**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**




**WASHINGTON,
      D.C. 20549**




**FORM
      20-F**




**(Mark
      One)**




o
              
              **REGISTRATION
                  STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE
                  ACT OF 1934**




**OR**




x
              
              **ANNUAL
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934**




For
      the
      fiscal year ended September 30, 2007




**OR**




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


**OR**




o
            
            **SHELL
                COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                EXCHANGE
                ACT OF 1934**




Date
      of
      event requiring this shell company report _________________________




**For
      the transition period** from
      ____ _______
      to ____ _______.




Commission
      file number: 000-51576




Origin
      Agritech Limited


(Exact
      name of Registrant as specified in its charter)




**Not
      Applicable**


(Translation
      of Registrant’s name into English)




**British
      Virgin Islands**


(Jurisdiction
      of incorporation or organization)




**No.
      21 Sheng Ming Yuan Road, Changping District, Beijing 102206,
      China**


(Address
      of principal executive offices)















Securities
      registered or to be registered pursuant to Section 12(b) of the
      Act.


Title
                of each class
            
            Name
                of each exchange on which registered**Ordinary
                Shares**
            
            **The
                NASDAQ Global Select Market**




Securities
      registered or to be registered pursuant to Section 12(g) of the
      Act.




**None**





(Title
      of
      Class)




Securities
      for which there is a reporting obligation pursuant to Section 15(d) of the
      Act.


**None**




Indicate
      the number of outstanding shares of each of the issuer’s classes of capital or
      common stock as of the close of the period covered by the annual report:
      23,472,910 ordinary shares.




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.




Yes
o
x No




If
      this
      report is an annual or transition report, indicate by check mark if the
      registrant is not required to file reports pursuant to Section 13 or 15(d)
      of
      the Securities Exchange Act of 1934.




Yes
o x No




Indicate
      by check mark whether the registrant (1) has 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.




x Yes  o No




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.




Large accelerated filer o Accelerated
      filer x  Non-accelerated
      filer o




Indicate
      by check mark which financial statement item the registrant has elected to
      follow:




o Item 17 x Item 18




If
      this
      is an annual report, indicate by check mark whether the registrant is a shell
      company (as defined in Rule 12b-2 of the Exchange Act).




**⁭** Yes    x No







**ORIGIN
      AGRITECH LIMITED**




**TABLE
      OF CONTENTS**




**INTRODUCTION**PART
                IItem
                1.
            
            Identity
                of Directors, Senior Management and Advisers
            3Item
                2.
            
            Offer
                Statistics and Expected Timetable
            3Item
                3.
            
            Key
                Information
            3Item
                4.
            
            Information
                on the Company
            29Item
                5.
            
            Operating
                and Financial Review and Prospects
            48Item
                6.
            
            Directors,
                Senior Management and Employees
            74Item
                7.
            
            Major
                Shareholders and Related Party Transactions
            84Item
                8.
            
            Financial
                Information
            88Item
                9.
            
            The
                Offer and Listing
            89Item
                10.
            
            Additional
                Information
            91Item
                11.
            
            Quantitative
                and Qualitative Disclosures About Market Risk
            99Item
                12.
            
            Description
                of Securities Other than Equity Securities
            100PART
                IIItem
                13.
            
            Defaults,
                Dividend Arrearages and Delinquencies
            100Item
                14.
            
            Material
                Modifications to the Rights of Security Holders and Use of
                Proceeds
            100Item
                15.
            
            Controls
                and Procedures
            100Item
                16A.
            
            Audit
                Committee Financial Expert
            102Item
                16B.
            
            Code
                of Ethics
            102Item
                16C.
            
            Principal
                Accountant Fees and Services
            102Item
                16D.
            
            Exemption
                from the Listing Standards for Audit Committees
            103Item
                16E.
            
            Purchases
                of Equity Securities by the Issuer and Affiliated
                Purchasers
            103PART
                III
            
            
            104Item
                17.
            
            Financial
                Statements
            104Item
                18.
            
            Financial
                Statements
            104Item
                19.
            
            ExhibitsEX-2.2
            
            INDENTURE
                DATED JULY 25, 2007EX-2.3
            
            REGISTRATION
                RIGHTS AGREEMENT DATED JULY 25, 2007EX-2.4
            
            AMENDMENT
                OF REGISTRATION RIGHTS AGREEMENTEX-2.5
            
            SECOND
                AMENDMENT OF REGISTRATION RIGHTS AGREEMENTEX-2.6
            
            THIRD
                AMENDMENT OF REGISTRATION RIGHTS AGREEMENTEX-2.7
            
            INVESTOR
                RIGHTS AGREEMENT DATED JULY 25, 2007EX-2.8
            
            NOTES
                PURCHASE AGREEMENT DATED JULY 25, 2007









EX-4.34FORM
                  OF INCENTIVE STOCK OPTION AGREEMENTEX-4.35FORM
                  OF NONQUALIFIED SHARE OPTION AGREEMENTEX-4.36FORM
                  SHARE TRANSFER AGREEMENTEX-4.37SHARE
                  TRANSFER AGREEMENT DATED DECEMBER 25, 2006EX-4.38RENMINBI
                  CAPITAL LOAN CONTRACT DATED JULY 6, 2007EX-4.39MORTGAGE
                  CONTRACT DATED JULY 6, 2007EX-4.40RENMINBI
                  CAPITAL LOAN CONTRACT DATED JULY 25, 2007EX-4.41
                  GUARANTEE CONTRACT DATED JULY 25, 2007EX-4.42
                  RENMINBI CAPITAL LOAN CONTRACT DATED SEPTEMBER 29, 2007EX-4.43
                  GUARANTEE CONTRACT DATED SEPTEMBER 29, 2007EX-4.44
                  RENMINBI CAPITAL LOAN CONTRACT DATED NOVEMBER 18, 2007EX-4.45
                  MORTGAGE CONTRACT DATED NOVEMBER 18, 2007EX-4.46
                  RENMINBI CAPITAL LOAN CONTRACT DATED NOVEMBER 13, 2007EX-4.47
                  GUARANTEE CONTRACT DATED NOVEMBER 13, 2007EX-4.48
                  RENMINBI CAPITAL LOAN CONTRACT DATED NOVEMBER 13, 2007EX-8.1
                  UPDATED LIST OF SUBSIDIARIESEX-12.1
                  CEO CERTIFICATIONEX-12.2
                  CFO CERTIFICATIONEX-13.1
                  CEO CERTIFICATION PURSUANT TO SECTION 906EX-13.2
                  CFO CERTIFICATION PURSUANT TO SECTION 906EX-15.1CONSENT
                  OF DELOITTE TOUCHE TOHMATSU CPA LTD. TO S-8EX-15.2CONSENT
                  OF BDO TO S-8





**INTRODUCTION**




Except
      where the context otherwise requires and for purposes of this Annual Report
      only:




·
              “we,”
                  “us,” “our company,” “our,” the “Company” and “Origin” refer to Origin
                  Agritech Limited and, in the context of describing our operations,
                  also
                  include State Harvest Holdings Limited and the following, which
                  are
                  collectively described in this Annual Report as “our PRC Operating
                  Companies”: Beijing Origin State Harvest Biotechnology Limited, or Origin
                  Biotechnology, Beijing Origin Seed Limited, or Beijing Origin,
                  and
                  its four subsidiaries, Changchun Origin Seed Technology Development
                  Limited, or Changchun Origin, Henan Origin Cotton Technology Development
                  Limited, or Henan Origin, Denong Zhengcheng Seed Limited, or Denong,
                  and
                  Jilin Changrong High-tech Seed Limited, or Jilin
                  Changrong;




·
            “last
                year,” “fiscal year 2007,” “the year ended September 30, 2007” and “the
                fiscal year ended September 30, 2007” refer to the twelve months ended
                September 30, 2007, which is the period covered by this Annual
                Report;




·
            “shares”
                and “ordinary shares” refer to our ordinary shares, “preferred shares”
                refers to our preferred shares;




·
            “China”
                or “PRC” refers to the People’s Republic of China, excluding Taiwan, Hong
                Kong and Macau;




·
            “Hong
                Kong” refers to the Hong Kong Special Administrative Region of the
                People’s Republic of China; and




·
            all
                references to “Renminbi,” “RMB” or “yuan” are to the legal currency of
                China; all references to “U.S. dollars,” “dollars,” “$” or “US$” are to
                the legal currency of the United States. Any discrepancies in any
                table
                between totals and sums of the amounts listed are due to
                rounding.




**FORWARD-LOOKING
      INFORMATION**




This
      Annual Report on Form 20-F contains forward-looking statements that are based
      on
      our current expectations, assumptions, estimates and projections about our
      company and industry. All statements other than statements of historical fact
      in
      this Annual Report are forward-looking statements. These forward-looking
      statements can be identified by words or phrases such as “may,” “will,”
“expect,” “anticipate,” “estimate,” “plan,” “believe,” “is/are likely to” or
      other similar expressions. The forward-looking statements included in this
      Annual Report relate to, among others:




·
            our
                goals and strategies, including how we implement our goals and
                strategies;




·
            our
                expectations for our future business and product development, business
                prospects, results of business operations and current financial
                condition;




·
            expected
                changes in our margins and certain costs or
                expenditures;




·
            our
                future pricing strategies or pricing
                policies;




·
            our
                ability to successfully anticipate market demand for crop seeds in
                our
                market and plan our volume and product
                mix;




·
            our
                plans for development of seed or technology internally, including
                our
                ability to successfully develop, produce, receive approval for and
                distribute proprietary seed
                products;




·
            our
                expectations regarding our need to produce seeds under licenses from
                third
                parties;




1




·
            the
                future development of agricultural biotechnology as a
                whole;




·
            our
                plans to license or co-develop any seed product or
                technology;




·
            our
                plans regarding any future business
                combination;




·
            PRC
                and other international governmental policies and regulations relating
                to
                the crop seed industry;




·
            the
                impact of genetically modified crop seeds on our industry and the
                policies
                and regulation regarding these products, and our ability to receive
                the
                necessary approvals and to develop, produce, market and distribute
                genetically modified crop seeds;




·
            our
                plans to expand our business level or corporate level operations
                and
                product offerings;




·
            the
                likelihood of recurrence of accounting charges or
                impairments;




·
            expected
                changes in the respective component shares of our revenues stream
                from our
                business operations or other
                sources;




·
            competition
                in the crop seed industry in China and other international
                markets;




·
            the
                future development of the crop seed industry in China and other
                international markets;




·
            our
                plans for current staffing requirements, research and development
                and
                regional business focus;




·
            the
                adequacy of our facilities for our future operations;
                and




·
            other
                “forward-looking” information.




We
      believe it is important to communicate our expectations to our shareholders.
      However, there may be certain events in the future that we are not able to
      predict with accuracy or over which we have no certain control. The risk factors
      and cautionary language discussed in this Annual Report provide examples of
      risks, uncertainties and events that may cause actual results to differ
      materially from the expectations in these forward-looking statements, including
      among other things:




·
            changing
                interpretations of generally accepted accounting
                principles;




·
            outcomes
                of the PRC and other international government reviews, inquiries,
                investigations and related
                litigation;




·
            continued
                compliance with the PRC and other international government
                regulations;




·
            legislative
                and regulatory environments, requirements or changes adversely affecting
                the businesses in which we and our PRC operating companies are
                engaged;




·
            fluctuations
                in the PRC or international customer
                demand;




·
            management
                of rapid growth of our business;




·
            intensity
                of competition from other providers of crop seeds in the PRC or other
                international markets;




·
            timing
                of approval and market acceptance of new
                products;




·
            general
                economic conditions in the PRC and worldwide;
                and




2




·
            geopolitical
                events and regulatory changes.




These
      forward-looking statements involve various risks, assumptions and uncertainties.
      Although we believe that our expectations expressed in these forward-looking
      statements are reasonable, we cannot be certain that our expectations will
      materialize. Our actual results could be materially different from and worse
      than our expectations. Important risks and factors that could cause our actual
      results to be materially different from our expectations are generally set
      forth
      in Item 3.D of this Annual Report, “Key information — Risk Factors” and
      elsewhere in this Annual Report.




This
      Annual Report also contains information relating to the crop seed market. These
      market data include projections that are based on a number of assumptions.
      The
      crop seed market may not grow at the rates we project or at all. The failure
      of
      this market to grow at the projected rates may have a material adverse effect
      on
      our business and the market price of our shares. In addition, the relatively
      new
      and rapidly changing nature of the genetically modified crop seed industry
      subjects any projections or estimates relating to the growth prospects or future
      condition of our markets to significant uncertainties. Furthermore, if any
      one
      or more of the assumptions underlying the market data turns out to be incorrect,
      actual results may differ from the projections based on these assumptions.




The
      forward-looking statements made in this Annual Report relate only to events
      or
      information as of the date on which the statements are made in this Annual
      Report. Readers should read these statements in conjunction with the risk
      factors disclosed in Item 3.D of this Annual Report.




All
      forward-looking statements included herein attributable to us or other parties
      or any person acting on our behalf are expressly qualified in their entirety
      by
      the cautionary statements contained or referred to in this section. Except
      to
      the extent required by applicable laws and regulations, we undertake no
      obligations to update these forward-looking statements to reflect events or
      circumstances after the date of this Annual Report or to reflect the occurrence
      of unanticipated events.




**PART
      I**




**ITEM
      1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS**




Not
      Applicable.




**ITEM
      2. OFFER STATISTICS AND EXPECTED TIMETABLE**




Not
      Applicable.




**ITEM
      3. KEY INFORMATION**




**A.** **Selected
      financial data** **.**




The
        following selected consolidated financial information has been derived from
        our
        consolidated financial statements. The following information should be read
        in
        conjunction with those statements and Item 5, “Operating and Financial
        Review and Prospects.” Our summary consolidated statements of operations and
        comprehensive income data for the year ended December 31, 2005, the nine
        months ended September 30, 2005 (unaudited) and 2006 and the twelve months
        ended
        September 30, 2007 and our summary consolidated balance sheet data as
        of September 30, 2006 and 2007, as set forth below, are derived from, and
        are qualified in their entirety by reference to, our audited consolidated
        financial statements, including the notes thereto, which are included in
        this
        Annual Report. The summary statement of operations and comprehensive income
        data
        for the years ended December 31, 2003 and 2004, and the summary balance
        sheet data as of December 31, 2003, 2004 and 2005 set forth below are
        derived from our audited consolidated financial statements not included herein.
        The summary statement of operations and comprehensive income data for the
        twelve
        months ended September 30, 2006 set forth below are derived from our
        unaudited consolidated financial statements not included
        herein.





Our
      consolidated financial statements are prepared and presented in accordance
      with
      accounting principles generally accepted in the United States, or U.S.
      GAAP.




3





(in
                  thousands, except share data)
              
              For
                  the year
                ended
                December
                  31
              
              For
                  the nine months ended
                September
                  30,
              
              For
                  the year ended
                September
                  302003
              
              2004
              
              2005
              
              2005
              
              2006
              
              2006
              
              2007RMB
              
              RMB
              
              RMB
              
              RMB
              
              RMB
              
              RMB
              
              RMB
              
              US$(1)Consolidated
                  statement of operations and comprehensive income data:
              
              
              
              
              
              
              
              (unaudited)
              
              
              
              (unaudited)Net
                  revenues
              
              
              191,645
              
              
              301,520
              
              
              207,291
              
              
              208,380
              
              
              522,999
              
              
              521,910
              
              
              489,379
              
              
              65,313Cost
                  of revenues
              
              
              (118,977
              )
              
              (178,313
              )
              
              (129,162
              )
              
              (126,418
              )
              
              (362,982
              )
              
              (365,726
              )
              
              (462,852
              )
              
              (61,773
              )Gross profit
              
              
              72,668
              
              
              123,207
              
              
              78,129
              
              
              81,962
              
              
              160,017
              
              
              156,184
              
              
              26,527
              
              
              3,540Selling
                  and marketing
              
              
              (13,310
              )
              
              (20,390
              )
              
              (27,037
              )
              
              (18,993
              )
              
              (49,651
              )
              
              (57,695
              )
              
              (57,994
              )
              
              (7,740
              )General
                  and administrative
              
              
              (18,948
              )
              
              (24,149
              )
              
              (28,983
              )
              
              (19,712
              )
              
              (40,933
              )
              
              (50,204
              )
              
              (92,246
              )
              
              (12,311
              )Research
                  and development
              
              
              (5,288
              )
              
              (6,774
              )
              
              (6,977
              )
              
              (5,963
              )
              
              (13,144
              )
              
              (14,158
              )
              
              (28,441
              )
              
              (3,796
              )Total
                  operating expenses
              
              
              (37,546
              )
              
              (51,313
              )
              
              (62,997
              )
              
              (44,668
              )
              
              (103,728
              )
              
              (122,057
              )
              
              (178,681
              )
              
              (23,847
              )Other
                  operating income
              
              
              -
              
              
              -
              
              
              2,309
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Income
                  from operations
              
              
              35,122
              
              
              71,894
              
              
              17,441
              
              
              37,294
              
              
              56,289
              
              
              34,127
              
              
              (152,154
              )
              
              (20,307
              )Interest
                  income
              
              
              845
              
              
              371
              
              
              886
              
              
              421
              
              
              8,783
              
              
              9,249
              
              
              10,942
              
              
              1,460Interest
                  expenses
              
              
              (483
              )
              
              (831
              )
              
              (1,829
              )
              
              (1,443
              )
              
              (5,005
              )
              
              (5,391
              )
              
              (21,697
              )
              
              (2,896
              )Other
                  income (expense)
              
              
              1,137
              
              
              149
              
              
              300
              
              
              62
              
              
              2,893
              
              
              5,441
              
              
              1,312
              
              
              175Equity
                  in earnings of associated company
              
              
              -
              
              
              1,925
              
              
              879
              
              
              305
              
              
              12,828
              
              
              13,400
              
              
              (669
              )
              
              (89
              )Changes
                  in the fair value of embedded derivatives
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              12,601
              
              
              1,682Income before
                  income taxes
              
              
              36,621
              
              
              73,508
              
              
              17,677
              
              
              36,639
              
              
              75,788
              
              
              56,826
              
              
              (149,665
              )
              
              (19,975
              )Income
                  tax
              
              
              (7,808
              )
              
              (7,698
              )
              
              (1,405
              )
              
              (1,205
              )
              
              (367
              )
              
              (566
              )
              
              49
              
              
              7Income before
                  minority interests
              
              
              28,813
              
              
              65,810
              
              
              16,272
              
              
              35,434
              
              
              75,421
              
              
              56,260
              
              
              (149,616
              )
              
              (19,968
              )Minority
                  interests
              
              
              138
              
              
              (351
              )
              
              137
              
              
              (510
              )
              
              910
              
              
              1,558
              
              
              (13,584
              )
              
              (1,813
              )Net
                  income
              
              
              28,951
              
              
              65,459
              
              
              16,409
              
              
              34,924
              
              
              76,331
              
              
              57,818
              
              
              (163,200
              )
              
              (21,781
              )Income attributable
                  to ordinary shareholders
              
              
              28,951
              
              
              65,459
              
              
              16,409
              
              
              34,924
              
              
              76,331
              
              
              57,818
              
              
              (163,200
              )
              
              (21,781
              )Net
                  income per share:Basic
              
              
              2.90
              
              
              6.55
              
              
              1.52
              
              
              3.49
              
              
              3.25
              
              
              2.46
              
              
              (7.01
              )
              
              (0.94
              )Diluted
              
              
              2.90
              
              
              6.55
              
              
              1.46
              
              
              3.49
              
              
              3.03
              
              
              2.30
              
              
              (7.01
              )
              
              (0.94
              )Shares
                  used in computation:Basic
              
              
              10,000,000
              
              
              10,000,000
              
              
              10,786,719
              
              
              10,000,000
              
              
              23,472,910
              
              
              23,472,910
              
              
              23,268,062
              
              
              23,268,062Diluted
              
              
              10,000,000
              
              
              10,000,000
              
              
              11,220,157
              
              
              10,000,000
              
              
              25,187,753
              
              
              25,187,753
              
              
              23,268,062
              
              
              23,268,062





(in
                thousands)
            
            December
                31,
            
            September
                30,2003
            
            2004
            
            2005
            
            2006
            
            2007RMB
            
            RMB
            
            RMB
            
            RMB
            
            RMB
            
            US$Consolidated
                balance sheet data:Cash
                and cash equivalents
            
            49,221
            
            
            68,848
            
            
            237,828
            
            
            140,953
            
            
            162,314
            
            
            21,663Current
                working capital(2)
            
            10,186
            
            
            51,897
            
            
            149,610
            
            
            208,809
            
            
            294,976
            
            
            39,368Total
                assets
            
            307,257
            
            
            416,384
            
            
            798,769
            
            
            984,126
            
            
            1,110,983
            
            
            148,274Deferred
                revenue
            
            65,296
            
            
            37,921
            
            
            181,583
            
            
            24,101
            
            
            23,238
            
            
            3,101Total
                current liabilities
            
            227,768
            
            
            273,002
            
            
            499,616
            
            
            509,631
            
            
            499,347
            
            
            66,644Total
                liabilities
            
            230,640
            
            
            275,874
            
            
            504,368
            
            
            512,511
            
            
            765,291
            
            
            102,137Minority
                interests
            
            3,184
            
            
            3,534
            
            
            3,234
            
            
            13,049
            
            
            48,775
            
            
            6,510Total
                shareholders’ equity
            
            73,433
            
            
            136,976
            
            
            291,167
            
            
            458,566
            
            
            296,917
            
            
            39,627




(1)Translations
                of RMB amounts for the twelve months ended September 30, 2007 into
                U.S.
                dollars were made at a rate of RMB7.4928 to US$1.00, the noon buying
                rate
                in New York City for cable transfers as certified for customs purposes
                by
                the Federal Reserve Bank of New York on September 28,
                2007.(2)Current
                working capital is the difference between total current assets and
                total
                current liabilities.




