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 December
31, 2010




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





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes 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:  As of
February 8, 2011, there were 26,848,259 shares of common stock, $.001 par value
per share, issued, of which 25,937,887 were outstanding.


TABLE
OF CONTENTS
  PagePART
      I
                                        
                                        FINANCIAL
      INFORMATIONItem
      1.
                                        
                                        Financial
      Statements.
                                        
                                        3Consolidated
      Balance Sheets
                                        
                                        4As
      of December 31, 2010 and June 30, 2010 (Unaudited)Consolidated
      Statements of Income and Comprehensive Income
                                        
                                        5For
      the Three and Six Months Ended December 31, 2010 and 2009
      (Unaudited)Consolidated
      Statements of Cash Flows
                                        
                                        6For
      the Six Months Ended December 31, 2010 and 2009
(Unaudited)Notes
      to Consolidated Financial Statements
                                        
                                        7As
      of December 31, 2010 (Unaudited)Item
      2.
                                        
                                        Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                        
                                        29Item
      3.
                                        
                                        Quantitative
      and Qualitative Disclosures About Market Risk
                                        
                                        41Item
      4.
                                        
                                        Controls
      and Procedures
                                        
                                        42PART
      II
                                        
                                        OTHER
      INFORMATIONItem
      1.
                                        
                                        Legal
      Proceedings
                                        
                                        43Item
      1A.
                                        
                                        Risk
      Factors
                                        
                                        44Item
      6.
                                        
                                        Exhibits
                                        
                                        44Signatures
                                        
                                        45Exhibits/Certifications
                                        
                                        46
  2
  PART
I - FINANCIAL INFORMATION
 
 Item
1.  Financial Statements
  3
  CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 AS
OF DECEMBER 31, 2010 AND JUNE 30, 2010
 (UNAUDITED)
 December 31, 2010
                  
                  
                  June 30, 2010ASSETSCurrent
      AssetsCash
      and cash equivalents
                  
                  $
                  56,686,587
                  
                  
                  $
                  62,335,437Accounts
      receivable, net
                  
                  
                  14,585,377
                  
                  
                  
                  15,571,888Inventories
                  
                  
                  30,151,381
                  
                  
                  
                  11,262,647Other
      assets
                  
                  
                  326,937
                  
                  
                  
                  86,824Related
      party receivables
                  
                  
                  185,268
                  
                  
                  
                  -Advances
      to suppliers
                  
                  
                  15,779,347
                  
                  
                  
                  221,280Total
      Current Assets
                  
                  
                  117,714,897
                  
                  
                  
                  89,478,076Plant,
      Property and Equipment, Net
                  
                  
                  47,327,181
                  
                  
                  
                  29,368,515Construction
      In Progress
                  
                  
                  2,929,923
                  
                  
                  
                  257,077Other
      Assets - Non Current
                  
                  
                  6,302,902
                  
                  
                  
                  1,098,704Intangible
      Assets, Net
                  
                  
                  27,517,452
                  
                  
                  
                  11,585,570Goodwill
                  
                  
                  1,419,836
                  
                  
                  
                  -Total
      Assets
                  
                  $
                  203,212,191
                  
                  
                  $
                  131,787,942LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable
                  
                  $
                  3,045,089
                  
                  
                  $
                  328,124Unearned
      revenue
                  
                  
                  19,507,197
                  
                  
                  
                  41,645Accrued
      expenses and other payables
                  
                  
                  5,540,615
                  
                  
                  
                  507,705Amount
      due to related parties
                  
                  
                  69,349
                  
                  
                  
                  68,164Taxes
      payable
                  
                  
                  5,464,640
                  
                  
                  
                  2,304,382Short
      term loans
                  
                  
                  6,295,550
                  
                  
                  
                  -Other
      short-term liability
                  
                  
                  3,859,977
                  
                  
                  
                  -Total
      Current Liabilities
                  
                  
                  43,782,417
                  
                  
                  
                  3,250,020Stockholders’
      EquityPreferred
      Stock, $.001 par value, 20,000,000 shares authorized, Zero shares issued
      and outstandingCommon
      stock, $.001 par value, 115,197,165 shares authorized, 26,848,260 and
      24,572,328 shares issued, and 25,937,887 and 24,572,328 shares
      outstanding, as of December 31, 2010 and June 30, 2010,
      respectively)
                  
                  
                  25,938
                  
                  
                  
                  24,573Additional
      paid-in capital
                  
                  
                  88,876,585
                  
                  
                  
                  75,755,682Statutory
      reserve
                  
                  
                  7,257,675
                  
                  
                  
                  5,864,648Retained
      earnings
                  
                  
                  56,160,658
                  
                  
                  
                  43,536,408Accumulated
      other comprehensive income
                  
                  
                  7,108,918
                  
                  
                  
                  3,356,611Total
      Stockholders’ Equity
                  
                  
                  159,429,774
                  
                  
                  
                  128,537,922Total
      Liabilities and Stockholders’ Equity
                  
                  $
                  203,212,191
                  
                  
                  $
                  131,787,942
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  4
 
 CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF  INCOME AND COMPREHENSIVE INCOME
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2010 AND 2009
 (UNAUDITED)
 
 For
      the Three Months Ended December 31,
                  
                  
                  For
      the Six Months Ended December 31,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009SalesJinong
                  
                  $
                  14,251,229
                  
                  
                  $
                  9,110,797
                  
                  
                  $
                  30,822,522
                  
                  
                  $
                  19,289,446Gufeng
                  
                  
                  18,875,897
                  
                  
                  
                  -
                  
                  
                  
                  40,676,931
                  
                  
                  
                  -Jintai
                  
                  
                  2,184,612
                  
                  
                  
                  2,061,319
                  
                  
                  
                  3,295,206
                  
                  
                  
                  3,159,490Net
      sales
                  
                  
                  35,311,738
                  
                  
                  $
                  11,172,116
                  
                  
                  
                  74,794,659
                  
                  
                  
                  22,448,936Cost
      of goods soldJinong
                  
                  
                  6,791,183
                  
                  
                  
                  3,267,122
                  
                  
                  
                  13,644,970
                  
                  
                  
                  7,002,486Gufeng
                  
                  
                  14,998,764
                  
                  
                  
                  -
                  
                  
                  
                  33,899,277
                  
                  
                  
                  -Jintai
                  
                  
                  1,188,965
                  
                  
                  
                  1,135,221
                  
                  
                  
                  1,778,259
                  
                  
                  
                  1,717,718Cost
      of goods sold
                  
                  
                  22,978,912
                  
                  
                  
                  4,402,343
                  
                  
                  
                  49,322,506
                  
                  
                  
                  8,720,204Gross
      profit
                  
                  
                  12,332,826
                  
                  
                  
                  6,769,773
                  
                  
                  
                  25,472,153
                  
                  
                  
                  13,728,732Operating
      expensesSelling
      expenses
                  
                  
                  1,589,006
                  
                  
                  
                  520,096
                  
                  
                  
                  3,004,991
                  
                  
                  
                  735,767General
      and administrative expenses
                  
                  
                  2,871,064
                  
                  
                  
                  814,551
                  
                  
                  
                  4,969,251
                  
                  
                  
                  1,348,730Total
      operating expenses
                  
                  
                  4,460,070
                  
                  
                  
                  1,334,647
                  
                  
                  
                  7,974,242
                  
                  
                  
                  2,084,497Income
      from operations
                  
                  
                  7,872,756
                  
                  
                  
                  5,435,126
                  
                  
                  
                  17,497,911
                  
                  
                  
                  11,644,235Other
      income (expense)Other
      income (expense)
                  
                  
                  2,084
                  
                  
                  
                  (413
                  )
                  
                  
                  (9,859
                  )
                  
                  
                  553Interest
      income
                  
                  
                  87,925
                  
                  
                  
                  52,656
                  
                  
                  
                  152,916
                  
                  
                  
                  81,922Interest
      expense
                  
                  
                  (117,852
                  )
                  
                  
                  (44,335
                  )
                  
                  
                  (294,527
                  )
                  
                  
                  (105,644
                  )Total
      other income (expense)
                  
                  
                  (27,843
                  )
                  
                  
                  7,908
                  
                  
                  
                  (151,470
                  )
                  
                  
                  (23,169
                  )Income
      before income taxes
                  
                  
                  7,844,913
                  
                  
                  
                  5,443,034
                  
                  
                  
                  17,346,441
                  
                  
                  
                  11,621,066Provision
      for income taxes
                  
                  
                  1,615,421
                  
                  
                  
                  722,041
                  
                  
                  
                  3,329,164
                  
                  
                  
                  1,652,798Net
      income
                  
                  
                  6,229,492
                  
                  
                  
                  4,720,993
                  
                  
                  
                  14,017,277
                  
                  
                  
                  9,968,268Other
      comprehensive incomeForeign
      currency translation gain/(loss)
                  
                  
                  2,458,260
                  
                  
                  
                  31,284
                  
                  
                  
                  3,752,307
                  
                  
                  
                  6,354Comprehensive
      income
                  
                  $
                  8,687,752
                  
                  
                  $
                  4,752,277
                  
                  
                  $
                  17,769,584
                  
                  
                  $
                  9,974,622Basic
      weighted average shares outstanding
                  
                  
                  25,937,866
                  
                  
                  
