UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549





FORM 10-Q





(Mark One)





x
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.





For the quarterly period ended March 31, 2011





o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.





For the transition period from ____________ to ____________





Commission File Number 001-34260





CHINA GREEN AGRICULTURE, INC.


(Exact name of registrant as specified in its charter)





Nevada
36-3526027(State or other jurisdiction of
(IRS Employerincorporation or organization)
Identification No.)





3 rd Floor, Borough A, Block A, No. 181,


South Taibai Road, Xi’an, Shaanxi Province,


People’s Republic of China  710065


(Address of principal executive offices) (Zip Code)





+86-29-88266368


(Issuer's telephone number, including area code)








Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 o





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 o   No o





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





Large accelerated filer    o
Accelerated filer             xNon-accelerated filer     o

( Do not check if a smaller reporting company )
Smaller reporting company   o





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No x








APPLICABLE ONLY TO CORPORATE ISSUERS:





Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:  26,845,859 shares of common stock, $.001 par value, as of May 6, 2011.











TABLE OF CONTENTS





PART I

FINANCIAL INFORMATION

PageItem 1.

Financial Statements.

3Consolidated Balance SheetsAs of March 31, 2011 and June 30, 2010 (Unaudited)

3Consolidated Statements of Income and Comprehensive IncomeFor the Three and Nine Months Ended March 31, 2011 and 2010 (Unaudited)

4Consolidated Statements of Cash FlowsFor the Nine Months Ended March 31, 2011 and 2010 (Unaudited)

5Notes to Consolidated Financial StatementsAs of March 31, 2011 (Unaudited)

6Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

33Item 3.

Quantitative and Qualitative Disclosures About Market Risk

44Item 4.

Controls and Procedures

45PART II

OTHER INFORMATIONItem 1.

Legal Proceedings

46Item 1A.

Risk Factors

46Item 6.

Exhibits

46Signatures

47Exhibits/Certifications

48





2





PART I - FINANCIAL INFORMATION





Item 1.  Financial Statements





CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSAS OF MARCH 31, 2011 AND JUNE 30, 2010(UNAUDITED)
  ASSETSMarch 31, 2011


June 30, 2010Current AssetsCash and cash equivalents

$
66,939,510


$
62,335,437Accounts receivable, net


25,349,120



15,571,888Inventories


28,716,618



11,262,647Other assets


1,229,912



86,824Related party receivables


-



-Advances to suppliers


17,789,047



221,280Total Current Assets


140,024,207



89,478,076Plant, Property and Equipment, Net


48,735,290



29,368,515Construction In Progress


12,753,126



257,077Other Assets - Non Current


1,776,676



1,098,704Intangible Assets, Net


27,448,735



11,585,570Goodwill


4,317,821



-Total Assets

$
235,055,855


$
131,787,942LIABILITIES AND STOCKHOLDERS' EQUITYCurrent LiabilitiesAccounts payable

$
9,656,661


$
328,124Advances from customers


25,067,151



41,645Accrued expenses and other payables


8,071,421



507,705Amount due to related parties


69,554



68,164Taxes payable


8,051,854



2,304,382Short term loans


6,337,050



-Other short-term liability


6,754,964



-Total Current Liabilities


64,008,655



3,250,020Stockholders' EquityPreferred Stock, $.001 par value, 20,000,000 shares authorized, Zero

shares issued and outstanding



-Common stock, $.001 par value, 115,197,165 shares authorized, 25,935,487

and 24,572,328 shares issued, and  26,845,860 and 24,572,328, shares

outstanding as of March 31, 2011 and June 30, 2010, respectively)


25,936



24,573Additional paid-in capital


89,876,979



75,755,682Statutory reserve


8,844,102



5,864,648Retained earnings


64,046,976



43,536,408Accumulated other comprehensive income


8,253,207



3,356,611Total Stockholders' Equity


171,047,200



128,537,922Total Liabilities and Stockholders' Equity

$
235,055,855


$
131,787,942The accompanying notes are an integral part of these consolidated financial statements.
 3
 CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF  INCOME AND COMPREHENSIVE INCOMEFOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2011 AND 2010(UNAUDITED)
  For the Three Months Ended March 31,


For the Nine Months Ended March 31,2011


2010


2011


2010SalesJinong

$
16,208,041


$
11,264,754


$
47,030,563


$
30,554,200Gufeng


26,127,821



-



66,804,752



-Jintai


2,317,422



2,177,523



5,612,628



5,337,013Net sales


44,653,284



13,442,277



119,447,943



35,891,213Cost of goods soldJinong


6,060,998



4,206,699



19,705,968



11,209,185Gufeng


20,300,721



-



54,199,998



-Jintai


1,252,056



1,125,017



3,030,315



2,842,735Cost of goods sold


27,613,775



5,331,716



76,936,281



14,051,920Gross profit


17,039,509



8,110,561



42,511,662



21,839,293Operating expensesSelling expenses


1,662,851



566,966



4,667,842



1,302,733General and administrative expenses


3,251,804



1,335,229



8,221,055



2,683,959Total operating expenses


4,914,655



1,902,195



12,888,897



3,986,692Income from operations


12,124,854



6,208,366



29,622,765



17,852,601Other income (expense)Other income (expense)


(45,788
)


492



(55,647
)


1,045Interest income


59,430



118,539



212,346



200,461Interest expense


(154,292
)


(6,813
)


(448,819
)


(112,457
)Total other income (expense)


(140,650
)


112,218



(292,120
)


89,049Income before income taxes


11,984,204



6,320,584



29,330,645



17,941,650Provision for income taxes


2,511,459



987,786



5,840,623



2,640,584Net income


9,472,745



5,332,798



23,490,022



15,301,066Other comprehensive incomeForeign currency translation gain/(loss)


1,144,289



(23,832
)


4,896,596



(17,478
)Comprehensive income

$
10,617,034


$
5,308,966


$
28,386,618


$
15,283,588Basic weighted average shares outstanding


25,936,713



24,418,325



25,932,497



23,098,783Basic net earnings per share

$
0.37


$
0.22


$
0.91


$
0.66Diluted weighted average shares outstanding


26,729,495



24,425,325



26,345,583



23,105,783Diluted net earnings per share

$
0.35


$
0.22


$
0.89


$
0.66
  The accompanying notes are an integral part of these consolidated financial statements.
  4
 CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIESSTATEMENTS OF CASH FLOWSFOR THE NINE MONTHS ENDED MARCH 31, 2011 AND 2010(UNAUDITED)
 
 2011


2010Cash flows from operating activitiesNet income

$
23,490,022


$
15,301,066Adjustments to reconcile net income to net cashprovided by operating activities:Issuance of equity for compensation


2,573,785



1,259,992Cancelation of previously issued shares for services


(31,056
)


-Depreciation


2,813,573



1,545,413Amortization


786,007



205,018Decrease / (Increase) in current assets, net of effects from acquisitions:Accounts receivable


(8,760,007
)


(5,125,906
)Other receivables


(183,839
)


(158,415
)Inventories


1,521,043



(3,701,733
)Advances to suppliers


(15,724,052
)


(66,279
)Other assets


(1,185,965
)


(73,784
)(Decrease) / Increase in current liabilities, net of effects from acquisitions:Accounts payable


3,198,918



166,957Advances form customers


5,096,171



37,171Tax payables


5,559,685



(1,725,159
)Other payables and accrued expenses


5,344,211



(282,450
)Net cash provided by operating activities


24,498,496



7,381,891Cash flows from investing activitiesPurchase of plant, property, and equipment


(4,168,604
)


(3,528,331
)Purchase of intangible assets


(55,814
)


(10,776,152
)Acquisition of Gufeng, net of cash acquired


(6,720,539
)


-Amounts increase in construction in progress


(11,503,067
)


(31,859
)Advances to suppliers - non current


(1,701,804
)


(392,695
)Net cash used in investing activities


(24,149,828
)


(14,729,037
)Cash flows from financing activitiesRepayment of loan


-



(3,179,115
)Borrows of loan


2,253,000



-Shares issuance cost


-



(2,232,302
)Proceeds from issuance of shares


-



53,063,824Restricted cash


-



83,148Net cash provided by financing activities


2,253,000



47,735,555Effect of exchange rate change on cash and cash equivalents


2,002,405



49,455Net increase in cash and cash equivalents


4,604,073



40,437,864Cash and cash equivalents, beginning balance


62,335,437



17,795,447Cash and cash equivalents, ending balance

$
66,939,510


$
58,233,311Supplement disclosure of cash flow informationInterest expense paid

$
(417,236
)

$
(95,740
)Income taxes paid

$
(312,497
)

$
(3,081,381
)
 The accompanying notes are an integral part of these consolidated financial statements.
 
 5
 CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)
 
 NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
 
 China Green Agriculture, Inc. (the “Company”), through its subsidiaries, is engaged in the research, development, production, distribution and sale of humic acid-based compound fertilizer, compound fertilizer, blended fertilizer, organic compound fertilizer, slow-release fertilizer, highly-concentrated water-soluble fertilizer, and mixed organic-inorganic compound fertilizer and the development, production and distribution of agricultural products. The Company was incorporated in 1987, but entered its current lines of business in December 2007.
 
 The Company’s corporate structure as of March 31, 2011 is set forth in the diagram below:
 
 
 
  6
 CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)
 NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 The consolidated interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “Commission”).  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
 
 These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein.  It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended June 30, 2010.  The Company follows the same accounting policies in preparation of interim reports.  Results of operations for the interim periods are not indicative of annual results.
 
 Principle of consolidation
 
 The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Green New Jersey, Jinong, Jintai, Yuxing, Gufeng and Tianjuyuan. All significant inter-company accounts and transactions have been eliminated in consolidation.
 
 Use of estimates
 
 The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.
 
 Subsequent Events
 
 The Company evaluates events subsequent to the end of the fiscal quarter through the date the financial statements are filed with the Commission for recognition or disclosure in the consolidated financial statements. Events that provide additional evidence about material conditions that existed at the date of the balance sheet are evaluated for recognition in the consolidated financial statements. Events that provide evidence about conditions that did not exist at the date of the balance sheet but occurred after the balance sheet date are evaluated for disclosure in the notes to the consolidated financial statements.
  7
 CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)
 Cash and cash equivalents and concentration of cash
 
 For statement of cash flows purposes, the Company considers all cash on hand and in banks, certificates of deposit with state owned banks in the Peoples Republic of China (“PRC”) and banks in the United States, and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. The Company maintains balances at financial institutions which, from time to time, may exceed deposit insurance limits for the banks located in the United States. Balances at financial institutions or state owned banks within the PRC are not covered by insurance. Cash overdraft as of balance sheet date will be reflected as liabilities in the balance sheet. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts.
 
 Accounts receivable
 
 The Company's policy is to maintain reserves for potential credit losses on accounts receivable. Management regularly reviews the composition of accounts receivable and analyzes customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves at each year-end. Accounts considered uncollectible are written off through a charge to the valuation allowance. As of March 31, 2011 and June 30, 2010, the Company had accounts receivable of $25,349,120and $15,571,888, net of allowance for doubtful accounts of $233,339 and $193,403, respectively.
 
 Inventories
 
 Inventory is valued at the lower of cost (determined on a weighted average basis) or market. Inventories consist of raw materials, work in process, finished goods and packaging materials. The Company reviews its inventories regularly for possible obsolete goods and establishes reserves when determined necessary.
 
 Property, plant and equipment
 
 Property, plant and equipment are recorded at cost. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extend the life of plant, property, and equipment are capitalized. These capitalized costs may include structural improvements, equipment, and fixtures. All ordinary repair and maintenance costs are expensed as incurred.
 
 Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets:
  Estimated Useful LifeBuilding
10-25 yearsAgricultural assets
8 yearsMachinery and equipment
5-15 yearsVehicles
3-5 years
  8
  CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)
 Construction in Progress
 
 Construction in progress represents the costs incurred in connection with the construction of buildings or new additions to the Company’s plant facilities. Costs classified to construction in progress include all costs of obtaining the asset and bringing it to the location and condition necessary for its intended use. No depreciation is provided for construction in progress until such time as the assets are completed and are placed into service. Interest incurred during construction is capitalized into construction in progress. All other interest is expensed as incurred.
 
 Long-Lived Assets
 
 The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.
 
 Intangible Assets
 
 The Company records intangible assets acquired individually or as part of a group at fair value. Intangible assets with definitive lives are amortized over the useful life of the intangible asset, which is the period over which the asset is expected to contribute directly or indirectly to the entity’s future cash flows. The Company evaluates intangible assets for impairment at least annually and more often whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. The Company has not recorded impairment of intangible assets as of March 31, 2011 and June 30, 2010, respectively.
 
