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 September
30, 2009




 ̈
            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 000-18606





CHINA GREEN AGRICULTURE,
INC.


(Exact
name of small business issuer as specified in its charter)




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





3rdFloor, 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. YesxNo ̈





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  ̈ 
No  ̈





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
                   ̈
                  Accelerated
      filer
                   ̈Non-accelerated
      filer
                   ̈
                  Smaller
      reporting company
                  x(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  ̈ 
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: 22,681,425 shares of Common
Stock, $.001 par value, were outstanding as of November 9,
2009.








TABLE OF
CONTENTS





PagePART I
                          FINANCIAL INFORMATIONItem 1.
                          Financial
      Statements.
                          3Consolidated
      Balance Sheets As of September 30, 2009 (Unaudited) and June 30,
      2009
                          3Consolidated
      Statements of Income and Comprehensive Income For the Three Months Ended
      September 30, 2009 and 2008 (Unaudited)
                          4Consolidated
      Statements of Cash Flows For the Three Months Ended September 30, 2009 and
      2008 (Unaudited)
                          5Notes
      to Consolidated Financial Statements As of September 30, 2009
      (Unaudited)
                          6Item 2.
                          Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                          25Item 3.
                          Quantitative
      and Qualitative Disclosures About Market Risk
                          33Item 4T.
                          Controls
      and Procedures.
                          33PART II
                          OTHER INFORMATIONItem 5.
                          Other
      Information.
                          34Item 6.
                          Exhibits
                          34Signatures
                          35Exhibits/Certifications


2





PART
I - FINANCIAL INFORMATION





Item
      1.
            Financial
      Statements




CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 AS
OF SEPTEMBER 30, 2009 AND JUNE 30, 2009
 (UNAUDITED)
 
 September 30, 2009
                  
                  
                  June 30, 2009ASSETSCurrent
      AssetsCash
      and cash equivalents
                  
                  $
                  35,156,962
                  
                  
                  $
                  17,795,447Restricted
      cash
                  
                  
                  58,813
                  
                  
                  
                  83,579Accounts
      receivable, net
                  
                  
                  11,709,073
                  
                  
                  
                  8,167,715Inventories
                  
                  
                  8,143,916
                  
                  
                  
                  7,162,249Other
      assets
                  
                  
                  160,826
                  
                  
                  
                  129,213Deferred
      offering cost
                  
                  
                  -
                  
                  
                  
                  160,500Advances
      to suppliers
                  
                  
                  77,423
                  
                  
                  
                  95,255Total
      Current Assets
                  
                  
                  55,307,013
                  
                  
                  
                  33,593,958Plant,
      Property and Equipment, Net
                  
                  
                  28,973,205
                  
                  
                  
                  17,341,654Construction
      In Progress
                  
                  
                  -
                  
                  
                  
                  9,609,649Intangible
      Assets, Net
                  
                  
                  11,734,412
                  
                  
                  
                  1,073,165Total
      Assets
                  
                  $
                  96,014,630
                  
                  
                  $
                  61,618,426LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable
                  
                  $
                  595,166
                  
                  
                  $
                  926,883Unearned
      revenue
                  
                  
                  67,458
                  
                  
                  
                  24,000Other
      payables and accrued expenses
                  
                  
                  1,719,745
                  
                  
                  
                  1,091,168Advances
      from other unrelated companies
                  
                  
                  298,546
                  
                  
                  
                  326,970Amount
      due to related parties
                  
                  
                  69,464
                  
                  
                  
                  31,160Taxes
      payable
                  
                  
                  5,544,691
                  
                  
                  
                  2,887,828Short
      term loans
                  
                  
                  2,193,752
                  
                  
                  
                  3,170,290Total
      Current Liabilities
                  
                  
                  10,488,822
                  
                  
                  
                  8,458,299Common
      Stock, $.001 par value, 6,313,617 shares subject to
    redemption
                  
                  
                  -
                  
                  
                  
                  20,519,255Stockholders'
      EquityPreferred
      Stock, $.001 par value,  20,000,000 shares authorized, Zero
      shares issued and outstanding
                  
                  
                  -
                  
                  
                  
                  -Common
      stock, $.001 par value,   115,197,165 shares
      authorized,  22,681,425 shares issued and outstanding
      (12,281,569 as of June 30, 2009)
                  
                  
                  22,682
                  
                  
                  
                  12,282Additional
      paid-in capital
                  
                  
                  49,712,354
                  
                  
                  
                  2,060,162Statuary
      reserve
                  
                  
                  4,026,529
                  
                  
                  
                  3,468,530Retained
      earnings
                  
                  
                  29,332,043
                  
                  
                  
                  24,642,768Accumulated
      other comprehensive income
                  
                  
                  2,432,200
                  
                  
                  
                  2,457,130Total
      Stockholders' Equity
                  
                  
                  85,525,808
                  
                  
                  
                  32,640,872Total
      Liabilities and Stockholders' Equity
                  
                  $
                  96,014,630
                  
                  
                  $
                  61,618,426
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  3
 
 CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF  INCOME AND COMPREHENSIVE INCOME
 FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
 (UNAUDITED)
 
 2009
                  
                  
                  2008Net
      sales
                  
                  $
                  11,276,820
                  
                  
                  $
                  8,880,002Cost
      of goods sold
                  
                  
                  4,317,862
                  
                  
                  
                  3,930,893Gross
      profit
                  
                  
                  6,958,958
                  
                  
                  
                  4,949,109Operating
      expensesSelling
      expenses
                  
                  
                  215,672
                  
                  
                  
                  216,376General
      and administrative expenses
                  
                  
                  534,179
                  
                  
                  
                  437,129Total
      operating expenses
                  
                  
                  749,850
                  
                  
                  
                  653,505Income
      from operations
                  
                  
                  6,209,108
                  
                  
                  
                  4,295,604Other
      income (expense)Other
      income (expense)
                  
                  
                  966
                  
                  
                  
                  4,275Interest
      income
                  
                  
                  29,266
                  
                  
                  
                  140,395Interest
      expense
                  
                  
                  (61,309
                  )
                  
                  
                  (320,864
                  )Total
      other income (expense)
                  
                  
                  (31,077
                  )
                  
                  
                  (176,194
                  )Income
      before income taxes
                  
                  
                  6,178,031
                  
                  
                  
                  4,119,410Provision
      for income taxes
                  
                  
                  930,757
                  
                  
                  
                  621,483Net
      income
                  
                  
                  5,247,274
                  
                  
                  
                  3,497,927Other
      comprehensive incomeForeign
      currency translation gain/(loss)
                  
                  
                  (24,930
                  )
                  
                  
                  (6,179
                  )Comprehensive
      income
                  
                  $
                  5,222,344
                  
                  
                  $
                  3,491,748Basic
      weighted average shares outstanding
                  
                  
                  21,632,488
                  
                  
                  
                  18,381,702Basic
      net earnings per share
                  
                  $
                  0.24
                  
                  
                  $
                  0.19Diluted
      weighted average shares outstanding
                  
                  
                  21,650,546
                  
                  
                  
                  18,381,702Diluted
      net earnings per share
                  
                  $
                  0.24
                  
                  
                  $
                  0.19
  4
 
 CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 STATEMENTS
OF CASH FLOWS
 FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
 (UNAUDITED)
 
 2009
                    
                    
                    2008Cash
      flows from operating activitiesNet
      income
                    
                    $
                    5,247,274
                    
                    
                    $
                    3,497,927Adjustments
      to reconcile net income to net cash provided by operating
      activitiesIssuance
      of stock options for compensation
                    
                    
                    -
                    
                    
                    
                    25,133Depreciation
                    
                    
                    444,215
                    
                    
                    
                    368,094Amortization
                    
                    
                    43,185
                    
                    
                    
                    26,740Decrease
      / (Increase) in current assetsAccounts
      receivable
                    
                    
                    (3,532,758
                    )
                    
                    
                    (2,750,170
                    )Other
      receivables
                    
                    
                    (30,915
                    )
                    
                    
                    8,258Inventories
                    
                    
                    (974,125
                    )
                    
                    
                    (2,583,908
                    )Advances
      to suppliers
                    
                    
                    17,933
                    
                    
                    
                    (66,825
                    )Other
      assets
                    
                    
                    2,171
                    
                    
                    
                    15,756(Decrease)
      / Increase in current liabilitiesAccounts
      payable
                    
                    
                    (332,626
                    )
                    