                  23,266,097
                  
                  
                  
                  25,930,424
                  
                  
                  
                  22,450,562Basic
      net earnings per share
                  
                  $
                  0.24
                  
                  
                  $
                  0.20
                  
                  
                  $
                  0.54
                  
                  
                  $
                  0.44Diluted
      weighted average shares outstanding
                  
                  
                  26,393,072
                  
                  
                  
                  23,286,653
                  
                  
                  
                  26,383,123
                  
                  
                  
                  22,471,118Diluted
      net earnings per share
                  
                  
                  0.24
                  
                  
                  
                  0.20
                  
                  
                  
                  0.53
                  
                  
                  
                  0.44
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  5
 
 CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 STATEMENTS
OF CASH FLOWS
 FOR
THE SIX MONTHS ENDED DECMEBER 31, 2010 AND 2009
 (UNAUDITED)
 
 2010
                    
                    
                    2009Cash
      flows from operating activitiesNet
      income
                    
                    $
                    14,017,277
                    
                    
                    $
                    9,968,268Adjustments
      to reconcile net income to net cash provided by operating
      activitiesIssuance
      of equity for compensation
                    
                    
                    1,542,337
                    
                    
                    
                    -Depreciation
                    
                    
                    1,715,800
                    
                    
                    
                    986,663Amortization
                    
                    
                    480,953
                    
                    
                    
                    150,318Decrease
      / (Increase) in current assets, net of effects from
      acquisitions:Accounts
      receivable
                    
                    
                    1,721,402
                    
                    
                    
                    (2,797,999
                    )Other
      receivables
                    
                    
                    (662,984
                    )
                    
                    
                    (321
                    )Inventories
                    
                    
                    (85,162
                    )
                    
                    
                    (2,719,957
                    )Advances
      to suppliers
                    
                    
                    (19,956,392
                    )
                    
                    
                    (142,513
                    )Other
      assets
                    
                    
                    45,480
                    
                    
                    
                    (35,952
                    )(Decrease)
      / Increase in current liabilities, net of effects from
      acquisitions:Accounts
      payable
                    
                    
                    (3,263,212
                    )
                    
                    
                    (395,573
                    )Unearned
      revenue
                    
                    
                    (244,631
                    )
                    
                    
                    141,422Tax
      payables
                    
                    
                    3,029,953
                    
                    
                    
                    391,854Other
      payables and accrued expenses
                    
                    
                    2,862,260
                    
                    
                    
                    436,338Net
      cash provided by operating activities
                    
                    
                    1,203,081
                    
                    
                    
                    5,982,548Cash
      flows from investing activitiesPurchase
      of plant, property, and equipment
                    
                    
                    (1,990,803
                    )
                    
                    
                    (2,440,748
                    )Purchase
      of intangible assets
                    
                    
                    -
                    
                    
                    
                    (10,703,302
                    )Acquisition
      of Gufeng, net of cash acquired
                    
                    
                    (6,720,539
                    )
                    
                    
                    -Amounts
      increase in construction in progress
                    
                    
                    (1,847,306
                    )
                    
                    
                    (4,730
                    )Net
      cash used in investing activities
                    
                    
                    (10,558,648
                    )
                    
                    
                    (13,148,780
                    )Cash
      flows from financing activitiesRepayment
      of loan
                    
                    
                    -
                    
                    
                    
                    (979,876
                    )Borrows
      of loan
                    
                    
                    2,238,000
                    
                    
                    
                    -Proceeds
      from issuance of shares
                    
                    
                    -
                    
                    
                    
                    51,373,234Restricted
      cash
                    
                    
                    -
                    
                    
                    
                    46,683Net
      cash provided by financing activities
                    
                    
                    2,238,000
                    
                    
                    
                    50,440,041Effect
      of exchange rate change on cash and cash equivalents
                    
                    
                    1,468,717
                    
                    
                    
                    114,236Net
      increase (decrease) in cash and cash equivalents
                    
                    
                    (5,648,850
                    )
                    
                    
                    43,388,045Cash
      and cash equivalents, beginning balance
                    
                    
                    62,335,437
                    
                    
                    
                    17,795,447Cash
      and cash equivalents, ending balance
                    
                    $
                    56,686,587
                    
                    
                    $
                    61,183,492Supplement
      disclosure of cash flow informationInterest
      expense paid
                    
                    $
                    116,105
                    
                    
                    $
                    (88,936
                    )Income
      taxes paid
                    
                    $
                    316,320
                    
                    
                    $
                    -
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
 
 6
  CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 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 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 December 31, 2010 is set forth in the
diagram below:
 
 
  7
  CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 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.
 
 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.
  8
  CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 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 December 31, 2010 and June 30, 2010, the Company
had accounts receivable of $14,585,377 and $15,571,888, net of allowance for
doubtful accounts of $222,008 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
 
 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 December 31, 2010 and June 30, 2010, respectively.
  9
  CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 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;
 
 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
December 31, 2010.
  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. As of December 31, 2010 and June 30, 2010, the Company had unearned
revenues of $19,507,197 and $41,645, respectively.
 
 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.
  10
  CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 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.
 
 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
December 31, 2010, the Company, through its subsidiaries is engaged in the
following businesses: fertilizer products (Jinong and Gufeng), 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.
 
 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.
  11
  CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
  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
                    
                    
                    Six Months EndedDecember 31,
                    
                    
                    December 31,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009Net
      Income for Basic Earnings Per Share
                    
                    $
                    6,229,492
                    
                    
                    $
                    4,720,993
                    
                    
                    $
                    14,017,277
                    
                    
                    $
                    9,968,268Basic
      Weighted Average Number of Shares
                    
                    
                    25,937,866
                    
                    
                    
                    23,266,097
                    
                    
                    
                    25,930,424
                    
                    
                    
                    22,450,562Net
      Income per Share – Basic
                    
                    
                    0.24
                    
                    
                    
                    0.20
                    
                    
                    
                    0.54
                    
                    
                    
                    0.44Net
      Income for Diluted Earnings Per Share
                    
                    
                    6,229,492
                    
                    
                    
                    4,720,993
                    
                    
                    
                    14,017,277
                    
                    
                    
                    9,968,268Diluted
      Weighted Average Number of Shares
                    
                    
                    26,393,072
                    
                    
                    
                    23,286,653
                    
                    
                    
                    26,383,123
                    
                    
                    
                    22,471,118Net
      Income per Share – Diluted
                    
                    $
                    0.24
                    
                    
                    $
                    0.20
                    
                    
                    $
                    0.53
                    
                    
                    $
                    0.44
 
 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 (ASU) No. 2010-20,
“Disclosures about the Credit Quality of Financing Receivables and the Allowance
for Credit Losses” ASU No. 2010-20 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.
 
 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.
  12
  CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 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.
 
 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 $3.9 million (455,186 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
$12.5 million were made to the fair values of the assets acquired and
liabilities assumed with a corresponding adjustment to goodwill. These
adjustments are summarized in the table presented below.
  13
 CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 ($ in millions)Purchase
      Price
                        
                        $
                        24.3Fair
      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)
                        
                        $
                        1.4
 
 (1)   The goodwill of $1.4 million is
non-deductible for tax purposes.
  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.
  14
  CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 For the ThreeMonths Ended
                          
                          
                          For the Six($ in millions, except per share data)
                          
                          December 31,
                            2010
                          
                          
                          Months Ended
                            December 31, 2010Net
      Sales
                          
                          $
                          19.7
                          
                          
                          $
                          48.5Net
      Income
                          
                          $
                          5.3
                          
                          
                          $
                          12.1Basic
      earnings per share
                          
                          $
                          0.23
                          
                          
                          $
                          0.54Diluted
      earnings per share
                          
                          $
                          0.23
                          
                          
                          $
                          0.54
 
 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 period ended December 31, 2010.  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 December 31, 2010 included the operations of the Company and
Gufeng.
 
 NOTE
4 – INVENTORIES
 
 Inventories
consisted of the following as of December 31, 2010 and June 30,
2010:
 
 December 31,
                        
                        
                        June 30,2010
                        
                        
                        2010Raw
      materials
                        
                        $
                        4,754,015
                        
                        
                        $
                        314,267Supplies
      and packing materials
                        
                        
                        856,257
                        
                        
                        
                        113,146Work
      in progress
                        
                        
                        91,026
                        
                        
                        
                        10,686,325Finished
      goods
                        
                        
                        24,450,083
                        
                        
                        
                        148,909Total
                        
                        $
                        30,151,381
                        
                        
                        $
                        11,262,647
 
 NOTE
5 – OTHER CURRENT ASSETS
 
 Other
current assets consisted of the following as of December 31, 2010 and June, 30
2010:
 
 December 31,
                      
                      
                      June 30,2010
                      
                      
                      2010Advancement
                      
                      $
                      208,125
                      
                      
                      $
                      41,875Promotional
      material
                      
                      
                      72,145
                      
                      
                      
                      44,949Prepaid
      insurance
                      
                      
                      46,667
                      
                      
                      
                      -Total
                      
                      $
                      326,937
                      
                      
                      $
                      86,824
  15
  CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 Advancement
represents advances made to non-related parties and employees. The amounts were
unsecured, interest free, and due on demand.
 
