UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





(Mark
One)





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





For the quarterly
period ended December
31, 2008




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





For the transition
period from ____________ to ____________





Commission
File Number 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)





+86-29-88266368


(Issuer's
telephone number)





Indicate
by check mark whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes x  No o





Indicate
by check mark whether the registrant 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 filero
                Accelerated
      fileroNon-accelerated
      filero
                Smaller
      reporting companyxDo
      not check if a smaller reporting company





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





APPLICABLE
ONLY TO CORPORATE ISSUERS





State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date:  18,595,186 shares of Common Stock,
$.001 par value, were outstanding as of February 6, 2009.










TABLE OF
CONTENTS





PagePART
      I
                                                        
                                                        FINANCIAL
      INFORMATIONItem
      1.
                                                        
                                                        Financial
      Statements.
                                                        
                                                        F-1Consolidated
      Balance SheetsAs
      of December 31, 2008 (Unaudited) and June 30, 2008
                                                        
                                                        F-1Consolidated
      Statements of Income and Comprehensive IncomeFor
      the Three and Six Months Ended December 31, 2008 and 2007
      (Unaudited)
                                                        
                                                        F-2Consolidated
      Statements of Cash FlowsFor
      the Six Months Ended December 31, 2008 and 2007
(Unaudited)
                                                        
                                                        F-3Notes
      to Consolidated Financial StatementsAs
      of December 31, 2008 (Unaudited)
                                                        
                                                        F-4Item
      2.
                                                        
                                                        Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                                                        
                                                        3Item
      3.
                                                        
                                                        Quantitative
      and Qualitative Disclosures About Market Risk
                                                        
                                                        15Item
      4T.
                                                        
                                                        Controls
      and Procedures.
                                                        
                                                        15PART
      II
                                                        
                                                        OTHER
      INFORMATIONItem
      2.
                                                        
                                                        Unregistered
      Sales of Equity Securities and Use of Proceeds...
                                                        
                                                        15Item
      6.
                                                        
                                                        Exhibits
                                                        
                                                        16Signatures
                                                        
                                                        17Exhibits/Certifications




2




PART
I - FINANCIAL INFORMATION





Item1.
            Financial
      Statements


CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 AS
OF DECEMBER 31, 2008 AND JUNE 30, 2008
 
 December 31, 2008
                                
                                
                                June 30, 2008(Unaudited)ASSETSCurrent
      AssetsCash
      and cash equivalents
                                
                                $
                                15,079,265
                                
                                
                                
                                16,612,416Restricted
      cash
                                
                                
                                134,478
                                
                                
                                
                                193,392Accounts
      receivable, net
                                
                                
                                4,540,866
                                
                                
                                
                                3,590,552Inventories
                                
                                
                                7,294,456
                                
                                
                                
                                3,988,979Other
      assets
                                
                                
                                87,863
                                
                                
                                
                                128,091Advances
      to suppliers
                                
                                
                                584,835
                                
                                
                                
                                512,845Total
      Current Assets
                                
                                
                                27,721,763
                                
                                
                                
                                25,026,275Plant,
      Property and Equipment, Net
                                
                                
                                17,922,298
                                
                                
                                
                                18,199,456Construction
      In Progress
                                
                                
                                6,579,564
                                
                                
                                
                                5,115,492Intangible
      Assets, Net
                                
                                
                                1,126,638
                                
                                
                                
                                1,180,159Total
      Assets
                                
                                $
                                53,350,263
                                
                                
                                
                                49,521,382LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable
                                
                                $
                                206,217
                                
                                
                                
                                232,417Unearned
      revenue
                                
                                
                                342,711
                                
                                
                                
                                88,950Other
      payables and accrued expenses
                                
                                
                                504,828
                                
                                
                                
                                455,228Registration
      rights liability
                                
                                
                                704,494
                                
                                
                                
                                506,142Advances
      from other unrelated companies
                                
                                
                                340,089
                                
                                
                                
                                344,628Amount
      due to related parties
                                
                                
                                31,120
                                
                                
                                
                                31,121Taxes
      payable
                                
                                
                                3,393,308
                                
                                
                                
                                5,878,275Short
      term loans
                                
                                
                                3,822,474
                                
                                
                                
                                4,201,925Total
      Current Liabilities
                                
                                
                                9,345,240
                                
                                
                                
                                11,738,686Common
      Stock, $.001 par value, 6,313,617 shares subject to
    redemption
                                
                                
                                20,519,255
                                
                                
                                
                                20,519,255Commitment
                                
                                
                                -
                                
                                
                                
                                -Stockholders'
      EquityPreferred
      Stock, $.001 par value,  20,000,000 shares authorized, Zero
      shares issued and outstanding
                                
                                
                                -
                                
                                
                                
                                -Common
      stock, $.001 par value,   780,000,000 shares
      authorized,  12,068,085 shares issued and
      outstanding
                                
                                
                                12,068
                                
                                
                                
                                12,068Additional
      paid-in capital
                                
                                
                                1,268,766
                                
                                
                                
                                1,200,077Statury
      reserve
                                
                                
                                2,578,042
                                
                                
                                
                                1,882,797Retained
      earnings
                                
                                
                                17,224,614
                                
                                
                                
                                11,764,079Accumulated
      other comprehensive income
                                
                                
                                2,402,277
                                
                                
                                
                                2,404,419Total
      Stockholders' Equity
                                
                                
                                23,485,768
                                
                                
                                
                                17,263,441Total
      Liabilities and Stockholders' Equity
                                
                                $
                                53,350,263
                                
                                
                                
                                49,521,382
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
 
 F-1
 
 CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF  INCOME AND COMPREHENSIVE INCOME
 FOR
THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2008 AND 2007
 (Unaudited)
 
 Six Months Ended December 31,
                                          
                                          
                                          Three Months Ended December 31,2008
                                          
                                          
                                          2007
                                          
                                          
                                          2008
                                          
                                          
                                          2007Net
      sales
                                          
                                          $
                                          15,880,128
                                          
                                          
                                          $
                                          10,947,163
                                          
                                          
                                          $
                                          7,000,126
                                          
                                          
                                          $
                                          3,756,142Cost
      of goods sold
                                          
                                          
                                          6,832,199
                                          
                                          
                                          
                                          4,394,981
                                          
                                          
                                          
                                          2,901,306
                                          
                                          
                                          
                                          1,621,220Gross
      profit
                                          
                                          
                                          9,047,929
                                          
                                          
                                          
                                          6,552,182
                                          
                                          
                                          
                                          4,098,820
                                          
                                          
                                          
                                          2,134,923Operating
      expensesSelling
      expenses
                                          
                                          
                                          582,537
                                          
                                          
                                          
                                          471,838
                                          
                                          
                                          
                                          366,161
                                          
                                          
                                          
                                          320,133General
      and administrative expenses
                                          
                                          
                                          1,023,774
                                          
                                          
                                          
                                          1,173,962
                                          
                                          
                                          
                                          586,645
                                          
                                          
                                          
                                          1,023,345Total
      operating expenses
                                          
                                          
                                          1,606,311
                                          
                                          
                                          
                                          1,645,800
                                          
                                          
                                          
                                          952,806
                                          
                                          
                                          
                                          1,343,478Income
      from operations
                                          
                                          
                                          7,441,618
                                          
                                          
                                          
                                          4,906,382
                                          
                                          
                                          
                                          3,146,014
                                          
                                          
                                          
                                          791,445Other
      income (expense)Other
      income
                                          
                                          
                                          4,655
                                          
                                          
                                          
                                          38,992
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          29,691Interest
      income
                                          
                                          
                                          143,019
                                          
                                          
                                          
                                          15,526
                                          
                                          
                                          
                                          2,624
                                          
                                          
                                          
                                          15,402Interest
      expense
                                          
                                          
                                          (447,923
                                          )
                                          
                                          
                                          (197,600
                                          )
                                          
                                          
                                          (127,059
                                          )
                                          
                                          
                                          (105,031
                                          )Bank
      charges
                                          
                                          
                                          (1,430
                                          )
                                          
                                          
                                          (1,504
                                          )
                                          
                                          
                                          (1,050
                                          )
                                          
                                          
                                          (1,482
                                          )Total
      other income (expense)
                                          
                                          
                                          (301,679
                                          )
                                          
                                          
                                          (144,585
                                          )
                                          
                                          
                                          (125,485
                                          )
                                          
                                          
                                          (61,420
                                          )Income
      before income taxes
                                          
                                          
                                          7,139,939
                                          
                                          
                                          
                                          4,761,797
                                          
                                          
                                          
                                          3,020,529
                                          
                                          
                                          
                                          730,025Provision
      for income taxes
                                          
                                          
                                          984,159
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          362,676
                                          
                                          
                                          
                                          -Net
      income
                                          
                                          
                                          6,155,780
                                          
                                          
                                          
                                          4,761,797
                                          
                                          
                                          
                                          2,657,852
                                          
                                          
                                          
                                          730,025Other
      comprehensive itemsForeign
      currency translation gain/(loss)
                                          
                                          
                                          (8,321
                                          )
                                          
                                          
                                          553,997
                                          
                                          
                                          
                                          (2,142
                                          )
                                          
                                          
                                          379,536Comprehensive
      income
                                          
                                          $
                                          6,147,459
                                          
                                          
                                          $
                                          5,315,794
                                          
                                          
                                          $
                                          2,655,711
                                          
                                          
                                          $
                                          1,109,561Basic
      and diluted weighted average shares outstanding
                                          
                                          
                                          18,381,702
                                          
                                          
                                          
                                          11,080,077
                                          
                                          
                                          
                                          18,381,702
                                          
                                          
                                          
                                          11,392,886Basic
      and diluted net earnings per share *
                                          
                                          $
                                          0.33
                                          
                                          
                                          $
                                          0.43
                                          
                                          
                                          $
                                          0.14
                                          
                                          
                                          $
                                          0.06
 
 *Basic
and diluted shares are the same because there are no anti dilutive
effect
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
 
