The Company also estimates that it incurred a net loss for the second half of 2011 in the range of $3.0 million – $5.0 million, which included $4.8 million (after tax) of legal and other expenses associated with the previously announced investigation by the Special Committee of the Board. Cash and cash equivalents totaled $12.8 million on 31 December 2011. All figures are unaudited. The second half 2011 amounts do not include the potential effects, if any, of the Company's ongoing restatement process described below.

As reported on 31 January 2012, the Special Committee of the Board completed its investigation into certain accounting issues in the animal nutrition and legacy farm hog operations in China. During the investigation by the Special Committee and subsequent further evaluation by management, accounting irregularities were uncovered in both of those segments. The Board and management are working closely with McGladrey & Pullen, LLP, the Company's independent public accountants, and the predecessor accounting firm on restating the Company's financial statements for the 2008 fiscal year and subsequent periods through the first two quarters of 2011. The Company expects to file restated financial statements and return to a regular reporting schedule as soon as practicable. The Company believes that the effect of the restatements will be non-cash items and will not affect current liquidity.

Over the past few months, AgFeed has taken actions to improve operations in the US and China. These actions include:

• Reduced corporate overhead by approximately $2.5 million on an annualized pre-tax basis. Additional expense reductions were achieved in US hog operations.
  
  
• Streamlined hog production operations in China and commenced the organizational restructuring of the animal nutrition business.
  
  
• Named K. Ivan F. Gothner as chief executive officer. Mr Gothner has been serving as interim CEO since December 2011. Mr Gothner also serves as chairman of the board of directors.
  
  
• Appointed two new board members, H. David Sherman and Todd Zelek, each of whom bring extensive business and financial expertise to the Company's board.
  
  
• Appointed Thomas Zhi Yang, Esq. as China country manager, responsible for coordinating all aspects of the Company's business in China.
  
  
• Appointed Joseph Barban as managing director of AgFeed USA and head of the Company's US hog production business.
  
  
• Changed the name of the US hog production operations to AgFeed USA (from the legacy name M2P2) to better reflect the integrated US and China nature of the Company's business.

"Our results in the second half of 2011 were buoyed by strong market demand and record hog prices in China," said Mr Gothner, chairman and chief executive officer. "We continued to deploy more efficient and disciplined production methods to our legacy hog production system in China and in the fourth quarter of 2011 also began selling hogs from the first of our two western-style facilities in China. We are pleased that we are getting a favorable reaction to the quality, reliability and pricing of our western-style hog production in that market.

"The transformation of AgFeed is well underway," he continued. "We have strengthened our executive team, reduced overhead and expect to return to a normalized financial reporting schedule in the third quarter of this year. We believe we have adequate liquidity under current market conditions to fund our operations for the remainder of 2012 and to complete the construction of our second western-style facility in China, which is scheduled to enter production in June with the first animals available for sale in December of this year. We look forward to providing a further update when 2012 first quarter results are available."