 Fair Value Measurement and Disclosures
 
 Our accounting for Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:
 
 Level one — Quoted market prices in active markets for identical assets or liabilities;
  9
 CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)
 Level two — Inputs other than level one inputs that are either directly or indirectly observable; and
 
 Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.
 
 Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The Company had no assets and liabilities measured at fair value at March 31, 2011.
 
 The carrying values of cash and cash equivalents, trade and other receivables, trade and other payables approximate their fair values due to the short maturities of these instruments.
 
 Revenue recognition
 
 Sales revenue is recognized on the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.
  The Company's revenue consists of invoiced value of goods, net of a value-added tax (VAT). No product return or sales discount allowance is made as products delivered and accepted by customers are normally not returnable and sales discounts are normally not granted after products are delivered.
 
 Stock-Based Compensation
 
 The costs of all employee stock options, as well as other equity-based compensation arrangements, are reflected in the consolidated financial statements based on the estimated fair value of the awards on the grant date. That cost is recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). Stock compensation for stock granted to non-employees is determined as the fair value of the consideration received or the fair value of equity instruments issued, whichever is more reliably measured.
 
 Income taxes
 
 The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.
  10
  CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)
 Foreign currency translation
 
 The reporting currency of the Company is the US dollar. The functional currency of the Company and Green New Jersey is the US dollar. The functional currency of Jinong and its subsidiaries Jintai and Yuxing is the Chinese Yuan or Renminbi (“RMB”). For the subsidiaries whose functional currencies are other than the US dollar, all asset and liability accounts were translated at the exchange rate on the balance sheet date; stockholder's equity is translated at the historical rates and items in the cash flow statements are translated at the average rate in each applicable period. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of shareholders’ equity. The resulting translation gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.
 
 Segment reporting
 
 The Company utilizes the "management approach" model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.
 
 As of March 31, 2011, the Company, through its subsidiaries is engaged in the following businesses: fertilizer products (Jinong), fertilizer products (Gufeng and Tianjuyuan), agricultural products (Jintai) and research and development (Yuxing).
 
 Fair values of financial instruments
 
 Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
 
 The Company's financial instruments primarily consist of cash and cash equivalents, accounts receivable, other receivables, advances to suppliers, accounts payable, other payables, tax payable, and related party advances and borrowings.
 
 As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheet. This is attributed to the short maturities of the instruments and that interest rates on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profile at respective balance sheet dates.
 
 11
 
 CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)
 Statement of cash flows
 
 The Company's cash flows from operations are calculated based on the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.
 
 
 Earnings per share
 
 Basic earnings per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and stock awards.
 
 The components of basic and diluted earnings per share consist of the following:
 
 Three Months Ended


Nine Months EndedMarch 31,


March 31,2011


2010


2011


2010Net Income for Basic Earnings Per Share

$
9,472,745


$
5,332,798


$
23,490,022


$
15,301,066Basic Weighted Average Number of Shares


25,936,713



24,418,325



25,932,497



23,098,783Net Income per Share – Basic


0.37



0.22



0.91



0.66Net Income for Diluted Earnings Per Share


9,472,745



5,332,7988



23,490,022



15,301,066Diluted Weighted Average Number of Shares


26,729,495



24,425,325



26,345,583



23,105,783Net Income per Share – Diluted

$
0.35


$
0.22


$
0.89


$
0.66
 
 Recent accounting pronouncements
 
 In January 2010, the FASB issued Accounting Standards Update No. 2010-06 (ASU 2010-06),Fair Value Measurements and Disclosures  which amends ASC Topic 820, adding new requirements for disclosures for Levels 1 and 2, separate disclosures of purchases, sales, issuances, and settlements relating to Level 3 measurements and clarification of existing fair value disclosures.  ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal year beginning after December 15, 2010 (the Company’s fiscal year 2011); early adoption is permitted.  The Company is currently evaluating the impact of adopting ASU 2010-06 on its financial statements.
 
 In July 2010, the FASB issued Accounting Standards Update No. 2010-20 (ASU 2010-20),  Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, which amends the guidance with ASC Topic 310, Receivables to facilitate financial statement users’ evaluation of (1) the nature of credit risk inherent in the entity’s portfolio of financing receivables; (2) how that risk is analyzed and assessed in arriving at the allowance for credit losses; and (3) the changes and reasons for those changes in the allowance for credit losses. The amendments in ASU No. 2010-20 also require an entity to provide additional disclosures such as a rollforward schedule of the allowance for credit losses on a portfolio segment basis, credit quality indicators of financing receivables and the aging of past due financing receivables. The adoption of ASU No. 2010-20 did not have an impact on the financial statements and footnotes.
  12
 CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)
 NOTE 3 – ACQUISITION
 
 Beijing Gufeng Chemical Products Co., Ltd. (“Gufeng”) was founded in 1993. Its wholly-owned subsidiary Beijing Tianjuyuan Fertilizer Co., Ltd. (“Tianjuyuan”) was founded in 2001 and was acquired by Gufeng on May 4, 2010. Both companies are based in Beijing, and registered to produce compound fertilizer, blended fertilizer, organic compound fertilizer and mixed, organic-inorganic compound fertilizer and sell their products throughout China and abroad.
 
 On July 2, 2010, the Company acquired Gufeng and its wholly-owned subsidiary Tianjuyuan by purchasing all of Gufeng’s outstanding equity interests and delivering acquisition consideration of approximately $8.8 million cash and approximately 1.4 million shares of the Company’s common stock (valued at approximately $11.6 million) to the former shareholders of Gufeng or their designees (the “Gufeng Shareholders”). Additionally, the Company may be required to deliver up to an additional 0.9 million shares of common stock, which are being held in escrow (the “Escrowed Shares”), to be released based upon achievement of following conditions:
 
 1)  If Gufeng achieves certain sales revenue targets for its fiscal year ending June 30, 2011 (the “Sales Target”), 341,390 of the Escrowed Shares will be released from escrow to the Gufeng Shareholders, which is subject to adjustment based on a three-tier system.   If Gufeng achieves at least 80% of the Sales Target, then 227,593 of the Escrowed Shares will be released from escrow to the Gufeng Shareholder, and if Gufeng achieves at least 60% of the Sales Target, then 113,797 of the Escrowed Shares will be released from escrow to the Gufeng Shareholders.
 
 2)  If Gufeng achieves certain net profit after tax targets for its fiscal year ending June 30, 2011 (the “Profit Target”), 341,390 of the Escrowed Shares will be released from escrow to the Gufeng Shareholders, which is subject to adjustment based on a three-tier system.   If Gufeng achieves at least 80% of the Profit Target, then 227,593 of the Escrowed Shares will be released from escrow to the Gufeng Shareholders, and if Gufeng achieves at least 60% of the Profit Target, then 113,797 of the Escrowed Shares will be released from escrow to the Gufeng Shareholders.
 
 3)  If Gufeng obtains a land use right with respect to certain real property located in China, along with ownership of the buildings thereon, then 227,593 of the Escrowed Shares will be released from escrow to the Gufeng Shareholders.
  13
 CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)
 Any Escrowed Shares that are not released from escrow to the Gufeng Shareholders for failure to achieve the conditions described above will be forfeited and returned to the Company for cancellation.  While the Escrowed Shares are held in escrow, the Gufeng Shareholders will retain all voting rights with respect to the Shares.
 
 The Company has recognized a liability based on the acquisition date fair value of the acquisition-related contingent consideration based on the probability of the achievement of the targets. Based on the Company’s estimation, an initial liability of $2.9 million (341,390 shares) was recorded. During the measurement period in the current quarter, the Company increased the contingent consideration liability to $6.8 million (796,576 shares) based on a revised estimated target achievement. Changes in the fair value of the acquisition-related contingent consideration during the measurement period, including changes from events after the acquisition date, such as changes in the Company’s estimate of the revenue and net income expected to be achieved and changes in their stock price, are being recognized in goodwill in the period in which the estimated fair value changes. The accompanying consolidated financial statements include the financial results of these companies from the date of acquisition.
 
 The estimated fair values of net assets acquired and presented below are preliminary and are based on the information that was available as of the acquisition date and prior to the filing of this Quarterly Report on Form 10-Q. The Company believes that the information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed; however, the Company is awaiting the finalization of certain third-party valuations to finalize those fair values. Thus, the preliminary measurements of fair value set forth below are subject to change. The Company expects to finalize the valuation and complete the purchase price allocations as soon as practicable, but no later than one year from the respective acquisition date.
 
 The following table summarizes the fair values of the assets acquired and liabilities assumed from the acquisition of Gufeng. Since the acquisition and the initial preliminary purchase price allocation, net adjustments of $10.0 million were made to the fair values of the assets acquired and liabilities assumed with a corresponding adjustment to goodwill. These adjustments are summarized in the table presented below.
 
 ($ in millions)Purchase Price

$
27.2Fair Value of Assets Acquired:Current assets


25.1Fixed assets


17.3Intangible assets


15.8Other assets


-Total Assets Acquired

$
58.2Fair Value of Liabilities Assumed:Current liabilities

$
15.9Deferred revenue


19.4Deferred tax liabilities, net


-Total Liabilities Assumed

$
35.3Goodwill (1)

$
4.3
 
 (1)   The goodwill of $4.3 million is non-deductible for tax purposes.
 
 14
  CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)
 The following table summarizes the preliminary fair value of amortizable and indefinite-lived intangible assets as of their respective acquisition dates:
 
 Gufeng at July 2, 2010($ in millions)

Fair Value


Estimated useful life

(in years)Amortizable intangible assets:Customer relationships

$
8.4



10Indefinite-lived intangibles:Trademarks

$
7.4Total intangible assets acquired

$
15.8
 
 Pro Forma Condensed Combined Financial Information
 
 The following unaudited pro forma condensed combined comparative financial information presents the results of operations of the Company as they may have appeared if the acquisition of Gufeng had been completed on July 1, 2009.
 
 For the ThreeMonths Ended


For the Nine($ in millions, except per share data)

March 31,

2010


Months Ended

March 31, 2010Net Sales

$
27.4


$
75.9Net Income

$
6.0


$
18.1Basic earnings per share

$
0.25


$
0.79Diluted earnings per share

$
0.25


$
0.79
 
 15
  CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)
 
 For the ThreeMonths Ended


For the Nine($ in millions, except per share data)

March 31,

2010


Months Ended

March 31, 2010Net Sales

$
30.5


$
79.1Net Income

$
6.4


$
18.5Basic earnings per share

$
0.26


$
0.80Diluted earnings per share

$
0.26


$
0.80
 
 Acquisition related expenses consist of integration related professional services, certain business combination adjustments after the measurement period or purchase price allocation period has ended, and certain other operating expenses, net.
 
 Pretax charges approximating $0.2 million were recorded for acquisition and integration related costs in the nine-month period ended March 31, 2011.  These charges were recorded as general and administrative expenses.  As the acquisition took place on July 2, 2010, the Company’s statement of income for the period ended March 31, 2011 included the operations of the Company and Gufeng.
 
 NOTE 4 – INVENTORIES
 
 Inventories consisted of the following as of March 31, 2011 and June 30, 2010:
 
 March 31,


June 30,2011


2010Raw materials

$
4,883,524


$
314,267Supplies and packing materials


845,839



113,146Work in progress


172,412



10,686,325Finished goods


22,814,843



148,909Total

$
28,716,618


$
11,262,647
 
 NOTE 5 – OTHER CURRENT ASSETS
 
 Other current assets consisted of the following as of March 31, 2011 and June, 30 2010:
 
 March 31,


June 30,2011


2010Advancement

$
1,203,245


$
41,875Promotional material


-



44,949Prepaid insurance


26,667



-Total

$
1,229,912


$
86,824
 
 Advancement represents advances made to non-related parties and employees. The amounts were unsecured, interest free, and due on demand.
 
 16
 CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)





NOTE 6 - PROPERTY, PLANT AND EQUIPMENT





Property, plant and equipment consisted of the following as of March 31, 2011 and June, 30, 2010:





March 31,


June 30,2011


2010Building and improvements

$
20,983,676


$
11,719,363Auto


1,346,126



117,295Machinery and equipment


37,290,921



21,628,525Agriculture assets


1,585,412



1,528,898Total property, plant and equipment


61,206,135



34,994,081Less: accumulated depreciation


(12,470,845)



(5,625,566
)Total

$
48,735,290


$
29,368,515





Depreciation expenses for the three months ended March 31, 2011 and 2010 were $1,097,773 and $558,750, respectively. Depreciation expenses for the nine months ended March 31, 2011 and 2010 were $2,813,573 and $1,545,413, respectively.