 NOTE
6 - PROPERTY, PLANT AND EQUIPMENT
 
 Property,
plant and equipment consisted of the following as of December 31, 2010 and June,
30, 2010:
 
 December 31,
                      
                      
                      June 30,2010
                      
                      
                      2010Building
      and improvements
                      
                      $
                      37,406,782
                      
                      
                      $
                      11,719,363Auto
                      
                      
                      1,353,601
                      
                      
                      
                      117,295Machinery
      and equipment
                      
                      
                      18,470,958
                      
                      
                      
                      21,628,525Agriculture
      assets
                      
                      
                      1,387,896
                      
                      
                      
                      1,528,898Total
      property, plant and equipment
                      
                      
                      58,619,237
                      
                      
                      
                      34,994,081Less:
      accumulated depreciation
                      
                      
                      (11,292,056
                      )
                      
                      
                      (5,625,566
                      )Total
                      
                      $
                      47,327,181
                      
                      
                      $
                      29,368,515
 
 Depreciation
expenses for the three months ended December 31, 2010 and 2009 were $862,837 and
$542,448, respectively. Depreciation expenses for the six months ended December
31, 2010 and 2009 were $1,715,800 and $986,663, 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
December 31, 2010 and June 30, 2010, construction in progress, representing
construction for a new product line and other buildings amounted to $2,929,923
and $257,077, respectively.
 
 NOTE
8 - INTANGIBLE ASSETS
 
 Intangible
assets consist of the following as of December 31, 2010 and June 30,
2010:
 
 December 31,
                      
                      
                      June 30,2010
                      
                      
                      2010Land
      use rights, net
                      
                      $
                      11,920,948
                      
                      
                      $
                      11,495,058Technology
      patent, net
                      
                      
                      51,990
                      
                      
                      
                      90,512Customer
      relationships, net
                      
                      
                      8,069,428
                      
                      
                      
                      -Trademarks
                      
                      
                      7,475,086
                      
                      
                      
                      -Total
                      
                      $
                      27,517,452
                      
                      
                      $
                      11,585,570
  16
  CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 LAND USE
RIGHT
 
 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 December 31, 2010 and June 30,
2010:
 
 December 31,
                      
                      
                      June 30,2010
                      
                      
                      2010Land
      use rights
                      
                      $
                      12,365,969
                      
                      
                      $
                      11,866,105Less:
      accumulated amortization
                      
                      
                      (445,021
                      )
                      
                      
                      (371,047
                      )Total
      land use rights, net
                      
                      $
                      11,920,948
                      
                      
                      $
                      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 December 31, 2010 and June
30, 2010:
 
 December 31,
                      
                      
                      June 30,2010
                      
                      
                      2010Technology
      know-how
                      
                      $
                      891,248
                      
                      
                      $
                      866,338Less:
      accumulated amortization
                      
                      
                      (839,258
                      )
                      
                      
                      (775,826
                      )Total
      technology know-how, net
                      
                      $
                      51,990
                      
                      
                      $
                      90,512
  17
  CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 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.
 
 December 31,
                      
                      
                      June 30,2010
                      
                      
                      2010Customer
      relationships
                      
                      $
                      8,494,135
                      
                      
                      $
                      -Less:
      accumulated amortization
                      
                      
                      (424,707
                      )
                      
                      
                      -Total
      customer relationships, net
                      
                      $
                      8,069,428
                      
                      
                      $
                      -
 
 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 December
31, 2010 and 2009 amounted to $399,810 and $107,132, respectively. Total
amortization expenses of intangible assets for the six months ended December 31,
2010 and 2009 amounted to $480,953 and $150,318, respectively.
  AMORTIZATION
EXPENSE
  Estimated
amortization expenses of intangible assets for the next five (5) twelve-month
periods-ended December 31, 2010, are as follows:
 
 December
      31, 2011
                      
                      $
                      1,077,909December
      31, 2012
                      
                      
                      984,768December
      31, 2013
                      
                      
                      984,768December
      31, 2014
                      
                      
                      984,768December
      31, 2015
                      
                      
                      984,768
 
 NOTE
9 - AMOUNT DUE TO RELATED PARTIES
 
 As of
December 31, 2010 and June 30, 2010, the amount due to related parties was
$69,349 and $68,164, respectively.  These amounts represent unsecured,
non-interest bearing loans that are due on demand.  These loans are
not subject to written agreements.
  18
  CHINA GREEN AGRICULTURE, INC. AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 NOTE
10 - ACCRUED EXPENSES AND OTHER PAYABLES
 
 Accrued
expenses and other payables consisted of the following as of December 31, 2010
and June 30, 2010:
 
 December 31,
                      
                      
                      June 30,2010
                      
                      
                      2010Payroll
      payable
                      
                      $
                      164,483
                      
                      
                      $
                      8,848Welfare
      payable
                      
                      
                      321,340
                      
                      
                      
                      164,051Accrued
      expenses
                      
                      
                      881,417
                      
                      
                      
                      334,806Other
      payables
                      
                      
                      3,558,606
                      
                      
                      
                      -Other
      levy payable
                      
                      
                      149,346
                      
                      
                      
                      -Accrued
      legal
                      
                      
                      465,423
                      
                      
                      
                      -Total
                      
                      $
                      5,540,615
                      
                      
                      $
                      507,705
 
 NOTE
11 - LOAN PAYABLES
 
 The
short-term loans payable consist of four loans which mature on dates ranging
from January 13, 2011 through June 17, 2011 with interest rates ranging from
5.58% to 6.37%. The loans are collateralized by the Company’s land use
rights.
 
 The
interest expense from these short-term loans were $117,852 and $44,335 for three
months ended December 31, 2010 and 2009, respectively. The interest expenses
from these short-term loans were $294,527 and $105,644 for the six months ended
December 31, 2010 and 2009, 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 December 31, 2010 and 2009 of $925,129 and $1,645,525,
respectively, and $2,212,538 and $2,576,282 for the six months ended December
31, 2010 and 2009, respectively, which is mainly due to the operating income
from Jinong. Gufeng is subject to 25% EIT rate and thus it made provision for
income taxes of $690,292 and $1,116,626 for the three and six months ended
December 31, 2010, 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.
  19
  CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 Income Taxes and Related
Payables
 
 Taxes
payable consisted of the following as of December 31, 2010 and June 30,
2010:
 
 December 31,
                      
                      
                      June 30,2010
                      
                      
                      2010VAT
      provision (credit)
                      
                      $
                      3,996
                      
                      
                      $
                      (24,655
                      )Income
      tax payable
                      
                      
                      5,144,042
                      
                      
                      
                      2,020,253Other
      levies
                      
                      
                      316,602
                      
                      
                      
                      308,784Total
                      
                      $
                      5,464,640
                      
                      
                      $
                      2,304,382
 
 Income Taxes in the
Consolidated Statements of Operations and Comprehensive
Income
 
 The
provision for income taxes for the six months ended December 31, 2010 and 2009
consisted of the following:
 
 December 31,
                      
                      
                      December 31,2010
                      
                      
                      2009Current
      Tax
                      
                      $
                      3,329,164
                      
                      
                      $
                      1,652,798Deferred
      Tax
                      
                      
                      -
                      
                      
                      
                      -Total
                      
                      $
                      3,329,164
                      
                      
                      $
                      1,652,798
 
 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 six months ended December 31, 2010 and 2009 for the following
reasons:
 
 December 31, 2010China
                                        
                                        
                                        United States15%
      - 25%
                                        
                                        
                                        34%
                                        
                                        
                                        `TotalPretax
      income (loss)
                                        
                                        
                                        20,365,391
                                        
                                        
                                        
                                        
                                        
                                        
                                        (3,018,950
                                        )
                                        
                                        
                                        
                                        
                                        
                                        17,346,441Expected
      income tax expense (benefit)
                                        
                                        
                                        5,091,348
                                        
                                        
                                        
                                        25.0
                                        %
                                        
                                        
                                        (1,026,443
                                        )
                                        
                                        
                                        34.0
                                        %
                                        
                                        
                                        4,064,905High-tech
      income benefits on Jinong
                                        
                                        
                                        (1,475,026
                                        )
                                        
                                        
                                        (7.2
                                        )%
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (1,475,026
                                        )Income
      tax benefit of nontaxable income on Jintai
                                        
                                        
                                        (351,565
                                        )
                                        
                                        
                                        (1.7
                                        )%
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (351,565
                                        )Other
                                        
                                        
                                        64,407
                                        
                                        
                                        
                                        0.3
                                        %
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        64,407Change
      in valuation allowance on deferred tax asset from US tax
      benefit
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        1,026,443
                                        
                                        
                                        
                                        (34.0
                                        )%
                                        
                                        
                                        1,026,443Actual
      tax expense
                                        
                                        
                                        3,329,164
                                        
                                        
                                        
                                        16.3
                                        %
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        %
                                        
                                        
                                        19.2
                                        %
  20
  CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 December 31, 2009China
                                        
