adversely affected.

In January 2009, the State Administration of Taxation promulgated the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises (“Measures”). Entities which have the direct obligation to make the following types of payments to a non-resident enterprise will be the relevant tax withholders for such a non-resident enterprise: income from equity investment (including dividends and other return on investment), interest, rent, royalties, and income from assignment of property as well as other income subject to enterprise income taxes received by non-resident enterprises in China. Further, the Measures provide that in the case of an equity transfer of a PRC company’s equity interest between two non-resident enterprises outside of the PRC, the non-resident enterprise which receives the equity transfer payment shall file a tax declaration with the PRC tax authority located at the place of the PRC company whose equity has been transferred, and the PRC company whose equity has been transferred shall assist the tax authorities to collect taxes from the relevant non-resident enterprise.

Moreover, the State Administration of Taxation released Circular Guoshuihan No. 698 (“Circular 698”) on December 10, 2009 that reinforces the taxation of certain equity transfers by non-resident investors through overseas holding vehicles. Circular 698 is retroactively effective from January 1, 2008. Circular 698 addresses indirect equity transfers as well as other issues. According to Circular 698, where a non-resident investor that indirectly holds an equity interest in a PRC resident enterprise through a non-PRC offshore holding company indirectly transfers an equity interest in the PRC resident enterprise by selling an equity interest in the offshore holding company, and the latter is located in a country or jurisdiction where the actual tax burden is less than 12.5% or where the offshore income of its residents is not taxable, the non-resident investor is required to provide the PRC tax authority in charge of that PRC resident enterprise with certain relevant information within 30 days of the execution of the equity transfer agreement. The tax authorities in charge will evaluate the offshore transaction for tax purposes. In the event that the tax authorities determine that such transfer is abusing forms of business organization and a reasonable commercial purpose for the offshore holding company other than the avoidance of PRC income tax liability is lacking, the PRC tax authorities will have the power to re-assess the nature of the equity transfer under the doctrine of substance over form. If challenge of a transfer from the State Administration of Taxation is successful, it may deny the existence of the offshore holding company that is used for tax planning purposes and subject the non-resident investor to PRC tax on the capital gain from such transfer. Since Circular 698 has a short history, there is uncertainty as to its application. We may become at risk of being taxed under Circular 698 and may be required to expend valuable resources to comply with Circular 698 or to establish that we should not be taxed under Circular 698, which could have a material adverse effect on its financial condition and results of operations. If the PRC tax authority determines that Circular 698 applies to us (or a non-resident investor), we (or a non-resident investor) will be obligated to make a tax return filing with the relevant PRC tax authority in accordance with PRC tax laws and regulations.

PRC regulation of direct investment and loans by offshore holding companies to PRC entities may delay or limit our ability to use the proceeds of any offering of securities to make additional capital contributions or loans to our PRC operating business.

Any capital contributions or loans that we, as an offshore company, make to our PRC operating business are subject to PRC regulations. For example, any of our loans to our PRC operating business cannot exceed the difference between the total amount of investment our PRC operating business are approved to make under relevant PRC laws and their respective registered capital, and must be registered with the local branch of SAFE as a procedural matter. In addition, our capital contributions to Yongye Nongfeng must be approved by MOFCOM or its local counterpart and registered with the SAIC or its local counterpart. We cannot assure you that we will be able to obtain these approvals on a timely basis, or at all. If we fail to obtain such approvals, our ability to make equity contributions or provide loans to our PRC operating business or to fund its operations may be negatively affected, which could adversely affect its liquidity and its ability to fund its working capital and expansion projects and meet its obligations and commitments. Furthermore, SAFE promulgated a circular in August 2008 with respect to the administration of conversion of foreign exchange capital contribution of foreign invested enterprises into RMB. Pursuant to that circular, RMB converted from foreign exchange capital contribution can only be used for the activities within the approved business scope of such foreign invested enterprise and cannot be used for domestic equity investment unless otherwise allowed by PRC laws or regulations. As a result, we may not be able to convert Yongye Nongfeng’s newly increased capital contribution into RMB for equity investment in China.

PRC labor law restricts our ability to reduce our workforce in the PRC in the event of an economic downturn and may increase our labor costs.

In June 2007, the National People’s Congress of the PRC enacted the Labor Contract Law, which became effective on January 1, 2008. To clarify certain details in connection with the implementation of the Labor Contract Law, the State Council promulgated the Implementing Rules for the Labor Contract Law, or the implementing Rules, on September 18, 2008 which came into effect immediately. The Labor Contract Law provides various rules regarding employment contracts that will likely have a substantial impact on employment practices in China. The Labor Contract Law imposes severe penalties on employers that fail to timely enter into employment contracts with employees. The employer is required to pay a double salary to the employee if it does not enter into a written contract with the employee within one month of the employment, and a non-fixed-term contract is assumed if a written contract is not executed after one year of the employment. Additionally, the Labor Contract Law sets a limit of two fixed-term contracts regardless of the length of each term, after which the contract must be renewed on a non-fixed-term basis should the parties agree to a further renewal unless otherwise required by the respective employee. This requirement curtails the common practice of continuously renewing short-term employment contracts. The Implementing Rules appear to further tighten this rule by suggesting that an employee has the right to demand a non-fixed-term contract upon the completion of the second fixed term regardless of whether the employer agrees to a contract renewal. A non-fixed-term contract does not have a termination date and it is generally difficult to terminate such a contract because termination must be based on limited statutory grounds. The employer can no longer supplement such statutory grounds through an agreement with the employee. In addition, the Labor Contract Law requires the payment of statutory severance upon the termination of an employment contract in most circumstances, including the expiration of a fixed-term employment contract.

Under the Labor Contract Law, employers can only impose a post-termination non-competition provision on employees for a maximum period of two years. If an employer intends to maintain the enforceability of a post-termination non-competition provision, the employer has to pay the employee compensation on a monthly basis post-termination of the employment. Under the Labor Contract Law, a “mass layoff” is defined as termination of more than 20 employees or more than 10% of the workforce. The Labor Contract Law expands the circumstances under which a mass layoff can be conducted, such as when a company undertakes a restructuring pursuant to the PRC Enterprise Bankruptcy Law, suffers serious difficulties in business operations, changes its line of business, performs significant technology improvements, changes operating methods, or where there has been a material change in the objective economic circumstances relied upon by the parties at the time of the conclusion of the employment contract, thereby making the performance of such employment contract impractical. The employer must follow specific procedures in conducting a mass layoff. There is little guidance on what penalties an employer will suffer if it fails to follow the procedural requirements in conducting the mass layoff. Finally, the Labor Contract Law requires that the employer discuss the company’s internal rules and regulations that directly affect the employees’ material interests (such as employees’ salary, work hours, leave, benefits, and training, etc.) with all employees or employee representative assemblies and consult with the trade union or employee representatives on such matters before making a final decision.

All of our employees based exclusively within the PRC are covered by these laws. As there has been little guidance and precedents as to how the Labor Contract Law and its Implementing Rules shall be enforced by the relevant PRC authorities, there remains uncertainty as to their potential impact on our business and results of operations. The compliance with the Labor Contract Law and its implementing Rules may increase our operating expenses, in particular our personnel expenses and labor service expenses. If we want to maintain the enforceability of any of our employees’ post-termination non-competition provisions, the compensation and procedures required under the Labor Contract Law may add substantial costs and cause logistical burdens to us. Prior to the Labor Contract Law such compensation was often structured as part of the employee’s salary during employment, and was not an additional compensation cost. In the event that we decide to terminate employees or otherwise change our employment or labor practices, the Labor Contract Law and its Implementing Rules may also limit our ability to effect these changes in a manner that we believe to be cost-effective or desirable, which could adversely affect our business and results of operations. In particular, our ability to adjust the size of our operations when necessary in periods of recession or less severe economic downturns such as the recent financial turmoil may be affected. In addition, during periods of economic decline when mass layoffs become more common, local regulations may tighten the procedures by, among other things, requiring the employer to obtain approval from the relevant local authority before conducting any mass layoff. Such regulations can be expected to exacerbate the adverse effect of the economic environment on our results of operations and financial condition.

Failure to fully comply with PRC labor laws may expose us to potential liability.

Companies operating in China must comply with a variety of labor laws, including certain social insurance, housing fund and other staff welfare-oriented payment obligations. While we believe we have complied with such obligations, there exist uncertainties as to the interpretation, implementation and enforcement of such obligations. If relevant governmental authorities determine that we have not complied fully with such obligations, we may be in violation of applicable PRC labor laws and we cannot assure you that PRC governmental authorities will not impose penalties on us for any failure to comply. In addition, in the event that any current or former employee files a complaint with relevant governmental authorities, we may be subject to making up such staff-welfare oriented obligations as well as paying administrative fines.

Risks Related to our Securities

If the merger does not close, our operations after any termination of the Amended Merger Agreement may suffer from the effects of business uncertainties resulting from the announcement of the proposed merger and costs associated with the proposed merger. The failure of the proposed merger to close would also likely have an effect on the market price of our common stock.

On September 23, 2013, the Company entered into the Merger Agreement, pursuant to which, upon the terms and subject to the conditions thereof, at the effective time of the merger, Merger Sub will be merged with and into the Company, the Company will become a wholly-owned subsidiary of Parent and each of the Company’s shares of common stock issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive US$6.69 in cash without interest, except for Excluded Shares, which will be cancelled for no consideration and cease to exist as of the effective time of the merger.

At the adjourned special meeting of stockholders of the Company held on March 5, 2014, the proposal to approve the Merger Agreement did not receive approval from at least a majority of the issued and outstanding shares of common stock of the Company (other than the Excluded Shares) and the Merger Agreement was not approved by the Company’s stockholders.

On April 9, 2014, the Company entered into the Amendment to the Merger Agreement. Pursuant to the Amended Merger Agreement, the merger consideration payable to holders of shares of the Company’s common stock (other than the Excluded Shares) has been increased to US$7.10 in cash without interest, and the stockholder voting requirement relating to the approval of the Amended Merger Agreement has been modified to require approval by the affirmative vote of the holders of at least a majority of the issued and outstanding shares of common stock of the Company (other than the Excluded Shares) that are present in person or by proxy and voting for or against approval of the Amended Merger Agreement at the special stockholders’ meeting to be held to approve the Amended Merger Agreement, rather than the prior requirement of the affirmative vote of the holders of at least a majority of the issued and outstanding shares of common stock of the Company (other than the Excluded Shares).

Uncertainty about the effect of the merger on our employees, customers, and other parties may have an adverse effect on our business. Such uncertainty may impair our ability to attract, retain, and motivate key personnel, including our executive leadership, and could cause customers, suppliers, financial counterparties, and others to seek to change existing business relationships with us.

We have incurred, and will continue to incur, significant costs, expenses, and fees for professional services and other transaction costs in connection with the merger. Many of the fees and costs will be payable by us even if the merger is not completed.

The outcome of the Amended Merger Agreement and the ongoing litigation arising from the Wu Proposal and the Amended Merger Agreement may have a material adverse effect on our financial performance and the market price of our common stock.

Our common stock may be affected by limited trading volume and may fluctuate significantly.

Our common stock is traded on the Nasdaq Global Select Market. Although an active trading market has developed for our common stock, there can be no assurance that an active trading market for our common stock will be sustained. Failure to maintain an active trailing market for our common stock may adversely affect our shareholders’ ability to sell our common stock in short time periods, or at all. In addition, sales of substantial amounts of our common stock in the public market could harm the market price of our common stock. Our common stock has experienced, and may experience in the future, significant price and volume fluctuations. Some of the factors that may materially affect the market price of our common stock are beyond our control, such as changes in financial estimates by industry and securities analysts, conditions or trends in the industry in which we operate or sales or our common stock. These factors may materially adversely affect the market price of our common stock, regardless of our performance. These broad market fluctuations may adversely affect the market price of our common stock.

Shares eligible for future sale may adversely affect the market price of our common stock, as the future sale of a substantial amount of our restricted stock in the public marketplace could reduce the price of our common stock.

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act of 1933, as amended (“Rule 144”), subject to certain limitations. In general, pursuant to Rule 144, a stockholder (or stockholders whose shares are aggregated) who has satisfied a six-month holding period may, under certain circumstances, sell within any three-month period a number of securities which does not exceed the greater of 1% of the then outstanding shares of common stock or the average weekly trading-volume of the class during the four calendar weeks prior to such sale. Rule 144 also permits, under certain circumstances, the sale of securities, without any limitations, by a non-affiliate of our Company that has satisfied a one-year holding period. We have granted MSPEA and any other holders of the convertible preferred stock certain registration rights with respect to the common stock underlying the convertible preferred stock and any other shares of common stock they may otherwise own or acquire in the future. Any substantial sale of common stock pursuant to Rule 144 or pursuant to any resale prospectus, including a resale prospectus used to register the common stock underlying the convertible preferred stock, may have an adverse effect on the market price of our securities.

There is a significant number of our common stock eligible for sale, which could depress the market price of such stock.

Since September 23, 2011, the effective date of the registration statement that registered the common stock underlying our convertible preferred stock, a large number of our common stock has become available for sale in the public market, which could harm the market price of the stock. Further, shares may be offered from time to time in the open market pursuant to Rule 144, and these sales may have a depressive effect as well. In general, a person who has held restricted shares for a period of six months may, upon filing a notification with the SEC on Form 144, sell common stock into the market in an amount equal to the greater of one percent of the outstanding shares or the average weekly trading volume during the last four weeks prior to such sale.

Your percentage ownership in us may be diluted by future issuances of capital stock and by the conversion of the convertible preferred stock, which could reduce your influence over matters on which stockholders vote.

Subject only to any applicable stockholder approval requirements imposed by the Nasdaq Global Select Market, our board of directors has the authority to issue all or any part of our authorized but unissued shares of common stock. Issuances of common stock would reduce your influence over matters on which our stockholders vote. The conversion of the convertible preferred stock will dilute your percentage ownership.

Stockholders should have no expectation of any dividends.

To date, we have not declared nor paid any cash dividends. The Board of Directors does not intend to declare any dividends on our common stock in the near future, but instead intends to retain all earnings, if any, for use in the operation and expansion of our business. If we decide to pay dividends, foreign exchange and other regulations in China may restrict our ability to distribute retained earnings from China or convert those payments from Renminbi into foreign currencies.

Techniques employed by manipulative short sellers in Chinese small cap stocks may drive down the market price of our common stock.