Agriculture assets consist of reproductive trees that are expected to be commercially productive for a period of eight years.





NOTE 7 – CONSTRUCTION IN PROGRESS





As of March 31, 2011 and June 30, 2010, construction in progress, representing construction for a new product line and other buildings amounted to $12,753,126and $257,077, respectively.




17


CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)


NOTE 8 - INTANGIBLE ASSETS





Intangible assets consist of the following as of March 31, 2011 and June 30, 2010:





March 31,


June 30,2011


2010Land use rights, net

$
11,999,757


$
11,495,058Technology patent, net


15,749



90,512Customer relationships, net


7,908,868



-Trademarks


7,524,361



-Total

$
27,448,735


$
11,585,570





LAND USE RIGHTS





On September 25, 2009, Yuxing was granted a land use right for approximately 88 acres (353,000 square meters or 3.8 million square feet) by the People’s Government and Land & Resources Bureau of Hu County, Xi’an, Shaanxi Province. The fair value of the related intangible asset was determined to be the respective cost of RMB 73,184,895 (or $11,102,149). The intangible asset is being amortized over the grant period of 50 years.





On August 13, 2003, Tianjuyuan was granted a certificate of Land Use Right for a parcel of land of approximately 11 acres (42,726 square meters or 459,898 square feet) at Ping Gu District, Beijing. The purchase cost was recorded at RMB 1,045,950 (or $158,670). The intangible asset is being amortized over the grant period of 50 years.





On August 16, 2001, Jinong received a land use right as a contribution from a shareholder, which was granted by the People’s Government and Land & Resources Bureau of Yanling District, Shaanxi Province. The fair value of the related intangible asset at the time of the contribution was determined to be RMB 7,285,099 (or $1,105,150). The intangible asset is being amortized over the grant period of 50 years.





The Land Use Rights consist of the following as of March 31, 2011 and June 30, 2010:




18


CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)


March 31,


June 30,2011


2010Land use rights

$
12,447,485


$
11,866,105Less: accumulated amortization


(447,728)
)


(371,047
)Total land use rights, net

$
11,999,757


$
11,495,058





TECHNOLOGY PATENT




On August 16, 2001, Jinong was issued a technology patent related to a proprietary formula used in the production of humid acid. The fair value of the related intangible asset was determined to be the respective cost of RMB 5,875,068 (or $891,248). The intangible asset is being amortized over the patent period of 10 years.





The technology know-how consisted of the following as of March 31, 2011 and June 30, 2010:





March 31,


June 30,2011


2010Technology know-how

$
897,123


$
866,338Less: accumulated amortization


(881,374)
)


(775,826
)Total technology know-how, net

$
15,749


$
90,512





CUSTOMER RELATIONSHIP





On July 2, 2010, the Company acquired Gufeng and its wholly-owned subsidiary Tianjuyuan. The preliminary fair value on the acquired customer relationships was estimated to be RMB 55,992,980 (or $8,494,135) and is amortized over the remaining useful life of ten years. See Note 3.





March 31,


June 30,2011


2010Customer relationships

$
8,550,128


$
-Less: accumulated amortization


(641,260)
)


-Total customer relationships, net

$
7,908,868


$
-




19


CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)


TRADEMARKS





On July 2, 2010, the Company acquired Gufeng and its wholly-owned subsidiary Tianjuyuan. The preliminary fair value on the acquired trademarks was estimated to be $7,475,086 and is subject to an annual impairment test. See Note 3.





Total amortization expenses of intangible assets for the three months ended March 31, 2011 and 2010 amounted to $305,054 and $54,701, respectively. Total amortization expenses of intangible assets for the nine months ended March 31, 2011 and 2010 amounted to $786,007 and $205,018, respectively.





AMORTIZATION EXPENSE





Estimated amortization expenses of intangible assets for the next five (5) twelve-month periods-ended March 31, 2011, are as follows:





March 31, 2012

$
1,011,548March 31, 2013


995,799March 31, 2014


995,799March 31, 2015


995,799March 31, 2016


995,799





NOTE 9 - AMOUNT DUE TO RELATED PARTIES





As of March 31, 2011 and June 30, 2010, the amount due to related parties was $69,554and $68,164, respectively.  These amounts represent unsecured, non-interest bearing loans that are due on demand.  These loans are not subject to written agreements.





NOTE 10 - ACCRUED EXPENSES AND OTHER PAYABLES





Accrued expenses and other payables consisted of the following as of March 31, 2011 and June 30, 2010:





March 31,


June 30,2011


2010Payroll payable

$
220,701


$
8,848Welfare payable


323,458



164,051Accrued expenses


1,567,553



334,806Other payables


5,841,219



-Other levy payable


118,489



--Total

$
8,071,421


$
507,705




20


CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)


NOTE 11 - LOAN PAYABLES





The short-term loans payable consist of four loans which mature on dates ranging from April 8, 2011 through February 1, 2012 with an interest rate of 7.26%. The loans are collateralized by the Company’s land use rights.





The interest expenses from these short-term loans were $152,318and $6,813 for three months ended March 31, 2011 and 2010, respectively. The interest expenses from these short-term loans were $417,236 and $112,457 for the nine months ended March 31, 2011 and 2010, respectively.





NOTE 12 - TAXES PAYABLE





Enterprise Income Tax





Effective January 1, 2008, the new Enterprise Income Tax (“EIT”) law of the PRC replaced the existing tax laws for Domestic Enterprises (“DEs”) and Foreign Invested Enterprises (“FIEs”). The new EIT rate of 25% replaced the 33% rate that was applicable to both DEs and FIEs. The two year tax exemption and three year 50% tax reduction tax holiday for production-oriented FIEs was eliminated. Since January 1, 2008, Jinong became subject to income tax in China at a rate of 15% as a high-tech company, as a result of the expiration of its tax exemption on December 31, 2007, and accordingly, it made provision for income taxes for the three months ended March 31, 2011 and 2010 of $1,186,257and $987,786, respectively, and $3,398,795and $2,640,584for the nine months ended March 31, 2011 and 2010, respectively, which is mainly due to the operating income from Jinong. Gufeng is subject to an EIT rate of  25% and thus it made provision for income taxes of $1,116,755and $2,233,381 for the three and nine months ended March 31, 2011, respectively. Jintai has been exempt from paying income tax since its formation as it produces products which fall into the tax exemption list set out in the EIT. This exemption is expected to last as long as the applicable provisions of the EIT do not change.





Value-Added Tax





All of the Company’s fertilizer products that are produced and sold in the PRC were subject to a Chinese Value-Added Tax (VAT) of 13% of the gross sales price. On April 29, 2008, the PRC State of Administration of Taxation (SAT) released Notice #56, Exemption of VAT for Organic Fertilizer Products, which allows certain fertilizer products to be exempt from VAT beginning June 1, 2008. The Company submitted the application for exemption in May 2009, which was granted effective September 1, 2009, continuing through December 31, 2015. The VAT exemption applies to all agricultural products sold by Jintai, and all but a nominal amount of agricultural products sold by Jinong.




21


CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)


Income Taxes and Related Payables





Taxes payable consisted of the following as of March 31, 2011 and June 30, 2010:





March  31,


June 30,2011


2010VAT provision (credit)

$
24,127


$
(24,655
)Income tax payable


7,694,457



2,020,253Other levies


333,270



308,784Total

$
8,051,854


$
2,304,382





Income Taxes in the Consolidated Statements of Operations and Comprehensive Income





The provision for income taxes for the nine months ended March 31, 2011 and 2010 consisted of the following:





March 31,


March 31,2011


2010Current Tax

$
5,840,623


$
2,640,584Deferred Tax


-



-Total

$
5,840,623


$
2,640,584





Tax Rate Reconciliation





Substantially all of the Company’s income before income taxes and related tax expense are from PRC sources. Actual income tax benefit reported in the consolidated statements of operations and comprehensive income differ from the amounts computed by applying the US statutory income tax rate of 34% to income before income taxes for the nine months ended March 31, 2011 and 2010 for the following reasons:




22


CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)


March 31, 2011





CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSMarch 31, 2011(Unaudited)
  China


United States15% - 25%



34%


TotalPretax income (loss)


34,573,848






(5,243,203
)





29,330,645Expected income tax expense (benefit)


8,643,462



25.0
%


(1,782,689
)


34.0
%


6,860,773High-tech income benefits on Jinong


(2,338,639
)


(6.8
) %


-



-



(2,338,639
)Income tax benefit of nontaxable income on Jintai


(603,406
)


(1.7
) %


-



-



(603,406
)Income tax benefit of nontaxable income on Yuxing


139,206



0.4
%


-



-



139,206Change in valuation allowance on deferred tax asset from US tax benefit


-







1,782,689



(34.0
) %


1,782,689Actual tax expense


5,840,623



16.9
%


-



-
%


19.9
%
  March 31, 2010China


United States15%- 25%



34%


TotalPretax income (loss)


19,643,016







(1,701,366
)






17,941,650Expected income tax expense (benefit)


4,910,754



25.0
%


(578,464
)


34.0
%


4,332,290High-tech income benefits on Jinong


(1,725,932
)


(8.8
) %










(1,725,932
)Income tax benefit of nontaxable income on Jintai


(562,470
)


(2.9
) %










(562,470
)Income tax benefit of nontaxable income on Yuxing


18,232



0.1
%










18,232Change in valuation allowance on deferred tax asset from US tax benefit










578,464



(34.0
) %Actual tax expense


2,640,584



13.4
%


-



-
%


14.7
%





NOTE 13 – STOCKHOLDERS’ EQUITY





Reclassification of Temporary Equity





On December 26, 2007 the Company issued 6,313,617 shares (the “Shares”) of common stock to 31 accredited investors (the “Investors”) at $3.25 per share in a private placement (the “Private Placement”). The Securities Purchase Agreement (“SPA”) set forth a contingency which gave the Investors the right to redeem the Shares in the event the Share Exchange was forced to be unwound as a result of any material adverse effect due to PRC governmental actions. As a result of the redemption feature, the Company recorded the Private Placement as temporary equity. In July 2009, the Investors and the Company entered into a Waiver and Consent pursuant to which the Investors consented to waive all their rights associated with the liquidated damages under Section 4.16 of the SPA. As a result, such temporary equity was no longer necessary for the purposes of the Company’s balance sheet as of June 30, 2010.




23


CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)


Common Stock





The Company issued 4,025,000 shares of common stock at a public offering price of $7.15 per share in an underwritten offering and received total gross proceeds of approximately $28.8 million on July 24, 2009. The shares were sold under the Company's previously filed shelf registration statement, which was declared effective by the Commission on June 12, 2009 (the “Shelf S-3”). The Company uses the net proceeds to expand its production facilities through the construction of new greenhouses at Yuxing.





The Company completed the sale of 1,282,052 shares of common stock at a public offering price of $15.60 per share on November 25, 2009 in a registered direct offering for gross proceeds of approximately $20 million. On December 16, 2009, the placement agent exercised rights to place up to 320,512 additional shares of common stock at a price of $15.60 per share, for additional gross proceeds of $4,999,987. The shares were sold under the Shelf S-3.





On January 3, 2010, the Company made a one-time grant of an aggregate of 120,000 shares of restricted common stock of the Company to certain members of management and officers under the 2009 Equity Incentive Plan of the Company. Pursuant to the terms of the grant, one-third of the shares vested on February 2, 2010, one-third of the shares vested on December 31, 2010 because the Company achieved certain financial performance targets for the fiscal year ended June 30, 2010 and the remaining one-third of the shares will vest on December 31, 2011 if certain financial performance targets are achieved for the fiscal year ending June 30, 2011. Additionally, the Company made a one-time grant of an aggregate of 22,961 shares of performance-based restricted common stock to certain officers, which vests in three equal installments on September 30, 2010, 2011 and 2012 because the Company achieved certain financial performance targets for the fiscal year ended June 30, 2010.





On February 10, 2010, the Company made a one-time grant of an aggregate of 50,700 shares of restricted common stock to a director and certain key employees under the 2009 Equity Incentive Plan. Pursuant to the terms of the grant, one-third of the shares vested on March 10, 2010, one-third of the shares vested on December 31, 2010 and the remaining one-third of the shares will vest on December 31, 2011 if certain financial targets are achieved. Additionally, the Company also granted to a director and certain key employees an aggregate of 70,500 shares of performance-based restricted common stock, which automatically vests in three equal installments on September 30, 2010, 2011 and 2012 because the Company achieved both net sales and income from operations targets for the fiscal year ended June 30, 2010.