 F-2
 
 CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 STATEMENTS
OF CASH FLOWS
 FOR
THE SIX MONTHS ENDED DECEMBER 31, 2008 AND 2007
 (Unaudited)
 
 2008
                                      
                                      
                                      2007Cash
      flows from operating activitiesNet
      income
                                      
                                      $
                                      6,155,780
                                      
                                      
                                      $
                                      4,761,797Adjustments
      to reconcile net income to net cashprovided
      by operating activitiesShare
      capital contribution - rental and interest paid by
      shareholders
                                      
                                      
                                      -
                                      
                                      
                                      
                                      32,177Stock
      options granted for compensation
                                      
                                      
                                      68,690
                                      
                                      
                                      
                                      -Depreciation
                                      
                                      
                                      737,464
                                      
                                      
                                      
                                      402,782Amortization
                                      
                                      
                                      53,494
                                      
                                      
                                      
                                      48,909Decrease
      / (Increase) in current assetsAccounts
      receivable
                                      
                                      
                                      (950,555
                                      )
                                      
                                      
                                      766,758Other
      receivables
                                      
                                      
                                      32,262
                                      
                                      
                                      
                                      -Inventories
                                      
                                      
                                      (3,306,067
                                      )
                                      
                                      
                                      (1,718,529
                                      )Advances
      to suppliers
                                      
                                      
                                      (72,015
                                      )
                                      
                                      
                                      131,916Other
      assets
                                      
                                      
                                      9,508
                                      
                                      
                                      
                                      (731,007
                                      )(Decrease)
      / Increase in current liabilitiesAccounts
      payable
                                      
                                      
                                      (26,200
                                      )
                                      
                                      
                                      74,928Unearned
      revenue
                                      
                                      
                                      253,800
                                      
                                      
                                      
                                      174,534Tax
      payables
                                      
                                      
                                      (2,485,151
                                      )
                                      
                                      
                                      1,067,900Advances
      from unrelated parties
                                      
                                      
                                      -
                                      
                                      
                                      
                                      762,443Other
      payables and accrued expenses
                                      
                                      
                                      243,560
                                      
                                      
                                      
                                      (456,670
                                      )Net
      cash provided by operating activities
                                      
                                      
                                      714,571
                                      
                                      
                                      
                                      5,317,938Cash
      flows from investing activitiesAcquisition
      of plant, property, and equipment
                                      
                                      
                                      (460,797
                                      )
                                      
                                      
                                      (247
                                      )Advances
      for construction in progress
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (5,178,556
                                      )Additions
      to construction in progress
                                      
                                      
                                      (1,464,432
                                      )
                                      
                                      
                                      (20,352
                                      )Cash
      paid to acquire china operation
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (4,096,100
                                      )Net
      cash used in investing activities
                                      
                                      
                                      (1,925,229
                                      )
                                      
                                      
                                      (9,295,255
                                      )Cash
      flows from financing activitiesRepayment
      of loan
                                      
                                      
                                      (379,384
                                      )
                                      
                                      
                                      (133,411
                                      )Shares
      issuance cost
                                      
                                      
                                      -
                                      
                                      
                                      
                                      18,602,720Proceeds
      issuance of shares subject to redemption
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (4,250,000
                                      )Restricted
      cash
                                      
                                      
                                      58,914
                                      
                                      
                                      
                                      -(Payments)/proceeds
      to/from related parties
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (632,926
                                      )Net
      cash provided by (used in) financing activities
                                      
                                      
                                      (320,470
                                      )
                                      
                                      
                                      13,586,383Effect
      of exchange rate change on cash and cash equivalents
                                      
                                      
                                      (2,024
                                      )
                                      
                                      
                                      34,412Net
      increase (decrease) in cash and cash equivalents
                                      
                                      
                                      (1,533,151
                                      )
                                      
                                      
                                      9,643,478Cash
      and cash equivalents, beginning balance
                                      
                                      
                                      16,612,416
                                      
                                      
                                      
                                      81,716Cash
      and cash equivalents, ending balance
                                      
                                      $
                                      15,079,265
                                      
                                      
                                      $
                                      9,725,194Supplement
      disclosure of cash flow informationInterest
      expense paid
                                      
                                      $
                                      242,459
                                      
                                      
                                      $
                                      178,095Income
      taxes paid
                                      
                                      $
                                      621,367
                                      
                                      
                                      $
                                      -
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
 
 F-3
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 NOTE
1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
 
 China
Green Agriculture, Inc. (the “Company”, “we”, “us”) was incorporated as
Videophone, Inc. in 1987 under the laws of the State of Kansas. It later changed
its name to Discovery Systems, Inc. on June 13, 1990 and Discovery Technologies,
Inc. (“Discovery Technologies”) on June 14, 1990. The State of Kansas
involuntarily dissolved the Company effective December 1996. On December 4, 2006
the State of Kansas reinstated the Company's corporate charter. From December
1996 to December 2007, the Company did not engaged in any operations and was
dormant.
 
 On August
27, 2007 our Board of Directors unanimously adopted resolutions announcing a
special meeting of shareholders to consider and act upon a proposed Agreement
and Plan of Merger to reincorporate Discovery Technologies, Inc. (“Discovery
Technologies”) in the State of Nevada by merger with and into a Nevada
corporation with the same name ("Discovery Technologies Nevada") which Discovery
Technologies formed for such purpose (the "Migratory Merger"). Effective
September 24, 2007, the shareholders approved the Agreement and Plan of Merger
as described in the definitive proxy materials filed with the Securities and
Exchange Commission.
 
 In
accordance with the Agreement and Plan of Merger, Discovery Technologies adopted
the capital structure of Discovery Technologies Nevada, which includes total
authorized capital stock of 800,000,000 shares, of which 780,000,000 are common
stock, with a par value of $.001 per share (the "Discovery Technologies Nevada
Common Stock") and 20,000,000 shares are blank check preferred stock, with a par
value of $.001 per share (the "Preferred Stock"). In addition, on the Effective
Date described below, the issued and outstanding shares of our Common Stock
automatically converted into shares of Discovery Technologies Nevada Common
Stock at a ratio of nine (9) shares of our currently outstanding Common Stock
for one (1) share of Discovery Technologies Nevada Common Stock.
 
 As a
result of the reverse stock split of registrant's common stock, the Company's
outstanding shares of common stock were reduced from 18,746,196 shares to
2,083,339 shares. The Migratory Merger and reverse split became effective on
October 16, 2007 (the "Effective Date").
  F-4
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 Furthermore
on December 18, 2007, the Company had another reverse stock split at a ratio of
6.771:1. As a result, registrant's outstanding shares of common stock were
reduced from 2,083,339 shares to 308,084 shares as of December 18,
2007.
 
 All
references in the accompanying financial statements to the number of common
shares and per share amounts have been retroactively restated to reflect the
reverse stock splits.
 
 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”) in which the Company
issued 10,770,669 number of shares of its common stock, par value $.001 per
share (the “Common Stock”) to Green Agriculture’s shareholders in exchange for
the Green Agriculture Shares. Immediately prior to the Share Exchange, the
Company redeemed 246,148 shares of Common Stock held by Michael Friess and
Sanford Schwartz (the “Redemption”) for $550,000 and issued 111,386 new shares
of Common Stock to Messrs. Schwartz and Friess, two of our directors at the
time, who then appointed Tao Li as the Company’s Director and Chief Executive
Officer who proceeded to effect the Share Exchange. In connection to the
redemption share issuance, the Company also issued 78,462 shares of common stock
to a consultant.
 
 The Share
Exchange has been accounted for as a reverse acquisition under the purchase
method of accounting because the stockholders of Green Agriculture obtained
control of the Company. Accordingly, the exchange of shares by the two companies
has been recorded as a recapitalization of the Company, with the Company (Green
Agriculture) being treated as the continuing entity. The historical financial
statements presented are those of Green Agriculture. As a result of the reverse
acquisition transaction described above the historical financial statements
presented are those of Green Agriculture, the operating entity. Pro-forma
information is not presented because the public shell’s assets are immaterial.
Transaction costs incurred in the reverse acquisition have been charged to
expense.
  F-5
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 On August
24, 2007, Green Agriculture acquired 100% outstanding shares of Shaanxi TechTeam
Jinong Humic Acid Product Co., Ltd. (“Techteam Jinong”, “Techteam” or “Jinong”)
which owns 100% equity of Xi’an Jintai Agriculture Technology Development
Company (“Xi’an Jintai” or “Jintai”). Green Agriculture was incorporated on
January 27, 2007 under the laws of the State of New Jersey with initially two
shareholders owning 89% and 11% of its stock. As of December 25, 2007,
immediately prior to the Share Exchange, Yinshing David To (95.1%), Paul Hickey
(2.45%) and Greg Freihofner (2.45%), (collectively, the “Green New Jersey
Stockholders”) owned 100% of the outstanding capital stock of Green New Jersey.
Green New Jersey, through its Chinese subsidiaries Techteam Jinong and Xi’an
Jintai is engaged in the research and development, manufacture, distribution and
sale of humic acid organic liquid compound fertilizer. The exchange of shares
with Techteam has been accounted for as a reverse acquisition under the purchase
method of accounting since the stockholders of the Techteam obtained control of
the consolidated entity. Accordingly, the merger of the two companies has been
recorded as a recapitalization of Techteam, with Techteam being treated as the
continuing entity. Inter-company amounts and balances have been
eliminated.
 
 Yangling
Techteam Jinong Humic Acid Product Co., Ltd. was founded in the People’s
Republic of China on June 19, 2000. On February 28, 2006, Yangling Techteam
Jinong Humic Acid Product Co., Ltd changed its name to be Shaanxi Techteam
Jinong Humic Acid Product Co., Ltd.
 
 On
January 19, 2007, Techteam 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 Techteam 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.
 