Short selling is the practice of selling securities that the seller does not own but rather has, supposedly, borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is therefore in the short seller’s best interests for the price of the stock to decline, many short sellers (sometime known as “disclosed shorts”) publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a stock short. While traditionally these disclosed shorts were limited in their ability to access mainstream business media or to otherwise create negative market rumors, the rise of the Internet and technological advancements regarding document creation, videotaping and publication by weblog (“blogging”) have allowed many disclosed shorts to publicly attack a company’s credibility, strategy and veracity by means of so-called research reports that mimic the type of investment analysis performed by large Wall Street firm and independent research analysts. These short attacks have, in the past, led to selling of shares in the market, on occasion in large scale and broad base. Issuers with business operations based in China and who have limited trading volumes and are susceptible to higher volatility levels than U.S. domestic large-cap stock, and can be particularly vulnerable to such short attacks.

These short seller publications are not regulated by any governmental, self-regulatory organization or other official authority in the U.S., are not subject to the certification requirements imposed by the Securities and Exchange Commission in Regulation AC (Regulation Analyst Certification) and, accordingly, the opinions they express may be based on distortions of actual facts or, in some cases, fabrications of facts. In light of limited risks involved in publishing such information, and the enormous profit that can be made from running just one successful short attack, unless the short sellers become subject to significant penalties, it is more likely than not that disclosed shorts will continue to issue such reports.

While we intend to strongly defend our public filings against any such short seller attacks, often times we are constrained, either by principles of freedom of speech, applicable state law (often called “Anti-SLAPP statutes”), or issues of commercial confidentiality, in the manner in which we can proceed against the relevant short seller. You should be aware that in light of the relative freedom to operate that such persons enjoy - oftentimes blogging from outside the U.S. with little or no assets or identity requirements - should we be targeted for such an attack, our stock will likely suffer from a temporary, or possibly long term, decline in market price should the rumors created not be dismissed by market participants.

In February, March, May and December of 2011, January of 2012 and March of 2013, there were reports published by the Seeking Alpha website, analysts, and other web-based publishers that contained misleading statements about us. Although we have responded to each of these reports in press releases dated February 7, 2011, March 24, 2011, May 19, 2011 and December 15, 2011, there are predictions that there will continue to be more short seller attacks against Chinese companies. As a result, the price of our stock remains vulnerable to any further attacks in this regard.

We are the subject of pending class action lawsuits, which could require us to pay substantial damages or could otherwise have a material adverse effect on us.

On or about October 18, 2012 and October 22, 2012, five shareholder class action complaints were filed against the Company and certain officers and directors thereof in connection with the preliminary, non-binding proposal letter dated October 15, 2012, from Mr. Zishen Wu, MSPEA and Abax Global Capital (Hong Kong) Limited, to acquire all outstanding shares of common stock of the Company not already owned by those parties, in a going private transaction for $ 6.60 per share of common stock in cash, subject to certain conditions (the “Wu Proposal”). The five complaints are captioned, respectively, Doherty v. Yongye International, Inc., et al., A-12-670343-C; Kirby v. Zishen Wu, et al. , A-12-670468-C; Calisti v. Zishen Wu, et al., Case No. A-12-670758-B; Kong, et al. v. Zishen Wu, et. al., Case No. A-12-670874-B; and Harris v. Yongye International, Inc., et al. , Case No. A-12-670817-B. Each of the complaints was filed in Nevada state court in the District Court, Clark County, and each challenged the Wu Proposal, alleging among other things, that the consideration to be paid in such proposal was inadequate, as was the process by which the proposal was being evaluated. The complaints sought, among other relief, to enjoin defendants from consummating the Wu Proposal and to direct defendants to exercise their fiduciary duties to obtain a transaction that is in the best interests of all of the Company’s shareholders. On or about March 5, 2013, the plaintiff in the Doherty case filed a notice of voluntary dismissal. By stipulation and order, filed on April 23, 2013, the remaining cases were consolidated for all purposes under the caption In re Yongye International, Inc. Shareholders’ Litigation, Case No. A-12-670468-B (the “Consolidation Order”). Under the Consolidation Order, the plaintiffs were directed to file a consolidated complaint within 20 days of the announcement of a definitive merger agreement entered into in connection with any proposed going private transaction. On October 18, 2013 the parties stipulated, and the Court ordered, that the plaintiffs would file the consolidated complaint within 14 days of the filing of the preliminary proxy statement (the“Consolidation Stipulation”). The preliminary proxy statement was filed on October 28, 2013, and the consolidated complaint was filed on November 7, 2013. The consolidated complaint alleges, among other things, that consideration to be paid under the merger agreement is inadequate, that the process leading to the merger agreement was flawed, and that the defendants failed to include all material information in the proxy statement. By stipulation and order filed on December 13, 2013, the defendants’ time to answer or otherwise respond to the consolidated complaint was adjourned until if and after the transaction contemplated in the merger agreement were to close. On December 23, 2013, the plaintiffs filed a motion to preliminarily enjoin the stockholder vote. The motion was heard on January 27, 2014, and on February 19, 2014 the court issued an order denying the plaintiffs’ motion. The Company has reviewed the allegations contained in the consolidated complaint and believes they are without merit. The Company intends to defend the litigation vigorously.

While we believe the claims contained in these lawsuits to be without merit and intend to defend these cases vigorously, these efforts will be both expensive and time consuming and ultimately, due to the nature of the litigation, there can be no assurance that these efforts will be successful. In addition, our bylaws, our amended articles of incorporation and an agreement we entered into in favor of MSPEA’s director in connection with the May 2011 financing require us to indemnify our directors for breaches of fiduciary duties, subject to certain limited exceptions. According to such documents, we are obligated to pay for certain costs and expenses of our directors and may be liable for substantial damages, costs and expenses if the plaintiffs prevail. Such litigation could also divert the attention of our management and our resources in general from day-to-day operations.

An SEC investor bulletin regarding reverse mergers may drive down the market price of our common stock.

On June 9, 2011, the SEC issued an investor bulletin in which it explained the process by which a company becomes a public company by means of a reverse merger, described the potential risks of investing in a reverse merger company and detailed recent enforcement actions taken by it against certain reverse merger companies. In particular the investor bulletin raised specific concerns with respect to foreign companies that access the U.S. markets through the reverse merger process, as we did. The SEC investor bulletin could cause investors in our common stock to sell their shares and may cause other investors not to invest in us, thus driving down the market price of our common stock or making it more difficult for us to raise funds in the future.

If our common stocks were delisted and determined to be “penny stocks,” a broker-dealer may find it more difficult to trade our common stocks and an investor may find it more difficult to acquire or dispose of our common stocks in the secondary market.

If our common stocks were removed from listing with the Nasdaq Global Select Market, we may be subject to the so-called “penny stock” rules. The SEC has adopted regulations that define a “penny stock” to be any equity security that has a market price per share of less than US$5.00, subject to certain exceptions, such as any securities listed on a national securities exchange. For any transaction involving a “penny stock,” unless exempt, the rules impose additional sales practice requirements on broker-dealers, subject to certain exceptions. If our common stocks were delisted and determined to be “penny stocks,” a broker-dealer may find it more difficult to trade our common stocks and an investor may find it more difficult to acquire or dispose of our common stocks on the secondary market. Investors in penny stocks should be prepared for the possibility that they may lose their whole investment.

Our independent registered public accounting firm’s audit documentation related to their audit reports included in this annual report may be located in the Peoples’ Republic of China. The Public Company Accounting Oversight Board currently cannot inspect audit documentation located in China and, as such, you may be deprived of the benefits of such inspection.

Our independent registered public accounting firm that issues the audit reports included in our annual reports filed with the U.S. Securities and Exchange Commission, as auditors of companies that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United States) (the “PCAOB”), is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the applicable laws of the United States and professional standards. Our operations are principally conducted in the Peoples’ Republic of China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities. Accordingly, any audit documentation located in China related to our independent registered public accounting firm’s reports included in our filings with the U.S. Securities and Exchange Commission is not currently inspected by the PCAOB.

Inspections conducted by the PCAOB outside of China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. This lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating audit documentation located in China and its related quality control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections. In December 2012, the SEC brought administrative proceedings against five accounting firms in China, including our independent registered public accounting firm, alleging that they had refused to produce audit work papers and other documents related to certain China-based companies under investigation by the SEC for potential accounting fraud. On January 22, 2014, an initial administrative law decision was issued, censuring these accounting firms and suspending four of the five firms from practicing before the SEC for a period of six months. The decision is neither final nor legally effective unless and until reviewed and approved by the SEC. These accounting firms have the ability to appeal and the four firms which are subject to the six-month suspension from practicing before the SEC have filed a petition for review of the decision. The sanction will not become effective until after a full appeal process is concluded and a final decision is issued by the SEC. The accounting firms can also further appeal the final decision of the SEC through the federal appellate courts. We are not involved in the proceedings brought by the SEC against the accounting firms. However, our independent registered public accounting firm is one of the four accounting firms subject to the six-month suspension from practicing before the SEC in the initial administrative law decision. We may therefore be adversely affected by the outcome of the proceedings, along with other U.S.-listed companies audited by these accounting firms. We cannot predict the outcome of this matter or the effect it may have on our ability to make timely filings with the SEC.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Except for the historical information contained herein, the matters discussed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report are forward-looking statements that involve risks and uncertainties. The factors listed in the section captioned “Risk Factors” as well as any cautionary language in this report, provided examples of risks, uncertainties and events that may cause our actual results to differ materially from those projected. Except as may be required by law, we undertake no obligation to update any forward-looking statement to reflect events after the date of this annual filing.

Overview

Currently, our principal product is our liquid crop nutrient product, from which we derived substantially all of our sales for the year ended December 31, 2013. We also produce powder animal nutrient product, which is mainly used for livestock. In 2012, we launched two new crop nutrient products, a crop seed nutrient product and a crop root nutrient product. The crop seed nutrient product helps crop seeds sprout and improves the growth of roots, and the crop root nutrient product improves crop roots’ ability to absorb water and fertilizers and enhance crop resistance against drought, freezing, diseases, and stalk leaning. We believe, by using our regular crop nutrient together with our new products at different stages of crop growth, the combined effectiveness of our products will further enhance crop yield. We market our regular crop and animal products under the trade name “Shengmingsu” (“生命素” in Chinese means “Life Essential”). Our new products for crop seeds and roots are named “Zhongbaosheng” and “Qianggenbao” respectively. We produce our liquid crop nutrient products, including the newly launched crop seed product and crop root product, based on our proprietary formulae utilizing fulvic acid as the primary compound base and combining with various micro nutrients such as zinc and boron, macro nutrients like nitrogen, phosphorous and potassium (“NPK”) and other nutrients that are essential for the crop health. Our crop nutrient’s core fulvic acid compound improves crop yield by enhancing the absorption of fertilizers and micro nutrients. In addition, the micro nutrients and NPK included in our crop nutrient formula serve as supplements during key growth stages of crops. We believe that our crop nutrient products are particularly well-suited for use in China, which generally has highly degraded farming soil as a result of over-farming, decades of over-use of chemical fertilizers and less advanced farming practices compared with more developed nations. Our regular crop nutrient product is most commonly applied by directly spraying onto leaves of crops after dilution with water, and is typically used at certain critical growth stages of crops in addition to normal fertilizer application. Our crop seed nutrient product is used by soaking the seeds in our product after water dilution. Soaking time and proportions of water to product vary among different crops and users should follow our product specifications. At the time that a seeding crop is transplanted, our crop root nutrient is used by applying the product onto the crop roots after water dilution and blending with soil. After the transplant, the water-diluted crop root product is used to irrigate the crops at the roots. Soaking time and water-product proportions during and after transplanting varies and users should follow our product specifications.

For the year ended December 31, 2013, our actual production output for liquid crop nutrient product was 53,789 tons and the actual output for powder animal nutrient was 1,479 tons. We may continue to expand our production capacity as required to respond to increasing demand for our products in the future. In 2014, we are introducing a new product to diversify our product mix. During 2013, we outsourced the production of this product to a third party factory that use our raw materials and follow our manufacturing procedures, and this product was included in our inventory balance as of December 31, 2013. The gross margin of this product is expected to be lower than our existing liquid crop nutrient product.

Recent Developments

On September 23, 2013, the Company entered into an agreement and plan of merger (the “Merger Agreement”) with Full Alliance International Limited, a British Virgin Islands company (“Holdco”), Yongye International Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands and a wholly-owned subsidiary of Holdco (“Parent”), and Yongye International Merger Sub Limited, a Nevada corporation and a wholly owned subsidiary of Parent (“Merger Sub”, together with the Company, Holdco and Parent, the “Parties” and any one of them a “Party”). Pursuant to the Merger Agreement, upon the terms and subject to the conditions thereof, at the effective time of the merger, Merger Sub will be merged with and into the Company, the Company will become a wholly-owned subsidiary of Parent and each of the Company’s shares of common stock issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive US$6.69 in cash without interest, except for (i) shares owned by Holdco, Parent and Merger Sub, including shares of common stock and Preferred Shares to be contributed to Parent by Holdco, Mr. Zishen Wu, Prosper Sino Development Limited and MSPEA, immediately prior to the effective time of the merger pursuant to a contribution agreement, dated as of September 23, 2013, among Parent, Holdco, Mr. Zishen Wu, Prosper Sino Development Limited and MSPEA (except that, with respect to Prosper Sino, only such shares designated as “Prosper Sino rollover shares” in the preliminary proxy statement in connection with the special meeting of stockholders will be contributed), and (ii) shares of common stock held by the Company or any subsidiary of the Company((i) and (ii) collectively, the “Excluded Shares”), which will be cancelled for no consideration and cease to exist as of the effective time of the merger. Currently, Holdco, Mr. Zishen Wu, Prosper Sino Development Limited and MSPEA, collectively beneficially own approximately 33.1% of the Company’s outstanding shares of common stock, on an as converted basis.

On April 9, 2014, the Parties entered into an amendment (the “Amendment”) to the Merger Agreement (the Merger Agreement as so amended, the “Amended Merger Agreement”).

Other than as expressly modified by the Amendment, the Merger Agreement remains in full force and effect as originally executed on September 23, 2013.

Factors affecting our operating results

Market Potential for Crop Nutrient Products in China

The long-term market growth of crop nutrient products in China is primarily driven by the need to improve crop yield to ensure sufficient food supply in view of limited per capita arable land in China. Currently, with only approximately 9% of the world’s arable land, China needs to feed 1.3 billion people, or approximately 21% of the world’s population. According to the National Population and Family Planning Commission of China, China’s population will reach 1.5 billion by 2030. Therefore, the country faces the challenge of producing additional food to feed the additional 200 million people within the next 20 years. This puts great pressure on China’s agricultural system to increase production output.