                    
                    30,941Unearned
      revenue
                    
                    
                    43,432
                    
                    
                    
                    91,989Tax
      payables
                    
                    
                    2,653,822
                    
                    
                    
                    1,603,503Other
      payables and accrued expenses
                    
                    
                    709,662
                    
                    
                    
                    174,431Net
      cash provided by operating activities
                    
                    
                    4,291,270
                    
                    
                    
                    441,868Cash
      flows from investing activitiesAcquisition
      of plant, property, and equipment
                    
                    
                    (2,437,738
                    )
                    
                    
                    (897
                    )Acquisition
      of intangible assets
                    
                    
                    (10,703,302
                    )
                    
                    
                    -Additions
      to construction in progress
                    
                    
                    -
                    
                    
                    
                    (41,223
                    )Net
      cash used in investing activities
                    
                    
                    (13,141,040
                    )
                    
                    
                    (42,120
                    )Cash
      flows from financing activitiesRepayment
      of loan
                    
                    
                    (979,876
                    )
                    
                    
                    (116,701
                    )Proceeds
      issuance of shares
                    
                    
                    27,143,338
                    
                    
                    
                    -Restricted
      cash
                    
                    
                    24,766
                    
                    
                    
                    28,311Net
      cash provided by / (used in) financing activities
                    
                    
                    26,188,228
                    
                    
                    
                    (88,391
                    )Effect
      of exchange rate change on cash and cash equivalents
                    
                    
                    23,057
                    
                    
                    
                    (4,671
                    )Net
      increase in cash and cash equivalents
                    
                    
                    17,361,515
                    
                    
                    
                    306,686Cash
      and cash equivalents, beginning balance
                    
                    
                    17,795,447
                    
                    
                    
                    16,612,416Cash
      and cash equivalents, ending balance
                    
                    $
                    35,156,962
                    
                    
                    $
                    16,919,102Supplement
      disclosure of cash flow informationInterest
      expense paid
                    
                    $
                    (61,309
                    )
                    
                    $
                    (122,511
                    )Income
      taxes paid
                    
                    $
                    -
                    
                    
                    $
                    -
  5




CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 NOTE
1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
 
 China
Green Agriculture, Inc. (the “Company”, “we”, “us”) was incorporated in 1987. On
December 26, 2007, the Company acquired all of the issued and outstanding
capital stock (the “Green Agriculture Shares”) of Green Agriculture Holding
Corporation, a New Jersey corporation (“Green Agriculture” or “Green New
Jersey”), through a share exchange (the “Share Exchange”).
 
 Green
Agriculture was incorporated on January 27, 2007 under the laws of the State of
New Jersey. On August 24, 2007, Green Agriculture acquired 100% outstanding
shares of Shaanxi TechTeam Jinong Humic Acid Product Co., Ltd. (“Techteam
Jinong”, or “Jinong”) which owns 100% equity of Xi’an Jintai Agriculture
Technology Development Company (“Xi’an Jintai” or “Jintai”). Jinong is engaged
in the research and development, manufacture, distribution and sale of humic
acid based compound fertilizer. It was incorporated in the People’s Republic of
China (the “PRC”) on June 19, 2000 under the name of Yangling Techteam Jinong
Humic Acid Product Co., Ltd. On February 28, 2006, Yangling Techteam Jinong
Humic Acid Product Co., Ltd changed its name to Shaanxi Techteam Jinong Humic
Acid Product Co., Ltd.
 
 On
January 19, 2007, Jinong incorporated Xi’an Jintai which provides testing and
experimental data collection base for the function and feature of the new
fertilizer products produced by Jinong by imitating the various growing
conditions and stages or cycles for a variety of plants, such as flowers,
vegetables and seedlings which the fertilizers apply on. Xi’an Jintai also sells
such plants themselves to its customers and generates sales.
 
 On
December 23, 2008, Xi’an Hu County Yuxing Agriculture Technology Development
Co., Ltd. (“Xi’an Yuxing”) was established and registered in Hu County, Xi’an by
two related parties. The purpose of establishing this entity is mainly to
facilitate the research and development of agriculture technology. On July 23,
2009, 100% ownership of Xi’an Yuxing was transferred to Techteam Jinong for
$146,250 which was the original contribution for the share capital. On September
25, 2009, Xi’an Yuxing was granted the Land Use Right for approximately 88 acres
of land for 50 years by the People’s Government and Land & Resources Bureau
of Hu County. The company will use the proceeds from the public offering on July
24, 2009 to build 12 additional greenhouse facilities to further strengthen its
R&D base and support its greenhouse capacity expansion.
  6
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 As a
result, the Company’s corporate structure is as follows:
 
 
 
 The
Company, through its subsidiaries are engaged in the following business:
Techteam Jinong’s main business is to produce and sell fertilizers, and Xi’an
Jintai’s and Xi’an Yuxing’s main business is to conduct research and development
on new fertilizer products and sell high quality agricultural
products.
 
 NOTE
2 – BASIS OF PRESETATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
 
 Principles of
consolidation
 
 The
accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries—Green Agriculture, Techteam Jinong,
Xi’an Jintai and Xi’an Yuxing. 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 estimates.
  7
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 Cash and cash
equivalents
 
 For
statement of cash flows purposes, the Company considers 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. Cash overdraft as of balance sheet date will be reflected as
liabilities in the balance sheet. As of September 30, 2009 and June 30, 2009,
cash and cash equivalents amounted to $35,156,962 and $17,795,447
respectively.
 
 Accounts
receivable
 
 The
Company's policy is to maintain reserves for potential credit losses on accounts
receivable. Management reviews the composition of accounts receivable and
analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves. As of September 30, 2009 and June 30,
2009, the Company had accounts receivable of $11,709,073 and $8,167,715, net of
allowance for doubtful accounts of $119,304 and $119,178
respectively.
 
 Advances to
suppliers
 
 The
Company makes advances to certain vendors for purchase of its materials. As of
September 30, 2009 and June 30, 2009, the advances to suppliers amounted to
$77,423 and $95,255 and 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.
 
 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 property, plant, 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
                  10-40
      yearsAgricultural
      assets
                  8
      yearsMachinery
      and equipment
                  5-15
      yearsVehicles
                  3-5
      years
  8
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  Leasehold improvements are
amortized over the lease term or the estimated useful life, whichever is
shorter.
  Impairment
 
 The
Company applies the provisions of Statement of Financial Accounting Standard No.
144, "Accounting for the
Impairment or Disposal of Long-Lived Assets"(ASC
360), issued by
the Financial Accounting Standards Board ("FASB"). FAS No. 144 (ASC 360)requires that
long-lived assets be reviewed 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.
 
 The
Company tests long-lived assets, including property, plant and equipment and
intangible assets subject to periodic amortization, for recoverability at least
annually or more frequently upon the occurrence of an event or when
circumstances indicate that the net carrying amount is greater than its fair
value. Assets are grouped and evaluated at the lowest level for their
identifiable cash flows that are largely independent of the cash flows of other
groups of assets. The Company considers historical performance and future
estimated results in its evaluation of potential impairment and then compares
the carrying amount of the asset to the future estimated cash flows expected to
result from the use of the asset. If the carrying amount of the asset exceeds
estimated expected undiscounted future cash flows, the Company measures the
amount of impairment by comparing the carrying amount of the asset to its fair
value. The estimation of fair value is generally measured by discounting
expected future cash flows as the rate the Company utilizes to evaluate
potential investments. The Company estimates fair value based on the information
available in making whatever estimates, judgments and projections are considered
necessary. There was no impairment of long-lived assets for the three months
ended September 30, 2009.
 
 Revenue
recognition
 
 The
Company's revenue recognition policies are in compliance with Staff Accounting
Bulletin (SAB) 104 (ASC 605). 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, no other significant obligations of the
Company exist and collectibility is reasonably assured. Payments received before
all of the relevant criteria for revenue recognition are satisfied are recorded
as advances from customers. As of September 30, 2009 and June 30, 2009, the
Company had advances from customers of $67,458 and $24,000,
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.
  9
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 Advertising
costs
 
 The
Company expenses the cost of advertising as incurred or, as appropriate, the
first time the advertising takes place. Advertising costs for the fiscal periods
ended September 30, 2009 and June 30, 2009 were $5,850 and $62,717,
respectively.
 
 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.
 