 The
Company, through its subsidiaries has two business segments: Techteam Jinong’s
main business is to produce and sell fertilizers, and Xi’an Jintai’s main
business is to sell the products which are the by-products (fruit and
vegetables) from the development experiment of the fertilizers.
 
 Effective
February 5, 2008, the Company changed its name from Discovery Technologies, Inc.
to China Green Agriculture, Inc. to better reflect its business. Related to the
name change, the trading symbol changed from DCOV.OB to CGAG.OB on the same
day.
 
 The
Company’s current structure is set forth in the diagram below:
  F-6
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 
  F-7
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 NOTE
2 – BASIS OF PRESETATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
 
 The
accompanying unaudited financial statements of the Company have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the interim periods are not necessarily indicative of the
results for any future period. These statements should be read in conjunction
with the Company's audited financial statements and notes thereto for the fiscal
year ended June 30, 2008. The results of the six month period ended December 31,
2008 are not necessarily indicative of the results to be expected for the full
fiscal year ending June 30, 2009.
 
 Principle of
consolidation
 
 The
accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, TechTeam Jinong and Xi’an Jintai. All
significant inter-company accounts and transactions have been eliminated in
consolidation.
 
 Use of
estimates
 
 The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the amount of revenues and
expenses during the reporting periods. Management makes these estimates using
the best information available at the time the estimates are made. However,
actual results could differ materially from those results.
 
 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 December 31, 2008
and June 30, 2008, cash and cash equivalents amounted to $15,079,265 and
$16,612,416, respectively.
  F-8
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 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 December 31, 2008 and June 30,
2008, the Company had accounts receivable of $4,540,866 and $3,590,552, net of
allowance for doubtful accounts of $85,781 and $96,065,
respectively.
 
 Advances to
suppliers
 
 The
Company provides advances to certain vendors for purchase of its material. As of
December 31, 2008 and June 30, 2008, the advances to suppliers amounted to
$584,835 and $512,845, respectively.
 
 Inventories
 
 Inventories
are valued at the lower of cost (determined on a weighted average basis) or net
realizable value. The management compares the cost of inventories with the net
realizable value and an allowance is made for writing down the inventories to
their net realizable value, if lower than the cost.
 
 Property, plant and
equipment
 
 Property,
plant and equipment are recorded at cost. Gains or losses on disposals are
reflected as gain or loss in the year of disposal. The cost of improvements that
extend the life of plant, property, and equipment are capitalized. These
capitalized costs may include structural improvements, equipment, and fixtures.
All ordinary repair and maintenance costs are expensed as incurred.
 
 Depreciation
for financial reporting purposes is provided using the straight-line method over
the estimated useful lives of the assets:
  F-9
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 Estimated Useful LifeBuilding
              10-40 yearsLeasehold improvements
              3-5 yearsMachinery and equipment
              5-15 yearsVehicles
              3-5 years
 
 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" ("FAS No.
144"), issued by the Financial Accounting Standards Board
("FASB").  FAS No. 144 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 six months ended
December 31, 2008.
  F-10
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 Revenue
recognition
 
 The
Company's revenue recognition policies are in compliance with Staff Accounting
Bulletin (SAB) 104. 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. As of December 31, 2008 and June 30, 2008, the Company had unearned
revenues of $342,711 and $88,950, 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.
 
 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 three months
ended December 31, 2008 and 2007, were $26,650 and $205,555, respectively.
Advertising costs for the six months ended December 31, 2008 and 2007, were
$51,031 and $228,680, 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.
 
  F-11
  CHINA GREEN AGRICULTURE INC. AND
SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 The
Company records a valuation allowance for deferred tax assets, if any, based on
itsestimates 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 asset
or liabilities in the PRC tax jurisdiction.
 
 Foreign currency
translation
 
 The
functional currency of the Company is RMB. The Company uses the United States
dollar ("U.S. dollars") for financial reporting purposes. The Company's
subsidiaries maintain their books and records in their functional currency,
being the primary currency of the economic environment in which their operations
are conducted. In general, for consolidation purposes, the Company translates
the subsidiaries' assets and liabilities into U.S. dollars using the applicable
exchange rates prevailing at the balance sheet date, and the statement of income
is translated at average exchange rates during the reporting period. Gain or
loss on foreign currency transactions are reflected on the income statement.
Gain or loss on financial statement translation from foreign currency is
recorded as a separate component in the equity section of the balance sheet, as
component of comprehensive income. The functional currency of the Company is
Chinese Renminbi ("RMB"), the PRC's official currency. Until July 21, 2005, RMB
had been pegged to US$ at the rate of RMB8.28: US$1.00. On July 21, 2005, the
PRC government reformed the exchange rate system into a managed floating
exchange rate system based on market supply and demand with reference to a
basket of currencies. In addition, the exchange rate of RMB to US$ was adjusted
to RMB8.11: US$1.00 as of July 21, 2005. The People's Bank of China announces
the closing price of a foreign currency such as US$ traded against RMB in the
inter-bank foreign exchange market after the closing of the market on each
working day, which will become the unified exchange rate for the trading against
RMB on the following working day. The daily trading price of US$ against RMB in
the inter-bank foreign exchange market is allowed to float within a band of 0.3%
around the unified exchange rate published by the People's Bank of China. This
quotation of exchange rates does not imply free convertibility of RMB to other
foreign currencies. All foreign exchange transactions continue to take place
either through the Bank of China or other banks authorized to buy and sell
foreign currencies at the exchange rates quoted by the People's Bank of China.
Approval of foreign currency payments by the Bank of China or other institutions
required submitting a payment application form together with invoices, shipping
documents and signed contracts.
  F-12
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 Fair values of financial
instruments
 
 Statement
of Financial Accounting Standard No. 107, "Disclosures about Fair Value of
Financial Instruments", 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 payables, tax payable, and related party advances and
borrowings.
 
 As of the
balance sheet dates, the estimated fair values of the financial instruments were
not materially different from their carrying values as presented on the balance
sheet. This is attributed to the short maturities of the instruments and that
interest rates on the borrowings approximate those that would have been
available for loans of similar remaining maturity and risk profile at respective
balance sheet dates.
 
 Segment
reporting
 
 Statement
of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure about
Segments of an Enterprise and Related Information" 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 six months ended December 31, 2008,the Company was organized
into two main business segments: fertilizer production (Techteam) and
agricultural products production (Jintai). The following tables present a
summary of operating information and quarter-end balance sheet information for
the six and three months ended December 31, 2008 and 2007,
respectively.
  F-13
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 For the six months endedDecember 31, 2008
                      
                      
                      December 31, 2007Revenues from
      unaffiliated customers:Fertilizer
                      
                      $
                      12,570,527
                      
                      
                      $
                      8,332,321Agricultural
      products
                      
                      
                      3,309,601
                      
                      
                      
                      2,614,842Consolidated
                      
                      $
                      15,880,128
                      
                      
                      $
                      10,947,163Operating
      income :Fertilizer
                      
                      $
                      6,669,921
                      
                      
                      $
                      4,085,568Agricultural
      products
                      
                      
                      1,376,295
                      
                      
                      
                      1,477,533Reconciling
      item (1)
                      
                      
                      -
                      
                      
                      
                      (50
                      )Reconciling
      item (2)
                      
                      
                      (561,041
                      )
                      
                      
                      (656,669
                      )Reconciling
      item (2)—stock compensation
                      
                      
                      (43,557
                      )
                      
                      
                      -Consolidated
                      
                      $
                      7,441,618
                      
                      
                      $
                      4,906,382Net
      income:Fertilizer
                      
                      $
                      5,575,915
                      
                      
                      $
                      3,925,734Agricultural
      products
                      
                      
                      1,376,529
                      
                      
                      
                      1,489,638Reconciling
      item (1)
                      
                      
                      6,558
                      
                      
                      
                      3,095Reconciling
      item (2)
                      
                      
                      (803,223
                      )
                      
                      
                      (656,669
                      )Consolidated
                      
                      $
                      6,155,780
                      
                      
                      $
                      4,761,797Identifiable
      assets:Fertilizer
                      
                      $
                      46,329,125
                      
                      
                      $
                      20,376,121Agricultural
      products
                      
                      
                      6,572,315
                      
                      
                      
                      3,647,048Reconciling
      item (1)
                      
                      
                      314,346
                      
                      
                      
                      9,693,596Reconciling
      item (2)
                      
                      
                      134,478
                      
                      
                      
                      4,250,000Consolidated
                      
                      $
                      53,350,263
                      
                      
                      $
                      37,966,765Depreciation
      and Amortization:Fertilizer
                      
                      $
                      715,276
                      
                      
                      $
                      451,691Agricultural
      products
                      
                      
                      75,682
                      
                      
                      
                      -Consolidated
                      
                      $
                      790,958
                      
                      
                      $
                      451,691Capital
      Expenditure:Fertilizer
                      
                      $
                      1,925,229
                      
                      
                      $
                      5,199,155Agricultural
      products
                      
                      
                      -
                      
                      
                      
                      -Consolidated
                      
                      $
                      1,925,229
                      
                      
                      $
                      5,199,155Interest
      expense:Fertilizer
                      
                      $
                      249,299
                      
                      
                      $
                      197,600Agricultural
      products
                      
                      
                      -
                      
                      
                      
                      -Reconciling
      item (2)
                      
                      
                      198,624
                      
                      
                      
                      -Consolidated
                      
                      $
                      447,923
                      
                      
                      $
                      197,600
  F-14
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 For the three months endedDecember 31,2008
                        
                        
                        December 31, 2007Revenues from unaffiliated
      customers:Fertilizer
                        
                        $
                        4,945,026
                        
                        
                        $
                        2,743,564Agricultural
      products
                        
                        
                        2,055,100
                        
                        
                        
                        1,012,578Consolidated
                        
                        $
                        7,000,126
                        
                        
                        $
                        3,756,142Operating
      income :Fertilizer
                        
                        $
                        2,544,835
                        
                        
                        $
                        954,152Agricultural
      products
                        
                        
                        922,191
                        
                        
                        