Distribution Network

The agricultural goods market is very fragmented and spans over 600,000 villages in over 2,000 counties in over 30 provincial regions in China. As farmers in China tend to be less mobile, it is vital to distribute at the village-level in order to address this market. However, due to the scattered nature of China’s villages, it is necessary to work through county-level distributors in order to overcome barriers related to geography, local cultures and business networks. To sell to farmers through village retail stores, crop nutrient manufacturers typically work with provincial-level distributors to manage county-level distributors or work directly with county-level distributors.

In order to more rapidly achieve nationwide coverage, we have adopted a strategy to work with provincial-level distributors which in turn sell our products to county-level distributors, Branded Retailers and end-customers. We invest significantly in branding, training and technical support to motivate and maintain the long-term loyalty of our distributors and Branded Retailers, which is critical to successfully selling product through a multi-tier distribution network. Since we enter and expand into provincial regions at different times, our sales in different provincial markets vary due to different market penetration rates.

Our end-customers are comprised of large farms which purchase directly from distributors, and individual farmers who purchase either through Branded Retailers or promotional events held by local distributors. Our Branded Retailer network has been a key driver of our sales. The number of Branded Retailers increased from 35,058 as of December 31, 2012 to 36,100 as of December 31, 2013. Inner Mongolia, Xinjiang, Yunnan/Guizhou, Guangdong/Hainan and Henan provinces accounted for the majority of newly recruited Branded Retailers.

Seasonality

Our regular liquid crop nutrient product is most commonly applied by directly spraying onto leaves of crops in the second and third quarters, which correspond to the growing seasons for most crops in most parts of China. Accordingly, the sales during the second and third quarters usually represent 70-80% of our total annual sales. Therefore, higher volume of finished goods are usually accumulated during the non-peak seasons in preparation for the subsequent peak sales seasons which will result in higher inventory turnover days during non-peak seasons. In the beginning of 2012, we launched two new products which are positioned specifically for crop seeds and roots, the peak sales seasons of which fall in the first and second quarter.

Pricing

We principally sell to our provincial-level distributors at an ex-factory price, and they in turn sell to lower level distributors at distributor prices. Branded Retailers sell to farmers at our suggested retail prices. Our pricing policy is consistent across the country, and we require our provincial-level distributors to ensure this policy is followed by county-level distributors and Branded Retailers. Our pricing policy for ex-factory price, different level of distributor prices and suggested retail prices have generally remained stable for the past several years. In 2012and 2013, we allowed Branded Retailers to charge a higher retail price for an updated version of our crop nutrient product that replaced the prior version.

In July 2010, we acquired a customer list and relationship of eight direct customers from our former provincial-level distributor in Hebei. As a result, we have been able to directly sell products in Hebei province at a county-level distributor price after bypassing the former provincial-level distributor. We expect to maintain the higher selling price to those eight distributors in Hebei in the foreseeable future.

The pricing of the two new crop products launched in 2012 is at the same level of our regular crop nutrient products. We may adjust our selling prices from time to time in the future based on then market conditions, and any such adjustments may affect our margins, market demand and financial results.

FINANCIAL HIGHLIGHTS

YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	For the Years Ended
	December 31, 2013			December 31, 2012			December 31, 2011

Sales	US$	661,881,100		US$	442,986,604		US$	390,379,489

Cost of sales		256,962,530			180,614,350			162,078,410

Gross profit		404,918,570			262,372,254			228,301,079

Selling expenses		148,967,729			104,036,345			73,886,542

Research and development expenses		22,119,473			16,575,976			13,130,627

General and administrative expenses, including a reversal of allowance for doubtful accounts of US$ nil ,US$6,332,022 , and US$ nil for the year ended December 31, 2013, 2012 and 2011, respectively		19,063,800			14,123,521			35,694,045

Impairment loss of goodwill		-			10,774,106			-

Income from operations		214,767,568			116,862,306			105,589,865

Other (expenses)/income
Interest expense		(6,990,661	)		(4,193,909	)		(1,429,111	)
Interest income		3,167,936			455,269			123,054
Subsidy income		2,775,229			9,506,306			2,973,362
Other (expenses)/income, net		(335,986	)		(496,014	)		223,496
Change in fair value of derivative liabilities		-			(296,822	)		719,085

Total other (expenses)/income, net		(1,383,482	)		4,974,830			2,609,886

Earnings before income tax expense		213,384,086			121,837,136			108,199,751

Income tax expense		33,350,985			22,803,881			18,407,554

Net income		180,033,101			99,033,255			89,792,197

Less: Net income attributable to the noncontrolling interest		9,191,973			5,350,190			4,930,571

Net income attributable to Yongye International, Inc.		170,841,128			93,683,065			84,861,626

Net income per share of common stock:
Basic	US$	2.93		US$	1.62		US$	1.57
Diluted	US$	2.93		US$	1.62		US$	1.55

Weighted average shares used in computation:
Basic		50,681,435			49,645,273			49,055,252
Diluted		50,681,435			49,645,273			49,161,073

Net income		180,033,101			99,033,255			89,792,197
Other comprehensive income
Foreign currency translation adjustment, net of nil income taxes		19,662,369			3,012,054			10,951,316

Comprehensive income		199,695,470			102,045,309			100,743,513
Less: Comprehensive income attributable to the noncontrolling interest		10,129,792			5,490,555			5,426,935
Comprehensive income attributable to Yongye International, Inc.	US$	189,565,678		US$	96,554,754		US$	95,316,578

RESULTS OF OPERATIONS

Fiscal year ended December 31, 2013 compared with Fiscal year ended December 31, 2012 and 2011

Our business for the year ended December 31, 2013 grew at a rate of 49.4% in net sales or a US$218.9 million increase over 2012, and for the year ended December 31, 2012 grew at a rate of 13.5% in net sales or a US$52.6 million increase over 2011. This increase was driven by higher penetration in our various geographic markets.

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

	Yongye			Yongye			Yongye			Changes in %
	International, Inc.			International, Inc.			International, Inc.			2013 vs.			2012 vs.
	2013			2012			2011			2012			2011
Net Sales	US$	661,881,100		US$	442,986,604		US$	390,379,489			49	%		14	%
Gross Profit		404,918,570			262,372,254			228,301,079			54	%		15	%
Income from Operations		214,767,568			116,862,306			105,589,865			84	%		11	%
Net Income		180,033,101			99,033,255			89,792,197			82	%		10	%

Gross Margins		61	%		59	%		58	%		2	%		1	%
Net Margins		27	%		22	%		23	%		5	%		(1	)%

EPS- Basic	US$	2.93		US$	1.62		US$	1.57			81	%		3	%
EPS- Diluted	US$	2.93		US$	1.62		US$	1.55			81	%		5	%

Our financial position at December 31, 2013 and 2012:

in US$, except for	As of		As of
percentages	December 31, 2013		December 31, 2012		Variance			%			Note

Cash and restricted cash		123,768,435		44,551,404		79,217,031			177.8	%
Accounts receivable, net of allowance for doubtful accounts		334,141,280		293,600,762		40,540,518			13.8	%		1	)
Inventories		251,372,750		118,693,596		132,679,154			111.8	%		2	)
Deposits to suppliers		54,400,166		24,048,028		30,352,138			126.2	%		3	)
Property, plant and equipment, net		23,675,240		26,224,957		(2,549,717	)		(9.7	)%
Prepayment for mining project		37,035,215		35,792,410		1,242,805			3.5	%		4	)
Total assets		896,559,205		623,847,190		272,712,015			43.7	%
Long-term loans and payables and capital lease obligations - current portion		8,958,983		9,545,158		(586,175	)		(6.1	)%
Short term bank loan		115,632,535		50,857,163		64,775,372			127.4	%
Accounts payable		8,137,337		12,364,193		(4,226,856	)		(34.2	)%
Income tax payable		26,612,792		3,196,078		23,416,714			732.7	%
Accrued expenses		19,465,163		31,389,630		(11,924,467	)		(38.0	)%		5	)
Other payables		4,271,519		2,828,262		1,443,257			51.0	%
Total current liabilities		183,684,752		110,683,792		73,000,960			66.0	%
Long-term loans and payables and capital lease obligations		9,428,182		12,389,077		(2,960,895	)		(23.9	)%
Other non-current liability		10,395,458		6,683,802		3,711,656			55.5	%
Total equity attributable to Yongye International, Inc.		602,006,569		415,472,496		186,534,073			44.9	%
Total equity		632,926,933		436,263,068		196,663,865			45.1	%		6	)

The balance of accounts receivable increased by US$40.5 million in 2013 as compared to 2012, representing an increase of 13.8%.

The increase of the accounts receivable was primarily due to our continued business growth. For certain distributors, we do not recognize revenues upon shipment of the finished goods to them since we determined that collectability was not reasonably assured at time of shipment. Revenues from sale of products to these distributors are not recognized until we receive full payment. For the year ended December 31, 2013, revenue of US$114.4 million is recognized which is resulting from the collection of prior year receivables from those distributors.

Past due balances are reviewed individually for collectability. We determine the adequacy of the allowance for doubtful accounts by considering the amount of historical losses adjusted to take into account current market conditions and customers’ financial condition, the amount of receivables in dispute and past due, the accounts receivable aging and customers’ repayment patterns.

Accounts receivable as of December 31, 2013 and 2012 consisted of the following:

	December 31, 2013			December 31, 2012

Accounts receivable	US$	343,462,019		US$	302,608,722

Less: allowance for doubtful accounts		(9,320,739	)		(9,007,960	)
Total	US$	334,141,280		US$	293,600,762

There was no write-off of accounts receivable for the years ended December 31, 2013, 2012 and 2011. As of March 12, 2014, approximately US$260.2 million had been collected from our distributors, including US$236.2 million of the accounts receivable outstanding at December 31, 2013.

Of the US$343.5 million of our gross accounts receivable as of December 31, 2013, US$124.1 million of our accounts receivable were past our six-month credit term, representing 36.2% of total gross account receivable balance as of December 31, 2013 and 18.7% of our sales in 2013. We provided for allowance for doubtful accounts in the amount of US$9.3 million, taking into account current market conditions, customers’ financial condition, the accounts receivable ageing and the customers’ repayment patterns. For the gross accounts receivable balance as of December 31, 2013, our top three customers accounted for US$113.6 million or 33.1% and our top five customers accounted for US$179.7 million or 52.3% of the total amount of accounts receivable.

The ageing of gross accounts receivable as of December 31, 2013 and December 31, 2012 was:

Receivable Ageing	December 31, 2013		%			December 31, 2012		%

Current:
0-3 months	US$	85,945,690		25.0	%	US$	62,258,015		20.6	%
3-6 months		133,420,035		38.8	%		125,453,713		41.4	%
Subtotal		219,365,725		63.8	%		187,711,728		62.0	%

Past due:
Past due 0-30 days		67,757,206		19.7	%		41,961,730		13.9	%
Past due over 30 days		56,339,088		16.5	%		72,935,264		24.1	%
Subtotal		124,096,294		36.2	%		114,896,994		38.0	%

Total		343,462,019		100.0	%		302,608,722		100.0	%

Days sales outstanding (“DSO”) is defined as average accounts receivable for the period divided by net sales for the period times the days of this period. DSO decreased by 14 days from 192 days for the year ended December 31, 2012 to 178 days for the same period of 2013, mainly due to the increased cash collection from those distributors for whom we do not recognize revenue upon shipment of our products.

The increase in inventory of US$132.7 million was mainly due to anticipation of continued business growth and product diversification in 2014. In 2014, we are introducing a new product to diversify our product mix. During 2013, we outsourced the production of this product to a third party factory that use our raw materials and follow our manufacturing procedures, and this product was included in our inventory balance as of December 31, 2013.

Inventory turn-over days (“Inventory days”) is defined as average inventory for the period divided by cost of sales for the period times the days of this period. As explained above, inventory days increased by 56 days from 207 days for the year ended December 31, 2012 to 263 days for the same period in 2013.

We increased deposits to suppliers by US$30.4 million at the year ended December 31, 2013 in anticipation of production demand for the next year. The deposits were paid primarily to a supplier of chemical components to lock in price and secure availability, which is expected to be delivered by April 2014 and consumed by the Company in the manufacturing process within one year.

The cash consideration for the resource project is RMB 240 million or approximately US$37 million. According to preliminary third party analysis, the mineral resource of the project we acquired is at surface level and the “open pit” mining method is recommended. Meanwhile, our Wuchuan Facility was built near the mineral resource project to minimize future shipping expense. We engaged a third party mineral institute to assist us in obtaining a Geological Exploration Report which is still in progress. We believe the cost to be incurred in completing the remaining administrative procedures and obtaining government approvals are not significant. If we cannot receive the report before the exploration right expires, we would apply for an extension from the local authority.

The decrease in accrued expenses of US$11.9 million is mainly due to the settlement of accrual for advertising and promotion activities, and research expenses for field tests that were conducted during the first half year of 2013.

Total equity increased by US$196.7 million from US$436.3 million as of December 31, 2012 to US$632.9 million as of December 31, 2013, which is mainly due to an increase in retained earnings of US$170.8 million primarily for the net income attributable to Yongye International, Inc. and other comprehensive income of US$19.7 million primarily for foreign currency exchange translation adjustment during the year.

Net Sales

										Changes in %
										2013 vs.			2012 vs.
	2013			2012			2011			2012			2011
Sales	US$	661,881,100		US$	442,986,604		US$	390,379,489			49.4	%		14	%
Gross Profit		404,918,570			262,372,254			228,301,079			54.3	%		15	%
Gross Margins		61	%		59	%		58	%

Our sales increased by US$218.9 million from US$443.0 million in 2012 to US$661.9 million in 2013, representing an increase of 49.4%. Sales increased by US$52.6 million from US$390.4 million in 2011 to US$443.0 million in 2012, representing an increase of 13.5%.

For the year ended December 31, 2013, we derived US$652.4 million, or 98.6% of our total sales, from liquid crop nutrient, and we derived US$9.5 million, or 1.4% of our total sales, from the powder animal nutrient. For our liquid crop nutrient, the regular crop nutrient contributed US$559.9 million, or 85.8% of total liquid crop nutrient, while the two new products for crop seeds and roots contributed US$92.5 million, or 14.2% of our total liquid crop nutrient sales for the year ended December 31, 2013. For the year ended December 31, 2012, we derived US$438.4 million, or 99.0% of our total sales, from liquid crop nutrient, and we derived US$4.6 million, or 1.0% of our total sales, from the powder animal nutrient.