**Exchange
      Rate Information**




The
        conversion of Renminbi into U.S. dollars in this Annual Report is based on
        the
        noon buying rate in the city of New York for cable transfers of Renminbi
        as
        certified for customs purposes by the Federal Reserve Bank of New York. Unless
        otherwise noted, for years ended December 31, 2003, 2004 and 2005, the nine
        months ended September 30, 2005 and 2006 and the twelve months ended September
        30, 2006 and 2007, all translations from Renminbi to U.S. dollars in this
        Annual
        Report were made at RMB8.2767, RMB8.2765, RMB8.0702, RMB8.092, RMB7.904,
        RMB7.904 and RMB7.4928 per US $1.00, respectively, which were the prevailing
        year or period end rates for those three years, the nine months ended September
        30, 2005 and 2006 and the twelve month periods ended September 30, 2006 and
        2007. We make no representation that any Renminbi or U.S. dollar amounts
        could
        have been, or could be, converted into U.S. dollars or Renminbi, as the case
        may
        be, at any particular rate, the rates stated below, or at all. The PRC
        government imposes controls over its foreign currency reserves in part through
        direct regulation of the conversion of Renminbi into foreign exchange and
        through restrictions on foreign trade.




4





The
      following table sets forth various information concerning exchange rates between
      the Renminbi and the U.S. dollar for the periods indicated. These rates are
      provided solely for your convenience and are not necessarily the exchange rates
      that we used in this Annual Report or will use in the preparation of our
      periodic reports or any other information to be provided to you. The source
      of
      these rates is the Federal Reserve Bank of New York.





**Average(1)**
            
            **High**
            
            **Low**
            
            **Period-end***(RMB
                per $1.00)***2003**
            
            
            8.2772
            
            
            8.2800
            
            
            8.2765
            
            
            8.2767**2004**
            
            
            8.2768
            
            
            8.2774
            
            
            8.2764
            
            
            8.2765**2005**
            
            
            8.1940
            
            
            8.2765
            
            
            8.0702
            
            
            8.0702**2006**
            
            
            7.9723
            
            
            8.0702
            
            
            7.8041
            
            
            7.8041**2007****August**
            
            
            7.5734
            
            
            7.6181
            
            
            7.5420
            
            
            7.5462**September**
            
            
            7.5196
            
            
            7.5540
            
            
            7.4928
            
            
            7.4928**October**
            
            
            7.5016
            
            
            7.5158
            
            
            7.4682
            
            
            7.4682**November**
            
            
            7.4212
            
            
            7.4582
            
            
            7.3800
            
            
            7.3850**December**
            
            
            7.3682
            
            
            7.4120
            
            
            7.2946
            
            
            7.2946**2008****January**
            
            
            7.2405
            
            
            7.2946
            
            
            7.1818
            
            
            7.1818**February**(through
                February 15)
            
            
            7.1860
            
            
            7.1973
            
            
            7.1780
            
            
            7.1780





(1)
            
            Annual
                averages are calculated from month-end rates. Monthly averages are
                calculated using the average of the daily rates during the relevant
                period.




**B.** **Capitalization
      and indebtedness.**




Not
      Applicable.




**C.** **Reasons
      for the offer and use of proceeds.**




Not
      Applicable.




**D.** **Risk
      factors.** ****




**Risks
      relating to our business**




***The
      uncertainty in the government regulation of genetic technology and genetically
      modified, or GM, agricultural products could have an adverse effect on our
      business.***





We
        are
        experiencing the transition from conventional seed company to agricultural
        biotechnology company. However, the GM product is controversial, and it has
        not
        been widely accepted in many regions of the world, including China. Since
        the
        Chinese government approved the commercial planting of GM cotton in 1997,
        the
        government no longer approves any GM crops commercial cultivation. The
        uncertainty in the government regulation of genetic technology could have
        adverse effect on our business and
        results of operations .





***The
      successful development and commercialization of our biotech pipeline products
      will be necessary for our growth.***





We
      have
      commenced our own research and development efforts for genetically modified
      seeds, and we have entered into agreements with the Chinese Academy of Science
      and the China Agricultural Academy of Science in the PRC working on genetic
      modifications that give us the right to market the seeds they develop. However,
      there can be no assurance that these efforts will be successful in producing
      improved seed varieties. Commercial success frequently depends on being the
      first company to enter the market. The length of time and the risk associated
      with the breeding and biotech pipelines are similar and interlinked because
      both
      are required as a package for commercial success in markets where biotech traits
      are approved for growers. Regulatory requirements affect the development of
      our
      biotech products, including the GM
      crop testing
      of seeds containing the biotech traits, which could harm our business and
      results of operations. The testing
      can be lengthy and costly, with no guarantee of success. It could have an
      adverse effect on our operations if our genetically modified products are unable
      to pass the safety
      evaluation of genetically modified agricultural organisms.




5





There
      has
      been a worldwide increase in the development and application of genetically
      modified agricultural products to increase the quality and quantity of crop
      yields. However, the production and commercial sale of genetically modified
      corn
      seeds is not currently allowed in China, and we still rely upon traditional
      methods of creating crop seed hybrids to develop new products. If government
      policies change to allow genetically modified corn seeds, demand may develop
      for
      these products, and we expect that we will need to produce genetically modified
      products to meet customer demands. There is a risk that our current steps to
      respond to the potential competitive threat posed by genetically modified
      agricultural products, including our research and development activities with
      respect to genetically modified crop seeds, may not allow us to compete
      successfully.





***The
      global competition in biotechnology will affect our
      business.***





We
      believe we are a leader in biotechnology in China since we initiated our own
      biotechnology research program many years ago and we have built the first
      internal biotech research center among Chinese companies. However, when
      multinational corporations engaged in the seed business expand into the
      agricultural market in China in the future, they may have more advanced
      technology or may market genetically modified seed more successfully than us.
      The major multinational competitors have a long operating history in the
      research and commercialization of the genetically modified crop seeds and have
      strong intellectual property estates supporting the use of biotechnology to
      enhance products. They are making considerable investments in new biotechnology
      products. These significant competitive advantages could cause our existing
      or
      candidate products to become less competitive, adversely affecting our
      operations.




***The
      degree of public acceptance or perceived public acceptance of our biotechnology
      products can affect our operations.***





Although
      all of the genetically modified products should go through rigorous testing,
      some opponents of the technology actively raise public concern about the
      potential for adverse effects of our products on human or animal health, other
      plants and the environment. The potential for adventitious presence of
      commercial biotechnology traits in conventional seed, or in the grain or
      products produced from conventional or organic crops, is another factor that
      could affect general public acceptance of these traits. Public concern can
      affect the timing of, and whether we are able to obtain, government approvals.
      Even after approvals are granted, public concern may lead to increased
      regulation or legislation, which could affect our business and operations,
      and
      may adversely affect sales of our products to farmers, due to their concerns
      about available markets for the sale of crops or other products derived from
      biotechnology.





***We
      are currently dependent on licensed seed products for the majority of our
      revenues, and if we lose the right to produce and sell licensed seeds, we will
      lose substantial revenues and suffer substantial losses.***





The
      following table sets forth the amount and percentage of our revenues resulting
      from licensed hybrid seeds as compared to our internally developed proprietary
      hybrid seeds for the periods listed:


Year
                  Ended December 31, 2004
              
              Year
                  Ended December 31, 2005
              
              Twelve
                  Months Ended September 30, 2006
              
              Year
                  Ended September 30, 2007Revenue
                  resulting from licensed hybrid seeds
              
              $
              35,933,245
              
              $
              24,314,206
              
              $
              58,572,673
              
              $
              52,052,737Percentage
                  of our total seed revenue resulting from licensed hybrid
                  seeds
              
              
              98.97
              %
              
              93.97
              %
              
              88.52
              %
              
              79.7
              %Revenue
                  resulting from internally developed proprietary hybrid
                  seeds
              
              $
              375,929
              
              $
              1,558,883
              
              $
              7,596,282
              
              $
              13,260,433Percentage
                  of our total seed revenue resulting from internally developed proprietary
                  hybrid seeds
              
              
              1.03
              %
              
              6.03
              %
              
              11.48
              %
              
              20.3
              %
 6




We
      sell a
      majority of seeds developed and produced under our license agreements with
      the
      Corn Research Institute Li County, Hebei Province (now Shijiazhuang Liyu
      Technology Development Co., Ltd.) and the Henan Agricultural University, which
      we collectively refer to as the significant licensors, as set forth in the
      table
      below.


Year
                    Ended December 31, 2004
                
                Year
                    Ended December 31, 2005
                
                Twelve
                    Months Ended September 30, 2006
                
                Twelve
                    Months Ended September 30, 2007Revenue
                    resulting from hybrid seeds developed and produced under our
                    license
                    agreements with the significant licensors
                
                $
                26,171,886
                
                $
                17,006,688
                
                $
                22,510,678
                
                $
                17,101,856Percentage
                    of our total seed revenue resulting from hybrid seeds developed
                    and
                    produced under our license agreements with the significant
                    licensors
                
                
                71.84
                %
                
                66.21
                %
                
                34.02
                %
                
                26.18
                %


If
      we are
      not able to develop and produce the licensed seed products or if the current
      license agreements are terminated or if we are unable to renew some of these
      license agreements on commercially reasonable terms or at all, we will suffer
      a
      substantial loss of revenue and will suffer substantial losses, and our
      financial condition and results of operations may be adversely
      affected.





***If
      we do not manage our growth successfully, our growth and chances for
      profitability may be hindered or impeded.***





We
      have
      expanded our operations rapidly during the last several years, and we plan
      to
      further our expansion efforts with new seed products and increased and enhanced
      distribution channels. This expansion has created significant demands on our
      corporate administrative, operational and financial personnel and other human
      resources and our need for working capital. Additional expansion into existing
      or new markets and new lines of business could strain these resources and
      increase our further need for capital, which may result in cash flow shortages.
      Our current resources may not be adequate to support further expansion.
      Consequently, industry factors such as overproduction or governmental policy
      changes may hinder our cash flow, which did, in fact, occur during our 2007
      fiscal year.





***We
      have a limited operating history and are subject to the risks of any new
      enterprise, any one of which could limit our growth and our product and market
      development.***





Our
      limited operating history makes it difficult to predict how our businesses
      will
      develop. Accordingly, we face all of the risks and uncertainties encountered
      by
      early stage companies, such as:




·
            uncertain
                market acceptance for our product extensions and our services;




7




·
            the
                evolving nature of the crop seed industry in the PRC, where significant
                consolidation is likely to occur, leading to the formation of companies
                which are better able to compete with us than is currently the case;




·
            changing
                competitive conditions, technological changes or evolving customer
                preferences could harm sales of our products or
                services.




·
            maintaining
                our competitive position in the PRC and competing with Chinese and
                international companies, many of which have longer operating histories
                and
                greater financial resources than
                us;




·
            continuing
                to offer commercially successful products to attract and retain a
                larger
                base of direct customers and ultimate
                users;




·
              retaining
                  access to the farmland we currently use for production of our products
                  and
                  obtaining access to additional farmland for
                  expansion;




·
            continuing
                our existing arrangements with production farms that grow our seed
                products and entering into new arrangements with additional production
                farms;




·
            maintaining
                effective control of our costs and expenses;
                and




·
            retaining
                our management and skilled technical staff and recruiting additional
                key
                employees.




If
      we are
      not able to meet the challenge of building our businesses and managing our
      growth, the likely result will be slowed growth, lower margins, additional
      operational costs and lower income.





***Due
      to our size and limited operating history, we substantially depend on a few
      key
      personnel who, if not retained, could cause declines in productivity and
      operational results and loss of our strategic guidance, all of which would
      diminish our business prospects and value to
      investors.***





Due
      to
      our size and limited operating history, our success depends to a large extent
      upon the continued service of a few executive officers and key employees,
      including:




·
            Dr.
                Gengchen Han, our Chairman and Co-Chief Executive Officer;




·
            Yasheng
                Yang, our Vice Chairman; and




·
            Liang
                Yuan, our Co-Chief Executive Officer and
                President.




The
      loss
      of the services of one or more of these key employees could have an adverse
      effect on us and our PRC operating subsidiaries, as each of these individuals
      played and continues to play a significant role in developing and executing
      our
      overall business plan and maintaining customer relationships and proprietary
      technology systems. While none of these key personnel is irreplaceable, the
      loss
      of the services of any of these individuals would be disruptive to our business.
      We believe that our overall future success depends in large part upon our
      ability to attract and retain highly skilled managerial and marketing personnel.
      There is no assurance that we will be successful in attracting and retaining
      such personnel on terms acceptable to them. Inadequate personnel will limit
      our
      growth, and will be seen as a detriment to our prospects, leading potentially
      to
      a loss in value for investors.





***We
      or our licensors may be subject to intellectual property infringement claims,
      which may force us to incur substantial legal expenses and, if determined
      adversely against us or our licensors, may materially disrupt our
      business.***





We
      cannot
      be certain that our licensed or self-developed proprietary seed products do
      not
      or will not infringe upon intellectual property rights held by third parties.
      We, or any of our licensors, may become subject to legal proceedings and claims
      from time to time relating to the intellectual property of others. If we, or
      any
      of our licensors, are found to have violated the intellectual property rights
      of
      others, we may be required to pay damages and be enjoined from using such
      intellectual property, and we may incur new or additional licensing fees if
      we
      wish to continue using the infringing products, or be forced to develop or
      license alternatives. In addition, we may incur substantial expenses in
      defending against these third party infringement claims, regardless of their
      merit.




8





***Efforts
      to protect our intellectual property rights and to defend against claims against
      us can increase our costs and will not always succeed. Any failures could
      adversely affect our sales and results of operations or restrict our ability
      to
      conduct our business.***





Intellectual
      property rights are crucial to our business. We endeavor to obtain and protect
      our intellectual property rights where our products are produced. However,
      we
      may be unable to obtain protection for our intellectual property. Even if
      protection is obtained, competitors, growers or others in the chain of commerce
      may raise legal challenges to our rights or illegally infringe on our rights,
      including through means that may be difficult to prevent, detect or defend.
      In
      addition, because of the rapid pace of technological change and the
      confidentiality of patent applications in some jurisdictions, competitors may
      be
      issued patents from applications that were unknown to us prior to issuance.
      These patents could reduce the value of our commercial or pipeline products
      or,
      to the extent they cover key technologies on which we have unknowingly relied,
      require that we seek to obtain licenses at a financial cost to us or cease
      using
      the technology, no matter how valuable the patents may be to our business.
      We
      cannot assure you we would be able to obtain such licenses on acceptable terms.
      Also, litigation may be necessary to enforce our intellectual property rights,
      protect our trade secrets or determine the validity and scope of the proprietary
      rights of others. There is a risk that the outcome of such potential litigation
      will not be in our favor. Such litigation may be costly and may divert
      management attention as well as expend other resources which could otherwise
      have been devoted to our business. An adverse determination in any such
      litigation will impair our intellectual property rights and may harm our
      business, prospects and reputation. In addition, we have no insurance coverage
      against litigation costs and would have to bear all costs arising from such
      litigation to the extent we are unable to recover such costs from other parties.
      The occurrence of any of the foregoing may harm our business, results of
      operations and financial condition.




Finally,
      implementation of PRC intellectual property-related laws has historically been
      lacking, primarily because of ambiguities in the PRC laws and difficulties
      in
      enforcement. Accordingly, intellectual property rights and confidentiality
      protections in China may not be as effective as in the United States or other
      countries, which increases the risk that we may not be able to adequately
      protect our intellectual property.





***Our
      business will not be able to be profitable if we do not continue to find and
      market products considered valuable by our customers.***





The
      ability of our seed business to be profitable depends on recurring and sustained
      reorders by farmers in China. Reorder rates are inherently uncertain due to
      several factors, many of which are outside our control. These include changing
      customer preferences, competitive price pressures, failure to develop acceptable
      new products, development of higher quality products by competitors and general
      economic conditions.





***Our
      single business line of crop seed development and production does not permit
      us
      to spread our business risks among different business segments and, thus, a
      disruption in our seed production or the industry would harm us more immediately
      and directly.***





We
      operate mainly in the crop seed business. Without business line diversity,
      we
      will not be able to spread the risk of our operations. Therefore, our business
      opportunities, revenues and income could be more immediately and
      directly affected by disruptions from such things as drought and disease or
      widespread problems affecting the industry, such as limited farmer credit,
      payment disruptions and customer rejection of modified crop seeds. If there
      is a
      disruption as described above, our revenues and income will be reduced, and
      our
      business operations may have to be scaled back.





***We
      are particularly dependent on revenue from our corn seed products and are
      vulnerable to market factors and, therefore, our operating results could be
      disproportionately and negatively impacted if we are unable to sell a sufficient
      amount of corn seed at satisfactory margins.***




9





For
        the
        fiscal year ended September 30, 2007, corn seed sales constituted
        approximately 74.36% of our revenues, as compared to 65.03% for the twelve
        months ended September 30, 2006 (unaudited). Our dependence on the corn
        seed market makes us particularly vulnerable to negative market changes that
        may
        occur in this product line. In particular, if demand for our corn seed generally
        decreases or if industry supply exceeds demand, prices will be driven downward
        and our margins will be negatively impacted, which would have an adverse
        effect
        on our business, results of operations and financial condition.





***Failure
      to develop and market new products could impact the company’s competitive
      position and have an adverse effect on the company’s financial
      results.***





The
      company’s operating results are largely dependent on its ability to renew its
      pipeline of new products and services and to bring those products and services
      to market. This ability could be adversely affected by difficulties or delays
      in
      product development such as the inability to identify viable new products,
      greater than anticipated development costs, technical difficulties, regulatory
      obstacles, competition, lack of demand, insufficient intellectual property
      protection, or lack of market acceptance of new products and services. Due
      to
      the lengthy development process, technological challenges and intense
      competition, there can be no assurance that any of the products the company
      is
      currently developing, or could begin to develop in the future, will achieve
      substantial commercial success. Consequently, if we are not able to fund
      extensive research and development activities and deliver new products to the
      markets we serve on a timely basis, our growth and operations will be harmed.
      In
      addition, sales of the company’s new products could replace sales of some of its
      current products, offsetting the benefit of even a successful product
      introduction.





***If
      we fail to introduce and commercialize new seed varieties, we will not be able
      to recover research, development and other costs associated with such activities
      and, thus, our future sales will be harmed.***





We
      cannot
      guarantee that the performance of our new seed varieties, whether licensed
      or
      proprietary, will meet our and our customers’ expectations, or that we will be
      able to introduce and commercialize specific seed varieties. Reorder rates
      are
      uncertain due to several factors, many of which are beyond our control. These
      include changing customer preferences, competitive price pressures, our failure
      to develop new products to meet the evolving demands of farmers in China, the
      development of higher-quality products by our competitors, and general economic
      conditions. In addition, farmers generally need time to learn about new seed
      varieties. Their traditional planting experience may also make it difficult
      for
      them to adapt to the new varieties. The process for new products to gain market
      recognition and acceptance is long and has uncertainties. If we fail to
      introduce and commercialize a new seed variety that meets the demand of farmers
      in China, if our competitors develop products that are favored by farmers in
      China, or if we are unable to produce our existing products in sufficient
      quantities, our growth prospects may be materially and adversely affected and
      our revenues may decline.





***One
      or more of our distributors could engage in activities that are harmful to
      our
      brand and to our business.***





Our
      crop
      seed products are sold primarily through distributors, and those distributors
      are responsible for ensuring that our products have the appropriate licenses
      to
      be sold to farmers in the PRC provinces. If those distributors do not apply
      for
      and receive the appropriate licenses, their sales of our products in those
      provinces may be illegal, and we may be subject to government sanctions,
      including confiscation of illegal revenues and a fine of between two and three
      times the amount of such illegal revenues. Unlicensed sales in a province may
      also cause a delay for our other distributors in receiving a license from the
      authorities for that province, which could further adversely impact our sales
      in
      that province. In addition, distributors may sell our products under another
      brand that is licensed in a particular province if our product is not licensed
      there. If our products are sold under another brand, the purchasers will not
      be
      aware of our brand name, and we will be unable to cross-market other crop seed
      varieties or other products as effectively to these purchasers. Moreover, our
      ability to provide appropriate customer service to these purchasers will be
      negatively affected, and we may be unable to develop our local knowledge of
      the
      needs of these purchasers and their environment. Furthermore, if any of our
      distributors sell inferior crop seeds produced by other companies under our
      brand name, our brand and reputation could be harmed, which could make marketing
      of our branded crop seeds more difficult.