                                        
                                        United States15%
      - 25%
                                        
                                        
                                        34%
                                        
                                        
                                        TotalPretax
      income (loss)
                                        
                                        
                                        12,222,996
                                        
                                        
                                        
                                        
                                        
                                        
                                        (601,930
                                        )
                                        
                                        
                                        
                                        
                                        
                                        11,621,066Expected
      income tax expense (benefit)
                                        
                                        
                                        3,055,749
                                        
                                        
                                        
                                        25.0
                                        %
                                        
                                        
                                        (204,656
                                        )
                                        
                                        
                                        34.0
                                        %
                                        
                                        
                                        2,851,093High-tech
      income benefits on Jinong
                                        
                                        
                                        (1,101,866
                                        )
                                        
                                        
                                        (9.0
                                        )%
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (1,101,866
                                        )Income
      tax benefit of nontaxable income on Jintai
                                        
                                        
                                        (319,315
                                        )
                                        
                                        
                                        (2.6
                                        )%
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (319,315
                                        )Other
                                        
                                        
                                        18,230
                                        
                                        
                                        
                                        0.1
                                        %
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        18,230Change
      in valuation allowance on deferred tax asset from US tax
      benefit
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        204,656
                                        
                                        
                                        
                                        (34.0
                                        )%Actual
      tax expense
                                        
                                        
                                        1,652,798
                                        
                                        
                                        
                                        13.5
                                        %
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        %
                                        
                                        
                                        14.2
                                        %
 
 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 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.
 
 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 greenhouse 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.
  21
  CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 On
February 10, 2010, the Company made a one-time grant of an aggregate of 50,700
shares of restricted common stock to certain independent directors and 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 certain independent directors and 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% will be 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.
 
 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
December 31, 2010, 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.
  22
  CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 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.
  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 December 31, 2010
and 2009, the Company recognized stock-based compensation expense of $898,261
and $0, respectively. During the six months ended December 31, 2010 and 2009,
the Company recognized stock-based compensation expense of $1,542,336 and $0,
respectively.
  Options
outstanding as of December 31, 2010 and related weighted average price and
intrinsic value are as follows:
 
 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
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Exercised
                                      
                                      
                                      -Outstanding,
      December 31, 2010
                                      
                                      
                                      195,291
                                      
                                      
                                      $
                                      14.67
                                      
                                      
                                      $
                                      -Exercisable.
      December 31, 2010
                                      
                                      
                                      115,099
                                      
                                      
                                      $
                                      14.67
                                      
                                      
                                      $
                                      -
  23
  CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 The
following table summarizes the options outstanding as of December 31,
2010:
  Options outstandingWeightedWeighted
                                
                                
                                AverageNumber
                                
                                
                                Average
                                
                                
                                RemainingRange of
                                
                                Outstanding as of
                                
                                
                                Exercise
                                
                                
                                Contractual LifeExercise Price
                                
                                December 31, 2010
                                
                                
                                Price
                                
                                
                                (Years)14.02-14.70
                                
                                
                                195,291
                                
                                
                                
                                14.67
                                
                                
                                
                                1.31
 
 The
following table summarizes the options exercisable as of December 31,
2010:
  Options ExercisableWeightedWeighted
                            
                            
                            AverageNumber
                            
                            
                            Average
                            
                            
                            RemainingRange of
                            
                            Outstanding as of
                            
                            
                            Exercise
                            
                            
                            Contractual LifeExercise Price
                            
                            December 31, 2010
                            
                            
                            Price
                            
                            
                            (Years)14.02-14.70
                            
                            
                            115,099
                            
                            
                            
                            14.67
                            
                            
                            
                            1.31
 
 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.
  Vendor
and Customer Concentration
  There was
no vendor from which the Company purchased more than 10% of its raw materials
for the six months ended December 31, 2010. There is no accounts payable to this
vender as of December 31, 2010.
 
 There was
one vendor from which the Company purchased more than 10% of its raw materials
for the six months ended December 31, 2009. There is no accounts payable to this
vender as of December 31, 2009.
 
 There was
no customer that accounted for over 10% of the total sales for the six months
ended December 31, 2010 and 2009.
  Concentration
of Cash
  The
Company maintains large sums of cash in three major banks in China. The
aggregate balance in such accounts as of December 31, 2010 was $56,686,587.
There is no insurance securing these deposits in China. In addition, the Company
also had $2,263,307 in cash in two banks in the United States as of December 31,
2010, with $500,000 secured by the U.S. Federal Deposit Insurance
Corporation.
  24
  CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 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 about the Company’s true financial
condition. The complaint alleges, among other things, that the financial
statements for the fiscal year ended June 30, 2010 included in the Company’s
Annual Report on Form 10-K filed with the Commission are materially false and
misleading on the basis that such financial statements materially differ from
certain financial information the Company reported to certain governmental
agencies in the People’s Republic of China.  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
December 10, 2010, a complaint was filed by one of the Company shareholders,
derivatively on the Company’s behalf, against certain of the Company’s officers
and directors and against the Company, as a nominal defendant, 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 the court to, among other
remedies, award us 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.
 
 On
January 5, 2011, a complaint was filed by two of the Company’s shareholders,
derivatively on the Company’s behalf, against certain of the Company’s officers
and directors and other parties, and against the Company, as a nominal
defendant, 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.
 
 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.
  25
  CHINA GREEN AGRICULTURE, INC. AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 NOTE
16 – SEGMENT REPORTING
 
 The
Company was organized into four main business segments: fertilizer production
(Jinong & Gufeng), 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.
  For the three months endedDecember 31,2010
                            
                            
                            2009Revenues
      from unaffiliated customers:Jinong
                            
                            $
                            14,251,229
                            
                            
                            $
                            9,110,797Gufeng
                            
                            
                            18,875,897
                            
                            
                            
                            -Jintai
                            
                            
                            2,184,612
                            
                            
                            
                            2,061,319Yuxing
                            
                            
                            -
                            
                            
                            
                            -Consolidated
                            
                            $
                            35,311,738
                            
                            
                            $
                            11,172,116Operating
      income :Jinong
                            
                            $
                            6,099,792
                            
                            
                            $
                            4,925,511Gufeng
                            
                            
                            2,710,717
                            
                            
                            
                            -Jintai
                            
                            
                            968,805
                            
                            
                            
                            839,233Yuxing
                            
                            
                            (85,750
                            )
                            
                            
                            (55,077
                            )Reconciling
      item (1)
                            
                            
                            -
                            
                            
                            
                            -Reconciling
      item (2)
                            
                            
                            (922,546
                            )
                            
                            
                            (274,541
                            )Reconciling
      item (2)—stock compensation
                            
                            
                            (898,262
                            )
                            
                            
                            -Consolidated
                            
                            $
                            7,872,756
                            
                            
                            $
                            5,435,126Net
      income:Jinong
                            
                            $
                            5,242,398
                            
                            
                            $
                            4,213,250Gufeng
                            
                            
                            1,923,078
                            
                            
                            
                            -Jintai
                            
                            
                            968,787
                            
                            
                            
                            839,304Yuxing
                            
                            
                            (84,801
                            )
                            
                            
                            (55,071
                            )Reconciling
      item (1)
                            
                            
                            840
                            
                            
                            
                            5,323Reconciling
      item (2)
                            
                            
                            (1,820,810
                            )
                            
                            
                            (274,541
                            )Consolidated
                            
                            $
                            6,229,492
                            
                            
                            $
                            4,728,265Depreciation
      and Amortization:Jinong
                            
                            $
                            783,301
                            
                            
                            $
                            564,709Gufeng
                            
                            
                            362,628
                            
                            
                            
                            -Jintai
                            
                            
                            42,355
                            
                            
                            
                            31,355Yuxing
                            
                            
                            74,363
                            
                            
                            
                            53,517Consolidated
                            
                            $
                            1,262,647
                            
                            
                            $
                            649,581Interest
      expense:Jinong
                            
                            $
                            -
                            
                            
                            $
                            44,335Gufeng
                            
                            
                            117,852
                            
                            
                            
                            -Consolidated
                            
                            $
                            117,852
                            
                            
                            $
                            44,335Capital
      Expenditure:Jinong
                            
                            $
                            865,887
                            
                            
                            $
                            3,010Gufeng
                            
                            
                            327,396
                            
                            
                            
                            -Jintai
                            
                            
                            -
                            
                            
                            
                            -Yuxing
                            
                            
                            20,851
                            
                            
                            
                            4,730Consolidated
                            
                            $
                            1,214,134
                            
                            
                            $
                            7,740
 
 (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.
  26
  CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
  For the six months endedDecember 31,2010
                      
                      
                      2009Revenues
      from unaffiliated customers:Jinong
                      
                      $
                      30,822,522
                      
                      
                      $
                      19,289,446Gufeng
                      
                      
                      40,676,931
                      
                      
                      
                      -Jintai
                      
                      
                      3,295,206
                      
                      
                      
                      3,159,490Yuxing
                      
                      
                      -
                      
                      
                      
                      -Consolidated
                      
                      $
                      74,794,659
                      
                      
                      $
                      22,448,936Operating
      income :Jinong
                      
                      $
                      14,619,350
                      
                      
                      $
                      11,049,785Gufeng
                      
                      
                      4,633,698
                      
                      
                      