In 2014, we are introducing a new product which has comparatively lower margins to diversify our product mix. The amount of sales of this product in 2013 was insignificant.

For the year ended December 31, 2013, the average selling price (“ASP”) of our liquid crop nutrient product was US$12,265 per ton, as compared to US$12,046 per ton for the same period of 2012. The small increase in our ASP is the result of the effect of currency rate fluctuations. The fluctuation in sales for the year ended December 31, 2013 compared with that for the same period of 2012, was all driven by the fluctuation in sales volume.

The following table set forth the sales breakdown by region for the year ended December 31, 2013, 2012 and 2011:

							2013vs 2012						2012 vs 2011
Sales By Region (US$ mm)	2013		2012		2011		Change in US$			2013vs 2012 Change in %			Change in US$			2012 vs 2011 Change in %
Hebei/Beijing/Tianjin		108.0		49.3		73.7		58.7			119.1	%		(24.4	)		-33.1	%
Inner Mongolia		70.3		56.7		33.5		13.6			24.0	%		23.2			69.3	%
Shandong		53.7		41.8		28.1		11.9			28.5	%		13.7			48.8	%
Guangdong/Hainan		47.8		36.5		25.9		11.3			31.0	%		10.6			40.9	%
Henan		51.0		39.8		23.6		11.2			28.1	%		16.2			68.6	%
Heilongjiang/Jilin/Liaoning		49.3		37.5		29.4		11.8			31.5	%		8.1			27.6	%
Xinjiang		18.3		7.5		10.7		10.8			144.0	%		(3.2	)		-29.9	%
Hubei/Hunan		17.1		5.1		13.2		12			235.3	%		(8.1	)		-61.4	%
Gansu/Qinhai		20.5		16.3		13.1		4.2			25.8	%		3.2			24.4	%
Jiangsu		37.0		29.5		23.8		7.5			25.4	%		5.7			23.9	%
Shanxi		18.8		15.2		11.8		3.6			23.7	%		3.4			28.8	%
Anhui		41.0		6.1		17.3		34.9			572.1	%		(11.2	)		-64.7	%
Shaanxi		30.3		24.5		20.0		5.8			23.7	%		4.5			22.5	%
Sichuan/Chongqin		31.2		24.1		21.3		7.1			29.5	%		2.8			13.1	%
Jiangxi/Fujian		33.9		26.7		21.9		7.2			27.0	%		4.8			21.9	%
Yunnan/Guizhou		33.1		26.1		22.2		7			26.8	%		3.9			17.6	%
Guangxi		*		0.2		0.5		(0.2	)		-100.0	%		(0.3	)		-60.0	%
Ningxia		*		0.1		0.1		(0.1	)		-100.0	%		-			-
Others		0.6		*		0.3		0.6			-			(0.3	)		-100.0	%
Total		661.9		443.0		390.4		218.9			49.4	%		52.6			13.5	%

* Less than US$50,000

The significant increase of our revenue in Hebei, Anhui, Hubei and Xinjiang for the year ended December 31, 2013 compared to the same period of 2012 is primarily due to cash collection from distributors in those provinces. In the fourth quarter of 2011, in consideration of the deteriorating payment ability of certain distributors in the above mentioned provinces, we delayed the recognition of revenues generated from sales to those distributors until payment collectability could be reasonably assured, which is generally evidenced by receipt of cash, and a sufficient period of collection history can be demonstrated, whichever is earlier. We decided to continue to ship our nutrient products to these distributors because (i) to stop shipment would disrupt our business and channel development in the respective regions where we have exclusive distribution arrangements, (ii) our products have relatively high gross margins to compensate the risk of any uncollection, and (iii) based on our assessment, none of these distributors are in adverse financial situations that causes us to believe it is remote that we will not collect although collectability cannot be reasonably assured. During the year ended December 31, 2013, revenue of US$114.4 million was recognized which is resulting from the collection of prior year receivables from those distributors. The sales to the other distributors which were recognized upon shipment increased from US$407.6 million for the year ended December 31, 2012 to US$517.8 million for the same period of 2013, representing an increase of US$110.2 million or 27.0%.The increase was derived from traditional provincial markets, primarily due to a higher penetration rate, more effective channel management and continued retail network development in provinces such as Hebei, Inner Mongolia, Shandong, Heilongjiang/Jilin/Liaoning, and Henan.

The increase of US$52.6 million for the year ended year ended December 31, 2012 as compared to 2011 is resulting from the combined effect of delay of revenue recognition as noted above and the business expansion.

Our gross profit increased by US$142.5 million from US$262.4 million in 2012 to US$404.9 million in 2013, representing an increase of 54.3%. Gross profit increased by US$34.1 million from US$228.3 million in 2011 to US$262.4 million in 2012, representing an increase of 14.9%.

Gross margin increased by 2% from 59.2% in 2012 to 61.2% in 2013, and increased by 0.7% from 58.5% in 2011 to 59.2% in 2012. The increase in gross margin from the year of 2012 to 2013 was mainly due to the scale effect of increased sales and our cost reduction initiatives. The gross margin increase from the year of 2011 to 2012 was mainly due to the decreased purchase price of certain raw materials.

The number of independently owned Branded Retailers reached 36,100 as of December 31, 2013, compared to 35,058 as of December 31, 2012.

Sales by Product Line

	2013		% of Total			2012		% of Total			2011		% of Total
	Total sales		Sales			Total sales		Sales			Total sales		Sales
Crop	US$	652,403,131		99	%	US$	438,375,997		99	%	US$	386,166,674		99	%
Animals		9,477,969		1	%		4,610,607		1	%		4,212,815		1	%
Total		661,881,100		100	%		442,986,604		100	%		390,379,489		100	%

During the year ended December 31, 2013, we sold 53,189 tons of liquid crop nutrient products, which represented 99% of our total sales. We also sold approximately 1,467 tons of our animal nutrient products, which represented 1% of our total sales.

During the year ended December 31, 2012, we sold 36,391 tons of liquid crop nutrient products, which represented 99% of our total sales. We also sold approximately 728 tons of our animal nutrient products, which represented 1% of our total sales.

Distributors

	2013					2012					2011
	% of Sales			Sales		% of Sales			Sales		% of Sales			Sales
5 Major Distributors		40	%	US$	268,509,308		46	%	US$	207,096,143		33	%	US$	130,621,380
1 Major Distributor		10	%		66,868,764		12	%		51,717,226		8	%		29,392,316

Top five major distributors accounted for 40% and the major distributor accounted for 10% of our total revenue for the year ended December 31, 2013. Top five major distributors accounted for 46% and the major distributor accounted for 12% of our total revenue for the year ended December 31, 2012.Top five major distributors accounted for 33% and the major distributor accounted for 8% of our total revenue for the year ended December 31, 2011.Our total sales to top five major distributors were US$268.5 million, US$207.1 million and US$130.6 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Cost of Goods Sold

	2013			2012			2011

Cost of Sales	US$	256,962,530		US$	180,614,350		US$	162,078,410
Percentage of Sales		39	%		41	%		42	%

Cost of goods sold for the year ended December 31, 2013 was US$257.0 million, or 38.8% of our net sales. This represents an increase of US$76.3 million over the previous period and represents a 42.3% increase compared with 2012. Cost of goods sold for the year ended December 31, 2012 was US$180.6 million, or 40.8% of our net sales. This represents an increase of US$18.5 million over the previous period and represents an 11.4% increase compared with 2011. The decrease in cost of goods sold as a percentage of our net sales from 40.8% for the year ended December 31, 2012 to 38.8% for the year ended December 31, 2013 is mainly due to the scale effect of increased sales and our cost reduction initiatives.

Selling, General & Administrative and Research & Development Expenses

			% of Total					% of Total					% of Total
	2013		Sales			2012		Sales			2011		Sales
Selling Expenses	US$	148,967,729		23	%	US$	104,036,542		23	%	US$	73,886,542		19	%
General & Administrative Expenses		19,063,800		3	%		14,123,521		3	%		35,694,045		9	%
Research & Development Expenses		22,119,473		3	%		16,575,976		4	%		13,130,627		3	%

Selling expenses increased by US$44.9 million to US$149.0 million for the year ended December 31, 2013 as compared with the year ended December 31, 2012. Selling expenses increased by US$30.2 million to US$104.0 million for the year ended December 31, 2012 as compared with the year ended December 31, 2011. As a percentage of sales for the year ended December 31, 2013, selling expenses remain the same level as that in 2012. Selling expenses increased 4.6% to 23.5% as compared to 18.9% of sales in the year ended December 31, 2011. The increase of selling expenses in 2013 is primarily due to an increase in advertising and promotion expense and distributors’ seminar expenditure of US$45.6 million relating to marketing and promotional activities for our products.

General & administrative expenses increase by US$4.9 million to US$19.1 million for the year ended December 31, 2013 from US$14.1 million in 2012, and decreased by US$21.6 million to US$14.1 million for the year ended December 31, 2012 from US$35.7 million in 2011. As a percentage of sales for the year ended December 31, 2013, general & administrative expenses remain the same level as that in 2012. As a percentage of sales for the year ended December 31, 2012, general & administrative expenses decreased by 5.9% to 3.2% as compared to 9.1% of sales in 2011. The increase of general and administrative expenses was mainly due to that equity based compensation expense of US$3.7 million was recorded during 2012, while there was no awards issued in 2013.

We incurred US$22.1 million of research and development expenses in the year ended December 31, 2013 as compared to US$16.6 million and US$13.1 million in the years ended December 31, 2012 and 2011, respectively. Our research and development expenses mainly consisted of field test expenses for existing and new products on different crops and in various geographic markets.

Corporate Income Taxes

We did not carry on any business and did not maintain any branch office in the United States during the years ended December 31, 2013, 2012, 2011,2010and 2009 and do not intend to repatriate any earnings from our Chinese operations. Therefore, no provision for withholding taxes for the undistributed earnings of foreign subsidiaries, U.S. federal income taxes, or deferred income tax benefits has been made.

Effective from January 1, 2008, the PRC’s statutory income tax rate is 25%. Our PRC subsidiaries are subject to PRC income tax at 25%, unless otherwise specified. During the year ended December 31, 2011, Yongye Nongfeng received a High-Tech Enterprise Certificate which entitles it to a preferential tax rate of 15% for three years starting from January 1, 2010. The certificate was renewed in August 2013, which enables Yongye Nongfeng to continually enjoy the preferential tax rate of 15% from 2013 to 2015. Pursuant to an approval from the Inner Mongolia Autonomous Region National Tax Authority on November 26, 2012, Yongye Fumin, being a foreign investment enterprise located in the Western Region of the PRC, was entitled to a preferential income tax rate of 15% retrospectively effective from January 1, 2011 to December 31, 2020. Our Company’s effective income tax rate was 15.63%, 18.72%, and 17.01%for the years ended December 31, 2013, 2012 and 2011, respectively. The effective income tax rates for the year ended December31, 2013and 2012differ from the PRC statutory income tax rate of 25% primarily due to the effect of Yongye Nongfeng and Yongye Fumin’s preferential tax treatment which is partly offset by the effect of non-deductible expenses.

For the year ended December 31, 2013, our Company’s income tax expense is US$33.4 million as compared to US$22.8 million and US$18.4 million for the years ended December 31, 2012 and 2011, respectively.

Our company’s PRC subsidiaries have cash balance of US$123.7 million as of December 31, 2013 which is planned to be permanently reinvested in the PRC. The distributions from our PRC subsidiaries are subject to the U.S. federal income tax at 34%, less any applicable foreign tax credits. Due to our plan to indefinitely reinvest our earnings in our PRC business, we have not provided for deferred tax liabilities on undistributed earnings of our PRC subsidiaries.

Net Income

Net income attributable to Yongye International, Inc. for the year ended December 31, 2013 is US$170.8million (representing a net profit margin of 25.8%) compared to US$93.7 million (representing a net profit margin of 21.1%) and US$84.9 (representing a net profit margin of 21.7%) in the years ended December 31, 2012 and 2011, respectively.

Foreign Currency Translation Gains

The financial position and results of operations of our Company’s subsidiaries in the PRC are measured using the Renminbi as the functional currency, while our Company’s reporting currency is the US dollar. Assets and liabilities of the subsidiaries are translated at the prevailing exchange rate in effect at each period end. The income statement is translated at the average rate of exchange during the period. Translation adjustments are included in the cumulative translation adjustment account in the consolidated statements of stockholders’ equity and comprehensive income.

Liquidity and Capital Resources

Our Company has historically financed its operations and capital expenditures principally through issuance of common shares and bank loans. As is customary in the industry, we provide credit terms to all of our distributors which typically exceed the terms that we receive from our suppliers. Currently, we provide credit terms of up to six months to all of our approved distributors. Therefore, our liquidity needs have generally consisted of working capital necessary to finance receivables and raw material and finished goods inventory. We believe that our existing cash and cash equivalents will be sufficient to meet our anticipated future operating cash needs for the coming 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 and to finance our new manufacturing facilities. 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

	2013			2012			2011
Net cash provided by/(used in) operating activities	US$	20,981,045		US$	(51,378,385	)	US$	(31,203,441	)
Net cash used in investing activities		(1,222,033	)		(1,747,550	)		(7,072,060	)
Net cash provided by financing activities		56,791,738			15,912,743			75,506,515
Effect of exchange rate change on cash and cash equivalents		2,666,281			569,716			2,010,397
Net increase /(decrease) in cash and cash equivalents		79,217,031			(36,643,476	)		39,241,411
Cash and cash equivalents at beginning of period		44,511,404			81,154,880			41,913,469
Cash and cash equivalents at end of period		123,728,435			44,511,404			81,154,880

Net cash provided by operating activities for the year ended December 31, 2013 was US$21.0 million, the net cash used in operating activities for the year ended December 31, 2012 was US$51.4 million, and the net cash used in operating activities for the year ended December 31, 2011 was US$31.2 million. The increase in cash flow from operating activities in 2013 compared to 2012 is primarily due to the increase of US$81.0 million in net income. For the year ended December 31, 2012, the change was primarily due to the increase of US$25.7 million in working capital employed, that was mainly driven by increase of accounts receivable and inventory.