 The
Company records a valuation allowance for deferred tax assets, if any, based on
its estimates of its future taxable income as well as its tax planning
strategies when it is more likely than not that a portion or all of its deferred
tax assets will not be realized. If the Company is able to utilize more of its
deferred tax assets than the net amount previously recorded when unanticipated
events occur, an adjustment to deferred tax assets would increase the Company
net income when those events occur. The Company does not have any significant
deferred tax assets or liabilities in the PRC tax jurisdiction.
 
 Foreign currency
translation
 
 The
reporting currency of the Company is the US dollar. The functional currency of
China Green Agriculture and Green Holding is the US dollar. The functional
currency of Jinong and its subsidiary Xi’an Jintai 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.
 
 Accumulated
other comprehensive income amounted to $2,432,200 and $2,457,130 as of September
30, 2009 and June 30, 2009, respectively.
  10
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 Fair values of financial
instruments
 
 The
Company adopts the standard of fair value of financial instruments. The standard
requires that the Company disclose estimated fair values of financial
instruments. The Company's financial instruments primarily consist of cash and
cash equivalents, accounts receivable, other receivables, advances to suppliers,
accounts payable, other payable, 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.
 
 Segment
reporting
 
 The
Company adopts the standard of segment reporting. The standard 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.
 
 The
Company was organized into three main business segments: fertilizer production
(Jinong), agricultural products production (Jintai) and future research and
development center (Yuxing). The following table presents a summary of operating
information and quarter-end balance sheet information for the three months ended
September 30, 2009 and 2008, respectively.
  11
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For
      the three months ended September 30,2009
                      
                      
                      2008(unaudited)
                      
                      
                      (unaudited)Revenues
      from unaffiliated customers:Jinong
                      
                      $
                      10,178,649
                      
                      
                      $
                      7,625,501Jintai
                      
                      
                      1,098,171
                      
                      
                      
                      1,254,501Consolidated
                      
                      $
                      11,276,820
                      
                      
                      $
                      8,880,002Operating
      income :Jinong
                      
                      $
                      6,124,274
                      
                      
                      $
                      4,125,086Jintai
                      
                      
                      437,906
                      
                      
                      
                      454,104Yuxing
                      
                      
                      (17,846
                      )
                      
                      
                      -Reconciling
      item (1)
                      
                      
                      -
                      
                      
                      
                      -Reconciling
      item (2)
                      
                      
                      (335,226
                      )
                      
                      
                      (283,586
                      )Consolidated
                      
                      $
                      6,209,108
                      
                      
                      $
                      4,295,604Net
      income:Jinong
                      
                      $
                      5,159,879
                      
                      
                      $
                      3,521,739Jintai
                      
                      
                      437,956
                      
                      
                      
                      454,229Yuxing
                      
                      
                      (17,847
                      )
                      
                      
                      -Reconciling
      item (1)
                      
                      
                      2,512
                      
                      
                      
                      4,043Reconciling
      item (2)
                      
                      
                      (335,226
                      )
                      
                      
                      (482,084
                      )Consolidated
                      
                      $
                      5,247,274
                      
                      
                      $
                      3,497,927Depreciation
      and Amortization:Jinong
                      
                      $
                      444,215
                      
                      
                      $
                      367,103Jintai
                      
                      
                      25,346
                      
                      
                      
                      27,731Yuxing
                      
                      
                      17,839Consolidated
                      
                      $
                      487,400
                      
                      
                      $
                      394,834Interest
      expense:Jinong
                      
                      $
                      61,309
                      
                      
                      $
                      122,365Reconciling
      item (1)
                      
                      
                      -Reconciling
      item (2)
                      
                      
                      -
                      
                      
                      
                      198,498Consolidated
                      
                      $
                      61,309
                      
                      
                      $
                      320,864Capital
      Expenditure:Jinong
                      
                      $
                      2,583,988
                      
                      
                      $
                      42,120Yuxing
                      
                      
                      10,703,302
                      
                      
                      
                      -Consolidated
                      
                      $
                      13,287,290
                      
                      
                      $
                      42,120Identifiable
      assets:
                      
                      As
      of 09/30/09
                      
                      
                      As
      of 06/30/09Jinong
                      
                      $
                      72,836,864
                      
                      
                      $
                      53,096,423Jintai
                      
                      
                      8,998,140
                      
                      
                      
                      8,250,834Yuxing
                      
                      
                      10,685,981Reconciling
      item (1)
                      
                      
                      3,438,492
                      
                      
                      
                      30,995Reconciling
      item (2)
                      
                      
                      55,153
                      
                      
                      
                      240,174Consolidated
                      
                      $
                      96,014,630
                      
                      
                      $
                      61,618,426
  12
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
  (1)
Reconciling amounts refer to the unallocated assets or expenses of Green
Agriculture Holding.
  (2)
Reconciling amounts refer to the unallocated assets or expenses of China Green
Agriculture.
 
 Statement of cash
flows
 
 In
accordance with Statement of Financial Accounting Standards No. 95, "Statement
of Cash Flows" (ASC 230), cash flows from the Company's operations is calculated
based upon 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.
 
 Recent accounting
pronouncements
 
 In June
2009, the FASB issued ASC 105 (previously SFAS No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles
("GAAP") - a replacement of FASB Statement No. 162), which will become
the source of authoritative accounting principles generally accepted in the
United States recognized by the FASB to be applied to nongovernmental entities.
The Codification is effective in the third quarter of 2009, and accordingly,
the Quarterly Report on Form 10-Q for the quarter ending September 30, 2009
and all subsequent public filings will reference the Codification as the sole
source of authoritative literature. The Company does not believe that this will
have a material effect on its consolidated financial
statements.
  13
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 In
June 2009, the FASB issued amended standards for determining whether to
consolidate a variable interest entity. These amended standards eliminate a
mandatory quantitative approach to determine whether a variable interest gives
the entity a controlling financial interest in a variable interest entity in
favor of a qualitatively focused analysis, and require an ongoing reassessment
of whether an entity is the primary beneficiary. These amended standards are
effective for us beginning in the first quarter of fiscal year 2010 and we are
currently evaluating the impact that adoption will have on our consolidated
financial statements.
 
 In June
2009, the FASB issued ASC 855 (previously SFAS No. 165, Subsequent Events), which
establishes general standards of accounting for and disclosures of events that
occur after the balance sheet date but before the financial statements are
issued or available to be issued. It is effective for interim and annual periods
ending after June 15, 2009. There was no material impact upon the adoption of
this standard on the Company’s consolidated financial statements.
 
 In August
2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which amends
ASC Topic 820, Measuring
Liabilities at Fair Value, which provides additional guidance on the
measurement of liabilities at fair value. These amended standards clarify that
in circumstances in which a quoted price in an active market for the identical
liability is not available, we are required to use the quoted price of the
identical liability when traded as an asset, quoted prices for similar
liabilities, or quoted prices for similar liabilities when traded as assets. If
these quoted prices are not available, we are required to use another valuation
technique, such as an income approach or a market approach. These amended
standards are effective for us beginning in the fourth quarter of fiscal year
2009 and are not expected to have a significant impact on our consolidated
financial statements.
 
 NOTE
3 – INVENTORIES
 
 Inventories
consist of the following as of September 30, 2009 and June 30,
2009:
 
 September 30, 2009
                        
                        
                        June 30, 2009Raw
      materials
                        
                        $
                        223,721
                        
                        
                        $
                        67,046Supplies
      and packing materials
                        
                        
                        89,558
                        
                        
                        
                        87,081Work
      in progress
                        
                        
                        7,658,472
                        
                        
                        
                        6,901,124Finished
      goods
                        
                        
                        172,165
                        
                        
                        
                        106,279Totals
                        
                        $
                        8,143,916
                        
                        
                        $
                        7,162,249
  14
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 NOTE
4 – OTHER ASSETS
 
 As of
September 30, 2009 and June 30, 2009, other assets comprised of the
following:
 
 September 30, 2009
                                
                                
                                June 30, 2009Other
      receivable
                                
                                $
                                125,077
                                
                                
                                $
                                91,334Promotion
      material
                                
                                
                                35,749
                                
                                
                                
                                37,879Total
                                
                                $
                                160,826
                                
                                
                                $
                                129,213
 
 NOTE
5 - PROPERTY, PLANT AND EQUIPMENT
 
 Property,
plant and equipment consist of the following as of September 30, 2009 and June
30, 2009:
  September 30, 2009
                      
                      
                      June 30, 2009Building
      and improvements
                      
                      $
                      18,833,392
                      
                      
                      $
                      10,632,055Vehicles
                      
                      
                      88,670
                      
                      
                      
                      23,784Machinery
      and equipment
                      
                      
                      12,431,754
                      
                      
                      
                      8,620,173Agriculture
      assets
                      
                      
                      1,335,944
                      
                      
                      
                      1,334,538Total
                      
                      
                      32,689,760
                      
                      
                      
                      20,610,551Less:
      accumulated depreciation
                      
                      
                      (3,716,555
                      )
                      
                      
                      (3,268,897
                      )Total
      property, plant and equipment
                      
                      $
                      28,973,205
                      
                      
                      $
                      17,341,654
 
 Depreciation
expenses for the three months ended September 30, 2009 and 2008 were $444,215
and $368,094, respectively.
 