                      -Jintai
                      
                      
                      1,406,251
                      
                      
                      
                      1,277,140Yuxing
                      
                      
                      (139,812
                      )
                      
                      
                      (72,924
                      )Reconciling
      item (1)
                      
                      
                      -
                      
                      
                      
                      -Reconciling
      item (2)
                      
                      
                      (1,479,239
                      )
                      
                      
                      (609,766
                      )Reconciling
      item (2)—stock compensation
                      
                      
                      (1,542,337
                      )
                      
                      
                      -Consolidated
                      
                      $
                      17,497,911
                      
                      
                      $
                      11,644,235Net
      income:Jinong
                      
                      $
                      12,537,716
                      
                      
                      $
                      9,373,129Gufeng
                      
                      
                      3,230,784
                      
                      
                      
                      -Jintai
                      
                      
                      1,406,260
                      
                      
                      
                      1,277,260Yuxing
                      
                      
                      (138,532
                      )
                      
                      
                      (72,918
                      )Reconciling
      item (1)
                      
                      
                      2,627
                      
                      
                      
                      7,835Reconciling
      item (2)
                      
                      
                      (3,021,578
                      )
                      
                      
                      (617,038
                      )Consolidated
                      
                      $
                      14,017,277
                      
                      
                      $
                      9,968,268Depreciation
      and Amortization:Jinong
                      
                      $
                      1,362,336
                      
                      
                      $
                      1,008,924Gufeng
                      
                      
                      631,241
                      
                      
                      
                      -Jintai
                      
                      
                      73,729
                      
                      
                      
                      56,701Yuxing
                      
                      
                      129,447
                      
                      
                      
                      71,356Consolidated
                      
                      $
                      2,196,753
                      
                      
                      $
                      1,136,981Interest
      expense:Jinong
                      
                      $
                      -
                      
                      
                      $
                      105,644Gufeng
                      
                      
                      294,527
                      
                      
                      
                      -Consolidated
                      
                      $
                      294,527
                      
                      
                      $
                      105,644Capital
      Expenditure:Jinong
                      
                      $
                      1,419,786
                      
                      
                      $
                      2,440,748Gufeng
                      
                      
                      536,828
                      
                      
                      
                      -Jintai
                      
                      
                      -
                      
                      
                      
                      -Yuxing
                      
                      
                      34,189
                      
                      
                      
                      10,708,032Consolidated
                      
                      $
                      1,990,803
                      
                      
                      $
                      13,148,780Identifiable
      assets:Jinong
                      
                      $
                      101,717,304
                      
                      
                      $
                      88,658,686Gufeng
                      
                      
                      65,284,782
                      
                      
                      
                      -Jintai
                      
                      
                      14,632,624
                      
                      
                      
                      10,161,564Yuxing
                      
                      
                      19,264,101
                      
                      
                      
                      10,724,673Reconciling
      item (1)
                      
                      
                      2,269,121
                      
                      
                      
                      13,026,892Reconciling
      item (2)
                      
                      
                      44,259
                      
                      
                      
                      32,991Consolidated
                      
                      $
                      203,212,191
                      
                      
                      $
                      122,604,806
 
 (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.
  27
 
 CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2010
 
 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 $8,486 and $5,122 as rent expenses for the
three months ended December 31, 2010 and 2009, respectively. The Company
recorded an aggregate of $16,944 and $10,244 as rent expenses for the six months
ended December 31, 2010 and 2009, respectively. Rent expenses for the next
twelve month periods ended December 31, 2010 is as follows:
  December
      31, 2011
                      
                      $
                      33,943December
      31, 2012
                      
                      
                      24,275December
      31, 2013
                      
                      
                      14,607December
      31, 2014
                      
                      
                      14,607December
      31, 2015
                      
                      
                      14,607
 
 28
  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 these 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 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), 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
acquired in July 2010, generated approximately 93.9% and 81.5% of our total
revenues for the three months ended December 31, 2010 and 2009, respectively. In
the six months ended December 31, 2010 and 2009, the fertilizer business
conducted by Jinong and Gufeng generated 95.6% and 85.9% of our total revenues,
respectively.
  29
 
 Fertilizer
Products
 
 As of
December 31, 2010, we had developed and produced a total of 470 different
fertilizer products, of which 166 and 304 were developed and produced by Jinong
and Gufeng, respectively. Of these fertilizer products, 20 have been replaced by
newer products.
 
 For the
three months ended December 31, 2010, we sold approximately 64,192 metric tons
of fertilizer products, as compared to 3,836 metric tons for the three months
ended December 31, 2009, which did not include sales of products by Gufeng. For
the six months ended December 31, 2010, we sold approximately 150,655 metric
tons of fertilizer products, as compared to 7,435 metric tons for the same
period in 2009, which did not include sales of products by Gufeng. For the three
months ended December 31, 2010, Jinong sold approximately 11,594 metric tons of
fertilizer products, as compared to 3,065 metric tons for the three months ended
December 31, 2009. For the six months ended December 31, 2010, Jinong sold
approximately 22,235 metric tons of fertilizer products, as compared to 7,435
metric tons for the six months ended December 31, 2009. Gufeng sold
approximately 52,598 metric tons of fertilizer products for the three months
ended December 31, 2010. For the six months ended December 31, 2010, Gufeng sold
approximately 128,420 metric tons of fertilizer products.
 
 For the
three months ended December 31, 2010, the top five provinces (or municipalities)
of our total fertilizer sales accounted for 29.2% of total fertilizer revenues.
The five provinces (or municipalities) and their respective percentage
contribution to total fertilizer revenues were Hebei(7.0%), Jilin(6.8%),Liaoning
(6.4%), Shaanxi (4.8%) and Beijing (4.1%). Jinong’s sales to the top five
provinces accounted for approximately 37.1% of Jinong’s fertilizer revenue (or
15.0% of our total revenues). The five provinces and their respective percentage
contribution to Jinong’s fertilizer revenues were Shaanxi (11.2%), Shandong
(8.5%), Henan (6.2%), Anhui (6.1%) and Sichuan (5.1%). For the three months
ended December 31, 2010, Gufeng’s sales of fertilizer products to the top five
provinces accounted for approximately 39.2% of Gufeng’s fertilizer revenue (or
20.9% of our total revenues). The five provinces (or municipalities) and their
respective percentage contribution to Gufeng’s fertilizer revenues were Jilin
(10.1%), Hebei (9.0%), Liaoning (8.5%), Beijing (7.3%) and Inner Mongolia
(4.3%).
 
 A
significant portion of our revenues are derived from sales in other countries.
Gufeng exports blended fertilizer through contracted distributors to other
countries including India, Zimbabwe, Mongolia, the Philippines and Brazil. The
export revenues accounted for 51% of Gufeng’s fertilizer revenues (or 27.4% of
our total revenues) for the three months ended December 31, 2010. In addition,
we export humic-acid based compound fertilizer products and blended fertilizer
products via contracted distributors. Jinong exports its humic-acid based
compound fertilizers to other countries, including India, Ecuador, Pakistan and
Lebanon. However, the revenues from Jinong’s export products currently account
for less than 1% of our fertilizer revenues for the three months ended December
31, 2010. In December 2010, Gufeng entered into a new contract which will
significantly increase Gufeng’s future export revenues.  See “Recent
Developments” below.
 
 As of
December 31, 2010, we had a total of 755 distributors covering 21 provinces,
four autonomous regions and three central government-controlled municipalities
in China. Jinong had 598 distributors in China. Jinong’s sales are not dependent
on any one or group of distributors. Its top five distributors accounted for
1.8% of Jinong’s fertilizer revenues (or 0.7% of our total revenues) for the
three months ended December 31, 2010. Gufeng had 157 distributors, including
some large state-owned enterprises. Its top five distributors accounted for
89.5% of Gufeng’s revenues (or 47.8% of our total revenues) for the three months
ended December 31, 2010.
 
 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 five PRC provinces which accounted for 100% of our agricultural
products revenue (or 6.2% of our total revenues) for the three months ended
December 31, 2010 were Shaanxi (86.1%), Sichuan (7.7%),Shanxi (4.7%), Ningxia
(1.3%) and Qinghai (0.2%) .
  30
 
 Recent
Developments
 
 During
the three months ended December 31, 2010, Jinong launched four new humic-acid
based liquid and powder fertilizer products, including three powder fertilizers
and one broad-spectrum liquidfertilizer.
Jinong’s new products generated approximately $148,522 or 1.1%, of Jinong’s
fertilizer revenues for the three months ended December 31, 2010. Jinong also
added 10 new distributors during the three months ended December 31, 2010.
Jinong’s new distributors accounted for approximately $44,465, or 0.3%, of
Jinong’s fertilizer revenues for the three months ended December 31,
2010.
 
 During
the three months ended December 31, 2010, Gufeng launched two new humic
acid-based blended and functional fertilizers. These new products generated
approximately $393,664, or 2.1%, of Gufeng’s fertilizer revenues for the three
months ended December 31, 2010. Gufeng also added five new distributors during
the three months ended December 31, 2010, which accounted for approximately
$143,840, or 0.8%, of Gufeng’s fertilizer revenues.
 