Net cash provided by financing activities were US$56.8 million, US$15.9 million and US$75.5 million for the years ended December 31, 2013, 2012 and 2011, respectively. The net cash provided by financing activities in the year ended December 31, 2013 and 2012 was mainly due to proceeds and repayment of short-term bank loans for operating purpose. Net cash provided by financing activities for the year ended December 31, 2011 including the net proceeds of US$49.4 million from the sales of redeemable convertible preferred shares to MSPEA, an affiliate of Morgan Stanley.

Net current assets at December 31, 2013 increased by US$211.3 million to US$594.6 million from US$ US$383.3 million, or 55%, over December 31, 2012. Net current assets at December 31, 2012 increased by US$112.9 million to US$383.3 million from US$270.4 million, or 42%, over December 31, 2011.

Capital Expenditure Requirements for New Manufacturing Facilities

Our Company expects to have a shortage of manufacturing capacity to meet our sales projections and plans to start construction of new manufacturing facilities in the second half of 2014 to address such shortage and seek to meet such sales projections. We expect the capital expenditure requirements for the new manufacturing facilities to be significant and we intend to finance such new manufacturing facilities primarily from existing cash resources of the Company, cash from operations and, to the extent necessary, external debt or equity financing.

However, there can be no assurance that such new manufacturing facilities will be completed within the timeframe that we anticipate or at all. If we are unable to complete the new manufacturing facilities, our business and prospects, as well as our results of operations, may be materially and adversely affected.

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, our 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, our financial position, results of operations or cash flows at this time.

Off Balance Sheet Arrangements

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

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make judgments, assumptions, and estimates that affect the amounts reported in the consolidated financial statements. The Note 2 to our Company’s financial statements (Summary of Significant Accounting Policies) describes the major accounting policies and methods used in the preparation of the financial statements.

The following are considered to be the Company’s critical accounting policies:

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recognized and carried at the original invoiced amount less an allowance for any uncollectible accounts.

We perform ongoing credit evaluations of our customers and review the composition of accounts receivable, analyze historical bad debts, customer concentration, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate if allowance for doubtful accounts is needed. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We primarily determine the allowance by (1) analyzing specific customer accounts that have known or potential collection issues and (2) applying an estimated loss rate on the customer accounts with consideration of the aging of the receivable balances, customer payment patterns during the year and subsequent to year-end. If circumstances related to specific customers change, our estimates of the recoverability of receivables could be further adjusted. In the event that we believe an account receivable will become uncollectible, we record additional provision to increase the allowance for doubtful accounts. The accounting effect of this entry is a charge to income. As of December 31, 2013, the balance of allowance for doubtful accounts was US$9.3million. If the financial condition of our distributors deteriorates in future, we would make further allowance for doubtful accounts, which could be significant. Furthermore, the financial condition deterioration of our distributors, in turn, directly affects our revenue recognition. One of the criteria to recognize revenues is that the collectability of the receivable is reasonably assured. As such, deteriorating payment ability of our distributors could result in revenue recognition of our product sales being delayed, generally until the receipt of cash.

Currently, we provide credit terms of six months to all of our approved distributors. Our regular liquid crop nutrient product is most commonly applied by directly spraying onto leaves of crops in the second and third quarters, which correspond to the growing seasons for most crops in most parts of China. Accordingly, the sales during the second and third quarters usually represent 70-80% of our total annual sales. Therefore, there is usually higher balance of accounts receivable at December 31.

As of December 31, 2013, our gross accounts receivable was US$343.5 million, of which US$124.1 million were past our six-month credit term, representing 36.2% of total gross account receivable balance as of December 31, 2013 and 18.7% of our sales in 2013.The ageing of gross accounts receivable as of December 31, 2013 and December 31, 2012 is:

Receivable Ageing	December 31, 2013		%			December 31, 2012		%

Current:
0-3 months	US$	85,945,690		25.0	%	US$	62,258,015		20.6	%
3-6 months		133,420,035		38.8	%		125,453,713		41.4	%
Subtotal		219,365,725		63.8	%		187,711,728		62.0	%

Past due:
Past due 0-30 days		67,757,206		19.7	%		41,961,730		13.9	%
Past due over 30 days		56,339,088		16.5	%		72,935,264		24.1	%
Subtotal		124,096,294		36.2	%		114,896,994		38.0	%

Total		343,462,019		100.0	%		302,608,722		100.0	%

As of March 12, 2014, approximately US$260.2 million had been collected from our distributors, including US$236.2 million of the accounts receivable outstanding at December 31, 2013. US$111.9 million of the past due accounts receivable at December 31, 2013 were subsequently collected.

Although we believe the allowance for doubtful accounts is adequate to cover the losses in our accounts receivable position at December 31, 2013, additional losses would be required if we are unable to collect the remaining balance of our accounts receivable.

Inventory

We value our finished goods inventory at the lower of cost or market value. Cost includes cost of direct labor and raw materials, as well as allocation of variable and fixed production overhead. Variable production overheads are allocated to each unit of production based on the actual use of the production facilities. Fixed production overheads are allocated to the cost of conversion based on the normal capacity of the production facilities. We define normal production capacity as being a reasonable level of production volume supported by sufficient customer demand without any abnormal equipment downtime due to shortages of materials and labor, taking into consideration the loss of production capacity resulting from planned maintenances.

We would write down the cost of excessive inventory. The factors considered in evaluating whether excessive inventory exists are:

·	our forecast of future demand, including existing customers’ order and forecasted orders; and

·	the expiration date for the specific products.

Inventory write-downs are recorded in the period in which the impairment occurs. If our current assumptions about future production, inventory levels or demand were to change or if actual market conditions are less favorable than those we have projected, additional inventory write-downs would be required, which could negatively impact our financial condition and results of operations.

Inventories also include finished goods shipped to certain customers for which the related revenue was not recognized since collectability was not reasonably assured at time of shipment in accordance with our accounting policy on revenue recognition. When we determine the finished goods will not be recovered through subsequent cash collection or other means, such as repossession, we record a write down of the cost of the inventory. If we are unsuccessful in recovering the cost of the inventory through collecting cash from the distributors or repossessing the finished goods, inventory write-downs would be recorded.

Probability of Redemption of the Redeemable Series A Convertible Preferred Shares

At the date of issuance, we recognized our redeemable Series A convertible preferred shares at their fair value. Under the terms of the Series A preferred share agreement, the redeemable Series A convertible preferred share becomes redeemable upon the occurrence of certain events, the most significant being if for the years ended December 31, 2011, 2012, 2013 and 2014, the Company does not meet the “Income Threshold”, as defined and prescribed in the security purchase agreement.

For the years ended December 31, 2012 and 2013, our net income (as adjusted for exclusion of certain items as defined in the security purchase agreement) exceeded the 2012 and 2013“Income Threshold”, respectively. Accordingly, the redeemable Series A convertible preferred shares are not currently redeemable.

In addition, since we believe we will meet the “Income Threshold” of US$145 million for the year ending December 31, 2014, we have concluded it is not probable that the redeemable Series A convertible preferred shares will become redeemable. As a result, we have not adjusted the initial carrying value of the redeemable Series A convertible preferred shares.

The determination of the probability that the redeemable Series A convertible preferred shares will become redeemable required us to project net income (as adjusted for exclusion of certain items) for the year ending December 31, 2014. The calculation of net income (as adjusted for exclusion of certain items) for the year ending December 31, 2014 required us to consider various estimates and assumptions, including among other things, future market demand, revenue growth rates of different products, unit costs of raw materials, production capacity and utilization ratio, gross margin percentages, operating expenses to revenues ratio, projected working capital needs, capital expenditures forecasts, interest rate and income tax rate.

We would be obligated to redeem all or a portion of the redeemable Series A convertible preferred shares if the actual net income (as adjusted for exclusion of certain items) of 2014 is lower than the specified “Income Threshold”. See Risk Factors, Upon the occurrence of certain events, we may be required to redeem all or a portion of the convertible preferred stock .

Part III

ITEM 10. Directors, Executive Officers and Corporate Governance

The Board of Directors is presently composed of six (6) members as indicated in the table below.

Name	Age	Other positions with Company; other directorships held in last five years	Has served as Company director since
Zishen Wu	46	Chief Executive Officer, President and Chairman	2008
Homer Sun	43	Director; Director of China Shanshui Cement Group Limited and China Flooring Holding Company Limited; Prior Director of Sihuan Pharmaceutical Holdings Group Limited	2011
XiaochuanGuo	48	Independent Non-Executive Director	2008
Sean Shao	57	Independent Non-Executive Director	2009
Xindan Li	47	Independent Non-Executive Director	2009
Rijun Zhang	51	Independent Non-Executive Director	2009

The business experience during at least the last five years of each of these individuals is as follows:

Mr. Zishen Wu, Chief Executive Officer, President and Chairman

Mr. Wu is CEO and Chairman of the Board of Directors of our Company and YongyeNongfeng. Mr. Wu began his career as an official at the State Planning Department in Inner Mongolia from 1984 to 1988. From 1989 to 2000, Mr. Wu worked at Inner Mongolia Constructional Consulting and Investment Co., Ltd., a business entity managing state-owned assets in Inner Mongolia. He also served as directors on the boards of several state-owned companies in textile, dairy and agriculture industries. In 2001, Mr. Wu founded Yongye Technology Company in Inner Mongolia, an entity that distributed consumer electronics. In 2003, Mr. Wu founded Inner Mongolia Yongye Biotechnology Co., Ltd, an entity that engages in business in agriculture industry. Mr. Wu was General Manager of Inner Mongolia Yongye Biotechnology Co., Ltd. from January 2003 to December 2007. Mr. Wu currently is Vice Chairman of Inner Mongolia Federation of Industry and Commerce. Mr. Wu has an EMBA degree from School of Management of Fudan University. We believe that Mr. Wu’s knowledge of the agricultural nutrient industry in the PRC brings a unique expertise to the Board of Directors.

Mr. Homer Sun, Independent Director

Mr. Sun is the Chief Investment Officer of Morgan Stanley Private Equity Asia and leads the China investments for Morgan Stanley Private Equity Asia. Mr. Sun is also a Managing Director of Morgan Stanley Asia Limited and a member of the China Management Committee which is comprised of Morgan Stanley Asia Limited’s most senior business leaders within China. He is currently the Non-Executive Director of China XD Plastics Company Limited (a company listed on the NASDAQ Stock Exchange, ticker: CXDC), China Shanshui Cement Group Limited, a company listed on the Stock Exchange of Hong Kong (stock code: 691), Sihuan Pharmaceutical Holdings Group Limited, a company listed on the Stock Exchange of Hong Kong (stock code: 460) and China Flooring Holding Company Limited, a company listed on the Stock Exchange of Hong Kong (stock code: 2083). Mr. Sun joined Morgan Stanley Asia Limited in 2000 and worked for six years on various mergers and acquisitions in Greater China in the Investment Banking Division prior to joining Morgan Stanley Private Equity Asia Limited. From 1996 to 2000, he was a corporate attorney with Simpson Thacher & Bartlett in New York and Hong Kong, specializing in mergers and acquisitions. Mr. Sun received a B.S.E. in Chemical Engineering, magna cum laude, from the University of Michigan in 1993 and a J.D, cum laude, from the University of Michigan Law School in 1996. Mr. Sun was appointed to the Board of Directors pursuant to the terms of the Securities Purchase Agreement and elected as such by the holders of all outstanding Preferred Shares in accordance with the terms of the Certificate of Designation relating thereto dated June 8, 2011. We believe that Mr. Sun’s capital markets and mergers & acquisitions experience brings unique expertise to the Board of Directors.

Mr. Sun was appointed to the Board of Directors pursuant to the terms of the Securities Purchase Agreement relating to the Preferred Shares and elected as such by the holders of all outstanding Preferred Shares in accordance with the terms of the Certificate of Designation relating thereto dated June 8, 2011.

Dr. Xiaochuan Guo, Independent Director, Chairman of Nominating and Corporate Governance Committee

Professor Xiaochuan Guo joined the Company as an Independent Director in April 2008. Professor Guo received his B.S., M.S. and PhD in management science in Fudan University. He is currently the Dean of the College of Economic & Management and Director of MBA Center of Inner Mongolia University. Professor Guo worked as lecturer for Inner Mongolia University from 1988 to 1992. Professor Guo was the founder of the MBA program at Inner Mongolia University. Professor Guo serves as an Independent Director of Inner Mongolia Ping Zhuang Energy Resource Co., Ltd. He has previously served as a director and as an independent director in several enterprises, such as Inner Mongolia Shunxin Ningcheng Laojiao Co., Ltd., Inner Mongolia Rising Group, Rising Securities and Baotou Aluminum (Group) Co., Ltd., and Yili Industrial Group Co., Ltd. We believe that Mr. Guo’s academic qualifications and knowledge of finance and accounting brings a unique expertise to the Board of Directors.

Mr. Sean Shao, Independent Director, Chairman of Audit Committee

Sean Shao joined the Company as an Independent Director in April 2009. Mr. Sean Shao currently serves as (i) independent director and chairman of the audit committee of: UTStarcom Holdings Corp., a provider of broadband equipment and solutions listed on NASDAQ since October 2012; Xueda Education Group, a Chinese personalized tutoring services company listed on NYSE since March 2010; and China Biologic Products, Inc., a biopharmaceutical company listed on NASDAQ since July 2008; (ii) independent director and chairman of the compensation committee of AsiaInfo-Linkage, Inc., a Chinese telecom software solutions provider listed on NASDAQ since July 2010, and (iii) independent director and chairman of the nominating committee of Agria Corporation, a Chinese agricultural company listed on NYSE since November 2008. He served as the chief financial officer of Trina Solar Limited from 2006 to 2008. In addition, Mr. Shao served from 2004 to 2006 as the chief financial officer of ChinaEdu Corporation, an educational service provider, and of Watchdata Technologies Ltd., a Chinese security software company. Prior to that, Mr. Shao worked at Deloitte Touche Tohmatsu CPA Ltd. for approximately a decade. Mr. Shao received his master’s degree in health care administration from the University of California at Los Angeles in 1988 and his bachelor’s degree in art from East China Normal University in 1982. Mr. Shao is a member of the American Institute of Certified Public Accountants. We believe that Mr. Shao’s deep knowledge of finance and accounting matters brings a unique expertise to the Board of Directors.