On February 10, 2010, the Company issued a total of 8,000 shares of restricted common stock under its 2009 Equity Incentive Plan to a consultant pursuant to the terms of a service agreement, half of which was vested on August 9, 2010 and half of which was forfeited due to the disengagement of the service on September 15, 2010.





On July 2, 1010, the Company issued a total of 2,275,931 shares of common stock to Gufeng’s previous shareholders or their designees. Of the shares being issued in the acquisition, 40% are being  held in escrow pending satisfaction of certain conditions such as make good targets set for Gufeng for the fiscal year ended June 30, 2011. See Note 3.




24


CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)


On March 31, 2011, the Company issued a total of 356,000 shares of restricted common stock of the Company to certain members of management and officers under its 2009 Equity Incentive Plan. Pursuant to the terms of the grant, 8,000 shares of restricted common stock will be vested on April 30, 2011, 129,000 shares vest on June 2, 2011, 129,000 shares vest on December 31,2011 and 90,000 shares vest on December 31, 2012.





Preferred Stock





Under the Company’s articles of incorporation, the board of directors has the authority, without further action by stockholders, to designate up to 20,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges, qualifications and restrictions granted to or imposed upon the preferred stock, including dividend rights, conversion rights, voting rights, rights and terms of redemption, liquidation preference and sinking fund terms, any or all of which may be greater than the rights of the common stock.  If the Company sells preferred stock under its registration statement on Form S-3, it will fix the rights, preferences, privileges, qualifications and restrictions of the preferred stock of each series in the certificate of designation relating to that series and will file the certificate of designation that describes the terms of the series of preferred stock the Company offers before the issuance of the related series of preferred stock.





As of March 31, 2011, the Company had 20,000,000 shares of preferred stock authorized, with a par value of $.001 per share, of which no shares are outstanding.





NOTE 14 – STOCK OPTIONS





On August 17, 2009, some directors, officers and employees exercised options to purchase an aggregate of 84,500 shares of common stock in a cashless manner and received 61,239 shares of common stock as a result of the cashless exercise.





On January 3, 2010, the Company made a one-time grant of options to purchase an aggregate of 150,000 shares of common stock to certain officers and directors under the 2009 Equity Incentive Plan at an exercise price of $14.70 per share, the closing price of common stock on the previous trading day. Pursuant to the terms of the grant, one-third of the options vested on February 2, 2010, one-third of the options vested on December 31, 2010 because the Company achieved certain financial performance targets for the fiscal year ended June 30, 2010 and the remaining one-third of the options will vest on December 31, 2011 if certain financial performance targets are achieved for the fiscal year ending June 30, 2011.





On January 3, 2010, the Company also made a grant of performance-based options to purchase an aggregate of 45,291 shares of common stock to certain officers and directors under the 2009 Equity Incentive Plan at an exercise price of $14.70 per share, the closing price of the common stock on the previous trading day. Pursuant to the terms of the grant, the options automatically vest in three equal installments on September 30, 2010, 2011 and 2012 because the Company achieved certain financial performance targets for the fiscal year ended June 30, 2010.




25


CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)


On February 3, 2010, one independent director resigned and all his vested and unvested options were forfeited pursuant to his grant agreement with the Company.





On February 7, 2010, the Company appointed a new independent director and issued to him performance-based options to purchase 10,000 shares of common stock under the 2009 Equity Incentive Plan at an exercise price of $14.02 per share, the closing price of the common stock on the previous trading day. Pursuant to the terms of the grant, one-third of the options vested on March 8, 2010, one-third of the options will vested on December 31, 2010 because the Company achieved certain financial performance targets for the fiscal year ended June 30, 2010 and the remaining one-third of the options will vest on December 31, 2011 if certain financial performance targets are achieved for the fiscal year ending June 30, 2011.





On March 31, 2011, the Compensation Committee of the Board of Directors of the Company resolved to cancel all those outstanding unvested options to purchase an aggregate of 65,096 shares of common stock granted in February and March 2010  under the 2009 Equity Incentive Plan.








The Company’s calculations are made using the Black-Scholes option-pricing model with the following weighted average assumptions: expected life of 2 years; 75.2%-75.6% stock price volatility; risk-free interest rate of 1.63% and no dividends during the expected term. Stock compensation expense is recognized based on awards expected to vest. The forfeitures are estimated at the time of grant and revised in subsequent periods pursuant to actual forfeitures, if it is different from those estimates. During the three months ended March 31, 2011 and 2010, the Company recognized stock-based compensation expense of $1,031,449and $1,238,425, respectively. During the nine months ended March 31, 2011 and 2010, the Company recognized stock-based compensation expense of $2,573,785and $1,259,992, respectively.





Options outstanding as of March 31, 2011 and related weighted average price and intrinsic value are as follows:




26


CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)


WeightedAverageNumber


Exercise


Aggregateof Shares


Price


Intrinsic ValueOutstanding, June 30, 2009


121,500


$
4.49Granted


205,291


$
14.67Forfeited/Canceled


(22,000
)

$
9.95Exercised


(109,500
)

$
4.32Outstanding, June 30, 2010


195,291


$
14.67Granted


-



-Forfeited/Canceled


(80,192)


$
14.67Exercised


-Outstanding, March 31, 2010


115,099


$
14.66


$
-Exercisable. March 31, 2010


115,099


$
14.66


$
-Forfeited/Canceled


80,192



-



-





-





The following table summarizes the options outstanding as of March 31, 2011:





Options outstandingWeightedWeighted


AverageNumber


Average


RemainingRange of

Outstanding as of


Exercise


Contractual LifeExercise Price

March 31, 2011


Price


(Years)14.02-14.70


115,099



14.67



1.0





NOTE 15 – SIGNIFICANT RISKS AND UNCERTAINTIES INCLUDING BUSINESS AND CREDIT CONCENTRATIONS AND LITIGIATION





Market Concentration





All of the Company's revenue-generating operations are conducted in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC's economy.





The Company's operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among other things , the political, economic and legal environments and foreign currency exchange. The Company's results may be adversely affected by, among other things, changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation.





27


CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)


Vendor and Customer Concentration





There were two vendors from which the Company purchased more than 10% of its raw materials for the three months ended March 31, 2011, with each vendor individually accounting for about 14% and 10%, respectively. Accounts payable to these two vendors amounted to $509,882 and  as of March 31, 2011.




One vendor accounted for over 10% of the Company’s total purchases for the three months ended March 31, 2010. Accounts payable to this vender amounted to $104,812 as of March 31, 2010.





There was no customer that accounted for over 10% of the total sales for the three months ended March 31, 2011 and 2010.





Concentration of Cash





The Company maintains large sums of cash in three major banks in China. The aggregate balance in such accounts as of March 31, 2011 was $65,359,907. There is no insurance securing these deposits in China. In addition, the Company also had $1,579,603 in cash in two banks in the United States as of March 31, 2011, with $500,000 secured by the U.S. Federal Deposit Insurance Corporation.





Litigation





On October 15, 2010, a class action lawsuit was filed against the Company and certain of its current and former officers in the United States District Court for the District of Nevada on behalf of purchasers of the Company’s common stock between November 12, 2009 and September 1, 2010.  The complaint alleges that the Company and certain of its current and former officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, by making material misstatements and omissions in the Company's financial statements and related disclosure during the class period. The plaintiffs claim that such allegedly misleading financial statements inflated the price of the Company’s common stock and seek monetary damages in an amount to be determined at trial. On April 27, 2011, the court appointed the lead plaintiff and lead plaintiff's counsel.





On December 10, 2010, a complaint was filed by one of the Company shareholders, purportedly on the Company’s behalf, against certain of the Company’s officers and directors in the First Judicial District Court of the State of Nevada in and for Carson City. The complaint alleges, among other things, various violations of state law by such officers and directors, including breach of fiduciary duty, waste of corporate assets and unjust enrichment. The plaintiff requests among other remedies, restitution from such officers and directors and reform to the Company’s corporate governance and internal procedures.





On January 5, 2011, a complaint was filed by two of the Company’s shareholders, purportedly on the Company’s behalf, against certain of the Company’s officers and directors and other parties, in the United States District Court, District of Columbia. The complaint alleges, among other things, that such officers and directors breached their fiduciary duties by knowingly filing inaccurate and inconsistent financial statements and other filings with the Commission and by failing to correct such allegedly inaccurate financial disclosure. The plaintiffs request the court to, among other remedies, award the Company damages in the amount sustained by the defendants’ alleged breach of fiduciary duties and other violations of law, and award such other equitable relief to remedy the defendant’s breaches of fiduciary duties and other violations of law.




28




CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)


On January 12, 2011, two separate complaints were filed by different shareholders, derivatively on the Company’s behalf, against certain of the Company’s current and former officers and directors and against the Company, as nominal defendant, in the Eighth Juridical District Court, Clark County, Nevada. Each of the complaints allege, among other things, that the defendants breached their fiduciary duties by disseminating false and misleading information to shareholders via public filings and other communications, failing to maintain internal controls and procedures and failing to properly oversee and manage the company. Each of the complaints also allege unjust enrichment, abuse of control, gross mismanagement and waste of corporate assets by the defendants. Each of the plaintiffs requests the court to, among other remedies, award damages caused by the breach of defendants’ fiduciary duties, award the Company restitution from such officers and directors and cause the Company to put to a vote of the Company’s shareholders certain actions to reform the Company’s corporate governance and internal procedures.





The Company intends to vigorously defend each of these lawsuits.





NOTE 16 – SEGMENT REPORTING





The Company was organized into four main business segments: fertilizer production (Jinong), fertilizer production (Gufeng and Tianjuyuan), agricultural products production (Jintai) and research and development center that is currently under construction (Yuxing). The following tables present a summary of our businesses’ and operating segments’ results.








29


CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)





For the three months ended

March 31,Revenues from unaffiliated customers:

2011


2010Jinong

$
16,208,041


$
11,264,754Gufeng


26,127,821



-Jintai


2,317,422



2,177,523Yuxing


-



-Consolidated

$
44,653,284


$
13,442,277Operating income :Jinong

$
8,983,380


$
6,346,348Gufeng


4,319,589



-Jintai


1,007,390



972,571Yuxing


39,684



(10
)Reconciling item (1)


-



-Reconciling item (2)


(1,193,741
)


127,882Reconciling item (2)--stock compensation


(1,031,448
)


(1,238,425
)Consolidated

$
12,124,854


$
6,208,366Net income:Jinong

$
7,638,564


$
5,459,624Gufeng


3,011,116



-Jintai


1,007,361



972,620Yuxing


39,956



(9
)Reconciling item (1)


935



11,108Reconciling item (2)


(2,225,187
)


(1,110,544
)Consolidated

$
9,472,745


$
5,332,798Depreciation and Amortization:Jinong

$
763,187


$
576,384Gufeng


839,034



-Jintai


61



36,943Yuxing


1,225



123Consolidated

$
1,603,507


$
613,450Interest expense:Jinong

$
-


$
6,813Gufeng


154,292



-Consolidated

$
154,292


$
6,813Capital Expenditure:Jinong

$
2,760,908


$
1,141,930Gufeng


8,480,706



-Jintai


1,249,887



-Yuxing


7,817,189



492,673Consolidated

$
22159025


$
1,634,603Identifiable assets:Jinong

$
108,780,211


$
97,793,931Gufeng


83,744,301



-Jintai


16,057,776



11,431,367Yuxing


21,005,409



11,102,841Reconciling item (1)


1,585,420



3,637,316Reconciling item (2)


3,882,738



(568
)Consolidated

$
235,055,855


$
123,964,887


(1) Reconciling amounts refer to the unallocated assets or expenses of Green New Jersey.


(2) Reconciling amounts refer to the unallocated assets or expenses of the parent company.