 Agriculture
assets consist of reproductive trees that are expected to be commercially
productive for a period of eight years.
 
 Construction
in Progress:
 
 As of
September 30, 2009 and June 30, 2009, construction in progress, representing
construction for a new product line, amounted to $0 and $9,609,649,
respectively.
 
 NOTE
6 - INTAGIBLE ASSETS
 
 The
intangible assets comprised of following at September 30, 2009 and June 30,
2009:
 
 September 30, 2009
                    
                    
                    June 30, 2009Land use right, net
                    
                    $
                    11,576,887
                    
                    
                    $
                    895,808Technology know-how, net
                    
                    
                    157,525
                    
                    
                    
                    177,357Total
                    
                    $
                    11,734,412
                    
                    
                    $
                    1,073,165
  15
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 LAND USE
RIGHT
 
 Under PRC
governmental regulations, the Government owns all land. However, the government
grants the user a “land use right” (the Right) to use the land. The Company has
recognized the amounts paid for the acquisition of rights to use land as an
intangible asset and amortizes the cost over a period of fifty
years.
  A former
shareholder of Jinong contributed the land use right for a parcel of land of
approximately 7.6 acres on August 16, 2001. The land use right was recorded at
cost of $1,065,447. On August 13, 2009, Xi’an Yuxing was granted a certificate
of Land Use Right for a parcel of land of approximately 88 acres.The purchase cost is
recorded at $10,703,302. Both certificates of land use right are valid for fifty
years. The land use right consists of the followings as of September 30, 2009
and June 30, 2009:
 
 September 30, 2009
                    
                    
                    June 30, 2009Land
      use right
                    
                    $
                    11,768,749
                    
                    
                    $
                    1,064,326Less:
      accumulated amortization
                    
                    
                    (191,862
                    )
                    
                    
                    (168,518
                    )Total
                    
                    $
                    11,576,887
                    
                    
                    $
                    895,808
 
 TECHNOLOGY
KNOW-HOW
 
 A former
shareholder of Jinong contributed certain technology know-how on August 16,
2001. The technology know-how is recorded at cost of $859,230. This technology
is the special formula to produce humid acid. The technology know-how is valid
for 10 years. The technology know-how consists of the following as of September
30, 2009 and June 30, 2009:
 
 September 30, 2009
                    
                    
                    June 30, 2009Technology
      Know-how
                    
                    $
                    859,230
                    
                    
                    $
                    858,326Less:
      accumulated amortization
                    
                    
                    (701,705
                    )
                    
                    
                    (680,969
                    )Total
                    
                    $
                    157,525
                    
                    
                    $
                    177,357
 
 Total
amortization expenses of intangible assets for the fiscal years ended September
30, 2009 and 2008 amounted to $43,185 and $26,740, respectively.
 
 Amortization
expenses of intangible assets for the next five years after September 30, 2009
are as follows:
 
 September
      30, 2010
                          
                          $
                          321,298September
      30, 2011
                          
                          
                          306,977September
      30, 2012
                          
                          
                          235,375September
      30, 2013
                          
                          
                          235,375September
      30, 2014
                          
                          
                          235,375
  16
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 NOTE
7 - AMOUNT DUE TO RELATED PARTIES
 
 The
amount due to related parties consisted of the advances to the Company’s
officers and shareholders, and was unsecured, non-interest bearing and due on
demand. As of September 30, 2009 and June 30, 2009, the amount due to
related parties was $69,464 and $31,160, respectively.
 
 NOTE
8 - ACCRUED EXPENSES AND OTHER PAYABLES
 
 Accrued
expenses and other payables of the following as of September 30, 2009 and June
30, 2009:
 
 September 30, 2009
                      
                      
                      June 30, 2009Payroll
      payable
                      
                      $
                      13,608
                      
                      
                      $
                      8,766Welfare
      payable
                      
                      
                      178,053
                      
                      
                      
                      177,865Accrued
      expenses
                      
                      
                      1,414,600
                      
                      
                      
                      791,172Other
      levy payable
                      
                      
                      113,484
                      
                      
                      
                      113,365Total
                      
                      $
                      1,719,745
                      
                      
                      $
                      1,091,168
 
 NOTE 9 - LOAN
PAYABLES
 
 As of
September 30, 2009 and June 30, 2009, the loan payables were as
follows:
 
 September 30, 2009
                      
                      
                      June 30, 2009Short
      term loans payable:Xi’an
      Commercial Bank Xincheng Branch
                      
                      $
                      2,193,752
                      
                      
                      $
                      2,191,445Xi’an
      Beilin District Rural Credit Union Wenyibeilu Branch
                      
                      
                      -
                      
                      
                      
                      555,166Agriculture
      Bank Yanglingshifangqu Branch
                      
                      
                      -
                      
                      
                      
                      423,679Total
                      
                      $
                      2,193,752
                      
                      
                      $
                      3,170,290
 
 As of
September 30, 2009, the Company had a loan payable of $2,193,752 to Xi’an
Commercial Bank Xincheng Branch in China, with an annual interest rate of
7.965%, and due on March 30, 2010. The loan is secured by the land use right and
property of the Company. On July 24, 2009, the Company repaid in full all of the
outstanding balance under the short term loans from Agriculture Bank
Yanglingshifangqu Branch. On August 27, 2009, the Company repaid in full all of
the outstanding balance under the short term loans from Xi’an Beilin District
Rural Credit Union Wenyibeilu Branch.
 
 The
interest expenses from these short-term loans are $61,309 and $122,365 for three
months ended September 30, 2009 and 2008.
  17
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 NOTE
10 - TAX PAYABLES
 
 Tax
payables consist of the following as of September 30, 2009 and June 30,
2009:
 
 September 30, 2009
                    
                    
                    June 30, 2009VAT
      payable
                    
                    $
                    2,191,772
                    
                    
                    
                    1,216,191Income
      tax payable
                    
                    
                    2,972,679
                    
                    
                    
                    1,290,777Other
      levies
                    
                    
                    380,240
                    
                    
                    
                    380,860Total
                    
                    $
                    5,544,691
                    
                    
                    
                    2,887,828
 
 NOTE
11 – ADVANCES FROM UNRELATED COMPANIES
 
 Advances
from unrelated companies were $298,546 and $326,970 at September 30, 2009 and
June 30, 2009, respectively. The advances were due on demand, unsecured and
non-interest bearing.
 
 NOTE
12 - OTHER INCOME (EXPENSES)
 
 Other
incomes (expenses) mainly consist of interest expenses and interest
income.
 
 NOTE
13 - INCOME TAXES
 
 The
Company adopts the standard which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each period end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be
realized.
  Since
January 1, 2008, Jinong has been subject to income tax at a rate of 15%. Xi’an
Jintai has been exempt from paying income tax since its formation as it produces
products that qualify for a government tax exemption.
  18
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
  The
provision for income taxes as of September 30, 2009 and 2008 consisted of the
following:
  September 30, 2009
                          
                          
                          September 30, 2008Current
      income tax - Provision for China income and local tax
                          
                          $
                          930,757
                          
                          
                          $
                          621,483Deferred
      taxes
                          
                          
                          -
                          
                          
                          
                          -Total
      provision for income taxes
                          
                          $
                          930,757
                          
                          
                          $
                          621,483
 
 The
following table reconciles the U.S. statutory rates to the Company’s effective
tax rate as of September 30, 2009 and 2008:
 
 September 30, 2009
                      
                      
                      September 30, 2008Tax
      at statutory rate
                      
                      
                      34
                      %
                      
                      
                      34
                      %Foreign
      tax rate difference
                      
                      
                      (19
                      )%
                      
                      
                      (19
                      )%Net
      operating loss in other tax jurisdiction for where no benefit is
      realized
                      
                      
                      (8
                      )%
                      
                      
                      (8
                      )%Total
                      
                      
                      7
                      %
                      
                      
                      7
                      %
 
 Due to
non-operation in U.S. and tax free status in China, the Company had no deferred
tax as of September 30, 2009 and 2008.
 