                        494,012Reconciling
      item (1)
                        
                        
                        -
                        
                        
                        
                        (50
                        )Reconciling
      item (2)
                        
                        
                        (277,455
                        )
                        
                        
                        (656,669
                        )Reconciling
      item (2)—stock compensation
                        
                        
                        (43,557
                        )Consolidated
                        
                        $
                        3,146,014
                        
                        
                        $
                        791,445Net
      income:Fertilizer
                        
                        $
                        2,054,176
                        
                        
                        $
                        877,586Agricultural
      products
                        
                        
                        922,300
                        
                        
                        
                        506,014Reconciling
      item (1)
                        
                        
                        2,515
                        
                        
                        
                        3,095Reconciling
      item (2)
                        
                        
                        (321,139
                        )
                        
                        
                        (656,669
                        )Consolidated
                        
                        $
                        2,657,852
                        
                        
                        $
                        730,025Identifiable
      assets:Fertilizer
                        
                        $
                        46,329,125
                        
                        
                        $
                        20,376,121Agricultural
      products
                        
                        
                        6,572,315
                        
                        
                        
                        3,647,048Reconciling
      item (1)
                        
                        
                        314,346
                        
                        
                        
                        9,693,596Reconciling
      item (2)
                        
                        
                        134,478
                        
                        
                        
                        4,250,000Consolidated
                        
                        $
                        53,350,263
                        
                        
                        $
                        37,966,765Depreciation
      and Amortization:Fertilizer
                        
                        $
                        348,173
                        
                        
                        $
                        218,539Agricultural
      products
                        
                        
                        47,951
                        
                        
                        
                        -Consolidated
                        
                        $
                        396,124
                        
                        
                        $
                        218,539Capital
      Expenditure:Fertilizer
                        
                        $
                        1,883,109
                        
                        
                        $
                        5,199,155Agricultural
      products
                        
                        
                        -
                        
                        
                        
                        -Consolidated
                        
                        $
                        1,883,109
                        
                        
                        $
                        5,199,155Interest
      expense:Fertilizer
                        
                        $
                        126,933
                        
                        
                        $
                        105,031Agricultural
      products
                        
                        
                        -
                        
                        
                        
                        -Reconciling
      item (2)
                        
                        
                        126
                        
                        
                        
                        -Consolidated
                        
                        $
                        127,059
                        
                        
                        $
                        105,031
  F-15
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
  (1)
Reconciling amounts refer to the unallocated assets or expenses of Green
Agriculture.
  (2)
Reconciling amounts refer to the unallocated assets or expenses of the parent
Company.
 
 Statement of cash
flows
 
 In
accordance with Statement of Financial Accounting Standards No. 95, "Statement
of Cash Flows," cash flows from the Company's operations are 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
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51.  This statement clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements.  This statement changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to both parent and the
noncontrolling interest.  This statement is effective for the fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008.  Based on current conditions, the Company does not
expect the adoption of SFAS 160 to have a significant impact on its results of
operations or financial position.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations.”  This statement replaces FASB Statement No. 141,
“Business Combinations.” This statement retains the fundamental requirements in
SFAS 141 that the acquisition method of accounting (which SFAS 141 called
the purchase method) be used for all business combinations and for an acquirer
to be identified for each business combination. This statement defines the
acquirer as the entity that obtains control of one or more businesses in the
business combination and establishes the acquisition date as the date that the
acquirer achieves control. This statement requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the statement. This statement applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The Company does not expect the adoption of SFAS 160 to have
a significant impact on its results of operations or financial
position.
  F-16
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 In March
2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities”. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The new standard also improves transparency about the location and
amounts of derivative instruments in an entity’s financial statements; how
derivative instruments and related hedged items are accounted for under
Statement 133; and how derivative instruments and related hedged items affect
its financial position, financial performance and cash flows.
 
 FASB
Statement No. 161 achieves these improvements by requiring disclosure of the
fair values of derivative instruments and their gains and losses in a tabular
format. It also provides more information about an entity’s liquidity by
requiring disclosure of derivative features that are credit risk–related.
Finally, it requires cross-referencing within footnotes to enable financial
statement users to locate important. Based on current conditions, the Company
does not expect the adoption of SFAS 161 to have a significant impact on its
results of operations or financial position.
 
 In May
2008, FASB issued SFASB No. 162, The Hierarchy of Generally Accepted Accounting
Principles. The pronouncement mandates the GAAP hierarchy reside in the
accounting literature as opposed to the audit literature. This has the practical
impact of elevating FASB Statements of Financial Accounting Concepts in the GAAP
hierarchy.  This pronouncement will become effective 60 days following
SEC approval. The Company does not believe this pronouncement will impact its
financial statements.
 
 In May
2008, FASB issued SFASB No. 163, Accounting for Financial Guarantee Insurance
Contracts-an interpretation of FASB Statement No. 60. The scope of the statement
is limited to financial guarantee insurance (and reinsurance) contracts. The
pronouncement is effective for fiscal years beginning after December 31, 2008.
The Company does not believe this pronouncement will impact its financial
statements.
  F-17
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 NOTE
3 – INVENTORIES
 
 Inventories
consist of the following as of December 31, 2008 and June 30, 2008:
 
 December 31, 2008
                      
                      
                      June 30, 2008Raw
      materials
                      
                      $
                      1,254,420
                      
                      
                      $
                      77,000Supplies
      and packing materials
                      
                      
                      774,074
                      
                      
                      
                      207,138Work
      in progress
                      
                      
                      4,955,101
                      
                      
                      
                      3,570,127Finished
      goods
                      
                      
                      310,861
                      
                      
                      
                      134,714Totals
                      
                      $
                      7,294,456
                      
                      
                      $
                      3,988,979
 
 NOTE
4 – OTHER ASSETS
 
 As of
December 31, 2008 and June 30, 2008, other assets comprised of the
following:
 
 December 31, 2008
                                
                                
                                June 30, 2008Other
      receivable
                                
                                $
                                48,678
                                
                                
                                $
                                93,987Promotion
      material
                                
                                
                                39,185
                                
                                
                                
                                34,104Total
                                
                                $
                                87,863
                                
                                
                                $
                                128,091
 
 Other
receivables represent advances made to non-related companies and employees. The
amounts were unsecured, interest free, and due on demand.
 
 NOTE
5 - PROPERTY, PLANT AND EQUIPMENT
 
 Property,
plant and equipment consist of the following as of December 31, 2008 and June
30, 2008:
 December 31, 2008
                    
                    
                    June 30, 2008Building
      and improvements
                    
                    $
                    8,608,351
                    
                    
                    $
                    8,795,804Vehicles
                    
                    
                    23,752
                    
                    
                    
                    23,753Machinery
      and equipment
                    
                    
                    10,911,296
                    
                    
                    
                    10,263,668Agriculture
      assets
                    
                    
                    887,492
                    
                    
                    
                    887,518Total
                    
                    
                    20,430,891
                    
                    
                    
                    19,970,743Less:
      accumulated depreciation
                    
                    
                    (2,508,593
                    )
                    
                    
                    (1,771,287
                    )Total
      property, plant and equipment
                    
                    $
                    17,922,298
                    
                    
                    $
                    18,199,456
 
 F-18
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 Depreciation
expenses for the three months ended December 31, 2008 and 2007 were $369,370 and
$193,884, respectively. Depreciation expenses for the six months ended December
31, 2008 and 2007 were $737,464 and $402,782, 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
December 31, 2008 and June 30, 2008, construction in progress, representing
construction for a new product line, amounted to $6,579,564 and $5,115,492,
respectively.
 
 NOTE
6 - INTAGIBLE ASSETS
 
 The
intangible assets comprised of following at December 31, 2008 and June 30,
2008:
 
 December 31, 2008
                    
                    
                    June 30, 2008Land
      use right, net
                    
                    $
                    905,208
                    
                    
                    $
                    915,864Technology
      know-how, net
                    
                    
                    221,430
                    
                    
                    
                    264,295Total
                    
                    $
                    1,126,638
                    
                    
                    $
                    1,180,159
 
 LAND USE
RIGHT
 
 Per the
People's Republic of China's 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 intangible asset and amortizing over a period of fifty
years.
  F-19
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 A
shareholder contributed the land use rights on August 16, 2001. The land use
right was recorded at a cost of $1,062,866.The land use right is for
fifty years. The land use right consists of the following as of December 31,
2008 and June 30, 2008:
 
 December 31, 2008
                          
                          
                          June 30, 2008Land
      use right
                          
                          $
                          1,062,866
                          
                          
                          $
                          1,062,898Less:
      accumulated amortization
                          
                          
                          (157,658
                          )
                          
                          
                          (147,034
                          )Total
                          
                          $
                          905,208
                          
                          
                          $
                          915,864
 
 TECHNOLOGY
KNOW-HOW
 
 A
shareholder contributed the technology know-how on August 16, 2001. The
technology know-how is recorded at a cost of $857,149. 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 December 31, 2008
and June 30, 2008:
 
 December 31, 2008
                          
                          
                          June 30, 2008Technology
      Know-how
                          
                          $
                          857,149
                          
                          
                          $
                          857,174Less:
      accumulated amortization
                          
                          
                          (635,719
                          )
                          
                          
                          (592,879
                          )Total
                          
                          $
                          221,430
                          
                          
                          $
                          264,295
 
 Total
amortization expenses of intangible assets for the three months ended December
31, 2008 and 2007 amounted to $26,754 and $24,656, respectively. Total
amortization expenses of intangible assets for the six months ended December 31,
2008 and 2007 amounted to $53,494 and $48,909, respectively.
 