***We
      rely on multiple distribution agreements for the sale and distribution of our
      products in the PRC provinces; if these agreements expire and we are unable
      to
      obtain new distribution agreements on similar terms, our future sales and
      results of operations would be adversely affected.***




10




We
      have
      established a network of over 3,800 first-level distributors and over 65,000
      second-level distributors and some retailers. Our distributors sell our seed
      products to retailers and the retailers in turn sell them to farmers. This
      distribution network covers almost all of the provinces of the PRC, excluding
      Qinghai and Tibet. The terms of our distribution agreements provide for
      territorial exclusivity on a designated seed product, usually on a county-wide
      basis and are one year in length. These distribution agreements are generally
      only for a term of one year and will expire next year. Although no single
      distributor accounts for more than 1% of our total sales, if we are unable
      to
      enter into new distribution agreements on substantially similar terms with
      a
      sufficient number of distributors each year, we will not have the distribution
      channels upon which we rely to market and sell our products, and our business
      and financial position could be adversely affected.





***We
      may be exposed to product quality claims, which may cause us to incur
      substantial legal expenses and, if determined adversely against us, may cause
      us
      to pay significant damage awards.***





The
      performance of our seeds depends on climate, geographical areas, cultivation
      method, farmers’ degree of knowledge and other factors in addition to genetic
      traits and the quality of our seeds. Natural disasters may also affect the
      performance of our seeds, particularly when farmers are not able to timely
      and
      effectively respond to those disasters. Furthermore, the cultivability of some
      farmland is deteriorating by toxic and hazardous materials due to farmers’
overuse of chemical herbicide. These factors generally result in
      underproduction. However, farmers generally attribute underproduction to seed
      quality. We may be subject to legal proceedings and claims from time to time
      relating to our seed quality. The defense of these proceedings and claims can
      be
      both costly and time consuming and may significantly divert efforts and
      resources of our management personnel. An adverse determination in any such
      proceeding could subject us to significant liability and damage our market
      reputation and prevent us from achieving increased sales and market share.
      Protracted litigation could also result in our customers or potential customers
      deferring or limiting their purchase of our products.





***Our
      revenues depend on the ability of a large number of small farmers to buy seed
      for cash because financing for purchases of this size and type is not available;
      therefore, if a substantial number of our customers become unable to pay for
      seed, our sales, revenues and operating results will
      decline.***





We
      have a
      large and diversified customer base, with no single customer representing more
      than 1% of our revenues. The large customer base provides some protection to
      us
      against a loss of revenues due to the inability of a significant number of
      our
      customers to pay for seed that has been previously ordered. However, the
      unavailability of credit for farmers in the PRC reduces the ability of those
      farmers to withstand the effects of difficult economic times. The lack of credit
      could prevent farmers from fulfilling their purchasing commitments to us with
      the result that our revenues and results of operations would be reduced.





***Fluctuations
      in commodity prices can increase our costs and decrease our
      sales.***





We
      purchase our seed inventories from production growers at market prices and
      retain the seed in inventory until it is sold. These purchases constitute a
      significant portion of the manufacturing costs for our seeds. We use hedging
      strategies to mitigate the risk of short-term changes in these prices but are
      unable to avoid the risk of medium- and long-term changes. Accordingly,
      increases in commodity prices may negatively affect our cost of goods sold
      or
      cause us to increase seed prices, which could adversely affect our sales.
      Farmers’ incomes are also affected by commodity prices; as a result, commodity
      prices could have a negative effect on their ability to purchase
      our products.





***Price
      increases for energy costs and raw materials could have a significant impact
      on
      our ability to sustain and grow earnings.***





Our
      production and distribution processes consume significant amounts of energy
      and
      raw materials, the costs of which are subject to worldwide supply and demand
      as
      well as other factors beyond the control of the company. Significant variations
      in the cost of energy, which primarily reflect market prices for oil and raw
      materials affect the company’s operating results from period to period. When
      possible, the company purchases raw materials through negotiated long-term
      contracts to minimize the impact of price fluctuations. The company has taken
      actions to offset the effects of higher energy and raw material costs through
      selling price increases, productivity improvements and cost reduction programs.
      Success in offsetting higher raw material costs with price increases is largely
      influenced by competitive and economic conditions and could vary significantly
      depending on the market served. If the company is not able to fully offset
      the
      effects of higher energy and raw material costs, it could have a significant
      impact on the company’s financial results.




11





***If
      we are unable to estimate our customers future needs accurately and to match
      our
      production to the demand of our direct customers, our business, financial
      condition and results of operations may be adversely affected.***





Due
      to
      the nature of the crop seed industry, we normally produce seeds according to
      our
      production plan before we sell and deliver crop seeds to distributors, which
      are
      our direct customers. Chinese farmers, the end users of our crop seed, generally
      make purchasing decisions for our products based on market prices, economic
      and
      weather conditions and other factors that we and our distributors may not be
      able to anticipate accurately in advance. If we fail to accurately estimate
      the
      volume and types of products sought by farmers, we may produce more seeds that
      are not in demand by our distributors resulting in aged seeds. In the event
      we
      decide not to sell the aged seeds due to our concerns about the quality of
      these
      seeds, the aged inventory could eventually be sold as crop for end uses at
      greatly reduced prices than seeds. Aged inventory could result in asset
      impairment, in which case we would suffer a loss and incur an increase in our
      operating expenses. On the other hand, if we underestimate demand, we may not
      able to satisfy our distributors’ demand for crop seeds, and thus damage our
      customer relations and end-user loyalty. Our failure to estimate farmers’ future
      needs and to match our production to the demand of our direct customers may
      adversely affect our business, financial condition and results of operations.
      In
      addition, inadequate distributor liquidity could affect distributors’ ability to
      pay for our products and, therefore, affect our sales or our ability to collect
      on our receivables.





***There
      are difficulties in managing our storage system, which may result in damage
      to
      our seeds in storage and, thus, operating losses.***





Seed
      storage entails significant risks, including difficulties in management of
      moisture, temperature and humidity of storage condition, any failure of which
      may result in damage to our seeds in storage and, thus, operating
      losses.





***It
      is difficult to predict our future performance because our revenues and
      operating results fluctuate significantly from period to period due in part
      to
      the nature of our business.***





Our
      operating results may fluctuate due to a number of factors, many of which are
      beyond our control. Our quarterly and annual revenues and costs and expenses
      as
      a percentage of our revenues may be significantly different from our historical
      rates. Our operating results in future quarters may fall below expectations.
      The
      industry in which we operate is seasonal in nature. The sales season of corn,
      rice and cotton seed lasts from October to June; the delivery of canola lasts
      from July to September. We generally do not have sales revenue from July to
      September, which results in cyclical changes of our cash flow and operating
      activities. As a result, if we are unable to generate sufficient working capital
      from our cash flow from operations and working capital facilities, we may
      encounter liquidity difficulties from the period of July through September,
      which may harm our operations. The seasonal nature of our business causes our
      operating results to fluctuate from quarter to quarter. Any unexpected seasonal
      or other fluctuations could cause the price of our common stock to fall. As
      a
      result, you may not rely on comparisons of our quarterly operating results
      as an
      indication of our future performance.





In
      addition, the future achievement and growth of our profits depends on our
      ability to secure sufficient orders from customers. An adverse change in market
      conditions may have material and adverse effects on our operating results if
      we
      cannot adjust our operating and marketing strategy to respond to such changes.
      Our results of operations may be adversely affected by reduced orders and profit
      margins in the event of a slowdown in market demand, an increase in business
      competition, a decrease in government subsidies to farmers, increased costs,
      or
      for other reasons. As such, there is a risk that we will not be able to achieve
      or maintain profitability or our historical results.





***Aged
      inventory may result in an increase of our administrative expenses and cause
      operating losses.***





Due
      to
      the nature of the seed industry, we normally produce seeds according to our
      production plan before we deliver the seeds to our customers. Our production
      plan could be too aggressive and, therefore, we could produce more seeds than
      demanded by the market which could result in aged seeds. We may decide not
      to
      sell the aged seeds if we take into account factors such as the quality of
      the
      seeds. In that case, the aged inventory could eventually be sold as common
      feed
      products at greatly reduced prices. Aged inventory could result in assets
      impairment risk, in which case we would suffer a loss and incur an increase
      of
      cost of revenue and a decrease in gross profit.




12





As
      a
      result of the measurement in the market value of inventory, last year we wrote
      off a significant portion of our seed inventory of RMB77.24 million (US$ 10.31
      million), 90.02% of which derived from the inventory of Denong.





***We
      have limited business insurance coverage in
      China.***




The
      insurance industry in China is still at an early stage of development. In
      particular, PRC insurance companies do not offer extensive business insurance
      products. As a result, we have very limited business liability, disruption
      insurance, or product liability coverage for our operations in China. We have
      determined that the difficulties associated with acquiring such insurance on
      commercially applicable terms and the nature of the industry makes it
      impractical for us to obtain such coverage. Any business disruption, litigation
      or natural disaster could result in our incurring substantial costs and the
      diversion of our resources, which could adversely affect our operations and
      financial condition.





***We
      rely on our network of approximately 110,000 farmers for the production of
      our
      seeds. Although our relationship with those farmers has been stable in the
      past,
      there are no assurances that those relationships will remain stable in the
      future. Instability of this kind could limit the amount of seed products
      available to us for sale to customers and threaten customer
      loyalty.***





We
      believe we maintain a favorable relationship with the farmers in our seed
      production network. In addition, the fact that we rely on a large number of
      farmers to produce crop seeds means that no one or even several farmers can,
      acting independently, adversely affect our business. However, events such as
      a
      shift in pricing caused by an increase in the value of commodity food crops
      other than seed crops, increase in land prices or competition could disrupt
      the
      chain of supply. Any of these disruptions could limit the supply of seeds that
      we obtain, adversely affecting supply and thereby lowering revenues. Such
      disruption could also damage our distributor relationships and farmer loyalty
      to
      us if we cannot supply the quantity of seed expected by them.





***We
      rely on license and technical service agreements which have imminent expiration
      dates and there is no assurance that we will be able to renew these agreements.***





We
      have
      multiple license agreements for designated seed products in relation to
      exclusive production and marketing within China. Our license agreements with
      Hubei Province Shiyan Agricultural Sciences Institute and Handan Agricultural
      Academy each have terms expiring on January 10, 2008 and July 1, 2011,
      respectively. In addition, under the technical service agreements dated December
      25, 2004, Origin Biotechnology will provide technical research, production
      and
      distribution services. In return, Beijing Origin is required to pay Origin
      Biotechnology a service fee calculated according to the weight of corn, rice
      and
      cotton seeds sold by the Beijing Origin. The initial term of each of these
      technical services agreements is three years and either party has the right
      to
      terminate the agreement if it does not desire to renew the provisions thereof
      at
      the expiration of the term. There is no guarantee that any of these agreement
      upon which we or our subsidiaries depend for licensing and technical services
      will be renewed. Moreover, there is no assurance that any steps we have already
      taken or might take in the future will ensure the successful renewal of any
      or
      all our rights or the granting of further new rights or that the terms of any
      renewals of our rights would not be significantly less favorable to us than
      the
      terms of our current rights under these agreements.





***Agreements
      between our subsidiaries may not reflect terms that would have resulted from
      arm’s length negotiations among unaffiliated third parties.***




Agreements
      between our subsidiaries that have been entered into, including the technical
      services agreements, by and among Beijing Origin, Changchun Origin, Henan Origin
      and Origin Biotechnology, may not reflect terms that would have resulted from
      arm’s-length negotiations among unaffiliated third parties. These agreements
      relate to, among other things, the transfer of intellectual property rights
      and
      the provision of technical research, production and distribution
      services. ******




13




***If
      our rights to lease land from farmers were subject to a dispute, or if their
      legality or validity were challenged, our operations could be disrupted.***




PRC
      law
      provides for the registration of land ownership and land-use rights and for
      the
      issuance of certificates evidencing land ownership or the right to use land.
      However, the administrative system for registration of land ownership and
      land-use rights is not well-developed in rural areas where most of our crop
      seed
      production bases are located. As a result, we are generally not able to verify
      through the land registry system the ownership or land-use rights of the parties
      from whom we have leased land. Despite our efforts to obtain representations
      from the farmers that they own the land, possess land-use rights or have the
      right to sub-contract the land-use right on behalf of the holder of such rights,
      there is nevertheless a risk that they have not legally and validly granted
      the
      right to use the land to us. Moreover, there is a risk that farmers may, in
      breach of the terms of the applicable leases, enter into leases with other
      third
      parties in respect of land-use rights which they have previously granted to
      us,
      or that they have not entered into leases with third parties before entering
      into leases with us.




There
      is
      a risk that the legality or validity of our leases will be subject to dispute
      or
      challenge in the future. If our leases become subject to a dispute or challenge,
      our operations on such land, especially our research and development on crop
      breeding, could be suspended and we could lose our rights to use such land
      which
      could adversely affect our business, financial condition and results of
      operations.




***In
      the course of preparing our consolidated financial statements for the twelve
      months ended September 30, 2007, a material weakness in our internal
      control over financial reporting was noted. If we fail to implement, achieve
      and
      maintain an effective system of internal controls, and as a result of this
      material weakness, we may be unable to accurately report our financial results,
      and investor confidence and the market price of our shares may be adversely
      impacted.***





We
      became
      subject to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in
      the
      fiscal year ended September 30, 2007, which requires us to set out a management
      report containing an assessment of our internal controls over financial
      reporting in our Annual Report. It also requires an independent registered
      public accounting firm to attest to and report on the effectiveness of our
      internal controls over financial reporting. In preparing our consolidated
      financial statements, a material weakness in our internal control over financial
      reporting were identified, as defined in the standards established by the U.S.
      Public Company Accounting Oversight Board. The material weakness identified
      primarily related to the application of derivative accounting in accordance
      with
      Financial Accounting Standard 133-Accounting for Derivative Instruments and
      Hedging Activities. Our management concluded that we did not maintain an
      effective control environment with respect to the accounting for derivative
      as
      at September 30, 2007. As a result, this control deficiency resulted in a
      material adjustment in the our annual consolidated financial statements.
      Therefore, we concluded that we did not have effective internal control over
      financial reporting for the twelve months ended September 30,
      2007.





We
      are
      planning for the complete remediation of the above issue in 2008 by seeking
      people with expertise in this aspect. We cannot be certain that this measure
      will resolve our control deficiency, and, if we fail to timely achieve and
      maintain the adequacy of our internal controls, we may continue to be unable
      to
      conclude that we have effective internal controls over financial reporting.
      Moreover, effective internal controls over financial reporting are necessary
      for
      us to produce reliable financial reports and are important to help prevent
      fraud. As a result, our failure to achieve and maintain effective internal
      controls over financial reporting could result in the loss of investor
      confidence in the reliability of our financial statements, which in turn could
      harm our business and negatively impact the market price of our ordinary shares.
      Furthermore, we anticipate that we will incur considerable costs and use
      significant management time and other resources in an effort to comply with
      Section 404.





***Any
      diversion of management attention to matters related to acquisitions or any
      delays or difficulties encountered in connection with integrating acquired
      operations may have an adverse effect on our business, results of operations,
      and/or financial condition.*** ******





We
      have
      completed several acquisitions involving seed companies and may complete other
      acquisitions in the near further. These transactions are designed to contribute
      to our long-term growth. We must fit such acquisitions into our growth
      strategies to generate sufficient value to justify their cost. Acquisitions
      also
      present other challenges, including geographical coordination, personnel
      integration and retention of key management personnel, systems integration
      and
      the reconciliation of corporate cultures. Those operations could divert
      management’s attention from our business or cause a temporary interruption of or
      loss of momentum in our business and the loss of key personnel from the acquired
      companies. In addition, proposed acquisitions which are not consummated will
      cause us to incur substantial costs, none of which are generally
      recoverable.




14





***We
      require short-term financing to fund our working capital, especially due to
      the
      seasonal nature of our business.***





The
      nature of the agricultural seed production industry involves expenses and
      revenue cycles that seasonal in nature. In our fiscal year third quarter, we
      may
      face costs that are in excess of our cash flow sources during that given period.
      The advanced payments made to our seed producing farmers may exceed the amount
      of deposits received from our customers. The exact timing of these deposit
      payments is dependant on the Chinese lunar calendar, which varies from one
      calendar year to the next. As a result, we have customarily relied upon short
      term bridge loans to cover our expenses pending receipt of cash payment from
      farmers at the time of seed purchases. For example, our short-term debt
      increased from RMB253 million ($32.01 million) on September 30, 2006 to
      RMB268.40 million (US$35.82 million) on September 30, 2007. Although we have
      historically had access to sufficient financing to manage these cash flow
      cycles, we cannot be certain that we will be able to obtain sufficient debt
      financing on terms that are satisfactory to us to maintain consistent operating
      results. Downgrades in our credit rating, tightening of related financing
      markets or other limitations on our ability to access short-term financing
      would
      increase our interest costs and adversely affect our operating
      results.





***Certain
      of our credit agreements contain restrictive covenants that may impair our
      ability to conduct our business.***





Certain
      of our outstanding credit agreements contain financial and operating covenants
      that limit our management’s discretion with respect to certain business matters.
      Among other things, these covenants require us to maintain certain financial
      ratios, restrict our ability and our subsidiaries’ ability to incur additional
      debt, create liens or other encumbrances, change the nature of our business,
      pay
      dividends, sell or otherwise dispose of assets, and merge or consolidate with
      other entities. Any failure by us or our subsidiaries to comply with these
      agreements could harm our business, financial condition and operating results.





**Risks
      relating to our industry**





***The
      Chinese agricultural market is highly competitive and our growth and results
      of
      operations may be adversely affected if we are unable to compete effectively.***





The
      agricultural market in China is highly fragmented, largely regional and
      competitive and we expect competition to increase and intensify within the
      sector. We face significant competition in our crop seed business. Our
      competitors may have greater financial, research and development resources
      than
      we have. Competition may also develop from consolidation or other market forces
      within the crop seed industry in China, and the privatization of crop seed
      producers that are currently operated by the local governments in China.
      According to the Opinion on Enhancement of Market Supervision regarding Seed
      Administration Reform issued by the General Office of the PRC State Council
      in
      May 2006, the agricultural administrative offices of local government were
      required to separate their governmental administrative functions from seed
      production activities by the end of June 2007 and, therefore, there may be
      more
      privately-owned seed companies in the future. Our competitors may be better
      able
      to take advantage of industry consolidation and acquisition opportunities than
      us. The reform and restructuring of state-owned equity in seed enterprises
      will
      likely lead to the reallocation of market share in the seed industry, and our
      competitors may increase their market share by participating in the
      restructuring of the state-owned seed companies. Such privatization would likely
      mean that these producers will need to develop more efficient and commercially
      viable business models in order to survive. In addition, the PRC government
      currently restricts foreign ownership of any domestic seed development and
      production business to no more than 50%. When and if such restrictions are
      lifted, multinational corporations engaged in the seed business may expand
      into
      the agricultural market in China. These companies have significantly greater
      financial, technological and other resources than us and may become our major
      competitors in China. In particular, our industry was affected by a widespread
      overproduction during the last year. As a result, supply of certain of our
      products exceeded demand for those products and, as a result, market prices
      were
      reduced and our margins and revenues were negatively impacted. If this trend
      continues in future years, we may be unable to successfully compete in our
      industry, especially if our competitors can produce and distribute seeds at
      a
      lower cost than us. As competition intensifies, our margins may continue to
      be
      compressed by more competitive pricing in the short term and may also to be
      compressed in the long term and we may lose our market share and experience
      a
      negative impact on our margins, revenues and results of operations.




15




***Natural
      or man-made disasters could damage seed production, which would cause us to
      suffer production losses and material reduction of revenues; there is no
      agriculture insurance in the PRC to cover the loss of seed
      crops.***




We
      produce our seeds using a network of approximately 110,000 farmers, who plant
      the crops and harvest the seeds for use as crop seeds for the next growing
      season. As a result, the source of supply for our seeds is subject to all of
      the
      risks associated with any agricultural enterprise, including natural disasters
      such as widespread drought, flood, snowstorm, pestilence, plant diseases and
      insect pests, and man-made disasters such as environmental contamination. Other
      man-made incidents may damage our products, such as arson or other acts that
      may
      adversely affect our crop seed inventory in the winter storage season.
      Furthermore, natural or man-made disasters may cause farmers to migrate from
      the
      farmland, which would decrease the number of end users of our products. While
      the use of such a large number of farmers provides some protection against
      a
      widespread failure of any particular crop, the majority of our seed production
      farmers are located in Gansu, Sichuan, and Hunan provinces, making them subject
      to risks that are somewhat local in nature. We have attempted to manage this
      risk by obligating ourselves to pay the farmers who produce our seeds only
      for
      the quantity of seeds that they produce, thus limiting our expenses somewhat.
      We
      have also set up a storage system since 2003 attempting to manage this risk.
      However, in the event of a widespread failure of the crop seed, we would likely
      sustain substantial operating losses, due to both the fact that a significant
      portion of our expenses are fixed overhead and that the loss of a large portion
      of a crop seed would limit our revenues significantly. Although insurance to
      protect against such a risk is available in many jurisdictions, such insurance
      is not available in the PRC.