 NOTE
14 - CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS
 
 The
Company's operations are all carried out 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 the North America
and Western Europe. These include risks associated with, among others, the
political, economic and legal environments and foreign currency exchange. The
Company's results may be adversely affected by changes in governmental policies
with respect to laws and regulations, anti-inflationary measures, currency
conversion and remittance abroad, and rates and methods of taxation, among other
things.
 
 MAJOR CUSTOMERS AND
VENDORS
 
 There
were three vendors from which the Company purchased more than 10% of its raw
materials for the three months ended September 30, 2009 with each vendor
individually accounting for about 13%, 12% and 10%. Accounts payable to those
venders amounted to $0 as
of September 30, 2009.
 
 There
were two vendors from which the Company purchased more than 10% of its raw
materials for the three months ended September 30, 2008 with each vendor
individually accounting for about 14% and 11%. Accounts payable to those venders
amounted to $15,806 as of
September 30, 2008.
  19
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 There was
no customer that accounted over 10% of the total sales as of three months ended
September 30, 2009 and September 30, 2008.
 
 NOTE
15– STOCKHOLDERS’ EQUITY
 
 COMMON
STOCK
 
 On
December 26, 2007 the Company issued 6,313,617 shares of common stock to 31
accredited investors (the “Investors”) at $3.25 per share in a private placement
(the “Private Placement”). If any governmental agency in the PRC challenges or
otherwise takes any action that adversely affects the transactions contemplated
by the Exchange Agreement, and the Company cannot undo such governmental action
or otherwise address the material adverse effect to the reasonable satisfaction
of the Investors within sixty (60) days of the occurrence of such governmental
action, then, upon written demand from an Investor, the Company shall promptly,
and in any event within thirty (30) days from the date of such written demand,
pay to that Investor, as liquidated damages, an amount equal to that Investor’s
entire Investment Amount with interest thereon from the Closing date until the
date paid at the rate of 10% per annum. As a condition to the receipt of such
payment, the Investor shall return to the Company for cancellation of the
certificates evidencing the Shares acquired by the Investor under the Agreement.
The Company has classified the equity as temporary equity, as “Common Stock,
$.001 par value, 6,313,617 shares subject to redemption”. In July 2009, the
Company signed the Waiver and Consent with the Investors where the Investors
consented to waive all their rights associated with the liquidated damages
arising from any material adverse effect due to PRC governmental actions as
stated above. As a result, such temporary equity was no longer necessary for the
purposes of the Company’s balance sheet as of September 30, 2009.
 
 The
Company issued 977,948 shares of common stock to consultants relating to the
Private Placement. Net proceeds from the Private Placement were $18,602,723, of
which $188,388 was received in January 2008. The direct costs related to this
placement, including legal and professional fees, were deducted from the related
proceeds and the net amount in excess of par value was recorded as additional
paid-in capital. The total of $4,250,000 was placed in escrow and booked as
restricted cash as of December 31, 2007. A total of $4,250,000 was placed in
escrow pursuant to a Securities Purchase Agreement and the Holdback Make Good
Agreement entered into in connection with the Private Placement for the
following purposes:
 
 1.           $2,000,000
was held pending the company hiring a qualified CFO. The Company appointed a CFO
in April 2008 and $2,000,000 was released to the Company
accordingly.
 2.           $2,000,000
was held pending the company hiring two independent directors, therefore
constituting a majority independent directors in the board. The Company
appointed a majority of independent directors in April 2008 and $2,000,000 was
released to the Company accordingly.
 3.           $250,000
was held for the retaining of an Investors Relation firm. The Company retained
an Investors Relation firm in January 2008 and the money is being released to
the company on a monthly basis.
  20
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 As of
September 30, 2009, the balance of restricted cash is $58,813.
 
 In
connection with the Securities Purchase Agreement and the Private Placement, the
Company also entered into a registration rights agreement (the “Registration
Rights Agreement”) and a lockup agreement (the “Lockup Agreement”). Among other
things, the Securities Purchase Agreement establishes targets for after tax net
income and earnings per share for our fiscal year ending June 30, 2009 at not
less than $12,000,000 and $0.609, respectively (the “2009 Targets”); In order to
secure our obligations to meet the 2009 profit target and earnings per share
target, Mr. To, the nominee holder for our CEO Mr. Tao Li, has placed 3,156,808
shares of Common Stock (“2009 Make Good Shares”) into an escrow account pursuant
to the terms of the Make Good Escrow Agreement by and among us, Mr. To, the
Investors and the escrow agent named therein. In the event we do not achieve
either of the 2009 Targets, the 3,156,808 shares of Common Stock will be
conveyed to the Investors pro-rata in accordance with their respective
investment amount for no additional consideration. In the event that we meet the
2009 Targets, the 3,156,808 shares will be transferred to Mr. Tao
Li.
 
 The
Company issued 4,025,000 shares of common stock at a public offering price of
$7.15 per share and received a total 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 Securities and
Exchange Commission on June 12, 2009. The Company intends to use all of the
net proceeds to expand its production of agricultural products through the
construction of new greenhouse facilities.
 
 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 under the preferred stock under the
registration statement on Form S-3, we 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
September 30, 2009, 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.
  21
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 NOTE
16 - STATUTORY RESERVES
 
 As
stipulated by the Company Law of the PRC, net income after taxation can only be
distributed as dividends after appropriation has been made for the
following:
  i)
              Making
      up cumulative prior years' losses, if
any;
 ii)
              Allocations
      to the "Statutory surplus reserve" of at least 10% of income after tax, as
      determined under PRC accounting rules and regulations, until the fund
      amounts to 50% of the Company's registered
  capital;
 iii)
              Allocations
      of 5-10% of income after tax, as determined under PRC accounting rules and
      regulations, to the Company's "Statutory common welfare fund", which is
      established for the purpose of providing employee facilities and other
      collective benefits to the Company's employees;
  and
 iv)
              Allocations
      to the discretionary surplus reserve, if approved in the shareholders'
      general meeting.
  In
accordance with the Chinese Company Law, the company has allocated 10% of its
net income to surplus. The balance as of September 30, 2009 and June 30, 2009
amounted to $4,026,529 and $3,468,530, respectively.
  NOTE
17 - STOCK OPTIONS
 
 Effective
January 1, 2006, the Company adopted the standard which requires the
measurement and recognition of compensation expense for all share-based payment
awards made to employees and directors, including stock options based on their
fair values.
  On
January 31, 2008, the Company issued 123,000 stock options to its employees with
an exercise price of $3.25 and term of three years. Compensation expense as of
June 30, 2008 recorded was $388,452. On June 24, 2008, the employees requested a
cashless exercise of 76,500 options at an exercise price of $3.25 per share.
Based on the formula provided in the option agreements, the employees received
67,685 shares. On August 17, 2009, the employees requested a cashless exercise
of 46,500 options and received 35,620 shares of common stock.
 
 The
assumptions used in calculating the fair value of options granted using the
Black-Scholes option pricing model are as follows:
 
 Risk-free
      interest rate
                      2.27%Expected
      life of the options
                      3
      yearExpected
      volatility
                      252%Expected
      dividend yield
                      0
      %
  22
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 On April
8, 2008, the Company issued 35,000 stock options to two directors with an
exercise price of $6 and a term of two years. 10,500 options vested on June 29,
2008, and 24,500 options vested on July 1, 2009. On August 17, 2009, one
director requested a cashless exercise and received 5,681 shares of common
stock.
 
 The
assumptions used in calculating the fair value of options granted using the
Black-Scholes option pricing model are as follows:
 
 Risk-free
      interest rate
                    1.87%Expected
      life of the options
                    2
      yearExpected
      volatility
                    540%Expected
      dividend yield
                    0
      %
 
 On April
23, 2008, the Company issued 40,000 stock options to its Chief Financial Officer
at that time with an exercise price of $6 and a term of two years. 12,000
options vested on June 29, 2008, and 28,000 options were forfeited due to the
former CFO’s resignation.
 