30




CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)


For the nine months ended

March 31,Revenues from unaffiliated customers:

2011


2010Jinong

$
47,030,563


$
30,554,200Gufeng


66,804,752



-Jintai


5,612,628



5,337,013Yuxing


-



-Consolidated

$
119,447,943


$
35,891,213Operating income :Jinong

$
23,602,730


$
17,396,134Gufeng


8,953,287



-Jintai


2,413,641



2,249,711Yuxing


(100,128
)


(72,934
)Reconciling item (1)


-



-Reconciling item (2)


(2,672,980
)


(460,318
)Reconciling item (2)--stock compensation


(2,573,785
)


(1,259,992
)Consolidated

$
29,622,765


$
17,852,601Net income:Jinong

$
20,176,280


$
14,825,480Gufeng


6,241,900



-Jintai


2,413,621



2,249,880Yuxing


(98,576
)


(72,927
)Reconciling item (1)


3,562



18,943Reconciling item (2)


(5,246,765
)


(1,720,310
)Consolidated

$
23,490,022


$
15,301,066Depreciation and Amortization:Jinong

$
2,125,523


$
1,585,308Gufeng


1,470,275



-Jintai


179



93,644Yuxing


3,603



71,479Consolidated

$
3,599,580


$
1,750,431Interest expense:Jinong

$
-


$
112,457Gufeng


448,819



-Consolidated

$
448,819


$
112,457Capital Expenditure:Jinong

$
4,180,694


$
3,528,331Gufeng


9,017,534



-Jintai


1,249,887



-Yuxing


7,851,378



11,200,705Consolidated

$
22,299,493


$
14,729,036Identifiable assets:Jinong

$
108,780,211


$
97,793,931Gufeng


83,744,301



-Jintai


16,057,776



11,431,367Yuxing


21,005,409



11,102,841Reconciling item (1)


1,585,420



3,637,316Reconciling item (2)


3,882,738



(568
)Consolidated

$
235,055,855


$
123,964,887





(1) Reconciling amounts refer to the unallocated assets or expenses of Green New Jersey.


(2) Reconciling amounts refer to the unallocated assets or expenses of the parent company.




31




CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March 31, 2011
 (Unaudited)





NOTE 17 - COMMITMENTS AND LEASES





In July 2007, Jinong signed an office lease with the Group Company at a monthly rent of $954 (RMB 6,460) per month. On September 30, 2010, Jinong cancelled this lease agreement with the Group Company without penalty and signed a two year lease effective as of July 1, 2010 directly with Xi’an Kingtone Information Technology Co., Ltd. (“Kingtone Information”), who owns the property. Kingtone Information is a Variable Interest Entity (“VIE”) controlled by Kingtone Wirelessinfo Solution Holoding Ltd. (“Kingtone Wirelessinfo”), whose Chairman and majority shareholder is Mr. Tao Li, the Chairman, President and Chief Executive Officer of the Company. According to the new lease agreement, the monthly rent is $1,596 (RMB 10,800).





In January 2008, Jintai signed a ten year land lease with Xi’an Jinong Hi-tech Agriculture Demonstration Zone for a monthly rent of $768 (RMB 5,200).





In February 2004, Tianjuyuan signed a fifty year lease with the village committee of Dong Gao Village and Zhen Nan Zhang Dai Village in the Beijing Ping Gu District, at a monthly rent of $437 (RMB 2,958).





Accordingly, the Company recorded an aggregate of $8,656 and $5,123 as rent expenses for the three months ended March 31, 2011 and 2010, respectively. The Company recorded an aggregate of $25,600 and $20,491 as rent expenses for the nine months ended March 31, 2011 and 2010, respectively. Rent expenses for the next twelve month periods ended March 31, 2011 are as follows:





March 31, 2012

$
19,832March 31, 2013


14,900March 31, 2014


14,900March 31, 2015


14,900March 31, 2016


14,900





NOTE 18 – SUBSEQUENT EVENT





On April 12, 2011, the Company renewed a loan payable in the amount of $1,221,600 (RMB 8,000,000) that was due on April 8, 2011.  The loan payable has been extended to April 11, 2012




32


Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes to those financial statements appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as the slow-down of the global financial markets and its impact on economic growth in general, the competition in the fertilizer industry and the impact of such competition on pricing, revenues and margins, the weather conditions in the areas where our customers are based, the cost of attracting and retaining highly skilled personnel, the prospects for future acquisitions, and the factors set forth elsewhere in this report, our actual results may differ materially from those anticipated in these forward-looking statements. In light of this risks and uncertainties, there can be no assurance that the forward-looking statements contained in this report will in fact occur. You should not place undue reliance on the forward-looking statements contained in this report.
 
 The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by U.S. federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.  Further, the information about our intentions contained in this report is a statement of our intention as of the date of this report and is based upon, among other things, the existing regulatory environment, industry conditions, market conditions and prices and our assumptions as of such date.  We may change our intentions, at any time and without notice, based upon any changes in such factors, in our assumptions or otherwise.
 
 Unless the context indicates otherwise, as used in the following discussion, “Company”, “we,” “us,” and “our,” refer to (i) China Green Agriculture, Inc. (“Green Nevada”), a corporation incorporated in the State of Nevada; (ii) Green Agriculture Holding Corporation (“Green New Jersey”), a wholly-owned subsidiary of Green Nevada incorporated in the State of New Jersey; (iii) Shaanxi TechTeam Jinong Humic Acid Product Co., Ltd. (“Jinong”), a wholly-owned subsidiary of Green New Jersey organized under the laws of the PRC; (iv) Xi’an Jintai Agriculture Technology Development Company (“Jintai”), wholly-owned subsidiary of Jinong in the PRC, (v) Xi’an Hu County Yuxing Agriculture Technology Development Co., Ltd. (“Yuxing”), a wholly-owned subsidiary of Jinong in the PRC; (vi) Beijing Gufeng Chemical Products Co., Ltd., a wholly-owned subsidiary of Jinong in the PRC (“Gufeng”), and (vii) Beijing Tianjuyuan Fertilizer Co., Ltd., Gufeng’s wholly-owned subsidiary in the PRC (“Tianjuyuan”).
 
 Unless the context otherwise requires, all references to (i) “PRC” and “China” are to the People’s Republic of China; (ii) “U.S. dollar,” “$” and “US$” are to United States dollars; and (iii) “RMB”, “Yuan” and Renminbi are to the currency of the PRC or China.
 
 Overview
 
 We are engaged in the research, development, production and sale of various types of fertilizers and agricultural products in the PRC through our wholly-owned Chinese subsidiaries, Jinong, Jintai, Yuxing, Gufeng and Tianjuyuan. Our primary business is fertilizer products, specifically humic-acid based compound fertilizer produced by Jinong and compound fertilizer, blended fertilizer, organic compound fertilizer, slow-release fertilizers, highly-concentrated water-soluble fertilizers and mixed organic-inorganic compound fertilizer produced by Gufeng and Tianjuyuan. In addition, through Jintai and Yuxing, we develop and produce agricultural products, such as top-grade fruits, vegetables, flowers and colored seedlings. For financial reporting purposes, our operations are organized into four business segments: fertilizer products (Jinong), fertilizer products (Gufeng and Tianjuyuan), agricultural products (Jintai) and research and development (Yuxing).
 
 Jintai and Yuxing also serve as a research and development base for our fertilizer products. The fertilizer business conducted by Jinong and Gufeng, which we acquiredin July 2010, generated approximately 94.8% and 83.8% of our total revenues for the three months ended March 31, 2011 and 2010, respectively. In the nine months ended March 31, 2011 and 2010, the fertilizer business conducted by Jinong and Gufeng generated 95.3% and 85.1% of our total revenues, respectively.
 
 Fertilizer Products
 
 As of March 31, 2011, we had developed and produced a total of 459 different fertilizer products, of which 149 and 310 were developed and produced by Jinong and Gufeng, respectively. Of the 459 fertilizer products, 13 have been replaced by Jinong’s newer products. Each of these products can be made to order as required by our customers.
 
 For the three months ended March 31, 2011, we sold approximately 74,924 metric tons of fertilizer products, as compared to 5,369 metric tons for the three months ended March 31, 2010, which did not include sales of products by Gufeng. For the nine months ended March 31, 2011, we sold approximately 176,046 metric tons of fertilizer products, as compared to 12,749 metric tons for the same period in 2010, which did not include sales of products by Gufeng. For the three months ended March 31, 2011, Jinong sold approximately 11,549 metric tons of fertilizer products, as compared to 5,369 metric tons for the three months ended March 31, 2010. For the nine months ended March 31, 2011, Jinong sold approximately 33,784 metric tons of fertilizer products, as compared to 12,749 metric tons for the nine months ended March 31, 2010. Gufeng sold approximately 63,375 metric tons of fertilizer products for the three months ended March 31, 2011. For the nine months ended March 31, 2011, Gufeng sold approximately 176,046 metric tons of fertilizer products.
  33
  For the three months ended March 31, 2011, the top five provinces (or municipalities) for our total fertilizer sales accounted for 60.3% of our total fertilizer revenues. The five provinces (or municipalities) and their respective percentage contribution to total fertilizer revenues were Liaoning (16.0%), Hebei (14.7%), Jilin (12.6%), Beijing (9.0%) and Heilongjiang (7.9%). Jinong’s sales to the top five provinces accounted for approximately 38.7% of Jinong’s fertilizer revenue (or 14.9% of our total revenues). The five provinces and their respective percentage contribution to Jinong’s fertilizer revenues were Shaanxi (12.4%), Shandong (10.6%), Henan (5.7%), Anhui (5.1%) and Heilongjiang (5.0%). For the three months ended March 31, 2011, Gufeng’s sales of fertilizer products to the top five provinces accounted for approximately 87.9% of Gufeng’s fertilizer revenue (or 54.1% of our total revenues). The five provinces (or municipalities) and their respective percentage contribution to Gufeng’s fertilizer revenues were Liaoning (24.0%), Hebei (21.5%), Jilin (18.1%), Beijing (14.5%) and Heilongjiang (9.7%). For the three months ended March 31, 2011, Gufeng had no export revenues. Jinong exports its humic-acid based compound fertilizers to India. However, the revenues from Jinong’s export products currently account for less than 1% of our fertilizer revenues for the three months ended March 31, 2011.
 
 As of March 31, 2011, we had a total of 771 distributors covering 22 provinces, four autonomous regions and three central government-controlled municipalities in China. Jinong had 608 distributors in China. Jinong’s sales are not dependent on any one or group of distributors. Its top five distributors accounted for 2.8% of Jinong’s fertilizer revenues for the three months ended March 31, 2011. Gufeng had 163 distributors, including some large state-owned enterprises. Its top five distributors accounted for 31.2% of Gufeng’s revenues for the three months ended March 31, 2011.
 
 Agricultural Products
 
 Through Jintai, we develop, produce and sell high-quality flowers, green vegetables and fruits to local marketplaces and various horticulture and planting companies. We also use certain of Jintai’s and Yuxing’s greenhouse facilities to conduct research and development activities for our fertilizer products. The three PRC provinces that accounted for all of our agricultural products revenue for the three months ended March 31, 2011 were Shaanxi (89.2%), Sichuan (10.1%) and Shanxi (0.7%).
 
 Recent Developments
 
 New Products
 
 During the three months ended March 31, 2011, Jinong launched two new humic-acid based liquid and powder fertilizer products. Jinong’s new products generated approximately $174,394, or 1.1% of Jinong’s fertilizer revenues for the three months ended March 31, 2011. Jinong also added ten new distributors during the three months ended March 31, 2011. Jinong’s new distributors accounted for approximately $147,797, or 0.9% of Jinong’s fertilizer revenues for the three months ended March 31, 2011.
 
 For the three months ended March 31, 2011, China experienced a drought that threatened to reduce wheat production. To aid in drought relief, Jinong promoted its anti-drought humic acid liquid fertilizers: (i) Jin Mai Sui, Jinong Guang Pu, Yingyang Dongli, Chongwang Chongshifei and Jinong Jing Dian, previously existing anti-drought products, and (ii) Mai Feng, a new anti-drought product developed in February this year. For the three months ended March 31, 2011, Jinong sold 1,910 metric tons of anti-drought fertilizer products, and increase of 115.1% compared to the same period a year ago.
 
 During the three months ended March 31, 2011, Gufeng launched new products, including four sulfur-based organic-inorganic compound fertilizers, one chloride-based blend fertilizer and one sulfur-based compound fertilizer. These new products generated approximately $2,721,624, or 10.6% of Gufeng’s fertilizer revenues for the three months ended March 31, 2011. Gufeng also added six new distributors during the three months ended March 31, 2011, which accounted for approximately $327,573, or 1.3% of Gufeng’s fertilizer revenues.
 