***Our
      results of operations and financial condition may be adversely affected by
      extreme weather conditions.*** ****




Our
      supply of crop seeds is subject to the risk of extreme weather conditions which
      may adversely affect the farmers producing crop seeds for us. In turn, the
      quality, cost and volumes of crop seeds that our farmers supply to us could
      be
      affected, thereby harming our sales and profitability. Extreme weather
      conditions could also affect our production facilities, or those of our
      suppliers or customers, which could affect our costs and our ability to meet
      supply.




***We
      primarily rely on arrangements with farmers to produce our crop seed products.
      If we were unable to continue these arrangements or enter into new arrangements
      with other farmers, our total land acreage devoted to crop seed production
      would
      decrease and our growth would be inhibited.***




We
      have
      access to approximately 6,500 hectares of farmland in fourteen provinces mainly
      through contractual arrangements with farmers. As we are legally prohibited
      from
      owning farmland, we typically enter into a seed production agreement with such
      farmer. These production agreements to produce crop seeds are typically one
      year
      in length ,
      covering one growing season. In the event that prices for other crops increase,
      these farmers may decide to farm other crops in breach of our seed production
      agreements with them. If we are unable to find new villages collectives willing
      to produce crop seeds for us, our business and results of operations would
      be
      materially and adversely affected. Any of these disruptions could materially
      and
      adversely affect our supply of crop seeds and our revenues. Such disruptions
      could also damage distributor relationships and farmer loyalty if we cannot
      supply them with the quantities and varieties of seeds that they expect.





***Crop
      seed prices and sales volumes may decrease in any given year with a
      corresponding reduction in sales, margins and results of
      operations.***





During
      most of our limited operating history, the crop seed market has been stable
      in
      the PRC, however, in the past, it was marked by periods of instability, as
      in
      the case of fiscal year 2007. In the future, there may be prolonged periods
      of
      instability during which commodity prices and sales volume might fluctuate
      greatly. Commodities can continue to be affected by general economic conditions,
      weather, disease and aspects of demand such as financing, competition and trade
      restrictions. Although we have followed a branded product strategy to
      differentiate our products from those of other crop seed producers, the crop
      seed market continues to behave as a commodity market. As a result, the price
      that we are able to demand for our seeds is somewhat dependent on the size
      of
      the supply of our seeds and the seeds of other producers. Therefore, the
      potential exists for fluctuation in supply and, consequently, in price, in
      our
      own markets, even in the absence of significant external events that might
      cause
      volatility. As a result, the amount of revenue that we receive in any given
      year
      is subject to change. Because decisions are made regarding the level of
      production prior to the time that the volume of orders and the market price
      for
      those orders is known, it is possible that we will have too much or not enough
      product available, each with the attendant impact on revenues, margins and
      results of operations.




16





***In
      recent years, prices of our crop seed products in China have been declining.***




The
      ability of our operations to be profitable is affected by the selling prices
      of
      our products. We benchmark the prices of our crop seed products against the
      prevailing domestic market prices of crop seed products of similar quality
      and
      attributes. Historically, prices of crop seed products in China have been
      volatile, primarily due to fluctuations in supply and demand. In the past four
      years, prices of our crop seed products in China have been declining. If the
      prices for such products continue to decline in the future, and we are unable
      sell more products and/or reduce our cost of sales, our revenues will decrease
      and our ability to generate operating results at historical levels will be
      adversely affected.





***We
      may face increased regulatory risks with respect to our recent expansion into
      Vietnam.***





In
      connection with certain of our recent acquisition and seed approval activities,
      including particular investments in rice seed varieties applicable to the soil
      conditions in Southeast Asia, we have begun to do limited business with farmers
      in Vietnam who purchase our rice hybrid products. We expect to continue to
      expand our business into Vietnam in the future. We may face material financial,
      business, and legal risks with respect to our expansion into Vietnam given
      that
      our business and operating results may be adversely affected by changes in
      the
      political and social conditions in Vietnam and by changes in Vietnamese
      government policies with respect to laws and regulations, anti-inflationary
      measures, currency conversion and remittance abroad, and rates and methods
      taxation, among other things.





***Technological
      change in creating seed hybrids could harm our business, causing a loss in
      business opportunities, market share and revenues.***





We
      currently rely upon traditional methods of creating crop seed hybrids to develop
      new products. While these methods are highly effective, there has been an
      increase in the development of genetically modified agricultural products in
      an
      effort to increase the quality and quantity of crop yields. This new genetic
      technology is controversial, and it has not been widely accepted in many regions
      of the world, including the PRC. However, as the ability to use genetic
      modification to produce seeds that are superior to or less costly than those
      that we produce by traditional methods increases, the threat of competition
      from
      this source becomes more realistic. A number of factors those are currently
      difficult to predict, including a shift in farmer and consumer attitudes
      regarding the acceptability of genetic technology affect the extent to which
      this potential threat could affect our business prospects.





**Risks
      relating to our business organization and structure**





***Three
      of our PRC operating subsidiaries are controlled subsidiaries through stock
      consignment agreements rather than by direct ownership of shares, the terms
      of
      which may have to be enforced, which would require us to incur extra costs,
      create uncertainty as to ownership of the operating businesses involved and
      risk
      the possible loss of rights.***





Under
      PRC
      law, foreign entities are not currently permitted to own more than 49% of a
      seed
      production company. In order to address those restrictions, Origin, a
      non-Chinese entity that cannot directly own the shares of three of our PRC
      operating subsidiaries, namely, Beijing Origin, Changchun Origin and Henan
      Origin, will instead hold the right to control such shares in all respects,
      including voting, dividends, nomination of directors, and corporate management,
      through stock consignment agreements executed by the owners of the stock of
      these companies. When the shares can be transferred, they will be transferred
      to
      us for no additional consideration.





There
      is
      the risk, however, that a consigning shareholder will not fulfill its
      obligations under the stock consignment agreement. In that event, we may need
      to
      resort to the PRC courts to have our rights under the applicable agreement
      enforced. Such enforcement will cause us to incur legal expenses. In addition,
      while a case is pending there will be uncertainty regarding our rights as to
      the
      three PRC operating subsidiaries involved. In addition, a PRC court may decide
      not to enforce the agreements in whole or in part. To the extent these
      agreements are neither observed nor enforced as intended, the three PRC
      operating subsidiaries and Denong, which is approximately 98% owned by Beijing
      Origin, will not be controlled by us as intended, which will affect our value
      and restrict our ability to obtain the income and other rights of ownership
      associated with the consigned stock. It may also prevent the consolidation
      of
      our financial statements with the three PRC operating subsidiaries, which would
      reduce the reported earnings of the consolidated companies. The uncertainty
      of
      ownership may also adversely affect our market value.




17





***Whether
      or not a stock consignment agreement is terminated depends on the consensus
      of
      our board and the consignees. Any such termination could result in a possible
      loss of certain rights or assets held by us without receiving fair value in
      return.***





The
      stock
      consignment agreements relating to our control of the stock of three of our
      PRC
      operating subsidiaries (not including Origin Biotechnology) may be terminated
      after three years upon mutual agreement between us and the consignees. Three
      of
      the consignees, Messrs. Han, Yang and Yuan, also serve as our officers and/or
      directors. These three persons own, in the aggregate, 8,662,350 shares of our
      ordinary stock, or about 37% of our issued and outstanding ordinary stock.
      Holding this amount of stock will allow these officers to control or greatly
      influence the selection of directors and matters submitted to a vote of our
      shareholders, including voting to terminate the stock consignment agreements.





There
      are
      corporate protections in place designed to protect our interests, such as an
      independent board of directors, an audit committee comprised of independent
      directors that must approve insider transactions, a code of conduct requiring
      fair dealing with the company, and the British Virgin Islands statutory
      provision that a disposition of more than 50% of the assets of a company must
      be
      approved by a majority of the shareholders. Moreover, if consigned stock is
      transferred to us as provided in the stock consignment agreements when the
      restrictions under PRC law are lifted, that stock will no longer be subject
      to
      the stock consignment agreements, and the termination of the stock consignment
      agreements would then have no effect on the ownership of that stock. However,
      if
      the stock consignment agreements are terminated, then we would lose our rights
      with respect to the consigned stock and the profits from the issuing
      corporation. Such a loss would impair the value of the company and would reduce
      our ability to generate revenue.





***The
      impact from the integration of our subsidiary Denong into Origin has increased
      our costs and might continue to have an adverse effect on our operating
      results.***





From
      January 2006 through December 2006, we acquired, in multiple transactions,
      approximately 97.62% interest in Denong, a developer, producer and marketer
      of
      rice, corn, canola and cotton in the southwest region of China. To integrate
      Denong into our growth strategies, we invested considerable financial and human
      resources, which increased our operating costs. Furthermore, the integration
      process diverted our management’s attention from our business, which might have
      a further adverse effect on our core operating results. We cannot be certain
      that we will achieve a favorable return on our investment.





***Our
      executive officers have entered into employment agreements with us which provide
      that they may be entitled to certain rights upon a change of control.***





The
      following executive officers have entered into employment agreements which
      provide that they may terminate their respective employment agreements with
      us
      as a result of a change of control:


·
            Dr.
                Gengchen Han, our Chairman and Co-Chief Executive Officer; 
 ·
            Yasheng
                Yang, our Vice Chairman; and  ·
            Liang Yuan, our Co-Chief Executive Officer and
              President





A
      change
      of control includes if any person other than us and/or any our officers or
      directors as of the date of the employment agreement acquires our securities
      other than from the executive or his affiliates (in one or more transactions),
      having 51% or more of the total voting power of all of our securities then
      outstanding. If the executive terminates his employment agreement due to a
      change of control, we must continue to pay the executive all payments,
      compensation and benefits pursuant to the terms of his employment agreement
      upon
      the earlier of two years from the date of termination or through the term of
      the
      employment agreement (each employment agreement has a term of three years
      commencing on January 1, 2005).




18





**Risks
      relating to doing business in China**





***If
      we do not comply with PRC regulations, we may not be able to operate our
      business or we may be fined, both of which would adversely affect our business,
      operations and revenues.***





The
      PRC
      has many regulations relating to the seed business, including obtaining and
      maintaining operating licenses and permits. Seed products must be licensed
      and
      undergo a stringent review process before they may be sold in the PRC. We
      believe we currently have all the necessary licenses necessary for our business,
      and that we are in compliance with applicable laws and regulations. If we are
      not in compliance, we may be fined or lose the ability to sell a particular
      seed
      or operate our business altogether. If the fines are substantial or if our
      ability to sell or operate is withdrawn, this will result in additional costs
      or
      the loss of revenues and could prevent us from continuing as an operating
      business.





***If
      we do not comply with applicable government regulations, we may be prohibited
      from continuing some or all of our operations, resulting in a reduction of
      growth and ultimately market share due to loss of competitive position.***





Our
      revenue depends on receiving approval from the PRC government to market new
      seed
      hybrids that we are developing and will develop. In addition, there may be
      circumstances under which the governmental approvals granted are subject to
      change without substantial advance notice, and it is possible that we could
      fail
      to obtain the approvals that we require to expand our business as we intend
      to
      do. The failure to obtain or to maintain such approvals would limit the number
      and quality of products that we would be able to offer. This reduction in
      product offerings would cause a reduction in the growth previously experienced
      and over time would result in the loss of market share from the competitive
      pressures of seeds developed by others that would likely be better than our
      products.





***The
      reform and restructuring of local agricultural administrative offices and
      state-owned seed enterprises may harm our future business.***





The
      General Office of the PRC State Council issued an opinion in May 2006, requiring
      that the agricultural administrative offices of the local governments stop
      engaging in the seed production and distribution business by the end of June,
      2007. The opinion also provides that the agricultural administrative offices
      of
      the local governments should sever their ties with their affiliated state-owned
      seed companies. We believe such reform and restructuring of state-owned seed
      companies will likely lead to reallocation of the seed market share and, thus,
      our competitors may be able to increase their market share by participating
      in
      the restructuring of the state-owned seed companies. As competition intensifies,
      our margins may be compressed by more competitive pricing in the short term
      and
      may continue to be compressed in the long term and we may lose our market share
      and experience a reduction in our revenues and results of
      operations.





***The
      technical services agreements between Origin Biotechnology and the other three
      operating subsidiaries may be subject to scrutiny by the PRC tax authorities
      for
      transfer pricing adjustments.***





We
      could
      face adverse tax consequences if the PRC tax authorities determine that our
      technical service agreements between Origin Biotechnology and the other three
      PRC operating subsidiaries, namely, Beijing Origin, Changchun Origin and Henan
      Origin, were not entered into based on arm’s length negotiations. If the PRC tax
      authorities determine that these agreements were not entered into on an arm’s
      length basis, they may adjust our income and expenses for PRC tax purposes
      in
      the form of a transfer pricing adjustment. A transfer pricing adjustment could
      result in a reduction, for PRC tax purposes, of deductions recorded by the
      three
      PRC operating subsidiaries, which could adversely affect us by:





·
            increasing
                the three PRC operating subsidiaries’ tax liability without reducing
                Origin Biotechnology’s tax liability, which could further result in late
                payment fees and other penalties to our PRC operating subsidiaries
                for
                under-paid taxes; or





·
            limiting
                Origin Biotechnology’s ability to maintain preferential tax treatment and
                government financial incentives, which, if the transfer pricing adjustment
                is significant, could result in Origin Biotechnology failing to qualify
                for those preferential tax treatments and government financial
                incentives.




19


As
      a
      result, any transfer pricing adjustment could have an adverse impact on our
      financial condition.





***Deficient
      railway transportation capacity in Northwestern China and the oil price hike
      may
      result in the increase of our transportation-related costs and thus adversely
      affect our business.***





Our
      major
      production base is located at Linze County, Gansu Province, China. Seeds
      produced in that geography are transported throughout China each year by means
      of railway, which we believe is currently the most cost-efficient means. With
      economic development and the frequent flow of material, we believe the Northwest
      railway is deficient in terms of its transportation capability. As our volume
      of
      freight increases year by year, the seeds may have to be transported by other
      means if the railway cannot guarantee the increasingly larger volume of
      freight ô for
      instance, by car. In such event, the production costs will increase
      correspondingly with the increase in transportation costs, which may adversely
      affect our business.





***Our
      business benefits from certain PRC government subsidies. Expiration of, or
      changes to, these incentives could have a material adverse effect on our
      operating results.***




The
      PRC
      government has in recent years reduced taxes and increased subsidies and other
      support across the agricultural industry. For instance, the government
      subsidizes farmers for their seed purchases, and has increased spending on
      rural
      infrastructure. Sales of agricultural products from producers to intermediaries
      or to farmers are exempt
      from PRC value-added tax. The discontinuance of preferential treatments granted
      by the Chinese government to the seed industry, could adversely affect our
      earnings.





In
      addition, subsidy policies may have an adverse effect on our ability to market
      our products. Farmers can buy crop seeds designated as “high-quality” at
      subsidized prices, but the designation of seeds as “high-quality” is at the
      discretion of the local government, companies owned by the local government
      and
      local private seed companies. It is possible that this policy could result
      in
      preferential treatment for local seed producers, with locally produced seeds
      being designated as “high-quality” while ours are not designated as such. If
      such preferential treatment were to occur, the price for our seeds to farmers
      in
      those provinces would be higher than the subsidized local seeds, and our sales
      in that province could suffer, which could adversely affect our results of
      operations.





***The
      discontinuation of any of the preferential tax treatments currently available
      to
      our PRC subsidiaries could materially increase our tax liabilities.***




Prior
      to
      January 1, 2008, under applicable PRC tax laws, companies established in China
      were generally subject to a state and local enterprise income tax, or EIT,
      at
      rates of 30% and 3%, respectively .
      In
      addition, an enterprise qualified as a “high and new technology enterprise,”
including agricultural companies, located in certain specified high-tech zones
      was entitled to a preferential state EIT rate of 15% and could enjoy an
      exemption from the state EIT for the first three years since its establishment
      and a 50% reduction of the state EIT for the succeeding three years. The
      qualification of a “high and new technology enterprise” was subject to an annual
      or biennial evaluation by the relevant government authority in China. For
      example, Origin Biotechnology is entitled to a preferential tax rate of 15%
      as a
      new technology company, and was exempted from income tax for 2006 and 2007. Also
      Beijing Origin has been approved as a new technology enterprise and enjoys
      the
      reduced enterprise income tax rate of 15%.





In
      March
      2007, the National People’s Congress, enacted the Enterprise Income Tax Law, or
      the EIT Law, and in December 2007, the State Council promulgated the
      implementing rules of the New EIT Law, both of which became effective on January
      1, 2008. The New EIT Law significantly curtails tax incentives granted to
      foreign-invested enterprises under the previous tax law. The New EIT Law,
      however, (i) reduces the top rate of enterprise income tax from 33% to 25%,
      (ii)
      permits companies to continue to enjoy their existing tax incentives, subject
      to
      certain transitional phase-out rules, and (iii) introduces new tax incentives,
      subject to various qualification criteria. Under the phase-out rules,
      enterprises established before the promulgation date of the New EIT Law and
      which were granted preferential EIT treatment under the then effective tax
      laws
      or regulations may continue to enjoy their tax holidays until their expiration
      and will gradually transition to the uniform 25% EIT rate over a five-year
      transition period. In addition, the new technology enterprise qualification
      of
      our PRC subsidiaries is subject to a biennial re-assessment by the relevant
      PRC
      government authority. In the event the preferential tax treatment for our PRC
      subsidiaries is discontinued, the affected entity will become subject to the
      standard PRC enterprise income tax rate. There is no assurance that the local
      tax authorities will not, in the future, change their position and discontinue
      any of our preferential tax treatments, potentially with retroactive effect.
      The
      discontinuation of any of our preferential tax treatments could materially
      increase our tax obligations.




20




***Under
      China’s New Enterprise Income Tax Law, we may be classified as a “resident
      enterprise” of China. Such classification could result in unfavorable tax
      consequences to us and our non-PRC shareholders.***





Under
      the
      New Enterprise Income Tax Law, or the New EIT Law, an enterprise established
      outside of China with “de facto management bodies” within China is considered a
“resident enterprise,” meaning that it can be treated in a manner similar to a
      Chinese enterprise for enterprise income tax purposes. The implementing rules
      of
      the New EIT Law define de facto management as “substantial and overall
      management and control over the production and operations, personnel,
      accounting, and properties” of the enterprise. Currently no official
      interpretation or application of this new “resident enterprise” classification
      is available, therefore it is unclear how tax authorities will determine tax
      residency based on the facts of each case. If the PRC tax authorities determine
      that our British Virgin Islands holding company is a “resident enterprise” for
      PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences
      could follow. First, we may be subject to enterprise income tax at a rate of
      25%
      on our worldwide taxable income as well as PRC enterprise income tax reporting
      obligations. Second, although under the New EIT Law and its implementing rules
      dividends paid to us from our PRC subsidiaries would qualify as “tax-exempt
      income,” we cannot guarantee that such dividends will not be subject to a 10%
      withholding tax, as the PRC foreign exchange control authorities, which enforce
      the withholding tax, have not yet issued guidance with respect to the processing
      of outbound remittances to entities that are treated as resident enterprises
      for
      PRC enterprise income tax purposes. Finally, it is possible that future guidance
      issued with respect to the new “resident enterprise” classification could result
      in a situation in which a 10% withholding tax is imposed on dividends we pay
      to
      our non-PRC shareholders and with respect to gains derived by our non-PRC
      shareholders from transferring our shares. The “resident enterprise” rule could
      be applied to our British Virgin Islands sub-holding company with similar
      consequences.





In
      addition to the uncertainty in how the new “resident enterprise” classification
      could apply, it is also possible that the rules may change in the future,
      possibly with retroactive effect. We are actively monitoring the possibility
      of
“resident enterprise” treatment for the 2008 tax year and are evaluating
      appropriate organizational changes to avoid this treatment.





***Adverse
      changes in political and economic policies of the PRC, including its policy
      of
      reforming its economic system, could have an adverse effect on the growth of
      private businesses in the PRC such as ours.***





Since
      the
      late 1970’s, the PRC has been reforming its economic system and changing from a
      planned economy based on governmental dictates and priorities to one that uses
      market forces to influence deployment of economic resources, labor and capital
      and to determine business endeavors. We cannot predict whether or not the
      government will continue to encourage economic liberalization and further
      release its control over the economy and encourage private enterprise. We also
      cannot predict the timing or extent of future economic reforms that may be
      proposed. Any reimposition of planned economy regulation or similar kinds of
      restrictions could reduce the freedom of private businesses to operate in a
      profitable manner, restrict inflows of capital or stifle investor willingness
      to
      participate in the PRC economy. To the extent we need additional capital, any
      restrictions on foreign ownership, foreign investment and repatriation of
      profits will hamper our ability to find capital outside of the PRC.





