Financial Statements to be Re-stated to Reflect Non-Cash Adjustments
BEIJING, Oct. 10 /PRNewswire-Asia/ -- Yongye International, Inc. (Nasdaq: YONG), ("Yongye" or "the Company") a leading developer, manufacturer and distributor of Shengmingsu brand plant and animal nutrient products in the People's Republic of China (PRC), today announced that the Company expects to restate its previously issued financial statements for 2008 and the first two quarters of fiscal 2009 to reflect the proper adoption of non-cash related accounting treatment of the warrants issued in 2008 based on Emerging Issues Task Force (EITF) Issues Nos. 07-05 and 00-19.
EITF Issue No. 07-05 now requires issuers to record as liabilities financial instruments which provide "down round" protection in the form of a "hard ratchet" adjustment mechanism to the relevant exercise or conversion price, which was originally designed to protect holders from dilutive issuances of the company's stock. This was implemented for fiscal years ending after December 15, 2008 and requires that warrants with such provisions no longer be recorded as equities and instead be recorded as liabilities since a hard ratchet provision may be considered a type of guarantee provided to the holder of the financial instrument. Yongye adopted EITF 07-05 to properly account for the value of the warrants issued in 2008 after the down round provisions were triggered upon the issuance of shares in its May 2009 private placement.
EITF 00-19 requires issuers which enter into contracts that are indexed to, and sometimes settled in, its own stock to record these contracts as liabilities if an event could occur considered to be not within the control of the issuer and which requires a net cash settlement to the contract holder unless there are provisions requiring that the contract holder receive the same form of consideration as holders of the shares underlying the contract. Yongye's warrants match this description and will be re-classified as liabilities and will be measured at fair value with changes in fair value reported in earnings and disclosed in the financial statements for each reporting period as long as the contracts remain classified as assets or liabilities. If the warrants are ultimately settled in shares, any gains or losses on those contracts will continue to be included in earnings.
Due to the complexities of accounting of their issued warrants, Yongye had accounted for them inappropriately by classifying them as permanent equity. Yongye now anticipates that once the restatements are complete, the cumulative effects for the last three quarters of 2008 to be a non-cash gain of approximately $2.1 million and for the first half of fiscal 2009 a non-cash adjustment of approximately $5.0 million. The Company expects to record non-cash adjustments to earnings in subsequent reporting periods, depending on the changes in fair value of the warrants which will be subject to, among other factors, changes in the Company's share price.
Upon completing its assessment of the adoption of EITF Issues Nos. 07-05 and EITF 00-19, the Company expects to file amendments to its Forms 10-Q and Form 10-K for the relevant quarterly and year ending periods affected as soon as possible.
About Yongye International, Inc.
Yongye International, Inc., headquartered in Beijing, is engaged in the development, manufacturing, distribution and sales of Shengmingsu brand plant and animal nutrient products. The Company's patented and patent pending formulas and proprietary extraction processes allow it to create products that increase crop yields and improve the health of livestock. Its sole operating subsidiary, Inner Mongolia Yongye Nongfeng Biotechnology Co., Ltd., is headquartered in Beijing with its manufacturing facility located in Inner Mongolia, People's Republic of China. For more information, please visit the Company's website at http://www.yongyeintl.com .
Safe Harbor Statement
This press release contains certain statements that may include "forward-looking statements." All statements other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involving known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the risk factors discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on the SEC's website ( http://www.sec.gov ). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these risk factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
For more information, please contact:
Yongye International, Inc.
Mr. Larry Gilmore-VP of Corporate Strategy
Phone: +86-10-8232-8866 x8880
Email: larry.gilmore@yongyeintl.com
CCG Investor Relations, Inc.
Mr. Crocker Coulson, President
Phone: +1-646-213-1915 (New York)
Email: crocker.coulson@ccgir.com
Web: http://www.ccgirasia.com