 Strategic Alliance Agreement with the China Humic Acid Industry Association
  As disclosed in a press release dated March 2, 2011, on February 27, 2011, we signed a Strategic Alliance Agreement (the "Agreement") with the China Humic Acid Industry Association ("CHAIA" or the "Association"), pursuant to which we will work extensively with the Association in the design of the Humic Acid-based Granular Compound Fertilizer Protocol (the "Protocol") and in establishing the National Engineering Research Center of Humic Acid-based Fertilizers of China (the "Engineering Center"). CHAIA is a nationwide non-profit organization sponsored by the Chinese government that functions as the humic acid industry's self-regulatory body. With dozens of corporate members, the Association aims to regulate and thus improve the humic acid market in China. By the end of 2011, the Association plans to release the Protocol, which will for the Chinese market. be the first ever in the Chinese fertilizer industry to standardize the ingredients and the formulas used in fertilizer products, thus establishing the product quality of humic acid-based granular fertilizers. The Protocol is largely expected to regulate the production and distribution of humic acid granular fertilizers among manufacturers and hopefully eliminate misuse of the humic acid label. We are also currently working with the Association to advocate approval for the Engineering Center by the PRC central government. The mandate of the Engineering Center would mainly include conducting humic acid-related research, discovering new uses for humic acid in the fertilizer industry and experimenting and developing new humic acid-based fertilizer products for various farming uses.
  34
  Ten-Year Growth Plan
  As disclosed in a press release dated March 2, 2011, on February 28, 2011, our Board of Directors approved our ten-year corporate growth plan (the "Growth Plan") for the period from 2011 to 2020. The Growth Plan underpins our goal of becoming a leader in the overall fertilizer industry in China by 2020.  It is the result of one year of intensive research and analysis covering market research, peer analysis, government information and projections, and evolved over many internal review meetings involving all managers responsible for key parts of our business.
  After careful review, our management and Board of Directors concluded that we should work towards the following revenue targets over the next ten years:
  ·
at least $150 million for fiscal year 2011;
  ·
at least $750 million for fiscal year 2015; and
  ·
at least $3 billion for fiscal year 2020.
  The Growth Plan lays out several strategies and business objectives in order for us to achieve the aforementioned revenue goals.  Our management is expected to implement the following strategies; however, our Board of Directors reserves the right to revise such strategies at any time based on changing circumstances:
  ·
Establish the Engineering Center;
  ·
Participate in the design of the Protocol;
  ·
Expand market share by broadening our geographic distribution network and increasing brand awareness;
  ·
Reduce future manufacturing costs by securing raw material supplies; and
  ·
Further utilize our research and development platform.
 
 Results of Operations
 
 Three Months Ended March 31, 2011 Compared to the Three Months Ended March 31, 2010.
 
 The following table shows our operating results on a consolidated basis for the three months ended March 31, 2011 and 2010. It should be noted that our consolidated results for the 2010 period do not include the results of Gufeng and its subsidiary, Tianjuyuan, which were acquired on July 2, 2010.
  35
  Three months ended March 31,2011


2010


Change


% changeNet Sales

$
44,653,284


$
13,442,277


$
31,211,007



232.2
%Jinong


16,208,041



11,264,754



4,943,287



43.9
%Gufeng


26,127,821



n/a



26,127,821



100.0
%Jintai


2,317,422



2,177,523



139,899



6.4
%Cost of Goods Sold


27,613,775



5,331,717



22,282,058



417.9
%Jinong


6,060,998



4,206,699



1,854,299



44.1
%Gufeng


20,300,721



n/a



20,300,721



100.0
%Jintai


1,252,056



1,125,017



127,039



11.3
%Gross Profit


17,039,509



8,110,560



8,928,949



110.1
%Selling Expenses


1,662,851



566,966



1,095,885



193.3
%General and Administrative Expenses


3,251,804



1,335,229



1,916,575



143.5
%Income from Operations


12,124,854



6,208,366



5,916,488



95.3
%Total Other Income (expense)


(140,650
)


112,218



(252,868
)


(2.3
)Income Before Income Taxes


11,984,204



6,320,584



5,663,620



89.6
%Provision for Income Taxes


2,511,459



987,786



1,523,673



154.3
%Net Income


9,472,745



5,332,798



4,139,947



77.6
%Jinong


7,638,564



5,459,624



2,178,940



39.9
%Gufeng


3,011,116



n/a



3,011,116



100.0
%Jintai


1,007,361



972,620



34,741



3.6
%Net Income Per Share (Basic)


0.37



0.22



0.15



66.0
%Basic Weighted Average Shares Outstanding


25,936,713



24,418,325



1,518,388



6.2
%Diluted Weighted Average Shares Outstanding


26,729,495



24,425,325



2,304,170



9.4
%
 
 Net Sales
 
 Our net sales for the three months ended March 31, 2011 were $44,653,284, an increase of $31,211,007, or232.2%, from $13,442,277 for the three months ended March 31, 2010. This increase was largely due to the inclusion of Gufeng’s net sales, which contributed $26,127,821, or58.5%, of our total net sales. Our total net sales without including Gufeng’s net sales for the three months ended March 31, 2011 were $18,525,463, an increase of $5,083,186, or37.8%, from the same period a year ago.
 
 For the three months ended March 31, 2011, Jinong’s net sales increased $4,943,287, or43.9%, to $16,208,041from $11,264,754 for the three months ended March 31, 2010. This increase was mainly attributable to stronger sales of Jinong’s main stream products including both existing and new liquid fertilizers, powder fertilizers, and particularly, the lower-margin granular fertilizers released after our 40,000 metric-ton production line began production in August 2009.
 
 Jintai’s net sales, which include sales of agricultural products, increased by $139,899, or6.4%, to $2,317,422for the three months ended March 31, 2011 from $2,177,523 for the same period in 2010. As its greenhouse facility reached its full capacity in fiscal 2010, we do not expect any further significant sales growth of agriculture products from Jintai in the near future.
 
 Our Yuxing segment had no revenues during the period ended March 31, 2011. However, since we completed 100 sunlight greenhouses at Yuxing, we expect that sales revenues from agriculture products will increase when Yuxing begins to produce agriculture products later this fiscal year.
 
 Cost of Goods Sold
 
 Total cost of goods sold for the three months ended March 31, 2011 were $27,613,775, an increase of $ 22,282,059, or417.9%, from $5,331,717 for the three months ended March 31, 2010. This increase was mainly due to the costs attributable to the production and sale of Gufeng’s products, which accounted for73.5%of total cost of goods sold. The total cost of goods sold without including Gufeng’s cost of goods sold for the three months ended March 31, 2011 was $7,313,054, an increase of $1,981,338, or37.2%, from $5,331,716for the same period a year ago.
  36
  Cost of goods sold by Jinong for the three months ended March 31, 2011 were $6,060,998, an increase of $1,854,299, or44.1%, from $4,206,699 for the same period in 2010. As a percentage of total net sales, cost of goods sold by Jinong accounted for approximately13.6%and 31.3% for the three months ended March 31, 2011 and 2010, respectively. The increase in cost of goods sold was primarily attributable to the increase in sales of lower-margin granular fertilizers and the increase in raw materials and packaging materials used as a result of our newly introduced powder and liquid fertilizer products.
 
 Cost of goods sold by Gufeng for the three months ended March 31, 2011 were $20,300,721, which accounted for73.5%of cost of goods sold.
 
 Cost of goods sold by Jintai for the three months ended March 31, 2011 were $1,252,056, an increase of $127,039, or11.3%, from $1,125,017 for the same period in 2010. The increase in cost of goods sold was primarily attributable to the increase in Jintai’s net sales. As a percentage of total net sales, cost of goods sold by Jintai accounted for approximately2.8%and 8.4% for the three months ended March 31, 2011 and 2010, respectively. As a result of our acquisition of Gufeng, Jintai’s relative percentage of our total revenue and cost of goods sold was significantly reduced.
 
 Gross Profit
 
 Gross profit for the three months ended March 31, 2011 increased by $8,928,948, or110.1%, to $17,039,509, as compared to $8,110,560 for the three months ended March 31, 2010. Gross profit margin was approximately38.2%and 60.3% for the three months ended March 31, 2011 and 2010, respectively. The decrease in gross profit margin was primarily due to the recent acquisition of Gufeng, which mainly sells low-margin granular fertilizer products. The gross profit without including Gufeng’s gross profit was $11,212,409with a gross profit margin of60.5%.
 
 Gross profit generated by Jinong increased by $3,088,988, or43.8%, to $10,147,043for the three months ended March 31, 2011 from $7,058,055 for the three months ended March 31, 2010. Gross profit margin from Jinong’s sales was approximately62.6%and 62.7% for the three months ended March 31, 2011 and 2010, respectively.. While we have experienced fast growth in our higher-margin liquid fertilizer products, we have recently penetrated the granular and powder fertilizer market with a view toward maximizing our marketing efforts, despite the relative lower-profit margins on granular fertilizer.
 
 Gross profit generated by Gufeng was $5,827,100with a gross profit margin of approximately22.3%for the three months ended March 31, 2011.
 
 Gross profit from Jintai increased by $12,860, or1.2%, for the three months ended March 31, 2011, to $1,065,366, as compared to $1,052,506 for the three months ended March 31, 2010. Gross profit margin from Jintai sales was approximately46.0%and 48.3% for the three months ended March 31, 2011 and 2010, respectively.
 
 Selling Expenses
 
 Our selling expenses consist primarily of salaries of sales personnel, advertising and promotion expenses, freight-out costs and related compensation. Selling expenses were $1,662,851, or3.7%of net sales, for the three months ended March 31, 2011 as compared to $566,966, or 4.2% of net sales, for the three months ended March 31, 2010, an increase of $1,095,885, or193.3%. This increase was primarily due to the inclusion of Gufeng’s selling expenses for the 2011 period. The selling expenses of Gufeng were $641,928, or 2.5% of Gufeng’s net sales. The selling expenses of Jinong for the three months ended March 31, 2011 were $1,015,525, or 6.3% of Jinong’s net sales, compared to selling expenses of $ 560,333, or 5.0% of Jinong’s net sales in the same period a year ago. Most of this increase was due to Jinong’s expanded marketing efforts and the increase in shipping costs.
 
 General and Administrative Expenses
 
 General and administrative expenses consisted primarily of related salaries, rental expenses, business development, depreciation and travel expenses incurred by our general and administrative departments and legal and professional expenses. General and administrative expenses were $3,251,804, or7.3%of net sales, for the three months ended March 31, 2011, as compared to $1,335,229, or 9.9% of net sales, for the three months ended March 31, 2010, an increase of $1,916,575. This increase was primarily the result of the inclusion of Gufeng’s general and administrative expenses and additional legal and investor relations fees incurred in connection with certain pending litigations. The general and administrative expenses of Gufeng were $865,583. In addition, the non-cash stock compensation expense was $1,031,449for the three months ended March 31, 2011, compared to $1,238,425 for the same period a year ago.
 
 Total Other Income (Expenses)
 
 Total other income (expenses) consisted of income from subsidies received from the PRC government, interest income, interest expenses and bank charges. Total other expense for the three months ended March 31, 2011 was $140,650, as compared to total other income of $112,218 for the three months ended March 31, 2010, an increase in expense of $252,868, or225.3%. The increase in expense was mainly attributable to the $154,292 interest expense from Gufeng’s outstanding short-term loans.
  37
  Income Taxes
 
 Jinong is subject to a preferred tax rate of 15% as a result of its business being classified as a “High-Tech” project under the PRC Enterprise Income Tax Law (“EIT”) that became effective on January 1, 2008. Jinong incurred income tax expenses of $1,394,704for the three months ended March 31, 2011, as compared to $987,786 for the same period in 2010, an increase of$ 406,918, or 41.2%,which was primarily attributable to Jinong’s increased operating income.
 
 Gufeng, subject to a tax rate of 25%, incurred income tax expenses of $1,116,755for the three months ended March 31, 2011.
 
 Jintai has been exempt from paying income tax since its formation as it produces products which fall into the tax exemption list set out in the EIT. This exemption is expected to last as long as the applicable provisions of the EIT do not change.
 
 Net Income
 
 Net income for the three months ended March 31, 2011 was $9,472,745, an increase of $4,139,947, or 77.6%, as compared to $5,332,798 for the three months ended March 31, 2010. The increase was attributable to the addition of Gufeng’s net income and to the increase in gross profit. Net income as a percentage of total net sales was approximately 21.2% and 39.7% for the three months ended March 31, 2011 and 2010, respectively. Net income generated by Jinong increased by $2,178,941, or39.9%, to $7,638,565for the three months ended March 31, 2011 from $5,459,624for the three months ended March 31, 2010. The increase in Jinong’s net income was primarily due to the strong sales of Jinong’s fertilizer products during this period and also to the increase in the gross profit. Net income generated by Gufeng was $3,011,116 for the three months ended March 31, 2011. Net income generated by Jintai increased by $34,742, or3.6%, to $1,007,362 for the three months ended March 31, 2011 from $972,620for the three months ended March 31, 2010.
 