***The
      economy of China has been experiencing unprecedented growth, leading to some
      inflation. If the government tries to control inflation by traditional means
      of
      monetary policy or returns to planned economic techniques, our business will
      suffer a reduction in sales growth and expansion
      opportunities.***





The
      rapid
      growth of the PRC economy has historically resulted in high levels of inflation.
      If the government tries to control inflation, it may have an adverse effect
      on
      the business climate and growth of private enterprise in the PRC. An economic
      slowdown could have an adverse effect on our sales and may increase our costs.
      If inflation is allowed to proceed unchecked, our costs would likely increase,
      and there can be no assurance that we would be able to increase our prices
      to an
      extent that would offset the increase in our expenses.




21





***A
      return to profit repatriation controls may limit our ability to pay dividends
      and expand our business, and may reduce the attractiveness of investing in
      PRC
      business opportunities.***





PRC
      law
      allows enterprises owned by foreign investors to remit their profits, dividends
      and bonuses earned in the PRC to other countries, and the remittance does not
      require prior approval by the State Administration of Foreign Exchange, or
      SAFE.
      SAFE regulations require extensive documentation and reporting, some of which
      is
      burdensome and slows payments. If there is a return to payment restrictions
      and
      reporting, the ability of a PRC company to attract investors will be reduced.





Also,
      our
      investors may not be able to obtain the benefits of the profits of the business
      generated in the PRC for other reasons. Relevant PRC laws and regulations permit
      payment of dividends only from accumulated
      profits ,
      if any,
      determined in accordance with PRC accounting standards and regulations.
      E ach
      of
      our subsidiaries and our affiliated entities in China is required to set aside
      at least 10% of its after-tax profits each year, if any, to fund a statutory
      reserve until such reserve reaches 50% of its registered capital, and to further
      set aside a portion of its after-tax profits to fund the employee welfare fund
      at the discretion of the shareholders’ meeting or the board. These reserves are
      not distributable as cash dividends. In addition, the PRC tax authorities may
      require us to adjust our taxable income under the contractual arrangements
      we
      currently have in place in a manner that would materially and adversely affect
      our subsidiary’s ability to pay dividends and other distributions to us. Any
      limitation on the ability of our subsidiary and our affiliated entity to
      distribute dividends or other payments to us could materially limit our ability
      to grow, make investments or acquisitions that could be beneficial to our
      businesses, or otherwise fund and conduct our business.





Pursuant
      to the new PRC enterprise income tax law to be effective on January 1,
      2008, dividends payable by a foreign-invested enterprise, or FIE, including
      Origin Biotechnology, its foreign investors will be subject to a 10% withholding
      tax, unless any such foreign investor’s jurisdiction of incorporation has a tax
      treaty with China that provides for a different withholding arrangement. Prior
      to 2008, dividend payments to foreign investors made by FIEs were exempted
      from
      PRC withholding tax.





***Any
      fluctuations in exchange rates may adversely affect your investment.***





The
      value
      of the Renminbi against the U.S. dollar and other currencies may fluctuate
      and
      is affected by, among other things, changes in political and economic
      conditions. Because our earnings and cash from operations are denominated in
      Renminbi, fluctuations in exchange rates between U.S. dollars and Renminbi
      will
      affect our balance sheet and earnings per share in U.S. dollars. In addition,
      appreciation or depreciation in the value of the Renminbi relative to the U.S.
      dollar would affect our financial results reported in U.S. dollar terms without
      giving effect to any underlying change in our business or results of operations.
      The People’s Bank of China sets and publishes a daily base exchange rate. Prior
      to July 21, 2005, the People’s Bank of China set this rate with reference
      primarily to the supply and demand of Renminbi against the U.S. dollar in the
      market during the prior day. Effective from July 21, 2005, the Renminbi is
      no
      longer pegged solely to the U.S. dollar. Instead, it is pegged to a basket
      of
      currencies determined by the People’s Bank of China, against which it can rise
      or fall by as much as 0.3% each day. For example, on July 21, 2005, the Renminbi
      was revalued against the US dollar to approximately RMB8.11 to the US dollar,
      representing an upward revaluation of 2.1% of the Renminbi against the US
      dollar, as compared to the exchange rate on the previous day. On September
      23,
      2005, the PRC government widened the daily trading band for Renminbi against
      non-US dollar currencies from 1.5% to 3% to improve the flexibility of the
      new
      foreign exchange system. The exchange rate may become volatile, the Renminbi
      may
      be revalued further against the US dollar or other currencies or the Renminbi
      may be permitted to enter into a full or limited free float, which may result
      in
      an appreciation or depreciation in the value of the Renminbi against the US
      dollar or other currencies. This change in policy resulted in an approximately
      8.0% appreciation in Renminbi against the US dollar between July 21, 2005 and
      June 30, 2007. Fluctuations in the exchange rate will affect the relative value
      of any dividend we issue which will be exchanged into U.S. dollars, the value
      of
      any U.S. dollar denominated investments we make in the future and any earnings
      on such investments.





***There
      are government regulations that limit or prohibit foreign investment in the
      PRC,
      which may restrict our growth.***





Notwithstanding
      the general restriction on foreign investment in the seed industry in the PRC,
      our corporate structure currently enables us to receive foreign investment.
      Our
      continued ability to receive foreign investment may be important to our ability
      to continue to expand our business rapidly and to manage that expansion
      effectively. We cannot be certain that a change in the regulations allowing
      us
      to receive foreign investment will not occur. In the event of such a change,
      our
      plan to expand our business could be disrupted.




22





***Restrictions
      on currency exchange may limit our ability to receive and use our revenues
      effectively.***





Substantially
      all our revenues and expenses are denominated in Renminbi. We may need to
      convert a portion of our revenues into other currencies to meet our foreign
      currency obligations, including, among others, payment of dividends declared,
      if
      any, in respect of our ordinary shares. Under China’s existing foreign exchange
      regulations, the PRC Operating Companies may not pay dividends in foreign
      currencies, without prior approval from SAFE, unless they comply with certain
      procedural requirements. The PRC government may also take measures in the future
      to restrict access to foreign currencies for current account transactions.





Foreign
      exchange transactions under the capital account continue to be subject to
      significant foreign exchange controls and require the approval of PRC
      governmental authorities, including the SAFE. If the PRC Operating Companies
      borrow in foreign currency from us or other foreign lenders, these loans must
      be
      registered with the SAFE, and if we finance the PRC Operating Companies means
      of
      additional capital contributions, these capital contributions must be approved
      by certain government authorities, including the Ministry of Commerce or its
      local counterparts. These limitations could adversely affect the ability of
      the
      PRC Operating Companies to obtain foreign exchange through debt or equity
      financing, which could harm our ability to fund our operations or cause us
      to
      seek additional financing on terms that may not be favorable.





***PRC
      regulations relating to offshore investment activities by PRC residents may
      increase the administrative burden we face and create regulatory uncertainties
      that could restrict our overseas and cross-border investment activity. Failure
      by our shareholders who are PRC residents to make any required applications
      and
      filings pursuant to such regulations may prevent us from being able to
      distribute profits, if any, and could expose us and our PRC resident
      shareholders to liability under PRC law.***





In
      October 2005, SAFE promulgated regulations that require registration with local
      SAFE offices in connection with direct or indirect offshore investment by PRC
      residents, including PRC individual residents and PRC corporate entities. These
      regulations apply to our shareholders who are PRC residents and also apply
      to
      our prior and future offshore acquisitions. In particular, the SAFE regulations
      require PRC residents to file with competent SAFE offices information about
      offshore companies in which they have directly or indirectly invested and to
      make follow-up filings in connection with certain material transactions
      involving such offshore companies, such as increases or decreases in investment
      amount, transfers or exchanges of shares, mergers or divisions, long-term equity
      or debt investments, or external guarantees or other material events that do
      not
      involve return investment.





The
      SAFE
      regulations required registration by March 31, 2006 of direct or indirect
      investments previously made by PRC residents in offshore companies. If a PRC
      resident with a direct or indirect stake in an offshore parent company fails
      to
      make the required SAFE registration, the PRC subsidiaries of such offshore
      parent company may be prohibited from making distributions of profit to the
      offshore parent and from paying the offshore parent proceeds from any reduction
      in capital, share transfer or liquidation in respect of the PRC subsidiaries.
      Further, failure to comply with various SAFE registration requirements described
      above could result in liability under PRC law for foreign exchange evasion.





We
      believe our major shareholders who are PRC residents, or whose shares are
      beneficially owned by PRC residents, have completed foreign exchange
      registration with the local foreign exchange bureau according to these SAFE
      regulations. However, as these regulations are relatively new and there is
      uncertainty concerning the reconciliation of the new regulations with other
      approval requirements, it is unclear how the regulations, and any future
      legislation concerning offshore or cross-border transactions, will be
      interpreted, amended and implemented by the relevant government authorities.
      We
      cannot assure you that all of our shareholders who are PRC residents will comply
      with our request to make or obtain any applicable registrations or approvals
      required by the regulations or other related legislation. The failure or
      inability of our PRC resident shareholders to receive any required approvals
      or
      make any required registrations may subject us to fines and legal sanctions,
      restrict our overseas or cross-border investment activities, limit our PRC
      subsidiary to make distributions or pay dividends or affect our ownership
      structure. As a result, our business operations and our ability to distribute
      a
      dividend to you could be adversely affected.


\


23





***The
      PRC legal system has inherent uncertainties that could limit the legal
      protections available to you.***





Nearly
      all of our assets and all of our operations are in the PRC. The PRC legal system
      is based on written statutes. Prior court decisions may be cited for reference
      but are not binding on subsequent cases and have limited precedential value.
      Since 1979, the PRC legislative bodies have promulgated laws and regulations
      dealing with such economic matters as foreign investment, corporate organization
      and governance, commerce, taxation and trade. However, because these laws and
      regulations are relatively new, and because of the limited volume of published
      decisions and their non-binding nature, the interpretation and enforcement
      of
      these laws and regulations involve uncertainties. The laws in the PRC differ
      from the laws in the United States and may afford less protection to our
      shareholders.





***You
      may experience difficulties in effecting service of legal process, enforcing
      foreign judgments or bringing original actions in the PRC based on United States
      judgments against us, our subsidiaries, officers and
      directors.***





We
      are
      incorporated in the British Virgin Islands and our PRC operating subsidiaries
      are formed under PRC law. Substantially all of our assets are located in the
      PRC. In addition, most of our directors and executive officers reside within
      the
      PRC, and substantially all of the assets of these persons are located within
      the
      PRC. It may not be possible to effect service of process within the United
      States or elsewhere outside the PRC upon our directors, or executive officers
      and experts, including effecting service of process with respect to matters
      arising under United States federal securities laws or applicable state
      securities laws. The PRC does not have treaties providing for the reciprocal
      recognition and enforcement of judgments of courts with the United States and
      many other countries. As a result, recognition and enforcement in the PRC of
      judgments of a court in the United States or many other jurisdictions in
      relation to any matter, including securities laws, may be difficult or
      impossible. Furthermore, an original action may be brought in the PRC against
      our assets and our subsidiaries, our directors and executive officers and
      experts only if the actions are not required to be arbitrated by PRC law and
      only if the facts alleged in the complaint give rise to a cause of action under
      PRC law. In connection with any such original action, a PRC court may award
      civil liability, including monetary damages.





***The
      recurrence of SARS in China, the potential outbreak of avian flu in China,
      similar adverse public health developments, concerns over the spread of these
      diseases, or acts of terrorism, in China and elsewhere may materially and
      adversely affect our business and operating results.***





From
      December 2002 to June 2003, China and certain other countries experienced an
      outbreak of a new and highly contagious form of atypical pneumonia now known
      as
      severe acute respiratory syndrome, or SARS. On July 5, 2003, the World Health
      Organization declared that the SARS outbreak had been contained. Since September
      2003, however, a number of isolated new cases of SARS have been reported, most
      recently in central China in April 2004. During May and June of 2003, many
      businesses in China were closed by the PRC government to prevent transmission
      of
      SARS. Recently, concerns have been raised with respect to the spread of avian
      flu in various regions in China. Any recurrence of the SARS outbreak, outbreak
      of avian flu, or the development of a similar health hazard in China, may
      adversely affect our business and operating results. For instance, a recurrence
      of SARS, outbreak of avian flu or any other epidemic may lead to health or
      other
      government regulations requiring temporary closure of our business, or the
      businesses of our suppliers or customers. In addition, terrorist attacks, such
      as those that took place on September 11, 2001, geopolitical uncertainty and
      international conflicts, could have an adverse effect on our business
      operations. Any of these events could adversely affect China’s economy and cause
      an immediate and prolonged drop in consumer demand. An immediate and prolonged
      drop in consumer demand could severely disrupt our business operations and
      adversely affect our results of operations.





**Risk
      relating to tax matters**





***We
      may be subject to contingent tax liabilities.***




24





On
      December 20, 2004, Chardan China Acquisition Corp., or Chardan, entered into
      a
      stock purchase agreement with State Harvest, and all the shareholders of State
      Harvest for Chardan’s acquisition of State Harvest. In connection with the
      acquisition, Chardan formed its wholly-owned subsidiary, Origin. On November
      8,
      2005, Chardan merged with and into Origin for the purpose of redomestication
      out
      of the United States. The redomestication merger was achieved by a one-for-one
      exchange of all the outstanding common stock of Chardan for ordinary stock
      of
      Origin, and the assumption of all the rights and obligations of Chardan by
      Origin. Immediately after the redomestication merger, Origin acquired all the
      common stock of State Harvest by the issuance of shares and payments of cash
      consideration to the shareholders of State Harvest or their designee. We may
      be
      subject to contingent tax liabilities in connection with the above share
      exchange transaction. As of September 30, 2007, such contingent tax liabilities
      could be in the range of RMB39.06 million to RMB64.22 million.





***We
      may become a passive foreign investment company, which could result in adverse
      U.S. tax consequences to U.S. holders.***





Depending
      upon the value of our shares and the composition of our assets and income over
      time, we could be classified as a passive foreign investment company, or PFIC,
      by the United States Internal Revenue Service, or IRS, for U.S. federal income
      tax purposes. If we were classified as a PFIC in any taxable year in which
      you
      hold our shares and you are a U.S. investor, you would generally be taxed at
      higher ordinary income rates, rather than lower capital gain rates, when you
      dispose of those shares at a gain in a later year, even if we are not a PFIC
      in
      that year. In addition, a portion of the tax imposed on your gain would be
      increased by an interest charge. Moreover, if we were classified as a PFIC
      in
      any taxable year, you would not be able to benefit from any preferential tax
      rate with respect to any dividend distribution that you may receive from us
      in
      that year or any later year. Finally, you would also be subject to special
      U.S.
      tax reporting requirements.





We
      believe that we were not a PFIC for the taxable year 2007. However, there can
      be
      no assurance that we will not be a PFIC for the taxable year 2008 and/or later
      taxable years, as PFIC status is re-tested each year and depends on the facts
      in
      such year. For example, we would be a PFIC for the taxable year 2007 if the
      sum
      of our average market capitalization, which is our share price multiplied by
      the
      total number of our outstanding shares, and our liabilities over that taxable
      year is not more than twice the value of our cash, cash equivalents, and other
      assets that produce, or are held for the production of, passive income. We
      could
      also be a PFIC for any taxable year if the gross income that we and our
      subsidiaries earn from passive investments is substantial in comparison with
      the
      gross income from our business operations.





While
      we
      will continue to examine our PFIC status, we cannot assure you that we will
      not
      be a PFIC for any future taxable year. For more information on the U.S. tax
      consequences to you that would result from our classification as a PFIC, please
      see Item 10E, “Additional Information — Taxation — United
      States federal income taxation — U.S. Holders — Passive Foreign Investment
      Company.”





***We
      may have to take actions that are contrary to our business objectives to avoid
      being deemed an investment company under the US Investment Company Act of
      1940.***





We
      are
      engaged in the research, development, production, sale and distribution of
      hybrid crop seeds through our PRC operating subsidiaries in China, and we do
      not
      engage in minority investments except on a selective basis as a component of
      our
      strategy to expand our business. Currently, we own substantial minority
      investments in Biocentury Transgene (China) Co., Ltd., or Biocentury, Liyu
      and
      Jilin Changrong. We believe we are not an investment company within the meaning
      of Section 3(a)(1)(C) the Investment Company Act of 1940, or the US Investment
      Company Act, however, as a result of these and other investments, we could
      be
      deemed an investment company within the meaning of Section 3(a)(1)(C). We will
      monitor our assets on a quarterly basis and take all necessary steps in order
      to
      seek to ensure that we are not deemed an investment company within the meaning
      of Section 3(a)(1)(C) or otherwise are required to register as an investment
      company under the US Investment Company Act in the future. The steps we may
      need
      to take could include selling all or part of our minority investments in those
      companies, investing in a greater proportion of tangible assets relative to
      our
      total assets or acquiring control (as such term is defined in the US Investment
      Company Act) over those companies. Depending on timing and other factors, taking
      one or more of these steps may divert us from our strategy of expanding our
      business. If we are unable to take the necessary steps to avoid being
      inadvertently deemed an investment company or otherwise being required to
      register under the US Investment Company Act, we would not be able to offer
      our
      securities in the United States until we were no longer deemed an investment
      company under the US Investment Company Act. We could also be subject to other
      adverse consequences as a result thereof.




25





**Risks
      related to our shares**








***If
      certain financial or financing objectives are achieved, the former State Harvest
      shareholders will be entitled to receive additional amounts of our ordinary
      shares as contingent consideration for the acquisition of their shares, which
      would result in dilution and might have an adverse effect on the market price
      of
      our ordinary shares.***





Under
      the
      stock purchase agreement among Chardan, State Harvest and all the shareholders
      of State Harvest, the former State Harvest shareholders are entitled to receive
      additional ordinary shares if certain financial performance or financing targets
      are achieved. There is no obligation to register the shares after issuance.
      However, after being held for appropriate periods, the ordinary shares will
      be
      eligible for resale under Rule 144. If the additional shares are earned, it
      will
      significantly increase the number of ordinary shares outstanding. The issuance
      of these additional shares will have a dilutive effect on the shares already
      outstanding and may cause a reduction in the trading price of our ordinary
      shares in the public market.





***Voting
      control by executive officers, directors and other of our affiliates may limit
      investors’ ability to influence the outcome of director elections and other
      matters requiring shareholder approval.***





Three
      of
      our executive officers and directors, Messrs. Han, Yang and Yuan, own
      approximately 37% of our issued and outstanding ordinary shares. These three
      major shareholders may maintain significant control over the outcome of some
      corporate transactions or other matters submitted to our shareholders for
      approval, including the election of directors and the approval of other business
      transactions. This concentration of ownership could have the effect of delaying
      or preventing a change in our control or discouraging a potential acquirer
      from
      attempting to obtain control of us, which in turn could have an adverse effect
      on the market price of our ordinary shares or prevent shareholders from
      realizing a premium over the market price for their ordinary shares. In
      addition, if these major shareholders choose to dispose of a material portion
      of
      our ordinary shares they hold, the prevailing market price of our securities
      may
      decline.





***Certain
      provisions in our organizational documents may discourage our acquisition by
      a
      third party, which could limit your opportunity to sell your shares at a
      premium.***





Our
      memorandum and articles of association include provisions that could limit
      the
      ability of others to acquire control of us. Under those provisions, our board of
      directors has the power to issue preferred shares with such rights attaching
      to
      them as they decide and this power could be used in a manner that would delay,
      defer or prevent a change of control of us. These provisions could have the
      effect of depriving you of an opportunity to sell your shares at a premium
      over
      prevailing market prices by discouraging third parties from seeking to acquire
      control of us in a tender offer or similar transactions.





***As
      a result of the merger of Chardan with and into Origin, a British Virgin Islands
      company, and the issuance of shares in the acquisition of State Harvest, we
      qualify as a foreign private issuer and as a result are subject to reduced
      requirements with respect to the reporting of financial statements and other
      material events to our shareholders and the SEC.***





As
      a
      foreign private issuer, we are obligated to file an Annual Report with audited
      financial statements and Form 6-K reports with the United States Securities
      and
      Exchange Commission, or the SEC, at such times as we release information to
      the
      public either voluntarily or pursuant to the laws of the British Virgin Islands
      or the PRC. Therefore, the regularity of financial and other information will
      be
      less than would be applicable to a domestic United States registered company
      under the rules and regulations of the SEC. Investors may not receive
      information on a timely basis, which could increase their risk of investment
      in
      us.





***We
      reported a net loss for the fiscal year ended September 30,
      2007.***





As
      described in this Annual Report and our audited financial statements, we
      reported a net loss for the fiscal year ended September 30, 2007. Our
      reported results may reduce the market price of our ordinary shares. This may
      lead to an activation of material contractual clauses triggered under Origin’s
      loan and/or credit agreements, which may harm Origin’s ability to access further
      necessary financing.