 On
September 10, 2008, the Company issued 28,000 stock options to its Chief
Financial Officer with an exercise price of $4 and a term of two
years.  The options will vest on July 1, 2009.  On August
17, 2009, the CFO requested a cashless exercise and received 19,938 shares of
common stock.
 
 The
assumptions used in calculating the fair value of options granted using the
Black-Scholes option pricing model are as follows:
 
 Risk-free
      interest rate
                    2.22%Expected
      life of the options
                    2
      yearExpected
      volatility
                    584%Expected
      dividend yield
                    0
      %
 
 Options
outstanding as of June 30, 2009 and related weighted average price and intrinsic
value are as follows:
 
 Exercise
                        Prices
                      
                      Total
                        Options
                        Outstanding
                      
                      
                      Weighted
                        Average
                        Remaining
                        Life
                        (Years)
                      
                      
                      Total
                        Weighted
                        Average
                        Exercise
                        Price
                      
                      
                      Options
                        Exercisable
                      
                      
                      Aggregate
                        IntrinsicValue$
                      3.25-$6
                      
                      
                      37,000
                      
                      
                      
                      0.85
                      
                      
                      $
                      6.00
                      
                      
                      
                      37,000
                      
                      
                      
                      211,640
  23
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
  The
following table summarizes the options outstanding as of June 30,
2009:
  Options
                            OutstandingOutstanding,
      July 1, 2007
                          
                          
                          -Granted
                          
                          
                          198,000Forfeited/Canceled
                          
                          
                          -Exercised
                          
                          
                          (76,500
                          )Outstanding,
      July 1, 2008
                          
                          
                          121,500Granted
                          
                          
                          28,000Forfeited/Canceled
                          
                          
                          (28,000
                          )Exercised
                          
                          
                          -Outstanding,
      June 30, 2009
                          
                          
                          121,500Exercised
                          
                          
                          (84,500
                          )Outstanding,
      September 30, 2009
                          
                          
                          37,000
 
 NOTE
18 - COMMITMENT
  From July
2007, the company signed an office lease with the shareholder and started to pay
the rent for $1,704 per month. The Company recorded rent expenses of $5,113 and
$5,104 as rent expenses for the three months ended September 30, 2008 and 2008,
respectively. Rent expenses for the 5 years after September 30, 2008 is as
follows:
 
 September
      30, 2010
                    
                    $
                    20,453September
      30, 2011
                    
                    
                    20,453September
      30, 2012
                    
                    
                    20,453September
      30, 2013
                    
                    
                    20,453September
      30, 2014
                    
                    
                    20,453Total
                    
                    $
                    102,265
 
 NOTE
19 – SUBSEQUENT EVENTS
 
 3,156,808
shares of Common Stock (“2009 Make Good Shares”) were placed into an escrow
account pursuant to the terms of the Make Good Escrow Agreementin order to secure the
Company’s obligations to meet the 2009 Targetsestablished by theSecurities
Purchase Agreement. We met the 2009 Targets for the fiscal year of 2009, and
consequently, the 3,156,808 shares were transferred to Mr. Tao Li on October 9,
2009 pursuant to the Make Good Escrow Agreement.
  24




Item
      2.
            Management’s
      Discussionand 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 market 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. 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”, formerly
known as Discovery Technologies, Inc.), 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
People’s Republic of China (the “PRC”); (vi) Xi’an Jintai Agriculture Technology
Development Company (“Jintai”), a wholly-owned subsidiary of Techteam in the PRC
and (vii) Xi’an Hu County Yuxing Agriculture Technology Development Co., Ltd.
(“Yuxing”), a wholly-owned subsidiary of Techteam in the PRC.
 
 Overview
 
 We,
through our indirect wholly-owned subsidiaries, Jinong, Jintai and Yuxing, are
engaged in the following business: (i) research, development, production and
distribution of humic acid based compound fertilizer (conducted through Jinong);
and (ii) development, production and distribution of agricultural products
(conducted through Jintai and will also be conducted through Yuxing), namely
top-grade fruits, vegetables, flowers and colored seedlings. Jintai also serves
as a research and development base for our fertilizer products. The fertilizer
business which is our main business, generated 90.3% and 85.9% of our total
revenues in the three months ended September 30, 2009 and 2008,
respectively.
 
 We employ
a multi-tiered product strategy whereby we tailor our products to different
needs and preferences of the different geographic regions across China. Each
region has varying climate and soil conditions and grows different crops which
require different fertilizers to address local unique conditions. As of
September 30, 2009, we developed and produced 137 different fertilizer products
and sold approximately 4,315 and 4,114 metric tons of fertilizer for the years
ended September 30, 2009 and 2008, respectively. The five provinces in which we
had the most sales accounted for a total of 36.0% of our fertilizer revenue for
the three months ended September 30, 2009. These provinces were Shandong
(10.5%), Shaanxi (8.3%), Heilongjiang (6.4%), Henan (5.6%) and Anhui
(5.2%).
 
 Our
fertilizers are sold through a large number of distributors and we are not
dependent on any one or group of distributors. As of September 30, 2009, we had
approximately 537 distributors in China. The top five distributors accounted for
a total of 3.3% of fertilizer revenues for the three months ended September 30,
2009.
  25
  Through
our wholly owned subsidiary Jintai, we sell high quality flowers, green
vegetables and fruits to airlines, hotels and restaurants, among other
customers. We also currently use Jintai to conduct our fertilizer research and
development activities. Jintai has a 137,000 square meter greenhouse facility.
The four provinces, which accounted for 100% of our agriculture product revenue
for the three months ended September 30, 2009, were Shaanxi (89.4%), Shanxi
(5.1%), Sichuan (2.8%) and Henan (2.6%). Jintai’s top five customers accounted
for a total of 45.9% of Jintai’s sales for the three months ended September 30,
2009.
 
 Recent
Developments
 
 During
the three months ended September 30, 2009, we launched three new fertilizer
products under the Company’s premium brand, Jinong. These new products accounted
for revenues of approximately $849,711, representing 8.3% of our total revenues
from our fertilizer products sold for the quarter ended September 30,
2009.
 
 Our new
production line with 40,000 metric ton capacity adjacent to our existing 15,000
metric ton capacity started production in August 2009. The new facility
increased our production capacity from 15,000 tons per year to 55,000 tons per
year to meet the growing demand for our organic compound fertilizer products. We
believe that we are the first company in the PRC to build an entirely automated
manufacturing system that precisely measures and mixes key ingredients to
formulate both liquid and highly concentrated fertilizer (i.e. powder
fertilizer) products.
 
 In July
2009, we received net proceeds of approximately $27.1 million from a public
offering of our common stock. The majority of the proceeds are being used to
expand our greenhouse facility, which requires an aggregate investment of
approximately $38.6 million over the course of two years from the first quarter
of fiscal year of 2010. On August 14, 2009, Yuxing, a newly formed corporation
under the laws of the PRC at Hu County in Shaanxi province, became a
wholly-owned subsidiary of Jinong. In September 2009, Yuxing obtained the land
use right over a piece of 353,850-square-meter (or approximately 88-acre) land
for a term of 50 years from the local Chinese government and will start the
design phase of the new 95,000 square-meter greenhouse facility.
 
 Results of
Operations
 
 THREE
MONTHS ENDED SEPTEMBER 30, 2009 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30,
2008.
 
 The
following table shows the operating results of the Company on a consolidated
basis for the three months ended September 30, 2009 and 2008.
 
 Three months ended
                  
                  
                  Three months endedSeptember 30, 2009
                  
                  
                  September 30, 2008Net
      Sales
                  
                  $
                  11,276,820
                  
                  
                  $
                  8,880,002Cost
      of Goods Sold
                  
                  
                  (4,317,862
                  )
                  
                  
                  (3,930,893
                  )Gross
      Profit
                  
                  
                  6,958,958
                  
                  
                  
                  4,949,109Selling
      Expenses
                  
                  
                  (215,672
                  )
                  
                  
                  (216,376
                  )General
      and Administrative Expenses
                  
                  
                  (534,179
                  )
                  
                  
                  (437,129
                  )Income
      from Operations
                  
                  
                  6,209,108
                  
                  
                  
                  4,295,604Total
      Other Income (expense)
                  
                  
                  (31,077
                  )
                  
                  
                  (176,194
                  )Income
      Before Income Taxes
                  
                  
                  6,178,031
                  
                  
                  
                  4,119,410Provision
      for Income Taxes
                  
                  
                  (930,757
                  )
                  
                  
                  (621,483
                  )Net
      Income
                  
                  
                  5,247,274
                  
                  
                  
                  3,497,927
  26
  Net
Sales
 
 Total net
sales for the three months ended September 30, 2009 were $11,276,820, an
increase of $2,396,818, or 27.0%, from $8,880,002 for the three months ended
September 30, 2008.
 