 On
December 22, 2010, Gufeng entered into a contract with Sinoagri Group Holding
Company Limited, a company incorporated under the laws of the PRC (“Sinoagri”),
pursuant to which Sinoagri agreed to purchase binary acid compound fertilizers
from Gufeng in the range of 165,000 to 180,000 metric tons to be delivered from
May 2011 to September 2011.
 
 Results of
Operations
 
 The
following table shows our operating results on a consolidated basis for the
three months ended December 31, 2010 and 2009.  It should be noted
that our consolidated results for the 2009 period do not include the results of
Gufeng and its subsidiary, Tianjuyuan, which were acquired on July 2,
2010.
 
 Three
      months ended December 31,2010
                      
                      
                      2009
                      
                      
                      Change
                      
                      
                      %
      changeNet
      Sales
                      
                      $
                      35,311,738
                      
                      
                      $
                      11,172,116
                      
                      
                      
                      24,139,622
                      
                      
                      
                      216.1
                      %Jinong
                      
                      
                      14,251,229
                      
                      
                      
                      9,110,797
                      
                      
                      
                      5,140,432
                      
                      
                      
                      56.4
                      %Gufeng
                      
                      
                      18,875,897
                      
                      
                      
                      n/a
                      
                      
                      
                      18,875,897
                      
                      
                      
                      100.0
                      %Jintai
                      
                      
                      2,184,612
                      
                      
                      
                      2,061,319
                      
                      
                      
                      123,293
                      
                      
                      
                      6.0
                      %Cost
      of Goods Sold
                      
                      
                      22,978,912
                      
                      
                      
                      4,402,343
                      
                      
                      
                      18,576,569
                      
                      
                      
                      422.0
                      %Jinong
                      
                      
                      6,791,183
                      
                      
                      
                      3,267,122
                      
                      
                      
                      3,524,061
                      
                      
                      
                      107.9
                      %Gufeng
                      
                      
                      14,998,764
                      
                      
                      
                      n/a
                      
                      
                      
                      14,998,764
                      
                      
                      
                      100.0
                      %Jintai
                      
                      
                      1,188,965
                      
                      
                      
                      1,135,221
                      
                      
                      
                      53,744
                      
                      
                      
                      4.7
                      %Gross
      Profit
                      
                      
                      12,332,826
                      
                      
                      
                      6,769,773
                      
                      
                      
                      5,563,053
                      
                      
                      
                      82.2
                      %Selling
      Expenses
                      
                      
                      1,589,006
                      
                      
                      
                      520,096
                      
                      
                      
                      1,068,910
                      
                      
                      
                      205.5
                      %General
      and Administrative Expenses
                      
                      
                      2,871,064
                      
                      
                      
                      814,551
                      
                      
                      
                      2,056,513
                      
                      
                      
                      252.5
                      %Income
      from Operations
                      
                      
                      7,872,756
                      
                      
                      
                      5,435,126
                      
                      
                      
                      2,437,630
                      
                      
                      
                      44.8
                      %Total
      Other Income (expense)
                      
                      
                      (27,843
                      )
                      
                      
                      7,908
                      
                      
                      
                      -35,751
                      
                      
                      
                      -452.1
                      %Income
      Before Income Taxes
                      
                      
                      7,844,913
                      
                      
                      
                      5,443,034
                      
                      
                      
                      2,401,879
                      
                      
                      
                      44.1
                      %Provision
      for Income Taxes
                      
                      
                      1,615,421
                      
                      
                      
                      722,041
                      
                      
                      
                      893,380
                      
                      
                      
                      123.7
                      %Net
      Income
                      
                      
                      6,229,492
                      
                      
                      
                      4,720,993
                      
                      
                      
                      1,508,499
                      
                      
                      
                      32.0
                      %Net
      Income Per Share (Basic and Fully Diluted)
                      
                      
                      0.24
                      
                      
                      
                      0.20
                      
                      
                      
                      0.04
                      
                      
                      
                      18.4
                      %Basic
      Weighted Average Shares Outstanding
                      
                      
                      25,937,866
                      
                      
                      
                      23,266,097
                      
                      
                      
                      2,671,769
                      
                      
                      
                      11.5
                      %Diluted
      Weighted Average Shares Outstanding
                      
                      
                      26,393,072
                      
                      
                      
                      23,286,653
                      
                      
                      
                      3,106,419
                      
                      
                      
                      13.3
                      %
  31
 
 Net
Sales
 
 Our net
sales for the quarter ended December 31, 2010 were $35,311,738, an increase of
$24,139,622, or 216.1%, from $11,172,116 for the three months ended December 31,
2009. This increase was largely due to the inclusion of Gufeng’s net sales
during the 2010 period, which contributed $18,875,897, or 53.5%, of the total
net sales. The total net sales without including Gufeng’s net sales for the
three months ended December 31, 2010 were $16,435,841, an increase of
$5,263,725, or 47.1%, from the same period a year ago.
 
 For the
three months ended December 31, 2010, Jinong’s net sales increased $5,140,432,
or 56.4%, to $14,251,229 from $9,110,797 from the three months ended December
31, 2009. 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
since our 40,000 metric-ton production line began production in August
2009.
  Jintai’s
net sales, which include sales of agricultural products, increased by $123,293,
or 6.0%, to $2,184,612 for the three months ended December 31, 2010 from
$2,061,319 for the same period in 2009. 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 December 31, 2010. 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 December 31, 2010 were
$22,978,912, an increase of $18,576,569, or 422.0%, from $4,402,343 for the
three months ended December 31, 2009. This increase was mainly due to the costs
attributable to the production and sale of Gufeng’s products, which accounted
for 65.3% 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 December 31,
2010 was $7,980,148, an increase of $3,577,805, or 81.3%, from $4,402,343 for
the same period a year ago.
  Cost of
goods sold by Jinong for the three months ended December 31, 2010 were
$6,791,183, an increase of $3,524,061, or 107.9%, from $3,267,122 for the same
period in 2009. As a percentage of total net sales, cost of goods sold by Jinong
accounted for approximately 19.2% and 29.2% for the three months ended December
31, 2010 and 2009, 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 December 31, 2010 were
$14,998,764, which accounted for 65.3% of cost of goods sold.
  Cost of goods sold by Jintai for the
three months ended December 31, 2010 were $1,188,965, an increase of $53,744, or
4.7%, from $1,135,221 for the same period in 2009.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 approximately 3.4% and 10.2% for the
three months ended December 31, 2010 and 2009, 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.
  32
 
 Gross
Profit
 
 Gross
profit for the three months ended December 31, 2010 increased by $5,563,053, or
82.2%, to $12,332,826, as compared to $6,769,773 for the three months ended
December 31, 2009.  Gross profit margin was approximately 34.9% and
60.6% for the three months ended December 31, 2010 and 2009, 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 $8,455,693  with a
gross profit margin of 51.4%.
  Gross
profit generated by Jinong increased by $1,616,371, or 27.7%, to $7,460,046 for
the three months ended December 31, 2010 from $5,843,675 for the three months
ended December 31, 2009. Gross profit margin from Jinong’s sales was
approximately 52.3% and 64.1% for the three months ended December 31, 2010 and
2009, respectively. The main reason for the decrease in Jinong’s gross profit
margin was the change in product mix for the three months ended December 31,
2010 compared with a year ago. In addition, the increase of raw materials also
contributed to the lower margin than before. 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 $3,877,133 with a gross profit margin of
approximately 20.5% for the three months ended December 31, 2010.
  Gross
profit from Jintai increased by $69,549, or 7.5%, for the three months ended
December 31, 2010, to $995,647, as compared to $926,098 for the three months
ended December 31, 2009.  Gross profit margin from Jintai sales was
approximately 45.6% and 44.9% for the three months ended December 31, 2010 and
2009, 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 $1,589,006, or 4.5%, of net sales for the three months ended
December 31, 2010 as compared to $520,096, or 4.7%, of net sales for the three
months ended December 31, 2009, an increase of $1,068,910, or 205.5%. This
increase was primarily due to the inclusion of Gufeng’s selling expenses for the
2010 period. The selling expenses of Gufeng were $590,891, or 3.1%, of Gufeng’s
net sales.  The selling expenses of Jinong were $991,890, or 7.0%, of
Jinong’s net sales, an increase of $269,478, or 37.3%, from the selling expenses
of $722,412, or 3.2% of net sales for the three months ended December 31, 2009.
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 $2,871,064, or 8.1%, of net sales, for
the three months ended December 31, 2010, as compared to $814,551, or 7.3%, of
net sales, for the three months ended December 31, 2009, an increase of
$2,056,513. The general and administrative expenses of Gufeng were $484,195, of
which $472,765 was the non-cash amortization expenses from its estimated
intangible assets. The acquisition related expenses, which mainly included
professional services related to the acquisition, were $55,789 for the three
months ended December 31, 2010. In addition, the non-cash stock compensation
expense was $898,261 for the three months ended December 31, 2010, compared to
$0 for the same period a year ago.  Additionally, during the three
months ended December 31, 2010, we incurred additional legal and investor
relations fees related to certain pending litigations.
  33
 
 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 three months ended December 31, 2010 was $27,843, as compared
to total other income of $7,908 for the three months ended December 31, 2009, an
increase in expense of $35,751, or 452.1%. The increase in expense was mainly
attributable to the $117,852  interest expense from Gufeng’s
outstanding short-term loans.
 