26





***Certain
      insiders and major shareholders have substantial control over the company,
      and
      they could delay or prevent a change in our corporate control, even if our
      other
      shareholders wanted such a change to occur which may limit your ability to
      influence shareholder matters.***





As
      of
      September 30, 2007, our executive officers, directors and principal shareholders
      and their affiliates beneficially owned 9,478,000 ordinary shares, or 40.38%
      of
      the outstanding shares of our ordinary stock. These shareholders will be able
      to
      exercise significant control over all matters requiring shareholder approval,
      including the election of directors and approval of significant corporate
      transactions. This concentration of ownership may have the effect of delaying,
      deferring or preventing a change in control of our company and some transactions
      may be more difficult or impossible without the support of these shareholders.
      Furthermore, the interests of these major shareholders may conflict with those
      of other shareholders. We also conduct transactions with businesses in which
      our
      principal shareholders maintain interests. We believe that these transactions
      have been conducted on an arm’s length basis, but we cannot assure you that
      these transactions would have the same terms if conducted with unrelated third
      parties.





**Risks
      related to the July 2007 private placement**





***If
      we fail to satisfy our obligations under the registration rights agreement,
      we
      will be subject to substantial penalties.***




Under
      the
      terms of the registration rights agreement we entered into in connection with
      the July 2007 private placement of our convertible notes, as amended in October
      2007, and on December 21, 2007 and February 6, 2008, we agreed to
      secure the registration of the ordinary shares issuable upon conversion of
      the
      notes by a certain date. If we fail to achieve effectiveness by the required
      date, or maintain the effectiveness of the registration statement required
      under
      the registration rights agreement, we will be subject to significant penalties,
      including the payment of additional interest in respect of the notes. We cannot
      guarantee we will successfully secure effectiveness of the registration
      statement or, if it is secured, that we will be able to maintain such
      effectiveness. Failure to meet these obligations will cause us to incur
      substantial penalties in the form of additional interest and could, given the
      passage of time, lead to an event of default under the notes. Payment of
      additional interest will have an adverse effect on our financial condition
      and
      results of operation.




Under
      the
      terms of the registration rights agreement, we also agreed to satisfy similar
      registration obligations for the convertible notes and the related guarantees
      of
      the notes if the selling shareholder requests that we undertake such a
      registration. Such a registration statement would involve challenging legal
      issues and could be significantly delayed due to review by the SEC. If the
      selling shareholder exercises these rights and we fail to satisfy our
      obligations, we will be subject to significant penalties similar to those
      described above. In light of the challenges associated with this process, we
      may
      not be able to file a registration statement and have it declared effective
      by
      the SEC within the time periods specified in the registration rights agreement.
      If we are unable to comply, we may be subject to substantial penalties under
      the
      registration rights agreement and the related indenture, including the accrual
      of additional interest and an eventual event of default, either of which would
      have an adverse effect on our financial condition and results of
      operation.




***If
      we are required for any reason to repay our outstanding notes, we would be
      required to deplete our working capital and/or raise additional funds. Our
      failure to repay our notes, if required, could result in legal action against
      us.***




The
      notes
      are due and payable on July 25, 2012, unless sooner converted into ordinary
      shares. The trigger of the repurchase or redemption requirements or any event
      of
      default under the indenture could require the principal amount of all notes,
      together with accrued interest thereon, to be immediately due and payable.
      If,
      prior to the maturity date, we are required to repay the notes in full, we
      would
      be required to use our working capital and/or raise additional funds. If we
      were
      unable to repay the notes when required, the holders could commence legal action
      against us to recover the amounts due. Any such action would have an adverse
      effect on our financial condition and results of operations.




27




***Certain
      provisions in the indenture governing our notes could discourage an acquisition
      of us or an investment in us by a third party, even if the acquisition or
      investment would be favorable to you.***





If
      we are
      a party to an “asset sale” or “change of control” (as defined in the indenture),
      the holders of the notes have the right to require us to redeem the notes at
      their election shortly after they are notified of such a change. Any redemption
      under these circumstances may be at a premium of the outstanding principal
      amount of the notes, plus all accrued and unpaid interest. The restrictions
      on
      the types of transactions we can engage in and the participation rights we
      may
      have to offer in future financings may operate to discourage third parties
      from
      engaging in these transactions with us, even if those transactions would be
      beneficial to us and our shareholders.





***Leverage
      and debt service obligations may adversely affect our cash
      flows.***





In
      connection with our sale of convertible notes in July 2007, we incurred new
      indebtedness of $40,000,000. As a result of this indebtedness, we incurred
      significant principal and interest payment obligations. The degree to which
      we
      are leveraged could, among other things:




·
            require
                us to dedicate a substantial portion of our future cash flows from
                operations and other capital resources to debt service, especially
                if the
                notes are not converted into ordinary
                shares;




·
              make
                  it difficult for us to obtain necessary financing in the future
                  for
                  working capital, acquisitions or other purposes on favorable terms,
                  if at
                  all;




·
              make
                  it more difficult for us to be
                  acquired;




·
              make
                  us more vulnerable to industry downturns and competitive pressures;
                  and




·
              limit
                  our flexibility in planning for, or reacting to changes in, our
                  business.





Our
      ability to meet our debt service obligations will depend upon our future
      performance, which will be subject to financial, business and other factors
      affecting our operations, many of which are beyond our control.





***The
      issuance of shares upon conversion of the notes may result in substantial
      dilution and may depress the market price of our ordinary stock.***





As
      of
      September 30, 2007, we had 23,472,910 shares of ordinary stock issued, the
      convertible notes issued in our 2007 private placement that are currently
      convertible into 3,478,260 ordinary shares (and up to 4,692,234 ordinary shares
      that may be issued in certain circumstances under the terms of the indenture,
      which additional number of shares would increase in the event that we obtain
      shareholder approval of the issuance of all of the ordinary shares potentially
      issuable under the terms of the indenture), and options to acquire 270,000
      ordinary shares. If these convertible notes are exercised or converted, and
      the
      ordinary shares issued upon such exercise or conversion are sold, our ordinary
      shareholders may experience substantial dilution and the market price of our
      shares of ordinary stock could decline. Further, the perception that such
      convertible securities might be exercised or converted could adversely affect
      the market price of our shares of ordinary stock. In addition, holders of our
      options are likely to exercise them when, in all likelihood, we could obtain
      additional capital on terms more favorable to us than those provided by the
      options. Further, during the time that the foregoing convertible securities
      are
      outstanding, they may adversely affect the terms on which we could obtain
      additional capital.





***Future
      sales by us or our existing shareholders could depress the market price of
      our
      ordinary shares.***





If
      we or
      our existing shareholders sell a large number of shares of our ordinary stock,
      or if we sell additional securities that are convertible into ordinary stock,
      the market price of our ordinary stock could decline significantly. Further,
      even the perception in the public market that we or our existing shareholders
      might sell shares of ordinary stock could depress the market price of our
      ordinary stock.




28




***Restrictions
      contained in the notes may limit the manner we conduct our business operations,
      including the payment of dividends to our shareholders.***




The
      notes
      contain restrictions on major corporate actions that may limit the manner in
      which we conduct our business. Under the indenture governing the notes, neither
      we nor any of our subsidiaries are permitted to make, directly or indirectly,
      any of the following payments if at the time of, and after giving effect to,
      a
      default or event of default has occurred under the indenture:




·
            any
                dividend or distribution with respect to any shares of our capital
                stock
                or the capital stock of our subsidiaries, except for any dividend
                or
                distribution that is made only to us or one of our subsidiaries or
                any
                dividend or distribution payable solely in shares of our capital
                stock;




·
            the
                redemption of any of our capital stock or the capital stock of our
                subsidiaries or any securities exchangeable into any such capital
                stock;




·
            the
                redemption for value, prior to the date for any scheduled maturity,
                sinking fund or amortization, or other installment payment, of any
                debt
                subordinate in right of repayment to the notes or applicable guarantee;
                or




·
            any
                direct or indirect loan, advance or other extension of credit or
                capital
                contribution to, or incurrence of a guarantee of any obligation of,
                or
                purchase or acquisition of capital stock or other securities or evidence
                of debt issued by, any other
                person.




**ITEM
      4. INFORMATION ON THE COMPANY**




**A.** **History
      and development of the company.**




Origin
      was first incorporated as a company under the International Business Companies
      Act, 1984 (as amended) of the British Virgin Islands on February 10, 2005.
      In
      view of the passing into law of the BVI Business Companies Act, 2004, or BCA,
      it
      having been Gazetted in 2004, the Company was re-registered on July 10, 2006
      under the BCA.




Chardan,
      the predecessor of Origin, was a blank check company organized as a corporation
      under the laws of the State of Delaware on December 5, 2003. Chardan was formed
      for the purpose of effecting a business combination with companies having
      operations based in China and significant growth potential. Initially, Chardan’s
      efforts were limited to organizational activities, completion of its initial
      public offering and the evaluation of possible business combinations
      opportunities. On March 22, 2004, Chardan successfully consummated an initial
      public offering of its equity securities from which it derived net proceeds
      of
      approximately $21,216,000. Chardan’s common stock, warrants to purchase common
      stock and units (each unit consisting of one share of common stock and two
      warrants to purchase common stock) were quoted on the Over-the-Counter Bulletin
      Board under the symbols CAQC for the common stock, CAQCW for the warrants and
      CAQCU for the units. Other than its initial public offering and the pursuit
      of
      business combination opportunities, Chardan was not engaged in any other
      business until December 2004.




On
      December 20, 2004, Chardan entered into a stock purchase agreement, or the
      Stock
      Purchase Agreement, with State Harvest, a company incorporated in the British
      Virgin Islands on October 6, 2004, and all the shareholders of State Harvest.
      On
      February 10, 2005, Chardan formed a wholly-owned subsidiary under the laws
      of
      the British Virgin Islands, under the name “Origin Agritech Limited” to effect a
      stock acquisition of State Harvest. Pursuant to the terms and conditions of
      the
      Stock Purchase Agreement, Chardan merged into Origin for the purpose of
      redomestication out of the United States, and immediately thereafter, Origin
      acquired all of the issued and outstanding stock of State Harvest, which
      acquisition included four controlled affiliated operating companies, namely,
      Beijing Origin, Changchun Origin, Henan Origin and Origin Biotechnology. These
      four controlled operating companies are organized under the laws of the PRC.




On
      December 5, 2005, Origin sent out redemption notices to all of the holders
      of
      its issued and its outstanding callable common stock purchase warrants. The
      warrants were originally issued by Chardan in March 2004. As a result of the
      merger of Chardan into Origin, the warrants were exercisable into ordinary
      shares of Origin. The warrants were exercised for ordinary shares of Origin
      at
      $5.00 per warrant. Approximately 8,043,752 of the 8,050,000 warrants that were
      then issued and outstanding were exercised at a price of $5.00 per warrant
      through the redemption date of January 9, 2006. Holders of the few remaining
      warrants that were not exercised were paid $0.01 per warrant and the warrants
      were extinguished. The gross proceeds received from this redemption were
      approximately $40 million, of which $15 million was used to satisfy the
      outstanding obligations of Origin to the shareholders of State Harvest under
      the
      Stock Purchase Agreement, and the remainder was and will continue to be used
      as
      working capital and for other corporate purposes, including future acquisitions.
      After the redemption of the warrants, Origin had approximately 23,472,910
      ordinary shares issued. Chardan was withdrawn on December 31, 2007.




29





On
      June
      26, 2007, our common stock began trading on the NASDAQ Global Select Market;
      our
      common stock had been listed on the Nasdaq Global Market from November 8, 2005
      to June 25, 2007.





On
      July
      25, 2007, we entered into a Notes Purchase Agreement with Citadel Equity Fund
      Ltd. or Citadel. Pursuant to the Notes Purchase Agreement, on July 25, 2007,
      Citadel purchased $40 million in principal amount of 1% guaranteed senior
      secured convertible notes, or the Notes, issued by us. The Notes are guaranteed
      by State Harvest and are secured by the shares of certain of our subsidiaries.
      The Notes bear interest at a rate of 1% per annum, payable semi-annually in
      arrears and will be redeemed by us on July 25, 2012, the maturity date of the
      Notes. The
      effective interest rate on the Notes is 13%. Furthermore, at maturity date,
      we
      are required to redeem any outstanding principal at the redemption amount
      determined so that it represents for the Note holders a gross yield of 16%
      on a
      semi-annual basis. The
      Notes are convertible into shares of our common stock at an initial conversion
      price of $11.50 per share. However, unless we obtain shareholder approval,
      the
      aggregate number of shares of our common stock issuable upon the conversion
      of
      any Notes is limited to 19.99% of the number of shares of our common stock
      outstanding on July 25, 2007. The conversion price is subject to adjustment
      in
      certain circumstances, including semi-annual reset of the conversion price
      commencing from December 31, 2008 and upon occurrence of certain dilutive
      events, in each case subject to certain conditions.





As
      part
      of our efforts to expand our operations, we have made the following investments
      and acquisitions during the fiscal year ended September 30, 2007:




·
            on
                January 24, 2006, Beijing Origin and Jilin Jinong Hi-tech Limited
                jointly
                established Jilin Changrong, with Beijing Origin holding 34.77% of
                Jilin
                Changrong. On April 11, 2007, Beijing Origin acquired an additional
                9.18%
                equity interest in Jilin Changrong for RMB22.04 million (US$2.94
                million),
                bringing Beijing Origin’s total direct ownership to 43.95% and our
                combined direct and indirect ownership to 51.66%. Jilin Changrong
                engages
                in the research, development, production, sale and distribution of
                hybrid
                corn in the northeast region of
                China;




·
            on
                January 24, 2006, Beijing Origin acquired a 52.21% controlling interest
                in
                Denong. On October 8, 2006, Beijing Origin acquired an additional
                42.42%
                equity interest in Denong, and together with a 2.99% equity interest
                acquired on December 25, 2006, bringing its total ownership to
                approximately 97.62%, for which it paid total consideration of
                approximately RMB54.56 million (US$7.28 million). Denong is a developer,
                producer and marketer of hybrid rice, cotton, corn and canola, principally
                in the southwest region of China;
                and




·
            on
                October 19, 2006, Beijing Origin acquired a 19% interest in Biocentury,
                a
                leading company engaged in GM cotton research, seed production, and
                marketing in China, for RMB16.7 million (US$2.23 million). After
                acquiring
                a 7% interest in 2004 and an 8% interest in 2005, Beijing Origin
                now holds
                34% of Biocentury.




Our
      principal executive offices are located at No. 21 Sheng Ming Yuan Road,
      Changping District, Beijing 102206, China, and our telephone number is (86-10)
      5890-7588.




Since
      2005, our capital expenditures consisted primarily of construction of
      headquarter facility in Beijing and purchase of plant and equipment. The table
      below sets forth our capital expenditures for the periods shown:


For
                    the year ended December 31,
                
                For
                    the nine months ended
                  September
                    30,
                
                For
                    the twelve months ended
                  September
                    30,
                
                For
                    the year ended
                  September
                    30,2004
                
                2005
                
                2005
                
                2006
                
                2006
                
                2007RMB
                
                RMB
                
                RMB
                
                RMB
                
                RMB
                
                RMB15.47
                    million (US$1.87 million)
                
                43.20
                    million (US$5.35 million)
                
                25.06
                    million (US$3.10 million)
                
                9.50
                    million
                  (US$1.20
                    million)
                
                27.64
                    million
                  (US$3.50
                    million)
                
                36.53 million
                  (US$4.88
                    million)




30




**B.** **Business
      overview.**




***Overview***




We are
      a
      leading, technology-focused crop seed company serving mainland China. We
      currently employ innovative plant breeding techniques, modern biotechnology,
      and
      innovative information and research management to develop and deliver high-yield
      seeds to our native farming customer base. Our goal is to lead the industry
      by
      providing farmers with unique enabling technology and services, producing and
      protecting higher crop yields. Our activities include the specialization in
      the
      research and development, production, and sales and marketing of crop seeds
      (corn, rice, cotton and canola) throughout the PRC. Our focus remains in the
      production of higher quality seed products, whether proprietary or licensed.
      The
      majority of our revenues continue to be from licensed seeds, as described in
      greater detail below under “Licensed Seed Products” of this item 4.B.




The
      following table sets forth the amount and percentage of our revenues resulting
      from licensed hybrid seeds as compared to our internally developed proprietary
      hybrid seeds for the periods listed:


Year
                  Ended December 31, 2004
              
              Year
                  Ended December 31, 2005
              
              Twelve
                  Months Ended September 30, 2006
              
              Twelve
                  Months Ended September 30, 2007Revenue
                  resulting from licensed hybrid seeds
              
              $
              35,933,245
              
              $
              24,314,206
              
              $
              58,572,673
              
              $
              52,052,737Percentage
                  of our total seed revenue resulting from licensed hybrid
                  seeds
              
              
              98.97
              %
              
              93.97
              %
              
              88.52
              %
              
              79.7
              %Revenue
                  resulting from internally developed proprietary hybrid
                  seeds
              
              $
              375,929
              
              $
              1,558,883
              
              $
              7,596,282
              
              $
              13,260,433Percentage
                  of our total seed revenue resulting from internally developed proprietary
                  hybrid seeds
              
              
              1.03
              %
              
              6.03
              %
              
              11.48
              %
              
              20.3
              %





Our
      sales
      offices are spread through the central, northern, and southern regions of China.
      We continue to develop our sales and marketing team of 360 employees located
      in
      12 sales offices nationwide. Our nationwide distribution network covers most
      parts of China and consists of over 3,800 first-level distributors and over
      65,000 second-level distributors and retailers. Our distributors sell our
      products to retailers who in turn sell to farmers, who are end-users of our
      products. We currently provide branded products and technical service to farmers
      in 29 of China’s 31 provinces.





During
      the fiscal year covered by this Annual Report, we established several plant
      genetic engineering technology platforms. These include transforming herbicide
      tolerance, insect resistance, nitrogen efficiency, and drought stress tolerance
      traits into corn inbred lines. We seek to effectively utilize modern
      biotechnology in China and hope to further expand beyond China in the
      future.





We
      plan
      to efficiently use China’s emerging technology base to utilize the natural
      advantages of operating within China. In particular, from time to time we enter
      intro cooperative agreements with publicly funded research institutes in China.
      In exchange for providing funding to these institutes, we receive rights, which
      are frequently exclusive rights, to market any seeds developed by these
      institutes. When a seed is ready to be marketed, we negotiate with the institute
      to establish an arrangement by which we are permitted to sell the newly
      developed seeds in exchange for the payment of certain fees to the institute.
      We
      believe that these cooperative ventures allow us to access new products without
      expending substantial costs for our own research and development.




31





Our
      business model draws from existing and new technologies by utilizing both
      conventional breeding and advances in biotechnology. We aim to build upon our
      current hybrid base where we have accumulated parental seeds with advantageous
      traits optimized to local soil conditions. We have roughly 100 total products
      ,
      both licensed and proprietary, in the market. We began to develop our own
      proprietary hybrid seed varieties in 1998, and, as of December 2007, we have
      12
      proprietary corn seed products, 12 proprietary rice seed products and 2
      proprietary canola seed products that are in commercial production and
      distribution. Currently, we have 9 breeding stations and employ 142 full time
      research personnel.





Over
      the
      past three years, the number of corn, cotton, rice and canola varieties we
      have
      sold (both licensed and proprietary) has increased significantly. The following
      table illustrates the increase in the number of the seed varieties we sold
      over
      the past three years.




**Varieties
      of Seed Products:**


**Year**
                
                **Varieties
                    of Seed Products**Corn
                
                Cotton
                
                Rice
                
                Canola
                
                Total2005
                
                
                29
                
                
                8
                
                
                2
                
                
                0
                
                
                392006
                
                
                42
                
                
                15
                
                
                32
                
                
                8
                
                
                972007
                
                
                44
                
                
                11
                
                
                60
                
                
                9
                
                
                124




The
      following table illustrates the total revenues for each of our seed varieties:


**Year**
              
              **Revenues***Corn
              
              Cotton
              
              Rice
              
              CanolaRMB
              
              RMB
              
              RMB
              
              RMBYear
                  ended December 31, 2005
              
              
              197,540,802
              
              
              8,478,572
              
              
              2,781,630
              
              
              (1
              )Twelve
                  months ended September 30, 2006 (unaudited)
              
              
              339,394,175
              
              
              32,622,126
              
              
              145,322,718
              
              
              (1
              )Year
                  ended September 30, 2007
              
              
              365,203,037
              
              
              32,030,858
              
              
              72,549,582
              
              
              17,958,429




*
      Substantially all of our revenues are derived from sales in China.




(1)
      The
      year ended September 30, 2007 represents our first year of canola sales.





Due
      to
      the seasonality of the seed industry, our revenue is mainly recognized during
      the several months up to and including September of each year. Thus, our
      performance each year is most accurately determined after the end of our
      seasonal year, which now tracks our year-end of September 30th of each
      year.





***Research
      and Development***





Developments
      in the science of genetics have allowed seed producers to create entirely new
      species of corn, rice and cotton, rather than merely new varieties, as has
      historically been the case. Compared with conventional varieties, the obvious
      advantages of these new species, known as GM varieties, are higher yield, better
      quality and increased disease-resistance and herbicide tolerance. Farmers plant
      GM varieties to save time and cost, while also reducing field labor. GM corn,
      soybean and cotton have been widely used in the United States and many other
      countries to guard against insect damage and to increase yields. Since receiving
      Chinese government approval in 1997, cotton that has been genetically modified
      to guard against damage from borer insects is now widely planted and accepted
      in
      China. The Chinese market has widely accepted GM cotton and the PRC Ministry
      of
      Agriculture is beginning to evaluate GM corn and rice seed as well. We believe
      that these GM products will eventually be approved by the PRC government for
      production and sale and will be accepted in the Chinese market in the
      future.