 Amortization
expenses of intangible assets for the next five years after December 31, 2008
are as follows:
 
 December
      31, 2009
                    
                    $
                    106,972December
      31, 2010
                    
                    
                    106,972December
      31, 2011
                    
                    
                    71,258December
      31, 2012
                    
                    
                    21,257December
      31, 2013
                    
                    
                    21,257Total
                    
                    $
                    327,717
  F-20
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 NOTE
7 - AMOUNT DUE TO RELATED PARTIES
 
 The
amount due to related parties were the advances due to the Company’s officers
and shareholders, and was unsecured, non-interest bearing and due on demand. As
of December 31, 2008 and June 30, 2008, the amount due to related parties is
$31,120 and $31,121, respectively.
 
 NOTE
8 - ACCRUED EXPENSES AND OTHER PAYABLES
 
 Accrued
expenses and other payables of the following as of December 31, 2008 and June
30, 2008:
 
 December 31, 2008
                      
                      
                      June 30, 2008Payroll
      payable
                      
                      $
                      13,847
                      
                      
                      $
                      15,379Welfare
      payable
                      
                      
                      174,921
                      
                      
                      
                      178,500Accrued
      expenses
                      
                      
                      202,851
                      
                      
                      
                      148,070Other
      levy payable
                      
                      
                      113,209
                      
                      
                      
                      113,279Total
                      
                      $
                      504,828
                      
                      
                      $
                      455,228
 
 NOTE 9 - LOAN
PAYABLES
 
 As of
December 31, 2008 and June 30, 2008, the loan payables were as
follows:
 
 December 31, 2008
                  
                  
                  June 30, 2008Short
      term loans payable:Xi’an
      Commercial Bank Xincheng Branch
                  
                  $
                  2,188,439
                  
                  
                  $
                  2,188,502Xi’an
      Beilin District Rural Credit Union Wenyibeilu Branch
                  
                  
                  554,405
                  
                  
                  
                  554,421Agriculture
      Bank Yanglingshifangqu Branch
                  
                  
                  1,079,630
                  
                  
                  
                  1,459,002Total
                  
                  $
                  3,822,474
                  
                  
                  $
                  4,201,925
 
 At
December 31, 2008, the Company had a loan payable of $2,188,439 to Xi’an
Commercial Bank Xincheng Branch in China, with an annual interest rate of
10.585%, and due on April 1, 2009. The loan is pledge by the land use right and
property of the Company.
  F-21
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 At
December 31, 2008, the Company had a loan payable of $554,405 to Xi’an Beilin
District Rural Credit Union Wenyibeilu Branch with an annual interest rate of
11.795%, and due on September 16, 2009.The loan is guaranteed by
a former shareholder.
 
 At
December 31, 2008, the Company had a loan payable of $1,079,630, to Agriculture
Bank in China Yanglingshifangqu Branch, with an annual interest rate of 7.02%.
The Company paid off principle of $262,613 (RMB1,800,000) and renewed the loan
that is due on June 29, 2009. The loan is guaranteed by the former
shareholder.
 
 The
interest expenses from these short-term loans are $126,933 and $105,031 for
three months ended December 31, 2008 and 2007, respectively. The interest
expenses from these short-term loans are $249,299 and $197,600 for the six
months ended December 31, 2008 and 2007, respectively.
 
 NOTE
10 - TAXES PAYABLE
 
 Taxes
payable consist of the following as of December 31, 2008 and June 30,
2008:
 
 December 31, 2008
                                                      
                                                      
                                                      June 30, 2008VAT
      payable
                                                      
                                                      $
                                                      1,009,242
                                                      
                                                      
                                                      
                                                      4,495,140Income
      tax payable
                                                      
                                                      
                                                      2,022,612
                                                      
                                                      
                                                      
                                                      1,038,651Other
      levies
                                                      
                                                      
                                                      361,454
                                                      
                                                      
                                                      
                                                      344,484Total
                                                      
                                                      $
                                                      3,393,308
                                                      
                                                      
                                                      
                                                      5,878,275
 
 NOTE
11 – ADVANCES FROM UNRELATED COMPANIES
 
 Advances
from unrelated companies were $340,089 and $344,628 at December 31, 2008 and
June 30, 2008, respectively. The advances were due on demand, unsecured and non
interest bearing.
  F-22
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 NOTE
12 - OTHER INCOME (EXPENSES)
 
 Other
income (expenses) mainly consists of interest expense and subsidy income from
government.
 
 NOTE
13 - INCOME TAXES
 
 The
Company utilizes SFAS No. 109, "Accounting for Income Taxes," 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.
 
 The
Company was subject to PRC Enterprise Income Tax at a rate of 33% on the net
income. For the calendar year 2007, the Company enjoyed tax-free benefit status
because it became a foreign invested company according to the PRC tax
law.
 
 Beginning January 1, 2008, in the
People's Republic of China (PRC) the new Enterprise Income Tax (“EIT”) law will
replace the existing laws for Domestic Enterprises (“DES”) and Foreign Invested
Enterprises (“FIEs”). The new standard EIT rate of 25% will replace the 33% rate
currently applicable to both DES and FIEs. The two years tax exemption and three
years 50% tax reduction tax holiday for production-oriented FIEs will be
eliminated. From January 1, 2008, TechTeam Jinong is subject to an income tax at
a rate of 15%.Jintai has been exempt from paying income tax since its
formation as it produces products which fall into the tax exemption list set out
in the EIT. This exemption will last as long as the related EIT does not
change.
  F-23
 CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 The
provision for income taxes as of December 31, 2008 and December 31, 2007
consisted of the following:
 
 2008
                            
                            
                            2007Current
      income tax - Provision for China income and local tax
                            
                            $
                            984,159
                            
                            
                            $
                            -Deferred
      taxes
                            
                            
                            -
                            
                            
                            
                            -Total
      provision for income taxes
                            
                            $
                            984,159
                            
                            
                            $
                            -
 
 The
following table reconciles the U.S. statutory rates to the Company’s effective
tax rate as of December 31, 2008 and 2007:
 
 2008
                      
                      
                      2007Tax
      at statutory rate
                      
                      
                      34
                      %
                      
                      
                      34
                      %Foreign
      tax rate difference
                      
                      
                      (19
                      )%
                      
                      
                      (19
                      )%Net
      operating loss in other tax jurisdiction for where no benefit is
      realized
                      
                      
                      (1
                      )%
                      
                      
                      (15
                      )%Total
                      
                      
                      14
                      %
                      
                      
                      0
                      %
 
 Due to
non-operation in U.S. and tax free status in China, the Company had no deferred
tax as of December 31, 2008 and 2007.
 
 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.
 
  F-24
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 MAJOR CUSTOMERS AND
VENDORS
 
 There
were three vendors accounted for more than 10% of the Company’s total purchases
for the three months ended December 31, 2008 with each vendor individually
accounting for about 14.5%, 12.7% and 11.5%. Accounts payable to those venders
amounted to $0 as of December 31, 2008.
 
 There
were two vendors that are over 10% of the Company’s total purchases for the
three months ended December 31, 2007 with each vendor individually accounting
for about 11% and 12%. Accounts payable to the vender amounted to $0 as of December 31,
2007.
 
 There was
no customer that accounted for more than 10% of the total sales for the six
months ended December 31, 2008 and 2007.
 
 NOTE
15– STOCKHOLDERS’ EQUITY
  6,313,617
shares of common stock were issued to 31 accredited investors (the “Investors”)
at $3.25 per share in a private placement of the Company’s common stock that was
completed on December 26, 2007 (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. In accordance with EITF D-98:
“Classification and Measurement of Redeemable Securities”, the Company has
classified the equity as temporary equity, as “Common Stock, $.001 par value,
6,313,617 shares subject to redemption”.
  F-25
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 977,948
shares were issued to the 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. The
total of $4,250,000 in escrow is pursuant to a Securities Purchase Agreement and
the Holdback Make Good Agreement entered into in connection with the placement
for the following:
 
 1.
              $2,000,000
      is 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
      is 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
      is for the retaining of an Investors Relation firm. The company retained
      an Investors Relation firm in January 2008 and the money was released to
      the company on a monthly basis.
 
 As of
December 31, 2008, the balance of restricted cash is $134,478.
 
 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: (i) 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”); (ii)
provides for liquidated damages in the event that PRC governmental policies or
actions have a material adverse effect on the transactions contemplated by the
Share Exchange Agreement (a “Material Adverse Effect”); and (iii) requires us to
hire a new, fully qualified chief financial officer (“CFO”) satisfactory to the
Investors. In order to secure our obligations to meet the 2009 profit target and
earnings per share target, Mr. To 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.
  F-26
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 Within 45
days of the closing of the Private Placement (the “Filing Date”), the Company
was obligated to file a registration statement with the Commission covering and
registering for re-sale all of the common stock offered and sold in the Private
Placement. If a registration statement was not filed by the Filing Date, the
company would have been obligated to pay the Investors liquidated damages equal
in amount to one percent (1%) of the principal amount subscribed for by the
Investors for each month (or part thereof) after the Filing Date until the
registration statement is filed (“Filing Damages”).
 
 If the
registration statement is not declared effective by the Commission within 150
days after the closing of the Private Placement (the “Effective Date”), the
company will be obligated to pay liquidated damages to the Investors in amount
equal to one percent (1%) of the principal amount subscribed for by the
Investors starting from the first day following the Effective Date for each
30-day period (or part thereof) after the Effective Date until the registration
statement is effective (“Effectiveness Damages”).  The aggregate of
Filing Damages and Effectiveness Damages is subject to a cap of ten percent
(10%). The Company incurred the Effectiveness Damages of $704,494.
 
 As of
December 29, 2008, the Company reached an agreement with the holders of a
majority shares issued in the Private Placement to issue an aggregate of 213,484
shares of common stock to the Investors on a pro rata basis in lieu of the cash
payment of the Effectiveness Damages.
 