 Jinong’s
net sales, which accounted for 90.3% of our total net sales, mainly were driven
by the sale of humic acid based liquid compound fertilizers. For the three
months ended September 30, 2009, Jinong’s net sales increased $2,553,148, or
33.5%, to $10,178,649 from $7,625,501 from the three months ended September 30,
2008. This increase was mainly attributable to the commencement of our new
production line in August 2009 and the sales of more high-end products including
our newly released highly-concentrated powdered fertilizer
products.
 
 Jintai’s
net sales, which include sales of agricultural products, namely top-grade
fruits, vegetables, flowers and colored seedlings decreased $156,331, or 12.5%,
to $1,098,171 for the three months ended September 30, 2009 from $1,254,501 for
the same period in 2008. Sales of our butterfly orchids and red leaf flowers
accounted for 86.6% of Jintai’s sales for the three months ended September 30,
2009.
 
 Cost
of Goods Sold
 
 Total
cost of goods sold for the three months ended September 30, 2009 was $4,317,862,
an increase of $386,968, or 9.8%, from $3,930,893 for the three months ended
September 30, 2008.
 
 Jinong’s
costs of goods sold primarily consist of costs for packaging materials, raw
materials, direct labor and overhead allocation. Cost of goods sold by Jinong
for the three months ended September 30, 2009 increased $509,418, or 15.8%, to
$3,735,364 compared to the same period in 2008. As a percentage of total net
sales, cost of goods sold by Jinong approximated 33.1% and 36.3% for the three
months ended September 30, 2009 and 2008, respectively.
 
 Jintai’s
costs of goods sold primarily consist of costs for direct materials, direct
labor, utility costs and depreciation expenses. Cost of goods sold by Jintai
decreased $122,450, or 17.4%, to $582,497 for the three months ended September
30, 2009 as compared to costs of goods sold of $704,947 for the three months
ended September 30, 2008. This decrease was partly due to the decreases in raw
material purchases resulting from the cultivation of our own plants as opposed
to purchasing maternal plants from other companies. As a percentage of total net
sales, cost of goods sold by Jintai approximated 5.2% and 7.9% for the three
months ended September 30, 2009 and 2008, respectively.
  27
  Gross
Profit
 
 Total
gross profit for the three months ended September 30, 2009 was $6,958,958, an
increase of $2,009,849, or 40.6%, from $4,949,109 for the three months ended
September 30, 2008. Gross profit margin approximated 61.7% and 55.7% for the
three months ended September 30, 2009 and 2008, respectively.
 
 Gross
profit from Jinong for the three months ended September 30, 2009 was $6,443,285,
an increase of $2,043,730, or 46.5%, from $4,399,555 for the three months ended
September 30, 2008. Gross profit margin from Jinong sales approximated 63.3% and
57.7% for the three months ended September 30, 2009 and 2008, respectively. The
increase in gross profit margin was mainly due to the introduction of three new
highly-concentrated powdered fertilizer products, which have high profit
margins, and an increase in sales of other high-margin products during the three
months ended September 30, 2009.
 
 Gross
profit from Jintai for the three months ended September 30, 2009 was $515,674, a
decrease of $33,881, or 6.2%, from $549,554 for the three months ended September
30, 2008. Gross profit margin from Jintai sales approximated 47% and 43.8% for
the three months ended September 30, 2009 and 2008, respectively. The increase
in gross profit margin was primarily due to a higher percentage of sales on
high-end flowers during the three months ended September 30, 2009 as compared to
the same period a year ago.
 
 Selling
Expenses
 
 Selling
expenses consist primarily of salaries of sales personnel, advertising and
promotion expenses, freight charges and related compensation. Selling expenses
were $215,672, or 1.9% of net sales, for the three months ended September 30,
2009 as compared to $216,376, or 2.4% of net sales, for the three months ended
September 30, 2008, a decrease of $704, or approximately 0.3%. The increased
salaries and marketing promotion expenses were offset by the reduction in
freight-out expenses.
 
 General
and Administrative Expenses
 
 General
and administrative expenses consisted primarily of rental expenses, related
salaries, business development, depreciation and travel expenses incurred by our
general and administrative departments and legal and professional expenses.
General and administrative expenses were $534,179, or 4.7% of net sales, for the
three months ended September 30, 2009, as compared to $437,129, or 4.9% of net
sales, for the three months ended September 30, 2008, an increase of $97,050.
The increase was largely attributable to research and development on new
products and professional service fees.
 
 Total
Other Income (Expenses)
 
 Total
other income (expenses) consisted of subsidy income from the PRC government,
interest income, interest expenses and bank charges. Total other expenses were
$31,077 and $176,194 for the three months ended September 30, 2009 and 2008,
respectively. The decrease in expenses of $145,117 was mainly due to the
decrease in interest expense on two short-term loans that were paid in full
during the three months ended September 30, 2009.
  28
  Income
Taxes
 
 Jinong is
subject to a preferred tax rate of 15% as a result of Jinong’s operation being
classified as a High-Tech project under the new PRC Enterprise Income Tax Law
(“EIT”) effective on January 1, 2008. Jinong incurred income tax expenses of
$930,757 for the three months ended September 30, 2009, as compared to $621,483
for the same period in the prior year, an increase of $309,274. This increase
was primarily attributable to our increased operating income during the three
months ended September 30, 2009.
 
 Jintai
has been exempt from paying income tax since its formation as it produces
products that fall into the tax exemption list set out in the EIT. The duration
of exemption is indefinite so long as there are no amendments to the relevant
provisions of the EIT.
 
 Net Income
 
 Our net
income was $5,247,274 for the three months ended September 30, 2009, an increase
of $1,749,347, or 50.0%, from $3,497,927 for the three months ended September
30, 2008. The increase in net income was largely due to the increase in our net
sales during the three months ended September 30, 2009. Net income as a
percentage of total net sales approximated 46.5% and 39.4% for the three months
ended September 30, 2009 and 2008, respectively.
 
 Discussion of Segment
Profitability Measures
 
 Our
business consists of three segments – the sales of fertilizer products through
Jinong ,the sales of agricultural products through Jintai and greenhouse
facility expansion through Yuxing. Each of the segments prepares its own
quarterly and annual projections with regard to marketing, research and
development, production and sales along with financial budgets.
 
 Liquidity and Capital
Resources
 
 Our
principal sources of liquidity include cash from operations, borrowings from
local commercial banks and net proceeds from our public offering in July 2009
(the “Public Offering”).
 
 As of
September 30, 2009, cash and cash equivalents were $35,156,962, an increase of
$17,361,515, or 97.6%, from $17,795,447 as of June 30, 2008, primarily due to
the net proceeds from the Public Offering. This does not include restricted cash
from our escrow account. Pursuant to the Securities Purchase Agreement and
Holdback Escrow Agreement by and among the Company and the investors in the
Private Placement, a total of $250,000 cash from the Private Placement proceeds
was escrowed for investor relations expenditures. The funds are being released
to the Company on a monthly basis to pay invoices issued by the Company’s
investor relations firm. As of September 30, 2009, there was $58,813 left in the
escrow account.
 
 The
following table sets forth a summary of our cash flows for the periods
indicated:
  29
  
 Three months ended September 30,2009
                  
                  
                  2008Net
      cash provided by operating activities
                  
                  $
                  4,291,270
                  
                  
                  $
                  411,868Net
      cash used in investing activities
                  
                  
                  (13,141,040
                  )
                  
                  
                  (42,120
                  )Net
      cash provided by/ (used in) financing activities
                  
                  
                  26,188,228
                  
                  
                  
                  (88,391
                  )Effect
      of exchange rate change on cash and cash equivalents
                  
                  
                  23,057
                  
                  
                  
                  (4,671
                  )Net
      increase in cash and cash equivalents
                  
                  
                  17,361,515
                  
                  
                  
                  306,686Cash
      and cash equivalents, beginning balance
                  
                  
                  17,795,447
                  
                  
                  
                  16,612,416Cash
      and cash equivalents, ending balance
                  
                  
                  35,156,962
                  
                  
                  
                  16,919,102
 
 Operating
Activities
 
 Net cash
provided by operating activities was $4,291,270 for the three months ended
September 30, 2009, an increase of $3,849,402 from net cash of $441,868,
provided by operating activities for the same period in 2008. The increase was
mainly due to a decrease in inventory and an increase in tax payables as a
result of payment of an accrued income tax and VAT obligation.
 