32





Utilizing
      our existing hybrid seed product line, we seek to further increase crop yield
      and produce higher quality seeds with the addition of GM traits. We commenced
      our own biotechnology research program in 2000 with a goal of having technology
      in place to produce GM products when demand for these products is sufficiently
      high. In 2005, we built an internal research and development center in China
      for
      GM crop seeds, which we believe was the first such facility to be utilized
      by a
      Chinese crop seed company. We have been successful in marketing genetically
      modified BT cotton varieties in China and plan to continue to develop other
      new
      seed varieties. In the past year, our key focus on biotechnology has accelerated
      significantly. We currently employ 40 people who are primarily engaged in
      genetic transformation, molecular biomarker testing and genetic mapping
      activities. Our development efforts go beyond our internal biotechnology center,
      as this unit serves as a central hub to connect with other research facilities
      throughout China. We are collaborating with the Chinese Academy of Sciences,
      Peking University and China Academy of Agriculture Science in the field of
      biotechnology. These co-operations help enhance our research capabilities and
      will help enable us to develop and commercialize our products. We have
      established several plant genetic engineering technology platforms, which
      incorporate increased herbicide tolerance, insect resistance, nitrogen
      efficiency, and drought stress tolerance traits into corn inbred lines. The
      GM
      traits and products we are working on now include increased
      herbicide tolerance, insect resistance, nitrogen efficiency, and drought stress
      tolerance in corn .
      We are
      also working to develop phytase GM corn, which is expected to be the first
      GM
      corn product to be approved for commercial production and sales in China.





In
      addition to biotechnology, our internal research and development also invested
      considerable energy in the conventional breeding of hybrid crop seed. Currently,
      we have 9 breeding stations and employ 142 full time research personnel in
      this
      area. We strive to maintain our position as a quality producer of advanced
      products by budgeting approximately 5% of our gross revenues (based on the
      prior
      year’s results) for research and development. Historically, because of the
      increase in our gross revenues, the actual amount spent in any year has
      generally been around 3% of gross revenues in that year. Because our sales
      last
      year were lower than expected, our actual amount exceeded 5%. The table below
      shows the amount we have spent on research and development for the following
      periods, as an absolute monetary amount.


For
                  the year ended December 31,
              
              For
                  the nine months ended
                September
                  30,
              
              For
                  the Twelve months ended
                September
                  30,
              
              For
                  the Twelve months ended
                September
                  30,2004
              
              
              2005
              
              
              2005
              
              
              2006
              
              
              2006
              
              
              2007RMB
              
              
              RMB
              
              
              RMB
              
              
              RMB
              
              
              RMB
              
              
              RMB6,773,621
                  (US$818,416)
              
              
              6,977,000
                  (US$865,000
              )
              
              5,963,096
                  (US$736,913
              )
              
              13,143,768
                (US$
                  1,662,926
              )
              
              14,157,671
                (US$
                  1,791,203
              )
              
              28,440,781
                (US$
                  3,795,748
              )





***Commercial
      Production***





Once
      approval for distribution of a new seed is obtained from both national and
      provincial regulatory bodies, a producer of that seed must commence commercial
      development of the seed variety. We produce our hybrid seeds by contracting
      with
      local farmers in China to whom we provide parental seeds and technical support.
      Currently, we have 255 production personnel and seed conditioning plants located
      in Gansu, Jilin, Henan, Sichuan, Hunan, Jiangxi, Inner Mongolia and Beijing
      that
      work to supply these parental seeds to our producer-farmers. At present, we
      have
      about 60,000 corn seed farmers and 40,000 rice seed farmers producing seeds
      for
      us, each of whom plants, grows and harvests the hybrid to produce seeds for
      commercial distribution in the following season. This network of local farmers
      who produce our seeds is an important element of our strategy to produce an
      increasing number of products with consistent quality. We were the first Chinese
      seed company to gain ISO9001-2000 certification by the China Certification
      Center for Quality Mark. We believe that we maintain a strict seed quality
      control system and that we have sufficient processing capability and advanced
      equipment to allow us to operate efficiently and maintain a high quality of
      seed
      products. By employing these practices, we believe that we have achieved a
      product quality on par with that of our foreign competitors and that is
      consistently well received by our customers.




33





According
      to the sales plan we develop for each year, before the growing season, we choose
      the planting area according to the trait of the seed variety, and enters into
      a
      seed booking production agreement with the local farmers. Under the agreement,
      we provide the producer-farmers with the parental seed, as well as the technical
      support in the course of farming. After the growing season, we purchase the
      seeds that meet our quality specifications from the farmers.





***National
      Marketing and Distribution***





We
      have
      our own sales organization consisting of 360 employees who oversee all aspects
      of our distribution and retail sale network and promote our sales within the
      distribution chain. In addition, these individuals provide high-level technical
      service to our end customers.





We
      have
      established a nationwide distribution network with over 3,800 first-level direct
      distributors and over 65,000 second-level distributors and retailers, who
      receive our products through first level dealers. These distributors in turn
      sell our products to retailers and the retailers sell them to the farmers who
      are our end consumers. This distribution network covers almost all the provinces
      of the PRC, excluding only Qinghai and Tibet, and allows us to effectively
      distribute to roughly 200 million farms throughout China.





The
      terms
      of our distributor agreements provide for territorial exclusivity for a
      distributor on a designated product, usually on a county-wide basis. To enforce
      exclusivity and monitor product locations, we assign a code to each distributor
      and mark all packaging sent to the distributor with this code. Careful
      monitoring of territorial integrity and enforcement of contractual penalties,
      which may include termination of distribution rights and cancellation of
      discounts on prices, provides stability and profitability within the
      distribution network and aims to provide quality services and product
      availability. We believe that we enjoy a positive reputation with our
      distributors for our implementation and enforcement of this exclusive
      distribution system. Distributors buy our seeds at a wholesale price established
      by us and are required to make payments to us prior to delivery. Distributors
      that place orders and that make deposits on orders for sales to be made the
      following year at least two months prior to delivery are generally offered
      a
      discount. At the end of the annual sales season, we set a discounted final
      sales
      price. The discounted final sales price results from the fact that the PRC
      government sets the price for agricultural commodities after we have sold our
      seeds to distributors. Seed prices fluctuate with agricultural commodity prices.
      This correlation is particularly strong for seeds that can be consumed as food
      and grown as seeds, such as corn. For example, if the price for corn for
      consumption increases, the price for corn seeds will increase as well. Once
      the
      PRC government has set the price for agricultural commodities, we negotiate
      with
      distributors to set the final price for our seeds which reflects the price
      the
      distributors sold our seeds to farmers and includes any season discount we
      may
      offer to such distributors. If the final price is lower than the preliminary
      price previously offered by us, we will return the difference to our
      distributors. Although the final price could technically be higher than the
      preliminary price, we have never experienced such a result. As a result of
      our
      discount policy, we cannot set the final price of our seeds to distributors
      prior to the end of their selling season to farmers. Selling seasons vary among
      distributors from region to region and from year to year ,
      and
      generally start in October and end in June of the following year for most of
      our
      products. We
      deliver our products and receive payments on a relatively predictable schedule.
      First, we request and generally receive a cash deposit, followed by a further
      pre-payment of the expected sales price. Then, we deliver products to our
      customers and receive confirmation of delivery. Finally, we set the final sales
      price of our delivered products to a customer based on the total volume of
      product delivered to that customer.





The
      specific terms of the distributor agreements vary depending on negotiations
      and
      the nature of the distributor and its prospective territory. There usually
      is an
      initial payment made by the distributors to the Company for the distribution
      right which is applied in whole or in part to future orders, depending upon
      compliance with the terms of the agreement. The agreement also delineates
      pricing adherence requirements and permissible discounting sales, territory,
      ordering and supply obligations, returns, market support and other regular
      business terms and dispute resolution provisions. No one distributor accounts
      for more than 1% of our sales.





On
      an
      annual basis, our sales team assists distributors in writing monthly sales
      plans. These sales plans are then submitted to us 30 days prior to the required
      seed delivery dates. Every year during the harvest season, we invite farmers
      and
      others in the seed distribution chain to attend production demonstrations in
      cooperation with local villages and seed distributors. At these demonstrations,
      our teams show their hybrid seeds, explain planting techniques, discuss industry
      best practices and disseminate promotional materials. We increased our efforts
      last year to conduct over 5000 such demonstrations during fiscal year 2007.
      These marketing and production demonstrations help create new demand, not only
      in each village where demonstrations are held, but also in nearby villages,
      for
      both the current season and for succeeding years.




34





Our
      technical service department has a 24-hour toll-free telephone number available
      for our producer-farmers and distributors, through which they can obtain
      solutions to specific technical problems. In addition, customers can report
      issues of seed piracy. If on-site help is required, we generally dispatch a
      technical assistant to arrive on location within 48 hours of a call. We also
      enlist the help of our distributors to provide help and advice to farmers.
      We
      believe that our focus on customer service and technical support have helped
      us
      to build brand identity and loyalty and have contributed to our total sales
      volume.





Using
      mass communication, such as local TV, radio broadcasts and newspapers, we
      promote our brand to over 70% of our geographic market, reaching over
      twenty-four million individual farmer households. Additionally, we publish
      a
      seasonal newspaper, “Technology and Service,” with a distribution to about
      thirty million farmers, which addresses technical issues, shares success stories
      and further promotes the Origin brand. Origin maintains a database of over
      15,000,000 farmers to track buying habits and contact information.





Product
      and technical service brochures are provided throughout the distribution network
      and have proved to be a valuable tool in promoting the sale of our crop seed
      products and the recognition of the Origin brand. Our slogan, “When buying seed,
      quality is paramount -- trust Origin,” appears on all promotional material,
      helping to build the brand in all the local markets.





Last
      year, three of our existing rice hybrids were approved to be sold in Vietnam.
      The approval process in Vietnam is a two year process. We began exporting
      products across the border at the end of year 2007. As Vietnam shares a border
      with China, we are able to use standard transportation, such as trucks, and
      deliver our products to selected distributors though an agent. We are also
      currently exploring sales channels to other countries in Southeast Asia and
      the
      Middle East.





***Intellectual
      Property***





Our
      intellectual property includes trademarks and patents relating to our seed
      products. All of the intellectual property has been registered for IP protection
      in China (or is the subject of a pending application), and is used in connection
      with our seed products packaging, production and distribution. Although we
      do
      not require our distributors to pay any license fee for the seed products,
      the
      value of the intellectual property has been reflected in selling price directly.
      Our intellectual property is crucial to our business, and bears directly on
      our
      ability to generate revenues.





We
      currently have two Chinese patents
      registered with the State
      Intellectual Property Office of China and
      twelve Chinese trademarks, including two trademarks registered with the
      Trademark Office of China’s State Administration for Industry and Commerce in
      2007. One of the patents relating to the method of producing hybrid corn seed
      is
      jointly owned by Henan Agriculture University and Beijing Origin. In addition,
      we have applied for nine additional trademarks, and the applications have been
      accepted and are now being reviewed by the Trademark Office of China’s State
      Administration for Industry and Commerce.





The
      following table lists our self-developed proprietary seed products that have
      been approved by the national variety authorization committee or provincial
      variety authorization committee:





No.
            
            Name
                of Variety
            
            Name
                of Seed Product1
            
            AoYu
                3102
            
            Corn2
            
            AoYu
                3101
            
            Corn3
            
            AoYu
                3206
            
            Corn4
            
            AoYu
                3202
            
            Corn5
            
            AoYu
                3007
            
            Corn6
            
            AoYu
                3111
            
            Corn7
            
            Ao
                Yu 3210
            
            Corn




35




8
            
            Ao
                Yu Qing Zhu 5102
            
            Corn9
            
            AoYu
                3108
            
            Corn10
            
            AoYu
                3118
            
            Corn11
            
            Ao
                Tian 8210
            
            Corn12
            
            Ao
                Yu 7
            
            Corn13
            
            Liang
                You 456
            
            Rice14
            
            Can
                You 456
            
            Rice15
            
            Denong
                108
            
            Rice16
            
            De
                E Liang You 1
            
            Rice17
            
            De
                Xiang Zao 4
            
            Rice18
            
            Denong
                88
            
            Rice19
            
            De
                Liang You 9
            
            Rice20
            
            Zhengcheng
                456
            
            Rice21
            
            De
                Liang You 1
            
            Rice22
            
            Fei
                You 463
            
            Rice23
            
            Fei
                You 98
            
            Rice24
            
            Te
                You 168
            
            Rice25
            
            De
                You 13
            
            Canola26
            
            De
                You 16
            
            Canola





With
      our
      research, breeding system and management, we have 64 proprietary corn seed
      products, 17 proprietary cotton seed products and 32 proprietary cotton seed
      products in the government testing and approval cycle, including 42 new
      proprietary corn seed products, 18 new proprietary corn seed products, and 4 new proprietary cotton seed products
      in
      2007. Although only a minority of our revenues historically and in the last
      year
      resulted from sales of our proprietary seed (as opposed to seeds produced under
      licenses from third parties), we expect that an increasing portion of our
      revenues in future years will be derived from our proprietary seeds.





***Licensed
      Seed Products***





In
      addition to the development of our own proprietary seeds, we have licenses
      to
      distribute seeds developed by independent research and development institutions
      which have no commercialization ability or distribution channels of their own.
      Currently, we have licenses to distribute thirty-one varieties of corn seed,
      eleven varieties of cotton seed, eleven varieties of rice seed and nine
      varieties of canola seed. Although substantially all of our historical revenues
      were derived from the sale of licensed hybrid seeds, the impact of our
      proprietary seeds has increased in recent years. For example, in the nine months
      ended September 30, 2006, approximately 88.5% of our revenues resulted from
      sales of licensed seeds, while in the fiscal year ended September 30, 2007,
      that
      figure had decreased to 79.7%. Under a typical license agreement, one of our
      PRC
      Operating Companies will obtain a license for a designated product for exclusive
      production and marketing within China. The license fees vary in their method
      of
      determination, but generally they are either a percentage of revenues from
      the
      sale of the variety or a flat fee arrangement. None of our license agreements
      results in a payment in excess of 1% of our revenues. Beijing Origin has these
      types of agreements with China Academy of Sciences Microbiology Institute,
      Liyu
      in Hebei Province, Henan Puyang Agricultural Academy, Tieling Agricultural
      Academy, Liaoning Benxi Agricultural Academy, Sichuang Agricultural Academy,
      Corn Research
      Institution of
      Beijing Agricultural Forestry Academy, Huafeng Seed Limited, Liaocheng Huafeng
      Corn Breeding Research Institution, Food Corn Research Institution of Yunnan
      Agricultural Academy, Henan Agriculture University, Handan Agricultural Academy,
      Hubei Province Shiyan Agricultural Sciences Institute, Shandong Cotton Research
      Center, China Rice Research Institution, among others. Except for the agreement
      with Handan Agricultural Academy, which will expire in July 2011, these
      agreements generally have no fixed term or termination date. The agreements
      may
      be terminated for breach by either party. We may terminate the agreements at
      any
      time, in effect, by not producing seeds thereunder, without
      penalty.





We
      have
      joint development agreements with the Liyu under which we and Liyu are
      coordinating to develop several varieties of corn seeds. Under these agreements,
      we have developed and produced six varieties of corn seeds, which together
      have
      represented a substantial amount of sales in each year ended December 31, 2004,
      2005, and in the nine months ended September 30, 2006 and in the twelve months
      ended September 30, 2007, as illustrated in the following chart:




36





Varieties
                of Corn Seeds
            
            Percentage
                of
              2004
                Sales
            
            Percentage
                of
              2005
                Sales
            
            Percentage
                of the nine months ended September 30,
              2006
                Sales
            
            Percentage
                of the fiscal year ended September 30,
              2007
                SalesLinAo1
            
            
            50.50
            %
            
            21.00
            %
            
            11.66
            %
            
            6.36
            %AoYu
                17
            
            
            7.44
            %
            
            2.95
            %
            
            3.10
            %
            
            1.35
            %Liyu
                16
            
            
            0.11
            %
            
            26.01
            %
            
            13.27
            %
            
            13.97
            %AoYu
                19
            
            
            0.57
            %
            
            0.00
            %
            
            0.21
            %
            
            0.00
            %Liyu
                26
            
            
            0.02
            %
            
            0.00
            %
            
            0.07
            %
            
            0.12
            %Liyu35
            
            
            --
            
            
            --
            
            
            0.00
            %
            
            0.76
            %**Total**
            
            
            58.64
            %
            
            49.96
            %
            
            28.31
            %
            
            22.56
            %





We
      have
      exclusive rights to produce and market the seeds developed under the agreements
      until the agreements are terminated, and Liyu has agreed that it will not
      develop any derivative hybrids from these seeds. Moreover, Liyu will pay the
      government fees to protect our exclusive rights. The agreement has no
      termination date, hence it continues until the parties jointly agree to
      terminate or a party breaches the agreement.





In
      addition to the exclusive license agreements set forth above, we also have
      non-exclusive license agreements. The non-exclusive license fees tend to be
      lower than the typical exclusive license fees. Those licensors that lack
      production ability or distribution channels of their own grant us the right
      to
      produce, distribute and propagate the covered variety of seeds, provide us
      with
      technical materials and instructions, supervise seed quality and evaluate
      growing areas. We are responsible for undertaking all the propagation costs
      and
      maintaining quality standards. So far, Beijing Origin has entered into these
      types of agreements with Henan Agriculture University for YuYu 22, Liaocheng
      Huafeng Maize Breeding Research Institution for Feng Liao 008 and Handan Academy
      of Agricultural Sciences for Ao Mian 885 and Ao Mian 802. The agreements may
      be
      terminated for breach by either party. We may, in effect, terminate the
      agreements at any time by not producing seeds thereunder, without penalty.





With
      regards to the licensed GM varieties, we have entered into strategy cooperation
      agreement with the China Academy of Agriculture Science, or CAAS, to work on
      biotechnology research and development. That agreement gives us the right to
      produce and sell the GM crop varieties that are developed in connection with
      this arrangement, subject to our obligation to reimburse certain of CAA’s
      expenses. When the subject GM products obtain an agricultural genetically
      modified organisms’ safety certificate, both parties are obligated to sign a
      license agreement to detail their respective rights and obligations for the
      commercialization.





Except
      as
      discussed immediately above, no other licensed seed product represented more
      than 10% of our sales in 2004, 2005, the nine months ended September 30, 2006
      or
      the fiscal year ended September 30, 2007. In addition, except as disclosed
      above, no one no licensor is responsible for a seed product or group of seed
      products that represents more than 1% of our revenues.





As
      we
      develop and receive approval for our proprietary seeds, we expect that the
      number of seeds that we will produce and sell under licenses from others will
      gradually decline.





***The
      Chinese Crop Seed Market***





The
      Chinese agricultural sector is primarily made up of small, family-oriented
      farms. Increasingly, corn is becoming an important crop in China because it
      has
      a number of uses, including the use as livestock feed and a source of fuel
      in
      the form of ethanol. In addition, rice is an important human food crop, cotton
      is an important industrial crop and canola is used to produce cooking
      oil.





The
      Chinese agricultural seed industry is fragmented, with the corn seed market
      in
      particular being served by approximately 5,000 small, local seed suppliers.
      Most
      of these seed companies were established in the 1960s and 1970s by local county
      governments to address Chinese central government agricultural initiatives.
      They
      were designed at the time to provide service and support to local farmers.
      These
      local seed providers usually sell varieties of agricultural seeds that have
      been
      grown in their respective locales for years.





Improved
      seed products have been generally available in China through large multinational
      suppliers, the largest being Pioneer Hi-Bred International, Inc., or Pioneer,
      Monsanto Company, or Monsanto, and Syngenta AG, or Syngenta, each of which
      established operations in China more than a decade ago. These multinational
      companies, however, have not yet penetrated the Chinese market to any
      appreciable extent. For more discussions about competition, please see
“Competition” under this Item 4.B below.




37





Our
      business strategy focuses on meeting the needs of small Chinese farmers and
      includes the following elements:





(i)
            producing
                and distributing high-quality seed products, initially under third-party
                licenses and, over time, increasingly internally developed proprietary
                seeds, to deliver superior value to our distributor-customers and
                their
                farmer-customers;





(ii)
            devising
                a process for obtaining regulatory approvals for new crop seeds (a
                Chinese
                legal requirement) that is efficient and
                effective;





(iii)
            establishing
                a broad network of producer-farmers in several regions to participate
                in
                the seed development process and to produce approved crop seeds for
                commercial distribution;





(iv)
            creating
                an effective distribution system using a relatively small network
                of
                primary distributors, only one in each county with exclusive territories,
                with which we can deal directly and efficiently which, in turn, develop
                their own secondary distribution network to reach out directly to
                the
                consumer- farmers. This distribution network is not only a means
                for
                securing and fulfilling orders, but acts as a conduit for our marketing
                and technical support activities;





(v)
            relying
                on a number of marketing activities to retain existing customers
                and
                attract new ones. These marketing activities
                include:





-
            a
                demonstration program that provides technical assistance to customers
                regarding the correct seed choice and proper cultivation
                methods;


-
            television
                advertising and a newsletter published three times per year that
                reaches
                nearly 2 million seed customers and provides them with information
                on the
                benefits of our products and the techniques for maximizing
                yields;


-
            a
                database of over 15 million customers that we use to keep repeat
                sales at
                a high level, an important component of revenue growth;
                and





(vi)
            delivering
                service and technical support to customers throughout the growing
                season
                for its products. End-user customers can contact us through a dedicated
                call center that handles up to 1,000 calls per day. Field service
                representatives are dispatched within 48 hours of a customer’s request for
                help.