 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 $925,129 for the three months ended December 31, 2010, as
compared to $722,041 for the same period in 2009, an increase of $203,088, or
28.1%, which was primarily attributable to our increased operating
income.
 
 Gufeng,
subject to a tax rate of 25%, incurred income tax expenses of $690,292 for the
three months ended December 31, 2010.
 
 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 December 31, 2010 was $6,229,492, an increase
of $1,508,499, or 32.0%, as compared to $4,720,993 for the three months ended
December 31, 2009. The increase was attributable to the increase in gross
profit. Net income as a percentage of total net sales was approximately 17.6%
and 42.3% for the three months ended December 31, 2010 and 2009,
respectively.
 
 SIX
MONTHS ENDED DECEMBER 31, 2010 COMPARED WITH SIX MONTHS ENDED DECEMBER 31,
2009.
 
 The
following table shows the operating results of the Company on a consolidated
basis for the six months ended December 31, 2010 and 2009.
  34
 
 Six
      months ended December 31,2010
                    
                    
                    2009
                    
                    
                    Change
                    
                    
                    %
      changeNet
      Sales
                    
                    $
                    74,794,659
                    
                    
                    $
                    22,448,936
                    
                    
                    
                    52,345,723
                    
                    
                    
                    233.2
                    %Jinong
                    
                    
                    30,822,522
                    
                    
                    
                    19,289,446
                    
                    
                    
                    11,533,076
                    
                    
                    
                    59.8
                    %Gufeng
                    
                    
                    40,676,931
                    
                    
                    
                    n/a
                    
                    
                    
                    40,676,931
                    
                    
                    
                    100.0
                    %Jintai
                    
                    
                    3,295,206
                    
                    
                    
                    3,159,490
                    
                    
                    
                    135,716
                    
                    
                    
                    4.3
                    %Cost
      of Goods Sold
                    
                    
                    49,322,506
                    
                    
                    
                    8,720,204
                    
                    
                    
                    40,602,302
                    
                    
                    
                    465.6
                    %Jinong
                    
                    
                    13,644,970
                    
                    
                    
                    7,002,486
                    
                    
                    
                    6,642,484
                    
                    
                    
                    94.9
                    %Gufeng
                    
                    
                    33,899,277
                    
                    
                    
                    n/a
                    
                    
                    
                    33,899,277
                    
                    
                    
                    100.0
                    %Jintai
                    
                    
                    1,778,259
                    
                    
                    
                    1,717,718
                    
                    
                    
                    60,541
                    
                    
                    
                    3.5
                    %Gross
      Profit
                    
                    
                    25,472,153
                    
                    
                    
                    13,728,732
                    
                    
                    
                    11,743,421
                    
                    
                    
                    85.5
                    %Selling
      Expenses
                    
                    
                    3,004,991
                    
                    
                    
                    735,767
                    
                    
                    
                    2,269,224
                    
                    
                    
                    308.4
                    %General
      and Administrative Expenses
                    
                    
                    4,969,251
                    
                    
                    
                    1,348,730
                    
                    
                    
                    3,620,521
                    
                    
                    
                    268.4
                    %Income
      from Operations
                    
                    
                    17,497,911
                    
                    
                    
                    11,644,235
                    
                    
                    
                    5,853,676
                    
                    
                    
                    50.3
                    %Total
      Other Income (expense)
                    
                    
                    (151,470
                    )
                    
                    
                    (23,169
                    )
                    
                    
                    -128,301
                    
                    
                    
                    553.8
                    %Income
      Before Income Taxes
                    
                    
                    17,346,441
                    
                    
                    
                    11,621,066
                    
                    
                    
                    5,725,375
                    
                    
                    
                    49.3
                    %Provision
      for Income Taxes
                    
                    
                    3,329,164
                    
                    
                    
                    1,652,798
                    
                    
                    
                    1,676,366
                    
                    
                    
                    101.4
                    %Net
      Income
                    
                    
                    14,017,277
                    
                    
                    
                    9,968,268
                    
                    
                    
                    4,049,009
                    
                    
                    
                    40.6
                    %Net
      Income Per Share (Basic)
                    
                    
                    0.54
                    
                    
                    
                    0.44
                    
                    
                    
                    0.10
                    
                    
                    
                    21.7
                    %Net
      Income Per Share (Fully Diluted)
                    
                    
                    0.53
                    
                    
                    
                    0.44
                    
                    
                    
                    0.09
                    
                    
                    
                    19.8
                    %Basic
      Weighted Average Shares Outstanding
                    
                    
                    25,930,424
                    
                    
                    
                    22,450,562
                    
                    
                    
                    3,479,862
                    
                    
                    
                    15.5
                    %Diluted
      Weighted Average Shares Outstanding
                    
                    
                    26,383,123
                    
                    
                    
                    22,471,118
                    
                    
                    
                    3,912,005
                    
                    
                    
                    17.4
                    %
 
 Net
Sales
 
 Total net
sales for the six months ended December 31, 2010 were $74,794,659, an increase
of $52,345,723, or 233.2%, from $22,448,936 for the six months ended December
31, 2009. This increase was largely due to the inclusion of Gufeng’s net sales
during the fiscal year 2011, which contributed $40,676,931, or 54.4%, of the
total net sales. The total net sales without including Gufeng’s net sales for
the six months ended December 31, 2010 were $34,117,728 an increase of
$11,668,792, or 52.0%, from the same period a year ago.
  For the
six months ended December 31, 2010, Jinong’s net sales increased $11,533,076, or
59.8%, to $30,822,522 from $19,289,446 from the six months ended December 31,
2009. 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 $135,716, or 4.3%, to $3,295,206 for the six months
ended December 31, 2010 from $3,159,490 for the same period in 2009. Our
Yuxing segment had no revenues during the period ended December 31, 2010.
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.
  35
 
 Cost
of Goods Sold
 
 Total
cost of goods sold for the six months ended December 31, 2010 were $49,322,506,
an increase of $40,602,302, or 465.6%, from $8,720,204 for the six months ended
December 31, 2009. This increase was mainly due to the costs attributable to the
production and sale of Gufeng’s products, which accounted for 68.7% of our cost
of goods sold. The total cost of goods sold without including Gufeng’s cost of
goods sold for the six months ended December 31, 2010 was
$15,423,229.
  Cost of
goods sold by Jinong for the six months ended December 31, 2010 were
$13,644,970, an increase of $6,642,484, or 94.9%, from $7,002,486 for the same
period in 2009.  As a percentage of total net sales, cost of goods
sold by Jinong accounted for approximately 18.2% and 31.2% for the six months
ended December 31, 2010 and 2009, 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.
  Cost of
goods sold by Gufeng for the six months ended December 31, 2010 were $33,899,277
which accounted for 68.7% of total cost of goods sold.
 
 Cost of
goods sold by Jintai for the six months ended December 31, 2010 were $1,778,259,
an increase of $60,541, or 3.5%, from $1,717,718 for the same period in 2009.
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 six months ended December 31, 2010 increased by
$11,743,421, or 85.5%, to $25,472,153, as compared to $13,728,732 for the six
months ended December 31, 2009. Gross profit margin was approximately 34.1% and
61.2% for the six months ended December 31, 2010 and 2009, 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 $18,694,499 with a gross
profit margin of 54.8%.
  Gross
profit generated by Jinong increased by $4,890,592, or 39.8%, to $17,177,552 for
the six months ended December 31, 2010 from $12,286,960 for the six months ended
December 31, 2009. Gross profit margin from Jinong’s sales was approximately
55.7% and 63.7% for the six months ended December 31, 2010 and 2009,
respectively. The main reason for the decrease in Jinong’s gross profit margin
was the change in product mix for the three months ended December 31, 2010
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 $6,777,654 with a gross profit margin of
approximately 16.7% for the six months ended December 31, 2010.
  Gross
profit from Jintai increased by $75,175, or 5.2%, for the six months ended
December 31, 2010, to $1,516,947, as compared to $1,441,772 for the six months
ended December 31, 2009.  Gross profit margin from Jintai sales was
approximately 46.0% and 45.6% for the six months ended December 31, 2010 and
2009, respectively.
  36
 
 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 $3,004,991, or 4.0%, of net sales for the six months ended
December 31, 2010 as compared to $735,767, or 3.3%, of net sales for the six
months ended December 31, 2009, an increase of $2,269,224, or 308.4%. This
increase was primarily due to the inclusion of Gufeng’s selling expenses for the
fiscal year 2011. The selling expenses of Gufeng were $1,107,476, or 2.7%, of
Gufeng’s net sales.  The selling expenses of Jinong were $1,884,820,
or 6.1%, of Jinong’s net sales, an increase of $1,162,408, or 160.9%, from the
selling expenses of $722,412, or 3.2%, of net sales for the six months ended
December 31, 2009. 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 $4,969,251, or 6.6%, of net sales, for the six
months ended December 31, 2010, as compared to $1,348,730, or 6.0%, of net
sales, for the six months ended December 31, 2009, an increase of $3,620,521.
The general and administrative expenses of Gufeng were $1,036,480 for the six
months ended December 31, 2010, of which $417,707 was the non-cash amortization
expenses from its estimated intangible assets. The acquisition related expenses,
which mainly included professional services related to the acquisition, were
$291,931 for the six months ended December 31, 2010. In addition, the non-cash
stock compensation expense was $1,542,336 for the six months ended December 31,
2010, compared to $0 for the same period a year ago. Additionally, during the
six months ended December 31, 2010, we incurred additional legal and investor
relations fees related to certain pending litigations.
 