Dr. Xindan Li, Independent Director, Chairman of Compensation Committee

Professor Xindan Li joined the Company as an Independent Director in April 2009. Mr. Li has served as the Dean of the Graduate School of Management Science and Engineering at Nanjing University since July 2009 and previously served as Deputy Dean from January 2001 to July 2009. He has over 20 years of teaching, research and administrative experiences. He has authored numerous books and papers, received numerous titles and honors, and undertaken research projects which addressed a wide range of business topics including investor behavior. He is a member of the Corporate Governance Index of the Shanghai Stock Exchange, and an independent director for NARI technology development Co., Ltd., Nanjing Securities Co. and Nanjing Agriculture Commercial Bank. We believe that Mr. Li’s background in corporate governance and the capital markets brings a unique expertise to the Board of Directors.

Dr. Rijun Zhang, Independent Director

Dr. Rijun Zhang joined the Company as an Independent Director in April 2009. Dr. Zhang is a professor in animal nutrition, feed biotechnology and green farming and animal husbandry at the Laboratory of Feed Biotechnology, State Key Lab of Animal Nutrition, College of Animal Science and Technology at China Agricultural University Beijing. He is a doctoral supervisor, and currently responsible for a number of research projects which address feed additives and animal nutrition issues. His work has led to numerous patents, over 100 papers in Chinese and English, awards and honors. We believe that Dr. Zhang’s knowledge of agricultural issues faced by our customers brings a unique expertise to the Board of Directors.

There are no family relationships between the directors and executive officers.

The Board of Directors has determined that XiaochuanGuo, Sean Shao, Xindan Li, Rijun Zhang and Homer Sun are independent under Rule 5605(a)(2) of the listing rules of The NASDAQ Stock Market LLC.

Board Operations

One person holds the positions of principal executive officer and chairman of the Board of Company. The board has not designated a lead director. Given the limited number of directors comprising the board, the independent directors call and plan their executive sessions collaboratively and, between board meetings, communicate with management and one another directly. In the circumstances, the directors believe that formalizing in a lead director functions in which they all participate might detract from rather than enhance performance of their responsibilities as directors.

The Board of Directors receives regular reports from the Chief Executive Officer and members of senior management on operational, financial, legal and regulatory issues and risks. The Audit Committee of the Board additionally is charged under its Charter with oversight of financial risk, including the Company’s internal controls, and it receives regular reports from management, the Company’s internal auditors and the Company’s independent auditors. Whenever a Committee of the Board receives a report involving risk identification, risk management or risk mitigation, the Chairman of the Committee reports on that discussion, as appropriate, to the full Board during the next Board meeting.

The Board of Directors held 5 meetings during 2013. During 2013, no director attended fewer than 75% of the meetings of the Board of Directors and Board committees of which the director was a member. It is the policy of the Board of Directors that all directors should attend the annual meeting of shareholders in person or by teleconference. Last year six directors attended the annual meeting in person or by teleconference.

The Board has adopted a code of ethics applicable to Company’s directors, officers, and employees. The code of ethics is available at Company’s website, www.yongyeintl.com.

Board Committees

The Board of Directors has standing audit, compensation, and nominating committees, comprised solely of independent directors. Each committee has a charter, which is available at Company’s website, www.yongyeintl.com.

Audit Committee

The Audit Committee, which is established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, engages Company’s independent accountants, reviewing their independence and performance; reviews Company’s financial disclosure, financial statements, and accounting principles, policies, and practices, scope and results of the annual audit, and internal audit and risk management processes and effectiveness of Company’s internal control over financial reporting; reviews related party transactions; and maintains procedures for receipt and handling of reports regarding accounting or financial irregularities. The Audit Committee held 4 meetings during 2013.

The members of the Audit Committee are Sean Shao, Chair, XiaochuanGuo and Xindan Li. The Board has determined that Sean Shao is an audit committee financial expert, as defined by the SEC rules.

Audit Committee Report

With respect to the audit of Company’s financial statements for the year ended December 31, 2013, the Audit Committee has reviewed and discussed the audited financial statements with management and has discussed with Company’s independent accountants the matters required to be discussed by Auditing Standard No. 16 as adopted by the Public Company Accounting Oversight Board (United States); and has received the written disclosures and the letter from the independent accountant required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence and has discussed with the independent accountant the independent accountant’s independence.

Based on these reviews and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the company’s annual report on Form 10-K for the year ended December 31, 2013.

Sean Shao, Chair

XiaochuanGuo

Xindan Li

Compensation Committee

The Compensation Committee makes recommendations to the Board of Directors concerning salaries and incentive compensation for the Company’s executive officers and administers the Company’s equity incentive plans. The Compensation Committee held 1 meeting during 2013.

The members of the Compensation Committee are Xindan Li, Chair, XiaochuanGuo, and Sean Shao.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee assists the Board of Directors in identifying and recommending qualified individuals to the Board as its nominees for election as directors, in determining the composition of the Board, and in assessing the performance of the Board as a whole and its individual members. The Nominating and Corporate Governance Committee held 1 meeting during 2013.

The members of the Nominating and Corporate Governance Committee are XiaochuanGuo, Chair, Homer Sun, and Xindan Li.

Stockholders wishing to propose a director candidate must send the recommendation to Company by the month and day that is the same month and day that was 120 days before the date of release of proxy materials for the annual meeting immediately preceding the annual meeting at which the candidate is proposed to be elected, c/o Secretary, Yongye International, Inc., accompanied by:

•

Evidence that the writer is a stockholder, sufficient for purposes of SEC Rule 14a-8;

•

The name and contact information of the candidate; and

• A statement signed by the candidate that the candidate is willing to be considered for nomination by the committee and willing to serve as a director, if nominated and elected.

The Company’s Secretary will send its standard director questionnaire to the candidate, and, if returned, fully and accurately completed, by the month and day that is the same month and day that was 100 days before the date of release of proxy materials for the annual meeting immediately preceding the annual meeting at which the candidate is proposed to be elected, the Secretary will forward the recommendation, accompanying documents, and the questionnaire to the Nominating and Corporate Governance Committee for consideration. Company may also require any proposed nominee to furnish such other information as Company or the Nominating Committee and Corporate Governance may reasonably require to determine the eligibility of the nominee to serve as a director.

The Nominating and Corporate Governance Committee also considers, as director nominees, persons recommended by current directors, executive officers, and others, which are evaluated in the same manner as persons proposed by stockholders, except that the Nominating and Corporate Governance Committee may consider, as one of the factors in its evaluation of stockholder recommended candidates, the amount and duration of the stock holding of the recommending stockholder or stockholder group.

The Committee applies the following criteria in considering director candidates:

Independence. Whether non-management candidates may be considered “independent” under applicable stock market rules; under securities and tax laws; or for any other purpose. The Committee also considers whether a candidate might be subject to any conflict of interest.

Corporate Governance. Whether the candidate recognizes the role of directors in representing the interests of stockholders, generally, and not of any particular stockholder or group of stockholders; whether the director demonstrates familiarity and intention to fulfill the fiduciary duties of directors and appears open and candid; whether the director understands the differences in functions of the Board of Directors and management.

Judgment and Knowledge. Whether the candidate demonstrates sound business judgment and ability to assess Company’s strategy and business plans, evaluate management, and decide other board-level issues

Communication Skills. The candidate’s communications skills; willingness to voice his own views; ability to listen to views of others dispassionately; and ability to express and bring to bear his expertise regarding Company matters.

Professional Status. The candidate’s record as a business manager and reputation for integrity; whether the candidate has the respect of his business and community peers; whether the candidate’s Board membership would enhance Company’s reputation.

Diversity. The Board wishes to establish a complement of directors with substantial skill and experience in the following areas:

industry-specific knowledge, experience;

accounting and finance;

capital markets;

corporate governance;

executive compensation;

international business;

operations management;

marketing, advertising, or promotion; and

risk management.

The Board implements this policy by seeking to fill any Board vacancy with a director having skill or experience in one of the areas that the Board wishes to strengthen and assesses the effectiveness of the policy in light of the results of Company’s operations.

In addition, the Nominating and Corporate Governance Committee considers any other factors it deems appropriate. ”Diversity,” as such, is not a criterion that the Committee considers.

Pursuant to the Securities Purchase Agreement and the Certificate of Designation for the Company’s Preferred Shares, MSPEA Agriculture Holding Limited (“MSPEA”) is entitled to designate a non-executive director to the Company’s Board of Directors. After such designee ceases to be a director of the Company, for as long as at least 25% of the Preferred Shares are outstanding, the holders of at least a majority of the outstanding Preferred Shares are similarly entitled to elect one director to the Company’s board of directors.

Homer Sun has been elected by MSPEA, the holder of all of the Preferred Shares, to the Board of Directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers and any beneficial owner of more than 10% of any class of Company equity security to file reports of ownership and changes in ownership with the Securities and Exchange Commission and furnish copies of the reports to Company. Based solely on the Company’s review of copies of such forms and written representations by Company’s executive officers and directors received by it, the Company believes that during 2013, all such reports were filed timely.

Executive Officers

Pursuant to General Instruction G(3) of Form 10-K, the information required by this item relating to our executive officers is included under the caption “Executive Officers of Our Company” in Part I of this 2013 Annual Report.

ITEM 11. Executive Compensation

Executive Compensation

Summary Compensation Table

The following table sets forth information regarding compensation of the named executive officers for each of the three fiscal years in the period ended December 31, 2013.

FISCAL 2013 COMPENSATION TABLE
Name and Principal Position	Year		Salary		Bonus		Stock Awards		Option Awards		Non-Equity Incentive Plan Compensation		Nonqualified Deferred Compensation Earnings		All Other Compensation		Total
Zishen Wu		2013	$	1,181,000	$	965,712		–		–		–		–		–	$	2,146,712
(Principal Executive Officer)		2012	$	1,181,000	$	780,572		–		–		–		–		–	$	1,961,572
		2011	$	550,000	$	567,144	$	1,799,926		–		–		–		–	$	2,917,070

Sam Yu		2013	$	905,000	$	772,360		–		–		–		–		–	$	1,677,360
(Principal Financial Officer)		2012	$	905,000	$	624,458		–		–		–		–		–	$	1,529,458
		2011	$	400,000	$	608,048	$	1,198,879		–		–		–		–	$	2,206,927

Nan Xu⁽¹⁾		2013	$	167,120		–		–		–		–		–		–	$	167,120
(Chief Operating Officer)		2012	$	400,000		–		–		–		–		–		–	$	400,000
		2011	$	196,546		–	$	450,785		–		–		–		–	$	647,331

⁽¹⁾

Mr. Xu resigned from his position as a director and Chief Operating Officer of the Company effective October 1, 2013.

Narrative Discussion

We have entered into an employment agreement with each of Zishen Wu, Sam Yu and Nan Xu. We entered into an employment contract on April 17, 2008 with Mr. Wu to employ him as our Chairman and CEO that was subsequently amended to extend the term of employment until May 31, 2016. Since January 1, 2012, Mr. Wu has been entitled to an annual gross salary in an amount of $1,181,000 including all allowances, social insurance such as pension, unemployment, medical insurance and other social insurance coverage in accordance with relevant PRC laws and regulations, and housing fund. This also includes a stipend of $50,000 annually for board activities. We have the right to adjust the salary and welfare benefits of Mr. Wu appropriately based on his capability, experience, attitude, performance, achievement, working-age and position as well as its salary and position adjustment policies and business conditions experienced. Either party to the agreement has a right to terminate the agreement, subject to the terms and conditions therein.

We entered into an employment contract on March 20, 2009 with Mr. Sam Yu to employ him as our Chief Financial Officer. The contract was subsequently amended to extend the term of employment until May 31, 2016. Since January 1, 2012, Mr. Yu has been entitled to an annual gross salary in an amount of $905,000 including all allowances, social insurance such as pension, unemployment, medical insurance and other social insurance coverage in accordance with relevant PRC laws and regulations, and housing fund. We have the right to adjust the salary and welfare benefits of Mr. Yu appropriately based on his capability, experience, attitude, performance, achievement, working-age and position as well as its salary and position adjustment policies and business conditions experienced. Either party to the agreement has a right to terminate the agreement, subject to the terms and conditions therein.

Assuming the employment of the Company’s named executive officers were to be terminated without cause or for good reason or in the event of change in control, as of December 31, 2013, none of the named executive officers would have been entitled to any cash payments.

Grants of Plan Based Awards

None of our named executive officers received a plan based award during 2013.

Outstanding Equity Awards at Fiscal Year-End

As of December 31, 2013, our named executive officers did not hold any unexercised options, shares of stock which had not vested or any equity incentive plan awards.

Option Exercises and Stock Vested

The following table sets forth aggregate information with respect to each named executive officer regarding exercise of stock options and vesting of restricted stock for fiscal 2013.

OPTION EXERCISES AND STOCK VESTED

Option Awards

Stock Awards

Name

Number of
Shares Acquired
on Exercise (#)

Value Realized
Upon Exercise
($)

Number of
Shares
Acquired
on Vesting
(#)

Value
Realized
on Vesting
($)

Zishen Wu

—

Sam Yu

—

Nan Xu

—

Compensation of Directors

The following table sets forth information regarding compensation of each director, other than named executive officers, for fiscal 2013.

FISCAL 2013 DIRECTOR COMPENSATION
Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)(5)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Rijun Zhang		63,000		—		—		—		—		—		63,000
XiaochuanGuo		193,500		—		—		—		—		—		193,500
Sean Shao		233,257		—		—		—		—		—		233,257
Xindan Li		196,000		—		—		—		—		—		196,000

Compensation Committee Interlocks and Insider Participation

No member of our compensation committee has at any time been an officer or employee of ours, or our subsidiaries. No interlocking relationship exists between our board of directors or Compensation Committee and the board of directors or Compensation Committee of any other company, nor has any interlocking relationship existed in the past.

Compensation Discussion and Analysis

The Company’s executive compensation program for the named executive officers (as defined below) is administered by the Board of Directors.

Background and Compensation Philosophy

The Compensation Committee of our Board of Directors has not adopted or established a formal policy or procedure for determining the amount of compensation paid to our executive officers. No pre-established, objective performance goals or metrics have been used by the Compensation Committee in determining the compensation of our executive officers.

Elements of Compensation

Some of our executive officers receive a base salary to compensate them for services rendered during the year. Our policy of compensating our certain executives with a cash salary has served the Company well. Because of our history of attracting and retaining executive talent, we do not believe it is necessary at this time to provide our executives regular discretionary bonuses, equity incentives, or other benefits for the Company to continue to be successful.