 Nine Months Ended March 31, 2011 Compared to the Nine Months Ended March 31, 2010.
 
 The following table shows the operating results of the Company on a consolidated basis for the nine months ended March 31, 2011 and 2010. It should be noted that our consolidated results for the 2010 period do not include the results of Gufeng and its subsidiary, Tianjuyuan, which were acquired on July 2, 2010.
 
 38
  2011


2010


Change


% changeNet Sales

$
119,447,943



35,891,213


$
83,556,730



232.8
%Jinong


47,030,563



30,554,200



16,476,363



53.9
%Gufeng


66,804,752



n/a



66,804,752



100.0
%Jintai


5,612,628



5,337,013



275,615



5.2
%Cost of Goods Sold


76,936,281



14,051,921



62,884,360



447.5
%Jinong


19,705,968



11,209,185



8,496,783



75.8
%Gufeng


54,199,998



n/a



54,199,998



100.0
%Jintai


3,030,315



2,842,736



187,579



6.6
%Gross Profit


42,511,662



21,839,292



20,672,370



94.7
%Selling Expenses


4,667,842



1,302,733



3,365,109



258.3
%General and Administrative Expenses


8,221,055



2,683,959



5,537,096



206.3
%Income from Operations


29,622,765



17,852,601



11,770,164



65.9
%Total Other Income (expense)


(292,120
)


89,049



(381,169
)


(4.3
)Income Before Income Taxes


29,330,645



17,941,649



11,388,996



63.5
%Provision for Income Taxes


5,840,623



2,640,584



3,200,039



121.2
%Net Income


23,490,022



15,301,066



8,188,956



53.5
%Jinong


20,176,280



14,825,480



5,350,800



36.1
%Gufeng


6,241,900



n/a



6,241,900



100.0
%Jintai


2,413,621



2,249,880



163,741



7.3
%Net Income Per Share (Basic)


0.91



0.66



0.25



37.2
%Basic Weighted Average Shares Outstanding


25,932,497



23,098,783



2,833,714



12.3
%Diluted Weighted Average Shares Outstanding


26,345,583



23,105,783



3,239,800



14.0
%
 
 Net Sales
 
 Total net sales for the nine months ended March 31, 2011 were $119,447,943, an increase of $83,556,730, or232.8%, from $35,891,213 for the nine months ended March 31, 2010. This increase was largely due to the inclusion of Gufeng’s net sales, which contributed $66,804,752, or55.9%, of our total net sales. Our total net sales without including Gufeng’s net sales for the nine months ended March 31, 2011 were $52,643,191,an increase of $16,751,978, or 46.7%, from the same period a year ago.
 
 For the nine months ended March 31, 2011, Jinong’s net sales increased $16,476,363, or 53.9%, to $47,030,563from $30,554,200 from the nine months ended March 31, 2010. This increase was mainly attributable to greater sales of new products including our liquid fertilizers, powder fertilizers, and particularly, the lower-margin granular fertilizers released since our 40,000 metric-ton production line began production in August 2009.
 
 Jintai’s net sales increased by $275,615, or 5.2%, to $5,612,628for the nine months ended March 31, 2011 from $5,337,013 for the same period in 2010.
 
 Our Yuxing segment had no revenues during the period ended March 31, 2011. However, since we completed 100 sunlight greenhouses at Yuxing, we expect that sales revenues from agriculture products will increase when Yuxing begins to produce agriculture products later this fiscal year.
 
 Cost of Goods Sold
 
 Total cost of goods sold for the nine months ended March 31, 2011 were $76,936,281, an increase of $62,884,361, or447.5%, from $14,051,921 for the nine months ended March 31, 2010. This increase was mainly due to the costs attributable to the production and sale of Gufeng’s products, which accounted for70.4%of our cost of goods sold. The total cost of goods sold without including Gufeng’s cost of goods sold for the nine months ended March 31, 2011 was $22,736,283.
 
 Cost of goods sold by Jinong for the nine months ended March 31, 2011 were $19,705,968, an increase of $8,496,783, or75.8%, from $11,209,185 for the same period in 2010. As a percentage of total net sales, cost of goods sold by Jinong accounted for approximately16.5%and 31.2% for the nine months ended March 31, 2011 and 2010, respectively. The increase in cost of goods sold was attributable to the increase in sales of lower-margin granular fertilizers and the increase in raw materials and packaging materials used as a result of our newly introduced powder and liquid fertilizer products.
  39
  Cost of goods sold by Gufeng for the nine months ended March 31, 2011 were $54,199,998which accounted for70.4%of total cost of goods sold.
 
 Cost of goods sold by Jintai for the nine months ended March 31, 2011 were $3,030,315, an increase of $187,580, or6.6%, from $2,842,736 for the same period in 2010. The increase in cost of goods sold was primarily attributable to the increase in Jintai’s net sales. As a result of our acquisition of Gufeng, Jintai’s relative percentage of our total revenue and cost of goods sold was significantly reduced.
 
 Gross Profit
 
 Total gross profit for the nine months ended March 31, 2011 increased by $20,672,369, or94.7%, to $42,511,662, as compared to $21,839,292 for the nine months ended March 31, 2010. Gross profit margin was approximately 35.6% and 60.8% for the nine months ended March 31, 2011 and 2010, respectively. The decrease in gross profit margin was primarily due to the recent acquisition of Gufeng, which mainly sells low-margin granular fertilizer products. The gross profit without including Gufeng’s gross profit was $29,906,908 with a gross profit margin of 56.8%.
 
 Gross profit generated by Jinong increased by $7,979,580, or41.2%, to $27,324,595 for the nine months ended March 31, 2011 from $19,345,014 for the nine months ended March 31, 2010. Gross profit margin from Jinong’s sales was approximately 58.1% and 63.3% for the nine months ended March 31, 2011 and 2010, respectively. The main reason for the decrease in Jinong’s gross profit margin was the change in product mix for the three months ended March 31, 2011 compared with a year ago. In addition, the increase of raw materials also contributed to the lower margin than before.
 
 Gross profit generated by Gufeng was $12,604,754with a gross profit margin of approximately18.9%for the nine months ended March 31, 2011.
 
 Gross profit from Jintai increased by $88,036, or 3.5%, for the nine months ended March 31, 2011, to $2,582,313, as compared to $2,494,277 for the nine months ended March 31, 2010. Gross profit margin from Jintai sales was approximately 46.0% and 46.7% for the nine months ended March 31, 2011 and 2010, respectively.
 
 Selling Expenses
 
 Our selling expenses consist primarily of salaries of sales personnel, advertising and promotion expenses, freight-out costs and related compensation. Selling expenses were $4,667,842, or 3.9%, of net sales for the nine months ended March 31, 2011 as compared to $1,302,733 or 3.6%, of net sales for the nine months ended March 31, 2010, an increase of $3,365,109, or258.3%. This increase was primarily due to the inclusion of Gufeng’s selling expenses for the fiscal year 2011. The selling expenses of Gufeng were $ 1,749,404, or 2.6%, of Gufeng’s net sales. The selling expenses of Jinong for the nine months ended March 31, 2011 were $2,900,345, or 6.2%, of Jinong’s net sales, compared to selling expenses of $1,282,746,or 4.2% of Jinong’s net sales in the same period a year ago. Most of this increase was due to Jinong’s expanded marketing efforts and the increase in shipping costs.
 
 General and Administrative Expenses
 
 General and administrative expenses consisted primarily of related salaries, rental expenses, business development, depreciation and travel expenses incurred by our general and administrative departments and legal and professional expenses including expenses incurred and accrued due to pending litigations. General and administrative expenses were $8,221,055, or 6.9%, of net sales, for the nine months ended March 31, 2011, as compared to $2,683,959, or 7.5%, of net sales, for the nine months ended March 31, 2010, an increase of $5,537,096. This increase was primarily the result of the inclusion of Gufeng’s general and administrative expenses and additional legal and investor relations fees incurred in connection with certain pending litigations. The general and administrative expenses of Gufeng were $1,902,063for the nine months ended March 31, 2011. In addition, the non-cash stock compensation expense was $2,573,785for the nine months ended March 31, 2011, compared to $1,259,992 for the same period a year ago.
 
 Total Other Income (Expenses)
 
 Total other income (expenses) consisted of income from subsidies received from the PRC government, interest income, interest expenses and bank charges. Total other expenses for the nine months ended March 31, 2011 was $292,120, as compared to total other income of $89,049 for the nine months ended March 31, 2010, an increase in expense of $381,169, or428.0%. The increase was mainly attributable to the $448,819 interest expense from Gufeng’s outstanding short-term loans.
  40
  Income Taxes
 
 Jinong incurred income tax expenses of $3,607,242 for the nine months ended March 31, 2011, as compared to $2,640,584 for the same period in 2010, an increase of $966,658, or36.6%, which was primarily attributable to Jinong’s increased operating income.
 
 Gufeng, subject to a tax rate of 25%, incurred income tax expenses of $2,233,381 for the nine months ended March 31, 2011.
 
 As set forth above in the three-month period comparisons, Jintai currently is exempted under PRC regulations from paying income tax.
 
 Net Income
 
 Net income for the nine months ended March 31, 2011 was $23,490,022, an increase of $8,188,956, or53.5%, compared to $15,301,066 for the nine months ended March 31, 2010. The increase was attributable to the increase in gross profit. Net income as a percentage of total net sales was approximately 19.7% and 42.6% for the nine months ended March 31, 2011 and 2010, respectively. Net income generated by Jinong increased by $5,350,802, or36.1%, to $20,176,281for the nine months ended March 31, 2011 from $14,825,479 for the nine months ended March 31, 2010. The increase in Jinong’s net income was primarily due to the strong sales of Jinong’s fertilizer products during this period and also to the increase in Jinong’s gross profit. Net income generated by Gufeng was $6,241,900 for the nine months ended March 31, 2011. Net income generated by Jitai increased by $163,742, or7.3%, to $2,413,622for the nine months ended March 31, 2011 from $2,249,880for the nine months ended March 31, 2010.
 
 Discussion of Segment Profitability Measures
 
 As of March 31, 2011, we were engaged in the following businesses: the production and sale of fertilizers through Jinong, Gufeng and Tianjuyuan, and the production and sale of high-quality agricultural products and research and development on new fertilizer products by Jintai. Upon the completion of its research and development center, Yuxing’s main business will be to conduct research and development on new fertilizer products and sell high-quality agricultural products. For financial reporting purposes, our operations were organized into four business segments: fertilizer products (Jinong), fertilizer products (Gufeng and Tianjuyuan), agricultural products (Jintai) and research and development (Yuxing). Each of the segments has its own annual budget with regard to development, production and sales.
 
 Liquidity and Capital Resources
 
 Our principal sources of liquidity include cash from operations, borrowings from local commercial banks and net proceeds of offerings of our securities consummated in July 2009 and November/December 2009 (collectively the “Public Offerings”).
 
 As of March 31, 2011, cash and cash equivalents were $66,939,510, an increase of $4,604,073, or 7.4%, from $62,335,437 as of June 30, 2010.
 
 We intend to use some remaining net proceeds from the Public Offerings (approximately $8.5 million), as well as other working capital if required, to acquire new businesses, upgrade production lines and complete Yuxing’s new greenhouse facilities for agriculture products located on 88 acres of land in Hu County, 18 kilometers southeast of Xi’an city. We believe that we have sufficient cash on hand and positive projected cash flow from operations to support our business growth for the next twelve months to the extent we do not have further significant acquisitions or expansions. However, if events or circumstances occur and we do not meet our operating plan as expected, we may be required to seek additional capital and/or to reduce certain discretionary spending, which could have a material adverse effect on our ability to achieve our business objectives.  Notwithstanding the foregoing, we may seek additional financing as necessary for expansion purposes and when we believe market conditions are most advantageous, which may include additional debt and/or equity financings. There can be no assurance that any additional financing will be available on acceptable terms, if at all. Any equity financing may result in dilution to existing stockholders and any debt financing may include restrictive covenants.
  41
  The following table sets forth a summary of our cash flows for the periods indicated:
  Nine months ended March 31,2011


2010Net cash provided by operating activities

$
24,498,496


$
7,381,891Net cash used in investing activities


(24,149,828)



(14,729,037
)Net cash provided by financing activities


2,253,000



47,735,555Effect of exchange rate change on cash and cash equivalents


2,002,405



49,455Net increase in cash and cash equivalents


4,604,073



40,437,864Cash and cash equivalents, beginning balance


62,335,437



17,795,447Cash and cash equivalents, ending balance


66,939,510



58,233,311
 
 Operating Activities
 
 Net cash provided by operating activities was $24,498,496for the nine months ended March 31, 2011, an increase of $17,116,605, or 231.9%, from the $7,381,891 net cash provided by operating activities for the same period in 2010. The increase was mainly due to an increase in the advancement to suppliers from Gufeng.
 