 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 six months ended December 31, 2010 was $151,470, as compared to
total other expenses of $23,169 for the six months ended December 31, 2009, an
increase in expense of $128,301, or 553.8%.  The increase was mainly
attributable to the $294,527 interest expense from Gufeng’s outstanding
short-term loans.
 
 Income
Taxes
 
 Jinong
incurred income tax expenses of $2,212,538 for the six months ended December 31,
2010, as compared to $1,652,798 for the same period in 2009, an increase of
$559,740, or 33.9%, which was primarily attributable to our increased operating
income.
 
 Gufeng,
subject to a tax rate of 25%, incurred income tax expenses of $1,116,626 for the
six months ended December 31, 2010.
 
 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 six months ended December 31, 2010 was $14,017,277, an increase
of $4,049,009, or 40.6%, compared $9,968,268 for the six months ended December
31, 2009. The increase was attributable to the increase in gross profit. Net
income as a percentage of total net sales was approximately 18.7% and 44.4% for
the six months ended December 31, 2010 and 2009, respectively.
  37
 
 Discussion of Segment
Profitability Measures
  As of
December 31, 2010, 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), 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
December 31, 2010, cash and cash equivalents were $56,686,587, a decrease of
$5,648,850, or 9.1%, 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) to acquire new businesses, upgrade production lines and complete the
greenhouse facilities for agriculture products of Yuxing 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. Notwithstanding the
foregoing, we may seek additional financing for expansion purposes, which may
include additional 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.
 
 The
following table sets forth a summary of our cash flows for the periods
indicated:
 
 Six MonthsEndedDecember 31,2010
                                        
                                        
                                        2009Net
      cash provided by operating activities
                                        
                                        $
                                        1,203,081
                                        
                                        
                                        $
                                        5,982,548Net
      cash used in investing activities
                                        
                                        
                                        (10,588,648
                                        )
                                        
                                        
                                        (13,148,780
                                        )Net
      cash provided by financing activities
                                        
                                        
                                        2,238,000
                                        
                                        
                                        
                                        50,440,041Effect
      of exchange rate change on cash and cash equivalents
                                        
                                        
                                        1,468,717
                                        
                                        
                                        
                                        114,236Net
      increase / (decrease) in cash and cash equivalents
                                        
                                        
                                        (5,648,850
                                        )
                                        
                                        
                                        43,388,045Cash
      and cash equivalents, beginning balance
                                        
                                        
                                        62,335,437,
                                        
                                        
                                        
                                        17,795,447Cash
      and cash equivalents, ending balance
                                        
                                        $
                                        56,686,587
                                        
                                        
                                        $
                                        61,183,492
 
 Operating
Activities
 
 Net cash
provided by operating activities was $1,203,081 for the six months ended
December 31, 2010, a decrease of $4,799,476, or 79.9%, from the $5,982,548
net cash provided by operating activities for the same period in 2009. The
decrease was mainly due to an increase in the advancement to suppliers from
Gufeng.
 
 Investing
Activities
 
 Net cash
used in investing activities in the six months ended December 31, 2010 was
$10,588,648, which was mainly used to acquire Gufeng. The net cash used in
investing activities for the same period in 2009 was $13,148,780, most of which
was used to purchase the land use right for the expansion of our new greenhouse
facility by Yuxing.
  38
 
 Financing
Activities
 
 Net cash
provided by financing activities in the six months ended December 31, 2010
totaled $2,238,000, 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 2009 was $50,440,041, mainly due to the Public Offerings.
 
 At
December 31, 2010, our loans payable were as follows:
 
 December 31, 2010
                            
                            
                            June 30, 2010Short
      term loans payable:
                            
                            $
                            6,295,550
                            
                            
                            $
                            -Total
                            
                            $
                            6,295,550
                            
                            
                            $
                            -
 
 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 $14,585,377 as of December 31, 2010, as compared to
$15,571,888 as of June 30, 2010, a decrease of $986,511, or 6.3%. The decrease
was primarily because the three-month period ended December 31, 2010 is a lower
fertilizer sales season for Gufeng than the three-month period ended June 30,
2010.
 
 Our
allowance for doubtful accounts was $222,008 as of December 31, 2010, as
compared to $193,403 as of June 30, 2010, an increase of $28,605, or 14.8%,
which was mainly attributable to the acquisition of Gufeng.
 
 Inventories
 
 We had an
inventory of $30,151,381 as of December 31, 2010, as compared to $11,262,647 as
of June 30, 2010, an increase of $18,888,734, or 167.7%. This increase was
mainly due to the recent acquisition of Gufeng, which had an inventory of
$15,751,200 as of December 31, 2010. Inventories in other subsidiaries were
$14,400,181 as of December 31, 2010, as compared to $11,262,647 as of June 30,
2010, an increase of $17,660,283, or 156.8%, mainly due to the increased work in
progress at Jintai’s greenhouse facilities with more high-end
flowers.
 
 Accounts
Payable
 
 We had
accounts payable of $3,045,089 as of December 31, 2010 as compared to $328,124
as of June 30, 2010, representing an increase of $2,716,965 or 828.0%, of which
$52,365 was attributable to Gufeng. Neither Jintai nor Yuxing had any accounts
payable as of December 31, 2010.
 
 Off-Balance Sheet
Arrangements
 
 As of
December 31, 2010, we did 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 (“US
GAAP”). 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:
  39
 
 Use of
estimates
 
 The
preparation of consolidated financial statements in conformity with US GAAP
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 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
purposes of the statement of cash flows, 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. We review our accounts receivable outstanding balance and our
assessment of the collectability of specific customer accounts, the aging of
accounts receivable, our history of bad debts, and the general condition of the
industry at each fiscal year-end to determine if the bad debt allowance is
adequate.
 
 Segment
reporting
 
 ASC Topic
280, “Segment Report,” 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.
 
 As of
December 31, 2010, we, through our subsidiaries are engaged in the following
businesses: fertilizer products (Jinong), fertilizer products (Gufeng),
agricultural products (Jintai) and research and development
(Yuxing).
  40
 
 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 December 31, 2010, 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 December 31, 2010 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 December 31, 2010. 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.
  41
  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 December 31, 2010 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.
  In
November 2010, we engagedErnst &
Young (China) Advisory Limited to review our practices and advise on us
potential improvements in our internal controls over financial reporting and
compliance with the requirements of Section 404 of the Sarbanes-Oxley
Act.
  Except as
stated above, during the period covered by this report, there was no change in
our internal control over financial reporting (as such term is defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or
is reasonably likely to materially affect our internal control over financial
reporting.
  42
  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 about our true financial condition. The complaint alleges, among
other things, that the financial statements for the fiscal year ended June 30,
2010 included in our Annual Report on Form 10-K filed with the Securities and
Exchange Commission are materially false and misleading on the basis that such
financial statements materially differ from certain financial information we
reported to certain governmental agencies in the People’s Republic of
China.  The plaintiffs claim that such allegedly misleading financial
statements inflated the price of our common stock and seek monetary damages in
an amount to be determined at trial.
  On
December 10, 2010, a complaint was filed by one of our shareholders,
derivatively on our behalf, against certain of our officers and directors and
against us, as a nominal defendant, 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 the court to, among other remedies, award us
restitution from such officers and directors and cause us to put to a vote of
our shareholders certain actions to reform our corporate governance and internal
procedures.
  On
January 5, 2011, a complaint was filed by two of our shareholders, derivatively
on our behalf, against certain of our officers and directors another party, and
against us, as a nominal defendant, 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
Securities and Exchange Commission and by failing to correct such allegedly
inaccurate financial disclosure. The plaintiffs request the court to, among
other remedies, award us 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.
  On
January 12, 2011, two separate complaints were filed by different shareholders,
derivatively on our behalf, against certain of our current and former officers
and directors and against us, as nominal defendant, in the Eighth Juridical
District Court, Clark County, Nevada.  Each of the complaints allege,
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 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 us restitution from such officers and directors and cause us to put to a
vote of our shareholders certain actions to reform our corporate governance and
internal procedures.
  We intend
to vigorously defend each of these lawsuits.
  43
  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, unfavorable outcomes of
which 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.  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, 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 litigations 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.
  44
  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:  February
      9, 2011
              By:/s/ Tao LiName:
      Tao LiTitle:
      President and Chief Executive Officer(principal
      executive officer)Date:  February
      9, 2011
              By:/s/ Ken RenName:
      Ken RenTitle:
      Chief Financial Officer(principal
      financial officer and principal accounting
  officer)
  45
  EXHIBIT
INDEX
  No.
              
              Description31.1
              
              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.
  46