Yayi Intl (OTC BB:YYIN)

We intend to, and are in the process of, expanding our administrative and production facilities to meet our current needs and anticipated increased demand for our products. In connection therewith, we plan to spend approximately $12.6 million during the 15 months ending March 31, 2013 ($1.6 million during the fiscal year ending March 31, 2012 and $11 million during the fiscal year ending March 31, 2013). The $12.6 million in capital expenditure is expected to be mainly used for the following items:

● $3.8 million for the purchase of machineries and equipment for the new powder processing plant in Weinan, Shaanxi and Fuping, Shaanxi ;

● $0.8million for the purchase of livestock, construction of goat farms and goat milk collection stations;

● $7.4million for the purchase of packing equipment, factory and warehouse, renovation of the office facility and staff apartment building in Jinghai, Tianjin and $0.6 million for the purchase of information technology equipment and systems.

We intend to, and are in the process of, expanding our administrative and production facilities to meet our current needs and anticipated increased demand for our products. In connection therewith, we plan to spend approximately $8.0 million during the eighteen months ending September 30, 2012 ($3.4 million during the fiscal year ending March 31, 2012 and $4.6 million during the six months ending September 30, 2012. The $8.0 million in capital expenditure is expected to be mainly used for the following items:

• the purchase of machineries and equipment for the new powder processing plant in Weinan, Shaanxi and machineries and equipment in Fuping, Shaanxi with the capital expenditure of $3.1 million;
• the purchase of livestock, the construction of goat farms and goat milk collection stations in an amount of $0.5 million;
• the packing equipment purchase and renovation of the office and staff apartment building in Jinghai, Tianjin in an amount of $4.2 million;
• and the purchase of information technology equipment and systems in an amount of $0.2 million.

We believe that our currently available working capital should be adequate to sustain our operations at our current levels through at least the next twelve months. However, depending on our future needs, changes and trends in the capital markets affecting our shares and the Company, we may determine to seek additional debt financing from commercial bank or equity financing in the private or public markets.

We currently plan on seeking at least $15 million in financing to fund the approximately $26.9 million in planned capital expenditures. No assurance can be given that we will be able to secure the financing required for these capital expenditures or that such financing will be sufficient.

Further, in the event we obtain financing through the issuance of equity or equity-linked securities, such financing may be dilutive to our security holders. If we are unable to fund such expenditures in the time frames contemplated (either because we cannot secure the $15 million in financing or such financing, together with cash flow from operations and short-term borrowings, is insufficient), we may be required to defer, modify the scope of, or terminate the implementation of the Weinan City project and/or delay or defer the equipping of the warehouses and processing facilities to be developed in Tianjin City.

If we are unable to expand our facilities, we contemplate that we will continue to rely, as we currently do in part, on third parties to assist us in the fulfillment of our goat milk processing requirements. Such third parties may be unwilling or unable to assist in fulfilling such processing requirements and, even if able to fulfill such requirements, our profits would be negatively impacted if we are required to rely on such third party processors.

Source: SEC Form 10Q (For the quarterly period ended January 31, 2009. Management’s       Discussion and Analysis of Financial Condition and Results of Operations)