 NOTE
16 - STATUTORY RESERVES
 
 As
stipulated by the Company Law of the People's Republic of China (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;
  F-27
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
  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 statutory common welfare fund is
      no longer required per the new cooperation law executed in
      2006.
 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 amount included in the statutory reserves as of
December 31, 2008 and June 30, 2008 amounted to $2,578,042 and $1,882,797,
respectively.
  NOTE
17– STOCK OPTIONS
 
 Effective
January 1, 2006, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 123-R, “Share-Based Payment” (“SFAS No. 123-R”),
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. SFAS No. 123-R supersedes Accounting
Principles Board Opinion No. 25, “Accounting for Stock Issued to
Employees”(“APB
25”), which the Company previously followed in accounting for stock-based
awards. In March 2005, the SEC issued Staff Accounting Bulletin
No. 107(SAB
107) to provide guidance on SFAS No. 123-R. The Company has applied SAB 107 in
its adoption of SFAS No. 123-R.
 
 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 for the
year ended 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 options agreement, the employees
received 67,685 shares.
 
 The
assumptions used in calculating the fair value of options granted using the
Black-Scholes option pricing model are as follows:
  F-28
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 Risk-free
      interest rate
                    2.27%Expected
      life of the options
                    3
      yearExpected
      volatility
                    252%Expected
      dividend yield
                    0
      %
 
 On April
8, 2008, the Company issued 35,000 stock options to two directors with an
exercise price of $6 and term of two years. 10,500 options vested on June 29,
2008 and 24,500 options will vest on July 1, 2009. Compensation expense for the
six months ended December 31, 2008 recorded was $31,845.
 
 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 the former CFO with an
exercise price of $6 and 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.
Compensation expense for the year ended June 30, 2008 recorded was
$38,994.
 
 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
                    544%Expected
      dividend yield
                    0
      %
 
 On
September 10, 2008, the Company issued 28,000 stock options to the CFO with an
exercise price of $4 and term of two years.  The options will vest on
July 1, 2009.  Compensation expense for the six months ended December
31, 2008 recorded was $36,845.
  F-29
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 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 December 31, 2008 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
                
                
                Weighted
                  Average
                  Exercise
                  Price
                
                
                Aggregate
                  Intrinsic
                  Value$3.25-$6
                
                
                121,500
                
                
                
                1.8
                
                
                $
                4.49
                
                
                
                69,000
                
                
                $
                4.15
                
                
                
                -
  The
following table summarizes the options outstanding as of December 31,
2008:
  Options
                      OutstandingOutstanding,
      June 30, 2008
                    
                    
                    121,500Granted
                    
                    
                    28,000Forfeited/Canceled
                    
                    
                    (28,000)Exercised
                    
                    
                    -Outstanding,
      December 31, 2008
                    
                    
                    121,500
  F-30
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 NOTE
18 - COMMITMENTS AND LEASES
 
 In July
2007, the Company signed an office lease with the shareholder and started to pay
therent for $1,702
per month. The Company recorded rent expenses of $5,104 and $2,589 as rent
expenses for the three months ended December 31, 2008 and 2007, respectively.
The Company recorded rent expenses of $10,208 and $5,178 as rent expenses for
the six months ended December 31, 2008 and 2007, respectively. Rent expenses for
the 5 years after December 31, 2008 are as follows:
 
 December
      31, 2009
                          
                          $
                          20,417December
      31, 2010
                          
                          
                          20,417December
      31, 2011
                          
                          
                          20,417December
      31, 2012
                          
                          
                          20,417December
      31, 2013
                          
                          
                          20,417Total
                          
                          $
                          102,085
 
 NOTE
19 – SUBSEQUENT EVENTS
 
 In
January 2009, the Company issued an aggregate of 213,484 shares of restricted
common stock on a pro rata basis to the Investors in the Private Placement. The
issuance was a settlement of the Company’s contractual obligation of a cash
payment to the Investors of $704,494 liquidated damages resulted from the late
effectiveness of the Company’s registration statement filed with the Securities
and Exchange Commission.
  F-31


Item2.
              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. (“Techteam”), a
wholly-owned subsidiary of Green New Jersey organized under the laws of the
People’s Republic of China (the “PRC”); and (vi) Xi’an Jintai Agriculture
Technology Development Company (“Jintai”), wholly-owned subsidiary of Techteam
in the PRC.
 
 Overview
 
 We,
through our indirect wholly owned subsidiaries, Techteam and Jintai, have two
business segments: (i) research, development, production and distribution of
humic acid organic liquid compound fertilizer (conducted through Techteam); and
(ii) development, production and distribution of agricultural products
(conducted through Jintai), namely, top-grade fruits, vegetables, flowers and
colored seedlings. The fertilizer business has been our main business which
generated 70.6% and 73.0% of our total revenues in the three months ended
December 31, 2008 and 2007, respectively. In the six months ended December 31,
2008 and 2007, the fertilizer business has generated 79.2% and 76.1% of our
total revenues, respectively.
 
 Fertilizers
can be organic (composed of organic matter), or inorganic (made of simple,
inorganic chemicals or minerals). Inorganic fertilizers or chemical fertilizers
generally may lead to ecosystem degradation. Organic compound fertilizer, the
fertilizer we produce, comprises a balance of both organic and inorganic
substances, thereby combining the speedy effectiveness of chemical fertilizers
with the environmental benefits of the organic fertilizers.
 
 We employ
a multi-tiered product strategy in which 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 fertilizer which addresses local conditions. For example, in Southern
and Eastern China, farmers are able to grow high margin crops such as fruits and
seasonal vegetables where climate and rainfall permits, hence they can gain more
return on investment from more expensive, specialized fertilizers, whereas in
Northwest areas, farmers’ low profit margin crops disincentivize investment in
fertilizer requiring that we market a more broad spectrum, low cost
fertilizer.
  3
  Currently,
we sell our products through a network of about 494 regional distributors
covering 27 provinces in China. Roughly 20 million farmers are using our
fertilizer products. We sold approximately 3,065 and 1,611 metric tons of our
fertilizer products for the three months ended December 31, 2008 and 2007,
respectively. In the six months ended December 31, 2008 and 2007, we sold
approximately 7,435 and 4,901 metric tons of our fertilizer products
respectively.
 
 We have
developed over 125 different fertilizer products, including six new products
introduced to the market in the six months ended December 31, 2008. The leading
five provinces by revenue for the three months ended December 31, 2008 are
Shannxi (21.6%), Shandong (7.1%), Xinjiang (5.0%), Fujian (5.0%) and Guangdong
(4.7%), in which we generated a total of $3,039,790 revenues, or approximately
43.4% of our total fertilizer sales from the sale of our fertilizer products for
the quarter ended December 31, 2008. Our top five fertilizer products by revenue
for the three months ended December 31, 2008 generated a total of approximately
$1,189,097 or 24.1% of the total fertilizer sales during that period. Our top
five fertilizer products by revenue for the six months ended December 31, 2008
generated a total of approximately $3,293,380 or 26.2% of the total fertilizer
sales during that period.
 
 We also
export our humic acid organic liquid compound fertilizer to some foreign
countries, including India, Ecuador, Pakistan and Lebanon through contracted
distributors. Total revenues from exported fertilizer products currently account
for approximately 0.3% of fertilizer sales for the three months ended December
31, 2008.
 
 We
conduct our research and development activities through our wholly owned
subsidiary, Jintai, which tests new fertilizers and grows high quality flowers,
vegetables and seedlings for commercial sales.
 
 Recent
Development
 
 During
the three months ended December 31, 2008, we launched two new fertilizer
products under the Company’s high-end brand, Techteam. They generated
approximately $366,161, or 7.4% of the revenues from our fertilizer products
sold for the quarter ended December 31, 2008.
 
 At
December 31, 2008, we have completed the upgrades to our production facility,
which will enable the Company to produce up to 15,000 metric tons of Humic Acid
liquid fertilizer. We are constructing new production facilities in order to
increase our annual fertilizer production capacity from the current 15,000
metric tons to 50,000 metric tons by using approximately $13 million of the net
proceeds we received in the private placement consummated in December 2007 (the
“Private Placement”). We anticipate our new production lines to commence actual
production in August 2009.
  4
  Results of
Operations
 
 THREE
MONTHS ENDED DECEMBER 31, 2008 COMPARED WITH THREE MONTHS ENDED DECEMBER 31,
2007.
 
 The
following table shows the operating results of the Company on a consolidated
basis for the three months ended December 31, 2008 and 2007.
 
 Three months ended
                      
                      
                      Three months endedDecember 31, 2008
                      
                      
                      December 31, 2007Net
      Sales
                      
                      $
                      7,000,126
                      
                      
                      $
                      3,756,142Cost
      of Goods Sold
                      
                      
                      2,901,306
                      
                      
                      
                      1,621,220Gross
      Profit
                      
                      
                      4,098,820
                      
                      
                      
                      2,134,923Selling
      Expenses
                      
                      
                      366,161
                      
                      
                      
                      320,133General
      and Administrative Expenses
                      
                      
                      586,645
                      
                      
                      
                      1,023,345Income
      from Operations
                      
                      
                      3,146,014
                      
                      
                      
                      791,445Total
      Other Income (expense)
                      
                      
                      (125,485
                      )
                      
                      
                      (61,420
                      )Income
      Before Income Taxes
                      
                      
                      3,020,529
                      
                      
                      
                      730,025Provision
      for Income Taxes
                      
                      
                      362,676
                      
                      
                      
                      -Net
      Income
                      
                      
                      2,657,852
                      
                      
                      
                      730,025
 
 Net
Sales
 
 Total net
sales for the three months ended December 31, 2008 increased $3,243,984, or
86.4%, from $3,756,142 for the three months ended December 31, 2007. The
increase was the result of an increase in sales volume due to expansion of our
Techteam’s sales network, the launch of new products and an increase of demand
for Jintai’s fruit, flower and vegetable products during the holiday
seasons.
 
 Techteam’s
net sales, which accounted for 70.6% of total net sales, were driven by the
sales of humic acid organic liquid compound fertilizers. For the three months
ended December 31, 2008, Techteam’s net sales increased $2,201,462, or 80.2%, to
$4,945,026 from $2,743,564 for the three months ended December 31, 2007. Sales
volume increased 61.2% to 2,688 tons for the three months ended December 31,
2008 from 1,667 tons for the three months ended December 31, 2007.
 