Base Salary and Bonus. The value of base salary and bonus for each our executive reflects his or her skill set and the market value of that skill set in the sole discretion of the Board of Directors.

Equity Incentives. The Company has adopted an equity incentive plan pursuant to which awards may be granted if the Compensation Committee of our Board of Directors determines that it is in the best interest of the Company and its stockholders to do so.

Retirement Benefits. Other than those benefits included in government-mandated social insurance programs, our executive officers are not presently entitled to company-sponsored retirement benefits.

Perquisites. We have not provided our executive officers with any material perquisites and other personal benefits and, therefore, we do not view perquisites as a significant or necessary element of our executive’s compensation.

Deferred Compensation. We do not provide our executives the opportunity to defer receipt of annual compensation.

This compensation discussion describes the material elements of compensation awarded to, earned by, or paid to each of our executive officers listed in the Summary Compensation Table below (the “named executive officers”) during the last completed fiscal year. This compensation discussion focuses on the information contained in the following tables and related footnotes and narrative for primarily the last completed fiscal year, but we also describe compensation actions taken before or after the last completed fiscal year to the extent it enhances the understanding of our executive compensation disclosure.

Compensation Committee Report on Executive Compensation

Our Compensation Committee has certain duties and powers as described in its charter. The Compensation Committee is currently composed of the three non-employee directors named at the end of this report, each of whom is independent as defined by the NASDAQ listing standards.

The Compensation Committee has reviewed and discussed with management the disclosures contained in the Compensation Discussion and Analysis section of this 2013 Annual Report. Based upon this review and discussion, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis section be included in this 2013 Annual Report.

Xindan Li, Chair

XiaochuanGuo

Sean Shao

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth certain information regarding beneficial ownership of common stock, as of April 11, 2014, by each of the Company’s directors and executive officers; all executive officers and directors as a group, and each person known to the Company to own beneficially more than 5% of the Company’s common stock. Except as otherwise noted, the persons identified have sole voting and investment powers with respect to their shares.

Name and Address of Beneficial Owner	Amount and nature of Beneficial Ownership(1)		Percentage Outstanding Shares of Common Stock
Full Alliance International Limited (2)		7,657,704		15.1	%
MSPEA Agriculture Holding Limited (3)		8,814,632		15.4	%
Morgan Stanley (4)		8,908,702		15.5	%
Zishen Wu (5)		1,155,000		2.0	%
Sam (Yue) Yu (5)		400,000		*
Homer Sun (6)		—		—
Rijun Zhang (5)		30,000		*
XiaochuanGuo (5)		30,000		*
Xindan Li (5)		30,000		*
Sean Shao (5)		50,000		*
All Directors and Executive Officers, as a group (8 persons)		1,845,000		3.6	%
Pentwater Capital Management, LP (7)		4,000,000		7.9	%
GLG Partners LP (8)		3,514,254		6.9	%

*Represents beneficial ownership of less than one percent of our outstanding shares.

(1) Beneficial ownership is determined in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (SEC). In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options held by that person that are currently exercisable or exercisable within 60 days of April 11, 2014, are deemed outstanding. Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. The percentage of beneficial ownership is based on 50,685,216 shares of common stock outstanding as of April 10, 2014.

(2) The business address of Full Alliance International Limited (“Full Alliance”) is OMC Chambers, P.O. Box 3152, Road Town, Tortola, British Virgin Islands. Full Alliance is wholly owned by Ms. XingmeiZhong and such shares may be deemed to be beneficially owned by Ms. Zhong. Of the 7,657,704 shares of common stock beneficially owned, 5,600,000 shares of the Company’s Common Stock have been pledged to MSPEA and are subject to the terms of a Stockholders’ Agreement (the “Stockholders’ Agreement”) with MSPEA, as described in further detail below.

(3) Represents shares of Company common stock issuable upon conversion of shares of the Company preferred stock originally issued to MSPEA, additional shares of the Company preferred stock issued as dividends on such shares of the Company preferred stock and 2,128,043 shares of Company common stock purchased in open market transactions in August and September 2011. Each share of the Company preferred stock entitles the holder to the number of votes as the number of shares of Company common stock as the share of the Company preferred stock is convertible into, calculated based upon the higher of (i) the applicable conversion price, or (ii) the greater of (x) US$3.75 per share, the last closing bid price of the Company common stock and (y) US$4.66 per share, the book value per share of the Company common stock, in the cases of both (x) and (y) immediately prior to the signing of the Securities Purchase Agreement, dated May 29, 2011, among the Company, MSPEA and the Company’s largest shareholder, Holdco. Does not include 91,851 additional shares held by the MS Reporting Units which MS Parent (each as defined below) may be deemed to beneficially own. The information was derived from a Schedule 13D filed by the MS Persons on June 10, 2011, as amended by Amendments No. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 and 11 thereto filed on August 26, 2011, September 7, 2011, September 9, 2011, October 16, 2012, December 28, 2012, May 17, 2013, September 25, 2013, October 16, 2013, November 26, 2013, March 26, 2014 and April 9, 2014 (as so amended, the “ MS 13D”). Each of Morgan Stanley, a Delaware corporation (“MS Parent”), (ii) MS Holdings Incorporated, a Delaware corporation (“ MS Holdings”), (iii) Morgan Stanley Private Equity Asia III, Inc., a Delaware corporation (“MS Inc”), (iv) MS LLC, (v) MS LP, (vi) Morgan Stanley Private Equity Asia Employee Investors III, L.P., a Cayman Islands limited partnership (“MS Employee”), and (vii) MSPEA III may be deemed, through their ownership of all or a controlling amount of the interests of MSPEA (or intermediate holding companies thereof) to beneficially own such securities. As noted in the MS 13D, in accordance with SEC Release No. 34-39538 (January 12, 1998) (the “ Release”), the MS 13D reflects the securities beneficially owned by certain operating units (collectively, the “MS Reporting Units”) of MS Parent and its subsidiaries and affiliates (collectively, “MS”). The directors of the board of MS Parent are James P. Gorman, Erskine B. Bowles, Howard J. Davies, Thomas H. Glocer, Robert H. Herz, C. Robert Kidder, Klaus Kleinfeld, Donald T. Nicolaisen, Hutham S. Olayan, James W. Owens, O. Griffith Sexton, Ryosuke Tamakoshi, Masaaki Tanaka, Laura D. Tyson and Rayford Wilkins, Jr. Information relating to MS Parent’s directors and nominees under the following captions in MS Parent’s definitive proxy statement for its 2014 annual meeting of shareholders is incorporated by reference herein: “Item1 – Election of Directors-Director Nominees”, “Item 1 – Election of Directors-Corporate Governance-Board Meetings and Committees” and “Item 1 – Election of Directors-Beneficial Ownership of Company Common Stock-Section 16 (a) Beneficial Ownership Reporting Compliance”. Neither the table above nor the MS 13D reflects securities, if any, beneficially owned by any affiliates or operating units of MS whose ownership of securities is disaggregated from that of the MS Reporting Units in accordance with the Release. The MS Reporting Units disclaim beneficial ownership of the securities beneficially owned by (i) any client accounts with respect to which the MS Reporting Units or their employees have voting or investment discretion, or both, and (ii) certain investment entities of which the MS Reporting Units act as the general partner, managing general partner or other manager, to the extent interests in such entities are held by persons other than the MS Reporting Units.

MSPEA acquired the securities in the ordinary course of business, and at the time of the acquisition, had no agreement or understanding, directly or indirectly, with any person to distribute the securities. The business address of MSPEA is 46^th Floor, International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong.

(4) Consists of shares of Company common stock issuable upon conversion of shares of the Company preferred stock originally issued to MSPEA, additional shares of the Company preferred stock issued as a dividend on such shares of the Company preferred stock and 2,128,043 shares of Company common stock purchased in open market transactions in August and September 2011 and 91,851 shares of Company common stock held by the MS Reporting Units which MS Parent may be deemed to beneficially own. The information was derived from the MS 13D. Each of MS Parent, MS Holdings, MS Inc, MS LLC, MS LP, MS Employee, and MSPEA III may be deemed, through their ownership of all or a controlling amount of the interests of MSPEA (or intermediate holding companies thereof) to beneficially own such securities. As noted in the MS 13D, in accordance with the Release, the MS 13D reflects the securities beneficially owned by the MS Reporting Units of MS. The directors of the board of MS Parent are James P. Gorman, Erskine B. Bowles, Howard J. Davies, Thomas H. Glocer, Robert H. Herz, C. Robert Kidder, Klaus Kleinfeld, Donald T. Nicolaisen, Hutham S. Olayan, James W. Owens, O. Griffith Sexton, Ryosuke Tamakoshi, Masaaki Tanaka, Laura D. Tyson and Rayford Wilkins, Jr. Information relating to MS Parent’s directors and nominees under the following captions in MS Parent’s definitive proxy statement for its 2014 annual meeting of shareholders is incorporated by reference herein: “Item 1 – Election of Directors-Director Nominees”, “Item 1 – Election of Directors- Corporate Governance-Board Meetings and Committees” and “Item 1 – Election of Directors-Beneficial Ownership of Company Common Stock- Section 16 (a) Beneficial Ownership Reporting Compliance”. Neither the table above nor the MS 13D reflects securities, if any, beneficially owned by any affiliates or operating units of MS whose ownership of securities is disaggregated from that of the MS Reporting Units in accordance with the Release. The MS Reporting Units disclaim beneficial ownership of the securities beneficially owned by (i) any client accounts with respect to which the MS Reporting Units or their employees have voting or investment discretion, or both, and (ii) certain investment entities of which the MS Reporting Units act as the general partner, managing general partner or other manager, to the extent interests in such entities are held by persons other than the MS Reporting Units.

MS Parent acquired the securities in the ordinary course of business, and at the time of the acquisition, had no agreement or understanding, directly or indirectly, with any person to distribute the securities. The business address of MS Parent is 1585 Broadway, New York, New York 10036.

(5) Address of referenced person is c/o Yongye International, Inc., 6th Floor, Suite 608, Xue Yuan International Tower, No. 1 Zhichun Road, Haidian District, Beijing, PRC. Except in the case of Mr. Shao and Mr. Wu, each such individual for whom share ownership is reflected has transferred such shares to Prosper Sino Development Limited, which entity is an affiliate of a trustee that has been engaged to administer such shares for the benefit of the relevant transferor or members of his or her family. Of the 1,155,000 shares beneficially owned by Mr. Wu, 555,000 shares are held directly by Mr. Wu and 600,000 shares have been transferred to Prosper Sino Development Limited.

(6) The business address of Mr. Sun is Morgan Stanley, 46^th Floor, International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong.

(7) The business address of Pentwater Capital Management, LP is 614 Davis Street, Evanston, IL 60201. The information was derived from a Schedule 13G filed February 14, 2014.

(8) The business address of GLG Partners LP is 1 Curzon Street, London W1J 5HB, United Kingdom. GLG Partners Limited, which serves as the general partner of GLG Partners LP, shares voting and dispositive control over such shares with GLG Partners LP. This information was derived from a Schedule 13G filed February 27, 2014.

Going Private Proposal

On April 9, 2014, the Parties entered into an amendment (the “Amendment”) to the Merger Agreement (the Merger Agreement as so amended, the “Amended Merger Agreement”).

Other than as expressly modified by the Amendment, the Merger Agreement remains in full force and effect as originally executed on September 23, 2013.

Stockholders’ Agreement

In connection with closing of the transactions contemplated by the Securities Purchase Agreement, on June 9, 2011, Full Alliance and MSPEA entered into a Stockholders’ Agreement. Pursuant to the agreement, Full Alliance agreed not to transfer or dispose of an aggregate of 5,600,000 shares of Common Stock pledged to MSPEA (the “Pledged Shares”) without the prior written consent of MSPEA until the earliest of (i) the conversion of all of the Preferred Shares into shares of Common Stock and the sale of all of the underlying shares of Common Stock, (ii) the redemption of all of the Preferred Shares or (iii) the fifth anniversary of the date of the agreement.

In the event that the Company’s net income falls below the certain income targets and the Company has engaged in certain additional issuances of Company’s equity securities not approved in writing by holders of a majority of the Preferred Shares outstanding, if the Certificate of Designation for the Preferred Shares does not allow for an increase in the applicable Income Target in calculating any adjustments to the conversion price of the Preferred Shares, Full Alliance agreed to transfer to MSPEA or its affiliates, for total consideration of $1, such amount of shares of Common Stock held by Full Alliance that MSPEA would otherwise receive upon conversion of its Preferred Shares, had the applicable Income Target been increased. Notwithstanding the above, the total amount of shares transferable from Full Alliance to MSPEA or its affiliates under the terms of the Stockholders’ Agreement and the shares of Common Stock issuable to MSPEA upon conversion of the Preferred Shares shall not exceed 9,869,205, or 19.99% of the total number of shares of Common Stock outstanding on the date of execution of the Securities Purchase Agreement.

The net income targets referenced above are: $84 million for fiscal 2011, $210 million for the cumulative period of fiscal 2011 through fiscal 2012, $399 million for the cumulative period of fiscal 2011 through fiscal 2013, and $682.5 million for the cumulative period of fiscal 2011 through fiscal 2014.

Full Alliance also agreed that, so long as MSPEA and its affiliates own at least 10% of the outstanding Preferred Shares, it will not, without the prior written consent of MSPEA, enter into any business that competes with the business of the Company and its subsidiaries or persuade, solicit, or encourage any management or key employee of the Company or its subsidiaries to terminate employment with the Company or its subsidiaries.

Share Pledge

In connection with the Stockholders’ Agreement, on June 9, 2011, Full Alliance pledged the Pledged Shares to guarantee its obligations under the Stockholders’ Agreement described in more detail above. Pursuant to the terms of the pledge agreement, Full Alliance agreed to appoint MSPEA as attorney-in-fact for the Pledged Shares with full power to vote and dispose of the Pledged Shares in the event Full Alliance fails to abide by the transfer restrictions or conversion adjustment transfers set forth in the Stockholders’ Agreement as described above (the “Guaranteed Obligations”).

The Share Pledge is binding upon the parties until the payment and satisfaction of all the Guaranteed Obligations and Full Alliance’s obligations under the pledge agreement.