 Investing Activities
 
 Net cash used in investing activities in the nine months ended March 31, 2011 was $24,149,828, which was mainly used to acquire Gufeng. The net cash used in investing activities for the same period in 2010 was $14,729,037, most of which was used to purchase the land use right for Yuxing’s new greenhouse facility.
 
 Financing Activities
 
 Net cash provided by financing activities in the nine months ended March 31, 2011 totaled $2,253,000, mainly due to the short-term loans borrowed by Gufeng from its local banks. The net cash provided by financing activities for the same period in 2010 was $47,735,555, mainly due to the Public Offerings.
 
 At March 31, 2011 and June 30, 2010, our loans payable were as follows:
 
 March 31, 2011


June 30, 2010*Short term loans payable:

$
6,337,050


$
-Total

$
6,337,050


$
-
 ___________
 *Excludes Gufeng, which was acquired in July 2010.
 
 None of our officers or shareholders has made commitments to us for financing in the form of advances, loans or credit lines.
 
 Accounts Receivable
 
 We had accounts receivable of $25,349,120as of March 31, 2011, as compared to $15,571,888 as of June 30, 2010, an increase of $9,777,232, or 62.8%. The increase was primarily due to the acquisition of Gufeng and the increase in fertilizer sales in fiscal year 2011 since the acquisition.
 
 Our allowance for doubtful accounts was $233,339 as of March 31, 2011, as compared to $193,403 as of June 30, 2010, an increase of $39,936, or 20.6%.
 
 Inventories
 
 We had an inventory of $28,716,618as of March 31, 2011, as compared to $11,262,647 as of June 30, 2010, an increase of $17,453,971, or155.0%. This increase was mainly due to the acquisition of Gufeng, which had an inventory of$12,279,412as of March 31, 2011. Inventories in other subsidiaries were $16,437,206 as of March 31, 2011.
 
 Accounts Payable
 
 We had accounts payable of $9,656,661as of March 31, 2011 as compared to $328,124 as of June 30, 2010, representing an increase of $9,328,537,or2,843.0%, of which $7,630,409 was attributable to Gufeng. Neither Jintai nor Yuxing had any accounts payable as of March 31, 2011.
  42
 
 Off-Balance Sheet Arrangements
 
 We do not have any off-balance sheet arrangements.
 
 Critical Accounting Policies and Estimates
 
 Management’s discussion and analysis of its financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. Our financial statements reflect the selection and application of accounting policies which require management to make significant estimates and judgments. See Note 2 to our consolidated financial statements, “Basis of Presentation and Summary of Significant Accounting Policies.” We believe that the following paragraphs reflect the more critical accounting policies that currently affect our financial condition and results of operations:
 
 Use of estimates
 
 The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those estimates.
 
 Revenue recognition
 
 Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, we have no other significant obligations and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.
 
 Our revenue consists of invoiced value of goods, net of a value-added tax (VAT). No product return or sales discount allowance is made as products delivered and accepted by customers are normally not returnable and sales discounts are normally not granted after products are delivered.
 
 Cash and cash equivalents
 
 For statement of cash flows purposes, we consider all cash on hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.
 
 Accounts receivable
 
 Our policy is to maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Any accounts receivable that is outstanding for more than three months will be accounted as allowance for bad debts.
 
 Segment reporting
 
 FASB ASC 280, (previously SFAS No. 131,Segment Reporting) requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.
 
 During the three months ended March 31, 2011, we were organized into four main business segments: fertilizer production (Jinong), fertilizer production (Gufeng and Tianjuyuan), agricultural products production (Jintai) and future research and development center (Yuxing).
 
 43
 Item 3.
Quantitative and Qualitative Disclosures About Market Risk


Disclosures About Market Risk




We may be exposed to changes in financial market conditions in the normal course of business. Market risk generally represents the risk that losses may occur as a result of movements in interest rates and equity prices. We currently do not use financial instruments in the normal course of business that are subject to changes in financial market conditions.




Currency Fluctuations and Foreign Currency Risk




Substantially all of our revenues and expenses are denominated in RMB. However, we use the U.S. dollar for financial reporting purposes. Conversion of RMB into foreign currencies is regulated by the People’s Bank of China through a unified floating exchange rate system. Although the PRC government has stated its intention to support the value of RMB, there can be no assurance that such exchange rate will not again become volatile or that RMB will not devalue significantly against the U.S. dollar. Exchange rate fluctuations may adversely affect the value, in U.S. dollar terms, of our net assets and income derived from our operations in the PRC.




Our reporting currency is the U.S. dollar. Except for the U.S. holding companies, all of our consolidated revenues, consolidated costs and expenses, and our assets are denominated in RMB. As a result, we are exposed to foreign exchange risk as our revenues and results of operations may be affected by fluctuations in the exchange rate between U.S. dollars and RMB. If the RMB depreciates against the U.S. dollar, the value of our RMB revenues, earnings and assets as expressed in our U.S. dollar financial statements will decline. Assets and liabilities are translated at exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and shareholders’ equity is translated at historical exchange rates. Any resulting translation adjustments are not included in determining net income but are included in determining other comprehensive income, a component of shareholders’ equity. As of March 31, 2011, our accumulated other comprehensive income was $7.1 million. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk. The value of the Renminbi against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions. Since July 2005, the Renminbi has not been pegged to the U.S. dollar. Although the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the Renminbi may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future, PRC authorities may lift restrictions on fluctuations in the Renminbi exchange rate and lessen intervention in the foreign exchange market.




Interest Rate Risk




We deposit surplus funds with Chinese banks earning daily interest. We do not invest in any instruments for trading purposes. All of our outstanding debt instruments carry fixed rates of interests. The amount of short-term debt outstanding as of March 31, 2011 and June 30, 2010 was $6.3 million and $0, respectively. We are exposed to interest rate risk primarily with respect to our short-term bank loans. Although the interest rates, which are based on the banks’ prime rates with respect to our short-term loans are fixed for the terms of the loans, the terms are typically three to twelve months for short-term bank loans and interest rates are subject to change upon renewal. There were no material changes in interest rates for short-term bank loans renewed during the three months ended March 31, 2011. The original loan term on average is one year, and the remaining average life of the short term-loans is nine months.




Management monitors the banks’ prime rates in conjunction with our cash requirements to determine the appropriate level of debt balances relative to other sources of funds. We have not entered into any hedging transactions in an effort to reduce our exposure to interest rate risk.




44




Credit Risk




We have not experienced significant credit risk, as most of our customers are long-term customers with superior payment records. Our receivables are monitored regularly by our credit managers.




Inflation Risk




Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net revenues if the selling prices of our products do not increase with these increased costs.


Item 4.
Controls and Procedures


(a)           Evaluation of disclosure controls and procedures.




At the conclusion of the period ended March 31, 2011 we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective and adequately designed to ensure that the information required to be disclosed by us in the reports we submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms and that such information was accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, in a manner that allowed for timely decisions regarding required disclosure.




(b)Changes in internal controls.




During the period covered by this report, in order to remediate the material weaknesses in our internal control over financial reporting as described in our Annual Report on Form 10-K for our fiscal year ended June 30, 2010, we engaged third party accounting consultants to assist us with the timely and accurate preparation, review and completion of our financial statements. Additionally, as previously disclosed, we engaged Ernst & Young (China) Advisory Limited (“Ernst & Young”) in November 2010 to review our practices and advise us on potential improvements in our internal controls over financial reporting and compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. During the past quarter, Ernst & Young helped us establish improved internal controls over financial reporting which we now follow.




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PART II    OTHER INFORMATION


Item 1.  Legal Proceedings
  On October 15, 2010, a class action lawsuit was filed against us and certain of our current and former officers in the United States District Court for the District of Nevada on behalf of purchasers of our common stock between November 12, 2009 and September 1, 2010.  The complaint alleges that we and certain of our current and former officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, by making material misstatements and omissions in our financial statements and related disclosure during the class period.  The plaintiffs claim that such allegedly misleading statements inflated the price of our common stock and seek monetary damages in an amount to be determined at trial.  On April 27, 2011, the court appointed the lead plaintiff and lead plaintiff’s counsel.




On December 10, 2010, a derivative complaint was filed by a shareholder, purportedly on our behalf, against certain of our officers and directors in the First Judicial District Court of the State of Nevada in and for Carson City. The complaint alleges, among other things, various violations of state law by such officers and directors, including breach of fiduciary duty, waste of corporate assets, and unjust enrichment. The plaintiff requests, among other remedies, restitution from such officers and directors and reform to our corporate governance and internal procedures.




On January 5, 2011, a derivative complaint was filed by two shareholders, purportedly on our behalf, against, among others, certain of our officers and directors, in the United States District Court, District of Columbia.  By stipulation of the parties, this case has been transferred to the District of Nevada.  This complaint alleges, among other things, that such officers and directors breached their fiduciary duties by knowingly filing inaccurate and inconsistent financial statements and other filings with the Securities and Exchange Commission and by failing to correct such allegedly inaccurate financial disclosure. The plaintiffs request, among other remedies, damages in the amount sustained by the defendants’ alleged breach of fiduciary duties and other violations of law, and other equitable relief.




On January 12, 2011, two additional derivative complaints were filed by different shareholders, purportedly on our behalf, against certain of our current and former officers and directors, in the Eighth Judicial District Court, Clark County, Nevada.  Each of the complaints alleges, among other things, that defendants breached their fiduciary duties by disseminating false and misleading information to shareholders via public filings and other communications, failing to maintain internal controls and procedures and failing to properly oversee and manage the company.  Each of the complaints also alleges unjust enrichment, abuse of control, gross mismanagement and waste of corporate assets by the defendants.  The plaintiffs request, among other remedies, damages caused by the breach of defendants’ fiduciary duties, restitution from such officers and directors and reform to our corporate governance and internal procedures.




We intend to vigorously defend each of these lawsuits.




In addition, the Commission is conducting an investigation of our prior reported financial statements, as well as the allegations in the complaints described above. We are cooperating with the Commission.




Item 1A.  Risk Factors




A class action lawsuit and shareholder derivative lawsuits have been filed against us alleging violations of the federal securities laws and breach of fiduciary duties by certain of our current and former officers and directors, respectively, and the Commission is conducting an investigation. Any unfavorable outcomes of such proceedings could have a material adverse effect on our business.




A class action lawsuit was filed in the United States District Court for the District of Nevada on behalf of purchasers of our common stock between November 12, 2009 and September 1, 2010, alleging that we and certain of our current and former officers violated the federal securities laws. Several shareholder derivative suits have also been filed against certain of our current and former officers and directors alleging, among other things, breach of fiduciary duties by such officers and directors.  In addition, the Commission is conducting an investigation of our prior reported financial statements, as well as the allegations in the complaints described above.  See “Item 1. – Legal Proceedings” of this Part II.  It is possible that additional similar complaints and related derivative actions may be filed in the future. The expense of defending these litigations, and possible additional similar litigations or other proceedings, may be substantial and the time required to defend the actions could divert management’s attention from the day-to-day operations of our business, which could adversely affect our business, results of operations and cash flows. In addition, an unfavorable outcome in any of such proceedings could have a material adverse effect on our business, results of operations and cash flows.





Item 6.  Exhibits





The exhibits required by this item are set forth in the Exhibit Index attached hereto.




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SIGNATURES





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




CHINA GREEN AGRICULTURE, INC.Date:  May 10, 2011
By:
/s/ Tao LiName:
Tao LiTitle:
President and Chief Executive Officer(principal executive officer)
 Date:  May 10, 2011
By:
/s/ Ken RenName:
Ken RenTitle:
Chief Financial Officer(principal financial officer and principal accounting officer)
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  EXHIBIT INDEX




No.
Description10.1
Offer Letter dated March 28, 2011 between China Green Agriculture, Inc. and Yizhao Zhang.10.2
Offer Letter dated March 28, 2011 between China Green Agriculture, Inc. and Lianfu Liu.10.3
Offer Letter dated February 8, 2011 between China Green Agriculture, Inc. and Robert B. Fields.31.1
Certification of Chief Executive Officer pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002.31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
Certification of Chief Executive Officer pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.32.2
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




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