 Jintai’s
net sales, which include sales of agricultural products, namely top-grade
fruits, vegetables, flowers and colored seedlings by using our existing and new
fertilizers, increased $1,042,522, or 103.0%, to $2,055,100 for the three months
ended December 31, 2008 from $1,012,578 for the same period in 2007. This
increase was largely due to the strong demand for our various decorative
flowers, such as butterfly orchids, big orchids and red leaf flowers during the
holiday seasons. The sales for these three products accounted for 67.7% of
Jintai’s sales for the three months ended December 31, 2008.
  5
  Cost
of Goods Sold
 
 Total
cost of goods sold for the three months ended December 31, 2008 increased
$1,280,086, or 79.0%, to $2,901,306 compared to that for the three months ended
December 31, 2007.
 
 Cost of
goods sold by Techteam for the three months ended December 31, 2008 increased
$689,669, or 57.9%, to $1,880,375 compared to that for the same period in 2007.
This increase was primarily due to increased sales. As a percentage of total net
sales, cost of goods sold by Techteam approximated 26.9% and 31.7% for the three
months ended December 31, 2008 and 2007, respectively.
 
 Cost of
goods sold by Jintai increased $590,416, or 137.1%, to $1,020,930 for the three
months ended December 31, 2008 compared to that for the three months ended
December 31, 2007. This increase was partly due to the increases in raw
materials and allocated overhead due to the addition of new machinery and partly
due to the weakening dollar. As a percentage of total net sales, cost of goods
sold by Jintai approximated 14.6% and 11.5% for the three months ended December
31, 2008 and 2007, respectively.
 
 Gross
Profit
 
 Total
gross profit for the three months ended December 31, 2008 increased $1,963,897,
or 92%, to $4,098,820 compared to $2,134,923 for the three months ended December
31, 2007. Gross profit margin approximated 58.6% and 56.8% for the three months
ended December 31, 2008 and 2007, respectively.
 
 Gross
profit from Techteam increased $1,511,794, or 97.4%, to $3,064,651 for the three
months ended December 31, 2008 from $1,552,859 for the three months ended
December 31, 2007. Gross profit margin from Techteam sales approximated 62.0%
and 56.6% for the three months ended December 31, 2008 and 2007,
respectively.
 
 Gross
profit from Jintai increased $452,105, or 77.7% for the three months ended
December 31, 2008, to $1,034,169 compared to $582,064 for the three months ended
December 31, 2007. Gross profit margin from Jintai sales approximated 50.3% and
57.5% for the three months ended December 31, 2008 and 2007,
respectively.
 
 Selling
Expenses
 
 Selling
expenses consist primarily of salaries of sales personnel, advertising and
promotion expenses, freight charges and related compensation. Selling expenses
were $366,161, or 5.2% of net sales for the three months ended December 31, 2008
as compared to $320,133, or 8.5% of net sales for the three months ended
December 31, 2007, an increase of $46,028, or approximately 14.4%. Most of this
increase was due to higher travel and lodging expenses for our sales
representatives and higher salaries from our expanded sales force.
  6
  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 $586,645, or 8.4% of net sales for the
three months ended December 31, 2008, as compared to $1,023,345, or 27.2% for
the three months ended December 31, 2007, a decrease of $436,700. The decrease
was largely attributable to the one time expenses incurred in the 2007 calendar
year associated with the reverse merger and the Private Placement in the
US.
 
 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 for
the three months ended December 31, 2008 and 2007 were $125,485 and $61,420,
respectively. We received an allowance income of $29,691 in the three months
ended December 31, 2007 due to a government project. This did not happen in the
same period in 2008. In addition, we received higher interest income in the
three months ended December 31, 2007 due to higher savings.
 
 Income
Taxes
 
 Techteam
is subject to a preferred tax rate of 15% as a result of Techteam’s operation
being classified as a High-Tech project under the new PRC Enterprise Income Tax
Law (“EIT”) effective on January 1, 2008. Prior to that, Techteam enjoyed an
income tax holiday until December 31, 2007, due to its status as a wholly
foreign owned enterprise (“WFOE”) and the PRC regulations provided such a tax
incentive through December 31, 2007. Therefore, Techteam incurred income tax
expenses of $362,676 for the three months ended December 31, 2008, compared to
$0 for the same period in the prior year.
 
 Jintai
has been exempt from paying income tax since its formation as it produces
products which fall into the tax exemption list set out in the EIT. This
exemption will last as long as the related EIT does not change.
 
 Net Income
 
 Our net
income was $2,657,852 for the three months ended December 31, 2008, an increase
of $1,927,827 or 264.1% from $730,025 for the three months ended December 31,
2007. The increase in gross profit was slightly offset by income taxes which
were previously exempted. Net income as a percentage of total net sales
approximated 38.0% and 19.4% for the three months ended December 31, 2008 and
2007, respectively.
 
 SIX
MONTHS ENDED DECEMBER 31, 2008 COMPARED WITH SIX MONTHS ENDED DECEMBER 31,
2007.
 
 The
following table shows the operating results of the Company on a consolidated
basis for the six months ended December 31, 2008 and 2007.
  7
  Six months ended
                      
                      
                      Six months endedDecember 31, 2008
                      
                      
                      December 31, 2007Net
      Sales
                      
                      $
                      15,880,128
                      
                      
                      $
                      10,947,163Cost
      of Goods Sold
                      
                      
                      6,832,199
                      
                      
                      
                      4,394,981Gross
      Profit
                      
                      
                      9,047,929
                      
                      
                      
                      6,552,182Selling
      Expenses
                      
                      
                      582,537
                      
                      
                      
                      471,838General
      and Administrative Expenses
                      
                      
                      1,023,774
                      
                      
                      
                      1,173,962Income
      from Operations
                      
                      
                      7,441,618
                      
                      
                      
                      4,906,382Total
      Other Income (expense)
                      
                      
                      (301,679
                      )
                      
                      
                      (144,585
                      )Income
      Before Income Taxes
                      
                      
                      7,139,939
                      
                      
                      
                      4,761,797Provision
      for Income Taxes
                      
                      
                      984,159
                      
                      
                      
                      -Net
      Income
                      
                      
                      6,155,780
                      
                      
                      
                      4,761,797
 
 Net
Sales
 
 Total net
sales for the six months ended December 31, 2008 increased $4,932,965, or 45.1%,
from $10,947,163 for the six months ended December 31, 2007. The increase was
attributable to an increase of $4,238,206 in sales by Techteam and an increase
of $694,759 in sales by Jintai.
 
 Techteam’s
net sales, which accounted for 79.2% of total net sales, were driven by the
sales of humic acid organic liquid compound fertilizers. For the six months
ended December 31, 2008, Techteam’s net sales increased $4,238,206, or 50.9%, to
$12,570,527 from $8,332,321 for the six months ended December 31, 2007. Sales
volume increased 38.8% to 6,802 tons for the six months ended December 31, 2008
from 4,901 tons for the six months ended December 31, 2007.
 
 Jintai’s
net sales increased $694,759, or 26.6%, to $3,309,601 for the six months ended
December 31, 2008 from $2,614,842 for the same period in 2007. This increase was
largely due to the strong demand for our various decorative flowers, such as
butterfly orchids, big orchids and red leaf flowers during the holiday seasons.
The sales for these three products accounted for 73.1% of Jintai’s sales for the
six months ended December 31, 2008.
 
 Cost
of Goods Sold
 
 Total
cost of goods sold for the six months ended December 31, 2008 increased
$2,437.218, or 55.5%, to $6,832,199 compared to that for the six months ended
December 31, 2007.
 
 Cost of
goods sold by Techteam for the six months ended December 31, 2008 increased
$1,777,446, or 53.4%, to $5,106,321 compared to that for the same period in
2007. This increase was primarily due to the increased sales. As a percentage of
total net sales, cost of goods sold by Techteam approximated 32.2% and 30.4% for
the six months ended December 31, 2008 and 2007, respectively.
 
 Cost of
goods sold by Jintai increased $659,770, or 61.9%, to $1,725,877 for the six
months ended December 31, 2008 compared to that for the six months ended
December 31, 2007. This increase was primarily due to the increase in our sales
volume, while the cost of goods sold as a percentage of net sales for the six
months ended December 31, 2008 remains in the similar level as compared to that
of the same period in 2007.
  8
  Gross
Profit
 
 Total
gross profit for the six months ended December 31, 2008 increased $2,495,747, or
38.1%, to $9,047,929 compared to $6,552,182 for the six months ended December
31, 2007. Gross profit margin approximated 57% and 59.9% for the six months
ended December 31, 2008 and 2007, respectively.
 
 Gross
profit from Techteam increased $2,460,759, or 49.2%, to $7,464,205 for the six
months ended December 31, 2008 from $5,003,446 for the six months ended December
31, 2007. Gross profit margin from Techteam sales approximated 59.4% and 60.0%
for the six months ended December 31, 2008 and 2007, respectively.
 
 Gross
profit from Jintai increased $34,989, or 2.3% for the six months ended December
31, 2008, to $1,583,724 compared to $1,548,735 for the six months ended December
31, 2007. Gross profit margin from Jintai sales approximated 47.9% and 59.2% for
the six months ended December 31, 2008 and 2007, respectively.
 
 Selling
Expenses
 
 Selling
expenses consist primarily of salaries of sales personnel, advertising and
promotion expenses, freight charges and related compensation. Selling expenses
were $582,537 for the six months ended December 31, 2008, an increase of
$110,699, or approximately 23.5% as compared to $471,838 for the six months
ended December 31, 2007. Most of this increase was due to higher travel and
salary expenses for our expended sales force. However, as a percentage of net
sales, the selling expenses accounted for a less percentage of net sales for the
six months ended December 31, 2008 as compared to the same period in the prior
year.
 