 Investing
Activities
 
 Net cash
used in investing activities in the three months ended September 30, 2009
was ,$13,141,040, an increase of $13,098,920 from $42,120 for the same period in
2008. This increase was mainly due to the obtaining land use right over a piece
of 353,850-square-meter (or approximately 88-acre) land for the expansion of our
new greenhouse facility.
 
 Financing
Activities
 
 Net cash
provided by financing activities in the three months ended September 30, 2009
was $26,188,228, mainly due to the Public Offering. The net cash used in
financing activities for the same period in 2008 was $88,391, primarily for
repayment of short-term loans.
 
 On July
24, 2009, we paid off the outstanding balance of our short-term loans from
Agriculture Bank Yanglingshifangqu Branch. On August 27, 2009, we paid off the
outstanding balance of our short term loans from Xi’an Beilin District Rural
Credit Union Wenyibeilu Branch. As of September 30, 2009, our loans payable were
as follows:
 
 Short term loans
                                          payable:
                                        
                                        Amount
                                          Outstanding
                                        
                                        Repayment Terms
                                        
                                        Expiration DateXi’an
      Commercial Bank Xincheng Branch
                                        
                                        $
                                        2,193,752
                                        
                                        Annual Interest Rate: 7.965%,
      payable  monthly
                                        
                                        03/31/2010Total
                                        
                                        $
                                        2,193,752
  30
  Accounts
Receivable
 
 Our
accounts receivable, net of allowance for doubtful account, was
$11,709,073,as of
September 30, 2009 as compared to $8,167,715 as of June 30, 2009 representing an
increase of $3,541,358. This increase was mainly due to increased sales by
Jinong.
 
 Our
allowance for doubtful accounts was $119,178 as of September 30, 2009 as
compared to $119,304 as of June 30, 2009, representing a decrease of
$126.
 
 Inventories
 
 We had
inventory of $8,143,916 as of September 30, 2009 as compared to $7,162,249 as of
June 30, 2009, representing an increase of $981,667. Of this increase, $222,116
was an increase in Jinong inventory which was mainly due to the increased
purchase of raw materials and packaging materials to meet higher production
demands and $759,551 was an increase in Jintai inventory which was mainly due to
the increased work in progress at Jintai to meet the higher demand for the
decorative flowers and for new fertilizer products testing.
 
 Accounts
Payable
 
 We had
accounts payable of $595,166 as of September 30, 2009 as compared to $926,883 as
of June 30, 2009, representing a decrease of $331,717, all of which was from
Jinong. Jintai did not have any accounts payable as of September 30,
2009.
 
 Off-Balance Sheet
Arrangements
 
 We do not
have any off-balance sheet arrangements.
 
 Critical Accounting Policies
and Estimates
 
 Management's
discussion and analysis of its financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with United States generally accepted accounting principles. Our
financial statements reflect the selection and application of accounting
policies which require management to make significant estimates and judgments.
See Note 2 to our consolidated financial statements, “Basis of Presentation and
Summary of Significant Accounting Policies.” We believe that the following
paragraphs reflect the more critical accounting policies that currently affect
our financial condition and results of operations:
 
 Use of
estimates
 
 The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the amount of revenues and
expenses during the reporting periods. Management makes these estimates using
the best information available at the time the estimates are made. However,
actual results could differ materially from those estimates.
  31
  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, no other significant obligations of the Company exist and
collectibility is reasonably assured. Payments received before all of the
relevant criteria for revenue recognition are satisfied are recorded as unearned
revenue.
 
 The
Company's revenue consists of invoiced value of goods, net of a value-added tax
(VAT). No product return or sales discount allowance is made as products
delivered and accepted by customers are normally not returnable and sales
discounts are normally not granted after products are delivered.
 
 Cash and cash
equivalents
 
 For
statement of cash flows purposes, the Company considers 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
 
 The
Company's policy is to maintain reserves for potential credit losses on accounts
receivable. Any accounts receivable that is outstanding for more than three
months will be accounted as allowance for bad debts.
 
 Segment
reporting
 
 FASB ASC
280, (previously SFAS No. 131, Segment Reporting) requires
use of the "management approach" model for segment reporting. The management
approach model is based on the way a company's management organizes segments
within the company for making operating decisions and assessing performance.
Reportable segments are based on products and services, geography, legal
structure, management structure, or any other manner in which management
disaggregates a company.
 
 During
the three months ended September 30, 2009, the Company was organized into three
main business segments: fertilizer production (Jinong), agricultural products
production (Jintai) and future research and development center
(Yuxing).
  32




Item
      3.
            Quantitative and
      Qualitative Disclosures About Market
Risk




This item does not apply to smaller
reporting company such as us.




Item
      4T.
            Controls and
      Procedures




(a)            Evaluation of disclosure controls
and procedures. At the conclusion of the period ended September 30, 2009
we carried out an evaluation, under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based
upon that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that as of the end of the period covered by this report, our
disclosure controls and procedures were effective and adequately designed to
ensure that the information required to be disclosed by us in the reports we
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the applicable rules and forms and that
such information was accumulated and communicated to our Chief Executive Officer
and Chief Financial Officer, in a manner that allowed for timely decisions
regarding required disclosure.





(b)  Changes in internal controls.
During the period covered by this report, 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.




33





PART
II OTHER
INFORMATION




Item
      5.
                Other
      Information
  Adoption
of Cash Based Compensation Plan for Fiscal Year 2010
 
 On
November 6, 2009, the Compensation Committee (the “Committee”) of the Board of
Directors of the Company adopted the Company’s Cash Based Compensation Plan for
Fiscal Year 2010 (the “2010 Plan”), effective retroactively as of July 1, 2009,
the first day of FY2010.
 
 Pursuant
to the 2010 Plan, Mr. Tao Li, President and Chief Executive Officer, receives an
increase in his annual base salary from $129,000 to $189,000 and Ms. Ying Yang,
Chief Financial Officer, receives an increase in her annual base salary from
$130,000 to $160,000.
 
 The 2010
Plan provides for the payment of cash incentive bonuses upon achievement of
certain quarterly and annual corporate financial targets, including revenue and
operating income (“Targets”). The total annual cash bonus pool for all
participants in the 2010 Plan is the lesser of 2% of our operating income for
the fiscal year 2010 or $500,000.
 
 Mr. Li’s
bonus target was set at 40% of his base salary and Ms. Yang’s at 35% of her base
salary. Bonus targets ranging from 30%, 20% and 10% of base salaries were
assigned to other senior management, mid-level management and employees,
respectively.
 
 Under the
2010 Plan, 80% of the annual base cash bonus is payable evenly based on the
quarterly performance and 20% of the annual base cash bonus is payable at the
year-end based on the full year results. For a quarterly bonus, both revenue and
operating income targets must be met for the corresponding quarter. For a
year-end bonus, if one but not both Targets has been met for the full 2010
fiscal year, then only 50% of the year-end bonus is payable. If we fail to
achieve at least 90% of the full year Targets, then no year-end bonus will be
paid. If we achieve 110% of the 2010 year-end Targets, the year-end bonus will
be 150% of base year-end bonus, which would be 30% of the annual base cash
bonus, not to exceed the total amount available in the bonus pool.
 
 The
Company elected to disclose the information above under Item 5 of Part II of
this report in lieu of disclosing it under Item 5.02 of the Current Report on
Form 8-K.





Item
      6.
            Exhibits





(a)
Exhibits





31.1 –
Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.





31.2 –
Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.





32.1 –
Certification of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.





32.2 –
Certification of Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.


34





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:
      November 12, 2009
                          
                          BY:
                          /s/Tao LiTao
      LiPresident
      and Chief Executive Officer(principal
      executive officer)Date:
      November 12, 2009
                          
                          BY:
                          /s/ Ying YangYing
      YangChief
      Financial Officer(principal
      financial officer and accounting
officer)


35