ITEM 14. Principal Accountant Fees and Services

Aggregate fees billed to the Company by KPMG during the last two fiscal years were as follows:

Fees	2013		2012
Audit Fees(1)	$	1,118,255	$	1,040,919
Audit Related Fees		-		-
Tax Fees		-		-
All Other Fees		-		-
Total	$	1,118,255	$	1,040,919

(1) Audit Fees consist of fees billed for professional services rendered for the audit of the Company’s consolidated annual financial statements and review of the interim consolidated financial statements included in quarterly reports and audit of the effectiveness of internal control over financial reporting, and services that are normally provided by our auditors in connection with statutory and regulatory filings or engagements.

The aggregate amount of Audit Fees for the year 2013 consists of $ 1,118,255 billed by KPMG for professional services rendered for the audit of the Company’s financial statements for the fiscal year ended December 31, 2013 and review of the Company’s financial statements included in the three Form 10-Q’s for the quarters ended March 31, June 30 and September 30, 2013, and audit of the effectiveness of internal control over financial reporting as of December 31, 2013.

The aggregate amount of Audit Fees for the year 2012 consists of $1,040,919 by KPMG for professional services rendered for the audit of the Company’s financial statements for the fiscal year ended December 31, 2012 and review of the Company’s financial statements included in the three Form 10-Q’s for the quarters ended March, 31, June 30 and September 30, 2012, and audit of the effectiveness of internal control over financial reporting as of December 31, 2012.

In accordance with the Audit Committee’s pre-approval policies and procedures described below, during fiscal 2013 and 2012, 100% of all audit, audit-related, tax and other services performed by KPMG were approved in advance by the Audit Committee. KPMG was our principal auditor and no work was performed by persons outside of this firm.

Pre-Approval of Services

In accordance with the SEC’s auditor independence rules, the Audit Committee has established the following policies and procedures by which it approves in advance any audit or permissible non-audit services to be provided to the Company by its independent auditor.

Prior to the engagement of the independent auditor for any fiscal year’s audit, management submits to the Audit Committee for approval lists of recurring audit, audit-related, tax and other services expected to be provided by the auditor during that fiscal year. The Audit Committee adopts pre-approval schedules describing the recurring services that it has pre-approved, and is informed on a timely basis, and in any event by the next scheduled meeting, of any such services rendered by the independent auditor and the related fees.

The fees for any services listed in a pre-approval schedule are budgeted, and the Audit Committee requires the independent auditor and management to report actual fees versus the budget periodically throughout the year. The Audit Committee will require additional pre-approval if circumstances arise where it becomes necessary to engage the independent auditor for additional services above the amount of fees originally pre-approved. Any audit or non-audit service not listed in a pre-approval schedule must be separately pre-approved by the Audit Committee on a case-by-case basis. Every request to adopt or amend a pre-approval schedule or to provide services that are not listed in a pre-approval schedule must include a statement by the independent auditors as to whether, in their view, the request is consistent with the SEC’s rules on auditor independence.

The Audit Committee will not grant approval for:

· any services prohibited by applicable law or by any rule or regulation of the SEC or other regulatory body applicable to the Company;

· provision by the independent auditor to the Company of strategic consulting services of the type typically provided by management consulting firms; or

· the retention of the independent auditor in connection with a transaction initially recommended by the independent auditor, the tax treatment of which may not be clear under the Internal Revenue Code and related regulations and which it is reasonable to conclude will be subject to audit procedures during an audit of the Company’s financial statements.

Subject to certain exceptions, tax services proposed to be provided by the auditor to any director, officer or employee of the Company who is in an accounting role or financial reporting oversight role must be approved by the Audit Committee on a case-by-case basis where such services are to be paid for by the Company, and the Audit Committee will be informed of any services to be provided to such individuals that are not to be paid for by the Company.

In determining whether to grant pre-approval of any non-audit services in the “all other” category, the Audit Committee will consider all relevant facts and circumstances, including the following four basic guidelines:

whether the service creates a mutual or conflicting interest between the auditor and the Company;

whether the service places the auditor in the position of auditing his or her own work;

whether the service results in the auditor acting as management or an employee of the Company; and

whether the service places the auditor in a position of being an advocate for the Company.

Part IV

ITEM 15. Exhibits and Financial Statement Schedules

Exhibit No.		Description
2.1		Share Exchange Agreement, dated as of April 17, 2008.(1)
2.2		Articles of Merger with Agreement and Plan of Merger.(6)
2.3		Agreement and Plan of Merger, dated as of September 23, 2013, by and among Yongye International, Inc., Full Alliance International Limited, Yongye International Limited, and Yongye International Merger Sub Limited (13)
3.1		Amended Articles of Incorporation.(1)
3.2		Articles of Merger with Agreement and Plan of Merger.(6)
3.3		Bylaws.(5)
3.4		Certificate of Designation. (10)
4.1		Form of Investor Warrant (i).(1)
4.2		Form of Investor Warrant (ii).(1)
4.3		Form of Placement Agent Warrant.(5)
4.4		Registration Rights Agreement, dated as of April 17, 2008.(1)
4.5		Registration Rights Agreement, dated as of September 5, 2008.(2)
4.6		Registration Rights Agreement, dated as of May 9, 2009.(3)
4.7		Registration Rights Agreement, dated as of May 29, 2011. (10)
9.1		Voting Agreement, dated as of September 23, 2013, by and among Yongye International Limited, Yongye International, Inc., Full Alliance International Limited, Mr. Zishen Wu, Prosper Sino Development Limited and MSPEA Agriculture Holding Limited. (13)
9.2		Limited Guarantee, dated as of September 23, 2013, by and between Mr. Zishen Wu, MSPEA Agriculture Holding Limited and Yongye International, Inc. (13)
10.1		Securities Purchase Agreement, dated as of April 17, 2008.(1)
10.2		Cooperation Agreement dated January 15, 2008 by and between Inner Mongolia Yongye Biotechnology Co., Ltd. and YongyeNongfeng Biotechnology Co., Ltd.(1)
10.3		Sino-foreign Cooperative Joint Venture Contract, dated November 16, 2007 by and between Inner Mongolia Yongye Biotechnology Co., Ltd. and Asia Standard Oil Limited.(1)
10.4		Supplemental Agreement to the Sino-foreign Cooperative Joint Venture Contract by and between Inner Mongolia Yongye Biotechnology Co., Ltd. and Asia Standard Oil Limited.(1)
10.5		Securities Purchase Agreement, dated as of September 5, 2008.(2)
10.6		Make Good Escrow Agreement, dated as of September 5, 2008.(2)
10.7		Securities Purchase Agreement, dated as of May 8, 2009.(3)
10.8		Employment Contract of Zishen Wu, dated as of March 12, 2012 (effective January 1, 2010), and amendments thereto. (11)
10.9		Employment Contract of Sam (Yue) Yu, dated as of March 12, 2012 (effective March 25, 2009), and amendment thereto. (11)
10.10		Employment Contract of Nan Xu, dated as of March 12, 2012 (effective September 1, 2011). (11)
10.11		Form of Non-Independent Director Contract.(5)
10.12		Form of Independent Director Contract.(5)
10.13		Form of Vehicle Usage Agreement. (8)
10.14		Working Capital Loan Contract dated April 2, 2011, by and between Inner Mongolia YongyeNongfeng Biotech Co., Ltd. and China Everbright Bank, Hohhot Branch. (9)
10.15		Working Capital Loan Contract dated April 18, 2011, by and between Inner Mongolia YongyeNongfeng Biotech Co., Ltd. and China Everbright Bank, Hohhot Branch. (9)
10.16		Maximum Amount Guarantee Contract dated April 2, 2011, by and between Inner Mongolia YongyeNongfeng Biotech Co., Ltd. and China Everbright Bank, Hohhot Branch. (9)
10.17		Comprehensive Credit Facility Agreement dated April 2, 2011, by and between Inner Mongolia YongyeNongfeng Biotech Co., Ltd. and China Everbright Bank, Hohhot Branch. (9)
10.18		Securities Purchase Agreement, dated as of May 29, 2011. (10)
10.19		Stockholders’ Agreement, dated as of May 29, 2011.(10)
10.20		Pledge Agreement, dated as of May 29, 2011. (10)
10.21		Loan Agreement dated December 23, 2011 by and between Inner Mongolia Yongye Biotechnology Co., Ltd. and China Citic Bank, Hohhot Branch.(11)
10.22		Maximum Amount Pledge Contract; dated December 23, 2011, by and between Inner Mongolia Yongye Biotechnology Co., Ltd. and China Citic Bank, Hohhot Branch.(11)
10.23		Loan Agreement dated December 26, 2011 by and between Inner Mongolia Yongye Biotechnology Co., Ltd. and China Citic Bank, Hohhot Branch.(11)

10.24		Personal Property Pledge Contract, dated December 23, 2011, by and between Inner Mongolia Yongye Biotechnology Co., Ltd. and China Citic Bank, Hohhot Branch.(11)
10.25		Working Capital Loan Agreement dated April 28, 2012 between Inner Mongolia YongyeNongfeng Biotech Co., Ltd. and China Everbright Bank, Hohhot Branch. (12)
10.26		Maximum Amount Guarantee Contract dated April 28, 2012 between Zishen Wu and China Everbright Bank, Hohhot Branch.(12)
10.27		Maximum Amount Guarantee Contract dated April 28, 2012 between Ping Yi and China Everbright Bank, Hohhot Branch.(12)
10.28		Working Capital Loan Contract dated June 20, 2012 between Inner Mongolia YongyeNongfeng Biotech Co., Ltd. and China International Trust and Investment Corporation (CITIC), Hohhot Branch.(12)
10.29		Working Capital Loan Contract dated November 13, 2012 between Inner Mongolia YongyeNongfeng Biotech Co., Ltd. and Shanghai Pudong Development Bank. (14)
10.30		Guarantee Engagement Contract between Inner Mongolia YongyeNongfeng Biotech Co., Ltd. and Inner Mongolia Dinxing Guarantee Co., Ltd. (14)
10.31		Counter-Guarantee Pledge Contract between Inner Mongolia YongyeNongfeng Biotech Co., Ltd. and Inner Mongolia Dinxing Guarantee Co., Ltd. (14)
10.32		Domestic Letter of Credit Financing Master Agreement dated December 5, 2012 between Inner Mongolia YongyeNongfeng Biotechnology Co., Ltd. and China International Trust and Investment Corporation (CITIC), Hohhot Branch. (14)
10.33		Fufaiting Financing Contract dated December 5, 2012 between Inner Mongolia YongyeNongfeng Biotechnology Co., Ltd. and China International Trust and Investment Corporation (CITIC), Hohhot Branch. (14)
10.34		Liquid Capital Loan Contract dated October 17, 2013 between Inner Mongolia YongyeNongfeng Biotechnology Co., Ltd. and China Everbright Bank, Hohhot Branch. (15)
10.35		Loan Contract, dated November 13, 2013 between Inner Mongolia YongyeNongfeng Biotechnology Co., Ltd. and China Merchants Bank. (15)
10.36		Domestic Factoring Contract dated December 26, 2013 between Inner Mongolia YongyeNongfeng Biotechnology Co., Ltd. and China Development Bank. (15)

14		Code of Ethics.(7)
21		Subsidiaries of the Registrant. (14)
99.1		Certificate of Scientific and Technological Advancements granted by the Inner Mongolia Autonomous Region Science and Technology Bureau, dated December 8, 2008.(5)
99.2		Consent of Scientific and Technological Advancements granted by the Inner Mongolia Autonomous Region Science and Technology Bureau, dated December 8, 2008.(5)
		Wuchuan County Government's approval of WuchuanShuntong's Lignite Coal Resource Project, dated May 10, 2009. (10)
		Wuchuan County Government's approval of the transfer of the Lignite Coal Resource Project from WuchuanShuntong to Inner Mongolia YongyeFumin Biotechnology Limited, dated July 28, 2010. (10)
		Inner Mongolia Government's approval of the change of the title for the Lignite Coal Resource Project from WuchuanShuntong to Inner Mongolia YongyeFumin Biotechnology Limited, dated December 3, 2010. (10)
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).*

* Filed Herewith.

(1) Incorporated by reference herein to the Report on Form 8-K filed on April 22, 2008.

(2) Incorporated by reference herein to the Company’s Registration Statement on Form S-1/A (Reg. No. 333-150949) filed with the Securities and Exchange Commission on September 9, 2008.

(3) Incorporated by reference herein to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 8, 2009.

(4) Incorporated by reference herein to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 7, 2009.

(5) Incorporated by reference herein to the Company’s Registration Statement on Form S-1 (Reg. No. 333-159892) filed with the Securities and Exchange Commission on June 11, 2009.

(6) Incorporated by reference herein to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 24, 2009.

(7) Incorporated by reference herein to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 5, 2009.

(8) Incorporated by reference herein to the Company’s Registration Statement on Form S-1/A (Reg. No. 333-159892) filed with the Securities and Exchange Commission on August 13, 2009.

(9) Incorporated by reference herein to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 9, 2011.

(10) Incorporated by reference herein to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 31, 2011.

(11) Incorporated by reference herein to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2012.

(12) Incorporated by reference herein to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 9, 2012.

(13) Incorporated by reference herein to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 23, 2013.

(14) Incorporated by reference herein to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 2013.

(15) Incorporated by reference herein to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 17, 2014.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

		YONGYE INTERNATIONAL, INC.

Date: April 11, 2014	By:	/s/ Zishen Wu
		Name: Zishen Wu
		Title: Chief Executive Officer

Date: April 11, 2014	By:	/s/ Sam Yu
		Name: Sam Yu
		Title: Chief Financial Officer

Pursuant to the requirements of the Securities and Exchange Act of 1934, this Report has been signed below by the following person on behalf of the Registrant and in the capacities and on the dates indicated.

Date: April 11, 2014	By:	/s/ Zishen Wu
		Name: Zishen Wu
		Title: Chief Executive Officer and Chairman (principal executive officer)

Date: April 11, 2014	By:	/s/ Sam Yu
		Name: Sam Yu
		Title: Chief Financial Officer (principal financial and accounting officer)

Date: April 11, 2014	By:	/s/ Homer Sun
		Name: Homer Sun
		Title: Director

Date: April 11, 2014	By:	/s/ Xiaochuan Guo
		Name: XiaochuanGuo
		Title: Director

Date: April 11, 2014	By:	/s/ Rijun Zhang
		Name: Rijun Zhang
		Title: Director

Date: April 11, 2014	By:	/s/ Xindan Li
		Name: Xindan Li
		Title: Director

Date: April 11, 2014	By:	/s/ Sean Shao
		Name: Sean Shao
		Title: Director

Attached files

Yongye International, Inc. Reports

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