 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 $1,023,774, or 6.4% of net sales for
the six months ended December 31, 2008, as compared to $1,173,962, or 10.7% for
the six months ended December 31, 2007, a decrease of $150,188. This was mainly
attributed to the internal cost control in both US and China
operations.
 
 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 for
the six months ended December 31, 2008 and 2007 were $301,679 and $144,585,
respectively. The increase in total other expenses was due to the carry over
from the quarter ended June 30, 2008 of part of the liquidated damages the
Company incurred arising from its contractual obligations to the Private
Placement investors for the late effectiveness of our registration
statement.
  9
  Income
Taxes
 
 Techteam
incurred income tax expenses of $984,159 for the six months ended December 31,
2008, compared to $0 for the same period in the prior year.
 
 As set
forth above, Jintai is exempt from paying income tax.
 
 Net Income
 
 Our net
income was $6,155,780 for the six months ended December 31, 2008, an increase of
$1,393,983 or 29.3% from $4,761,797 for the six months ended December 31, 2007.
The increase was mainly a result of our increased net sales. Net income as a
percentage of total net sales approximated 38.8% and 43.5% for the six months
ended December 31, 2008 and 2007, respectively.
 
 Discussion of Segment
Profitability Measures
 
 Our
business consists of two segments – the sales of fertilizer products through
Techteam and the sales of agricultural products through Jintai. 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 proceeds from our December 2007 Private
Placement.
 
 As of
December 31, 2008, cash and cash equivalents were $15,079,265, a decrease of
$1,533,151 from $16,612,416 as of June 30, 2008, primarily due to tax payments
of $2,485,151. This does not include the 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 purposes. The funds are released to the Company on a monthly
basis to pay invoices issued by the Company’s investor relations firm. As of
December 31, 2008, there was $134,478 left in the escrow account.
 
 Based on
our current operating plan, we anticipate spending approximately $2.5 million in
our third fiscal quarter and approximately $3 million in our fourth fiscal
quarter on the new production facilities. We believe that existing cash and cash
equivalents balances, cash forecasted by management to be generated by
operations and borrowings from existing credit facilities will be sufficient to
meet our working capital and capital requirements for at least the next 12
months. However, if events or circumstances occur such that we do not meet our
operating plan as expected, we may be required to seek additional capital and/or
reduce certain discretionary spending, which could have a material adverse
effect on our ability to achieve our business objectives. We may seek additional
financing, which may include debt and/or equity financing. There can be no
assurance that any additional financing will be available on acceptable terms,
if at all. Any equity financing may result in dilution to existing stockholders
and any debt financing may include restrictive covenants.
  10
  The
following table sets forth a summary of our cash flows for the periods
indicated:
 
 Six months ended December 31,2008
                  
                  
                  2007Net
      cash provided by operating activities
                  
                  
                  714,571
                  
                  
                  
                  5,317,938Net
      cash used in investing activities
                  
                  
                  (1,925,229
                  )
                  
                  
                  (9,295,255
                  )Net
      cash provided by financing activities
                  
                  
                  (320,470
                  )
                  
                  
                  13,586,383Effect
      of exchange rate change on cash and cash equivalents
                  
                  
                  (2,024
                  )
                  
                  
                  34,412Net
      increase in cash and cash equivalents
                  
                  
                  (1,533,151
                  )
                  
                  
                  9,643,478Cash
      and cash equivalents, beginning balance
                  
                  
                  16,612,416
                  
                  
                  
                  81,716Cash
      and cash equivalents, ending balance
                  
                  
                  15,079,265
                  
                  
                  
                  9,725,194
 
 Operating
Activities
 
 Net cash
provided by operating activities was $714,571 for the six months ended December
31, 2008, a decrease of $4,603,367 from $5,317,938, net cash provided by
operating activities for the same period in 2007. The decrease was mainly due to
an increase in inventory, advances to suppliers and a decrease in tax
payables.
 
 Investing
Activities
 
 Net cash
used in investing activities in the six months ended December 31, 2008 was
$1,925,229, mainly due to the upgrades to the existing production line and
additions made for our new production line. The net cash used in investing
activities for the same period in 2007 was $9,295,255, mainly due to the
acquisition of Techteam and advances for construction in progress of updating
our greenhouse facilities and the initial construction of a new production
line.
 
 Financing
Activities
 
 Net cash
used by financing activities in the six months ended December 31, 2008 totaled
$320,470. The release of $58,914 from the escrow account was offset by the
repayment of $379,384 of our loans. The net cash provided from financing
activities for the same period in 2007 was $13,586,383, primarily due to the
Private Placement.
 
 On
December 28, 2008 we paid off principal of $262,613 to Agriculture Bank Yangling
Shifangqu Branch and extended another six-month loan. As of December 31, 2008,
our loans payable were as follows:
  11
 
 Short term loans
                                      payable:
                                    
                                    Amount
                                      Outstanding
                                    
                                    Repayment Terms
                                    
                                    Expiration DateXi’an
      Commercial Bank Xincheng Branch
                                    
                                    $
                                    2,188,439
                                    
                                    Annual
      Interest Rate: 10.585%, repaid on a monthly basis
                                    
                                    04/01/2009Xi’an
      Beilin District Rural Credit Union Wenyibeilu Branch
                                    
                                    $
                                    554,405
                                    
                                    Annual
      Interest Rate: 11.794%, repaid on a monthly basis
                                    
                                    09/16/2009Agriculture
      Bank Yanglingshifangqu Branch
                                    
                                    $
                                    1,079,635
                                    
                                    Annual
      Interest Rate: 7.02%, repaid on a monthly basis
                                    
                                    06/29/2009Total
                                    
                                    $
                                    3,822,474
 
 None of
our officers or shareholders has made commitments to the Company for financing
in the form of advances, loans or credit lines.
 
 Accounts
Receivable
 
 Our
accounts receivable, net of allowance for doubtful accounts, was $4,540,866 as
of December 31, 2008, compared to $3,590,552 as of June 30, 2008, an increase of
$950,314. The increase is mainly to due our increased sales. Compared to
accounts receivable, net of allowance for doubtful accounts as of September 30,
2008, the balance decreased $1,799,280.
 
 Our
allowance for doubtful accounts was $85,780 as of December 31, 2008 compared
with $96,065 as of June 30, 2008, a decrease of $10,285 due to improvements we
made to collect accounts receivable amounts that were greater than 90 days past
due.
 
 Inventories
 
 We had
inventory of $7,294,456 as of December 31, 2008 as compared to $3,988,979 as of
June 30, 2008, an increase of $3,305,477. This increase was mainly due to the
increased purchase of raw materials and packaging materials at Techteam for
higher production demands in the next quarter and increased work in progress at
Jintai to accommodate the demands during the Chinese New Year.
 
 Off-Balance Sheet
Arrangements
 
 We do not
have any off-balance sheet arrangements.
  12
  Critical Accounting Policies
and Estimates
 
 Management's
discussion and analysis of its financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with United States generally accepted accounting principles. Our
financial statements reflect the selection and application of accounting
policies which require management to make significant estimates and judgments.
See Note 2 to our consolidated financial statements, “Basis of Presentation and
Summary of Significant Accounting Policies.” We believe that the following
paragraphs reflect the more critical accounting policies that currently affect
our financial condition and results of operations:
 
 Use of
estimates
 
 The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the amount of revenues and
expenses during the reporting periods. Management makes these estimates using
the best information available at the time the estimates are made. However,
actual results could differ materially from those estimates.
 
 Revenue
recognition
 
 Sales
revenue is recognized at the date of shipment to customers when a formal
arrangement exists, the price is fixed or determinable, the delivery is
completed, no other significant obligations of the Company exist and
collectability is reasonably assured. Payments received before all of the
relevant criteria for revenue recognition are satisfied are recorded as unearned
revenue.
 
 The
Company's revenue consists of invoiced value of goods, net of a value-added tax
(VAT). No product return or sales discount allowance is made as products
delivered and accepted by customers are normally not returnable and sales
discounts are normally not granted after products are delivered.
 
 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. Management reviews the composition of accounts receivable and
analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves. Any accounts receivable that is
outstanding for more than three months will be accounted as allowance for bad
debts.
  13
  Segment
reporting
 
 Statement
of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure About
Segments of an Enterprise and Related Information" 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 December 31, 2008, the Company was organized into two
main business segments: produce fertilizer (Techteam) and agricultural products
(Jintai).
  14




Item3.
            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 December 31, 2008
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 defined in the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), Rules 13a-15e and 15d-15e). 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 that has materially affected, or is reasonably
likely to materially affect our internal control over financial
reporting.





PART
II           OTHER
INFORMATION





Item
2.               Unregistered Sales of Equity Securities and
Use of Proceeds.





In
January 2009, the Company issued an aggregate of 213,484 shares of restricted
common stock on a pro rata basis to the thirty-one investors (the “Investors”)
in the private placement consummated on December 26, 2007 (the “Private
Placement”). The issuance was a settlement of the Company’s contractual
obligation of a cash payment to the Investors of a total of $704,494 liquidated
damages resulted from the late effectiveness of the Company’s registration
statement filed with the Securities and Exchange Commission. Please refer to the
Amendment to Registration Rights Agreement filed as Exhibit 10.1 to this report.
The issuance was in reliance upon the registration exemption provided by Section
4(2) of the Securities Act.




15




Item
6.                Exhibits





(a)
Exhibits





10.1
– Amendment to Registration Rights Agreement by and among the Company and
Investors dated as of December 29, 2008.





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





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





32.1 –
Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 by Mr. Tao Li and Ms. Ying
Yang.




16




SIGNATURES





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





CHINA
      GREEN AGRICULTURE, INC.Date:
      February 12, 2009
                  
                  BY:
                  /s/Tao LiTao
      LiPresident
      and Chief Executive Officer(principal
      executive officer)Date:
      February 12, 2009
                  
                  BY:
                  /s/ Ying YangYing YangChief Financial Officer(principal
      financial officer and accounting
                    officer)




17