The
      average lifespan of a typical product in our industry is five to seven years.
      After this period, the product begins to lose potency and develops material
      genetic weaknesses that make the product significantly less attractive in the
      marketplace. New hybrids are approved every year and the speed at which
      technology changes is driven by the amount of high quality hybrids produced
      in
      the local region for the local seed type. One product may dominate a particular
      region for a three to five year time period, and then dominance may shift
      depending on the available seeds for the local soil types.





As
      discussed above under “Research and Development” of this Item 4.B, below under
“Research and Development Outlook” of Item 5 and elsewhere in this Annual
      Report, we expect that GM products will become increasingly significant in
      our
      industry in the coming years.





***Competition*** ******





We
      face
      competition at three primary levels, including other private Chinese companies,
      smaller local seed companies, and large multinational hybrid and GM seed
      producers. Currently, we believe that we can compete effectively with each
      of
      these competitors and that we can continue to do so in the future. Each of
      these
      groups of competitors is discussed in turn below.




38





*Larger
      Domestic Seed Companies.* Historically, we relied primarily on standard hybridizing techniques to produce
      our improved seed varieties for the Chinese marketplace. However, we recognized
      that genetically modified crop seeds will gain wide acceptance in China, and
      for
      that reason we began a biotech seed development program that relies on genetic
      modifications to improve the quality of seeds and their yields. As a result,
      we
      believe we are in a position to compete in the genetically modified portion
      of
      the seed market.





While
      there are eight seed companies that control roughly 25% of the corn seed market
      of China, we believe we may possess the most competitive technology base,
      including the capability to develop and commercialize genetically modified
      seeds. However, there is little disclosed information in this regard, and as
      a
      result internal research pipelines remain unclear. Much of the
      genetically-modified product research remains at the academic levels. The
      majority of the largest crop seed companies have been in existence for
      considerably longer periods of time than we have, and though they have
      sophisticated breeding techniques, are somewhat entrenched in their ways. Some
      of these larger entities are evolved state owned enterprises. We compete within
      this group on the basis of our consistent product quality, brand identity,
      customer and technical support, enforcement of our intellectual property rights
      and a pipeline of proprietary products.





*Smaller
      Local Seed Companies.* The
      local
      seed companies in China are the legacy of the centrally planned agricultural
      economy that was predominant in China until recently. Most of these were
      affiliated with county governments, which played a role in determining what
      crops would be grown and by whom. As was often the case with planned economies,
      these extensions of the bureaucracy had no profit motive, and no incentive
      to
      improve efficiencies, increase sales or innovate with new products. Market
      expansion was limited by the tight geographic boundaries within which they
      were
      designed to operate.





The
      majority of these local companies lack the scale and the resources to compete
      with us in a number of ways. They lack access to the improved, proprietary
      hybrids. For the most part they do not have effective marketing, advertising,
      technical support or customer service operations. The majority of our recent
      growth has come from acquiring customers from these operations. We believe
      that
      the existing trend will continue, and that eventually some of these smaller,
      local distributors can be integrated into our distribution network.





*Multinational
      Seed Companies.* At the
      opposite end of the competitive spectrum from the local seed companies are
      the
      large multinational companies, including Pioneer, Monsanto, and Syngenta. These
      companies present a formidable competitive threat from the standpoint of their
      financial resources, the high quality of their seed products, and
      biotechnological capabilities. However, the unique aspects of the Chinese crop
      seed market, which distinguish it from the market in Western countries, have
      proven a significant barrier to entry for these very large companies, even
      though they have come to the market through joint ventures formed with existing
      Chinese seed companies.





The
      principal difference between the Chinese and Western markets is that in China
      a
      large number of low volume sales are made to local farmers, while in the West,
      relatively few sales of very large volumes make up the majority of product
      sales. As a result, success in China depends on marketing and distributing
      effectively to a very large number of small customers. Relatively few Chinese
      companies have achieved any degree of success in doing so, and the international
      competitors, despite several years of trying, have not succeeded to any
      meaningful degree.





These
      multinationals rely heavily on GM seed products. Our market research indicates
      that most of the superior products that the multinationals have to offer are
      genetically modified. GM seed products have not yet achieved acceptance in
      China. To date, cotton seed is the only genetically modified crop seed product
      that has received approval for sale in China.





Should
      GM
      seed products become approved by the government on a larger scale and begin
      to
      gain broader acceptance in the market, as we expect will occur in the relatively
      near future, the large biotech companies would become more serious competitors.
      However, they will also continue to face numerous obstacles in competing with
      us, including the significant lead time associated with obtaining approval
      of a
      new seed (usually at least six years) and the need to establish effective sales,
      marketing and distribution networks to manage the large volume of small
      purchases that is characteristic of the Chinese market.





***Government
      Regulation*** **




39





We
      operate our business mainly in China under a legal regime that consists, at
      the
      national level, of the State Council, which is the highest authority of the
      executive branch of the PRC central government, and several ministries and
      agencies under its leadership, including:




·
            the
                Ministry of Agriculture and its local
                authorities;




·
            the
                Ministry of Commerce and its local
                authorities;




·
            SAFE
                and its local authorities;




·
            the
                State Administration of Industry and Commence and its local authorities;
                and




·
            the
                State Administration of Taxation, and the Local Taxation
                Bureau.




The
      following sets forth a summary of significant regulations or requirements that
      affect our business activities in China and our shareholders’ right to receive
      dividends and other distributions from us.




***Seed
      Law and Other Relevant Regulations***




Participation
      in the crop seed business is a highly regulated activity in the PRC. In July
      2000, China enacted its Seed Law, which became effective on December 1, 2000.
      The Seed Law was revised in August 2004. The Seed Law sets forth provisions
      concerning the development, government approval, production, and distribution
      of
      crop seeds. Various provinces have enacted regulations to implement the Seed
      Law.





Under
      the
      Seed Law, for a company to engage in the seed business, it must obtain two
      licenses. One is the production license, which is issued at the provincial
      level, entitling the holder to engage in seed production in that province.
      The
      production license specifies the types of seeds that may be produced, the
      location of the production of the seeds, and the term of the production license.
      The second is a license to distribute seeds. Generally, a distribution license
      is issued by the government at the county level or above. A seed company must
      obtain a provincial-level license to distribute major crop seeds in that
      province. In addition, a national level license is necessary for a seed company
      to distribute seeds nationwide. Among other standards, the amount of the
      licensee’s registered capital determines if the distribution license is issued
      at the national or local level, along the following lines:




·
            to
                obtain a national distribution license, the licensee must have a
                registered capital of at least RMB30 million (approximately
                $3,717,380);




·
            to
                obtain a provincial license to distribute hybrid seed varieties,
                the
                licensee must have a registered capital of at least RMB5 million
                (approximately $619,563); and




·
            to
                obtain a provincial license to distribute non-hybrid seed varieties,
                the
                licensee must have a registered capital of at least RMB1 million
                (approximately $123,913).




A
      separate license is required to import and export seeds. To obtain this license,
      the applicant must have a minimum registered capital of RMB10 million
      (approximately $1,239,127).





We
      have a
      national distribution license, which entitles us to sell approved crop seeds
      in
      any province in the PRC without the need for any provincial
      licenses.





In
      addition to the license(s) needed to engage in the seed production and
      distribution business, each seed must undergo a stringent regulatory review
      before it may be sold in China. A seed production company cannot receive a
      license to engage in seed production, regardless of the level of its registered
      capital, until it has secured rights to an approved seed product.





The
      testing of seeds for approval can be conducted at the provincial level or the
      national level. However, seeds that have been approved at the provincial level
      can only be distributed in the province in which the approval was issued. An
      approval at the national level means the approved seed can be distributed
      nationwide.




40





The
      procedure for provincial examination and approval requires the applicant to:




·
            submit
                the application to the provincial variety authorization
                committee;




·
            undergo
                twogrowing
                seasonsof
                monitored growth in at least five different locations in the province.
                Seeds submitted for testing are planted together with control seeds,
                which
                is typically the most popular seed with farmers in the testing locations.
                Only seeds that have an increased yield of 8% or higher versus the
                control
                seeds and that rank in the top six among all seeds then being tested
                are
                cleared to proceed to the second year of testing, during which the
                results
                of the initial test season must be confirmed;
                and




·
            go
                through one successful growing season of trial production, also in
                at
                least five different locations. If successful, a provincial examination
                certificate is granted and a public announcement is made.




The
      procedure for national examination and approval requires the applicant to:




·
            submit
                the application to the national variety authorization
                committee;




·
            complete
                two growing seasons of monitored production in at least five different
                locations. Only seeds that have 8% or higher yield compared to control
                seeds and that also rank in the top six among all seeds being tested
                in
                that cycle can proceed to the second year of testing;
                and




·
            complete
                one successful growing season of trial production in at least five
                different locations.




Seeds
      developed outside of China must also follow the above procedures before they
      can
      be distributed in China.





The
      ability to process an application for approval is an important element of
      success, especially in view of the long timeframe associated with obtaining
      approval after the seed has been developed. Failures and delays in getting
      the
      approvals on a timely basis can seriously disrupt the planning that is critical
      to successful commercial production. A minimum of six years - three to obtain
      approval and three to develop the first crop of seed for commercial distribution
      - is required to bring a seed to market after it has been developed. Because
      of
      our extensive network of seed-producing farmers, we have consistently been
      able
      to bring a new product to market in the minimum time. Other seed companies
      often
      take an additional season or more to bring an approved product to market. This
      loss of an entire growing season can be a significant disadvantage.





***Genetically
      Modified Organisms Safety Regulations***





GM
      products are controversial in China. There are public concerns regarding the
      potential for adverse effects of GM products on human health. In May 2001,
      the
      State Council of China enacted the Agricultural Genetically Modified Organisms
      Safety Regulation. The Ministry of Agriculture enacted the Agricultural
      Genetically Modified Organisms Safety Assessment Approach which became effective
      in July 1996 and was revised in March 2002. These enactments set forth
      provisions concerning the classification, testing, safety evaluation and
      identification of GM crop seeds.





Considering
      the degree of risk faced by humans, animals, plants, micro-organisms and the
      ecological environment, agricultural genetically modified organisms are divided
      into the following four levels:





Safety
      level I: no danger;


Safety
      level II: low danger;


Safety
      level III: moderately dangerous;


Safety
      level IV: highly dangerous.




41





Agricultural
      genetically modified organisms testing shall generally go through three stages
      including the intermediate test, environmental release and production test.
      When
      finished with the production test, the company can apply for the certificate
      of
      agricultural genetically modified organisms safety.





Due
      to
      the fact that we are engaged in the GM seeds business in China, we must comply
      with the Seed Law as well as the GM regulations described above.





***Foreign
      Ownership Restrictions*** ****





Currently,
      China restricts foreign ownership of businesses in the seed industry. FIEs
      engaged in the breeding of new varieties, development, production, marketing,
      distribution and sale of food crop seeds is limited to 49% pursuant to the
      Regulation on the Approval and Registration of Foreign Investment Enterprises
      in
      Agricultural Seed Industry (effective on September 8, 1997) and The Foreign
      Investment Industrial Guidance Catalogue (effective on December 1, 2007).





In
      addition to the restrictions in the conventional seed business, China forbids
      FIEs from engaging in the development and production of genetically modified
      corp seed pursuant to the Foreign Investment Industrial Guidance
      Catalogue  distributed
      by Ministry of Commence of China in 2007. Furthermore, the FIEs shall obtain
      the
      approval to engage in the breeding of GM research and testing pursuant to the
      Agricultural Genetically Modified Organisms Safety Regulation.





***Tax***





Origin
      and State Harvest are both tax-exempted companies organized in the British
      Virgin Islands.





Our
      PRC
      Operating Company Subsidiaries are organized in the PRC and governed by PRC
      laws. PRC enterprise income tax, or EIT, is calculated based on taxable income
      determined under PRC accounting principles. Before January 1, 2008, PRC EIT
      was generally assessed at the rate of 33% (30.0% of state income tax plus 3.0%
      local income tax) of taxable income. On March 16, 2007, the National
      People’s Congress of China enacted the Enterprise Income Tax Law, or the new tax
      law, which became effective on January 1, 2008. Under the new tax law, FIEs
      and domestic companies will be subject to EIT at a uniform rate of 25% and
      the
      current tax exemption, reduction and preferential treatments which are
      applicable only to FIEs will be revoked. However, any enterprises established
      before the promulgation of the new tax law that are entitled to preferential
      tax
      treatments for a fixed period will continue to be entitled to such preferential
      tax treatment until the expiration of such period.




The
      applicable tax rate of the PRC enterprise income tax to Beijing Origin is 25%
      since January 1, 2008. However, the majority of our PRC Operating Companies
      has
      been approved as new technology enterprises and enjoys the reduced EIT rate
      of
      15%.





Pursuant
      to the Provisional Regulation of China on Value Added Tax, or VAT, and their
      implementing rules, all entities and individuals that are engaged in the sale
      of
      goods, the provision of repairs and replacement services and the importation
      of
      goods in China are generally required to pay VAT at a rate of 17.0% of the
      gross
      sales proceeds received, less any deductible VAT already paid or borne by the
      taxpayer. Pursuant to the Notice of the Ministry of Finance and the State
      Taxation Administration on Exempting the Value Added Tax for Agricultural
      Material, self-produced agricultural products sold by agricultural producers
      shall be exempt from VAT. Pursuant to an approval document received from Beijing
      Haidian District State Tax Bureau, Beijing Origin has been entitled to exemption
      from VAT since August 1, 2001. Changrong has been exempted from VAT since its
      establishment in 2006 and Denong has also been exempted from VAT since January
      1, 2006,




***Dividend
      Distribution***





Under
      PRC
      law, FIEs in China, including Origin may pay dividends only out of their
      accumulated profits, if any, determined in accordance with PRC accounting
      principles. In addition, FIEs in China are required to set aside at least 10%
      of
      their after-tax profit based on PRC accounting standards each year for their
      general reserves until the accumulative amount of such reserves reaches 50%
      of
      registered capital. These reserves are not distributable as cash dividends.
      The
      board of directors of a FIE has the discretion to allocate a portion of its
      after-tax profits to staff welfare and bonus funds, and expansion (development)
      funds which may not be distributed to equity owners except in the event of
      liquidation.




42





We
      believe that we are currently in compliance with all applicable PRC laws and
      regulations relating to our business.





**C.** **Organizational
      structure.**




Origin
      is
      a holding company with no operations of its own. We conduct our operations
      in
      China primarily through our PRC Operating Companies. The following diagram
      illustrates our current organizational structure:


43









(1)
      We do
      not have any ownership interest in Beijing Origin, Henan Origin, Changchun
      Origin, Jilin Changrong or Denong. Through State Harvest, we have entered into
      a
      series of stock consignment agreements with their respective shareholders.
      Han
      Gengchen (our co-chief executive officer and Chairman), Yang Yasheng (a director
      and our Vice-Chairman) and Yuan Liang (our co-chief executive officer and
      president) currently own 34.4%, 28.675%, and 25.8% of Beijing Origin,
      respectively.




The
      table
      below lists each of our group companies, their place of incorporation and their
      percentage of ownership interest:


Name
              
              Place
                  of incorporation
                (or
                  establishment)
                /operation
              
              Percentage
                of
                  ownershipState
                  Harvest
              
              British
                  Virgin Islands
              
              100%
                  owned by OriginOrigin
                  Biotechnology
              
              Haidian
                  District, Beijing, PRC
              
              100%
                  owned by State HarvestBeijing
                  Origin
              
              Haidian
                  District, Beijing, PRC
              
              97.96%
                  controlled by State HarvestHenan
                  Origin
              
              Zhengzhou,
                  Henan Province, PRC
              
              92.04%
                  owned by Beijing OriginChangchun
                  Origin
              
              Changchun,
                  Jilin Province, PRC
              
              99%
                  owned by Beijing OriginDenong
              
              Chengdu,
                  Sichuan Province, PRC
              
              97.62%
                  owned by Beijing OriginJilin
                  Changrong
              
              Changchun,
                  Jilin Province, PRC
              
              43.95%
                  owned by Beijing OriginLiyu
              
              Shijiazhuang,
                  Hebei Province, PRC
              
              30%
                  owned by Beijing OriginBiocentury
              
              Shengzhen,
                  Guangdong Province, PRC
              
              34%
                  owned by Beijing Origin




***Stock
      Consignment Agreements*** ****





As
      discussed above in “Foreign Ownership Restrictions,” under Chinese law, foreign
      ownership of businesses engaged in the breeding of new varieties, development,
      production, marketing, distribution and sale of hybrid food crop seeds is
      limited to 49% pursuant to the Regulation on the Approval and Registration
      of
      Foreign Investment Enterprises in Agricultural Seed Industry and The Foreign
      Investment Industrial Guidance Catalogue. State Harvest, as a non-Chinese
      corporation, may not directly own more than 49% of any of the PRC Operating
      Companies. However, Chinese law does not forbid the owner of stock to consign
      rights associated with the stock, as long as the owner does not transfer title
      to the stock.





To
      gain
      control over the PRC Operating Companies (other than Origin Biotechnology,
      which
      is not subject to the 49% ownership restriction and which State Harvest already
      entirely owns), State Harvest entered into a series of stock consignment
      agreements with shareholders of those companies or, in the case of Denong and
      Jilin Changrong, with Beijing Origin, the parent of those entities. These
      agreements consign to State Harvest all of the rights of ownership of the shares
      involved other than legal title, effectively transferring the control of the
      shares subject to the agreements to State Harvest. Those rights include the
      right to manage in all respects the shares held in title by the shareholders
      that are parties to them, including all shareholder rights to call meetings
      of
      shareholders, to submit shareholder proposals, to elect directors, to vote
      the
      shares on all matters and to exercise all other rights of a shareholder in
      respect of the shares consigned. More specifically, the consignment agreements
      include giving the right to select, replace and increase the number of the
      directors and supervisors, recommend new directors and supervisory personnel
      and
      to exercise management rights, controlling rights and decision-making power
      over
      the shares of the subject company.




44





Each
      title holder of these shares has agreed not to interfere with State Harvest’s
      exercise of its rights and to cooperate fully and promptly to permit State
      Harvest to exercise its authority over the consigned shares. This includes
      all
      limitations on the ability of the consignee to transfer or dispose of the shares
      to someone other than State Harvest, give guarantees using the shares, consign
      the shares to another, alter the ownership proportion in any way, dispose of
      any
      rights in the ownership of the shares, and agree to any debt or restructuring
      of
      the shares. State Harvest has the right to take all action in respect of the
      consigned shares to avoid any damage or infringement of its rights, including
      in
      the event of the consigning shareholder’s bankruptcy. State Harvest, under the
      agreements, has virtually all property rights in the consigned shares, including
      the profits, interests, dividends, bonuses and residual assets, except for
      legal
      title. If in the future any stock subject to the consignment agreements can
      be
      legally transferred to State Harvest then, without further action by State
      Harvest, it shall be transferred to State Harvest in whole or in part for no
      additional consideration to the consigning shareholder.





The
      stock
      consignment agreements also provide that if and when the restriction on foreign
      ownership of food production companies to 49% is removed or the allowed
      ownership percentage is increased, the consigned shares will then be transferred
      to State Harvest. If not, the consignment agreements continue in full force
      and
      govern State Harvest’s rights over the shares.





The
      agreements are subject to force majeure limitations. The term of the agreements
      is initially three years, but they are automatically renewed indefinitely until
      both State Harvest and the consignor agree to terminate. There is no unilateral
      right of termination except in the event of a breach, in which event the
      non-breaching party may cancel the consignment agreement after notice and a
      reasonable cure period has passed and the breach continues. The consigning
      shareholders have warranted their authority to enter into the agreements and
      that State Harvest has the exclusive right to control the shares that are
      subject to the consignment agreements. The agreements are binding on the
      successors, assigns and heirs of the respective consigning shareholders.





The
      importance of the stock consignment agreements is that, under U.S. GAAP, State
      Harvest may consolidate the financial reporting of those PRC Operating Companies
      whose shares are subject to stock consignment agreements in the manner of wholly
      and majority owned subsidiaries and enjoy the economic benefits of such
      subsidiaries. Each stock consignment agreement is subject to enforceability
      and
      other limitations of the laws and rules of PRC. State Harvest may not transfer
      the consignment agreement, except as permitted by PRC law. However, we may
      transfer our interest in State Harvest without limitation. If there is
      non-performance by the shareholder or some or all of an agreement is
      unenforceable, we and State Harvest may lose the benefits of the agreements
      and
      suffer severe economic loss as a result. No assurance can be given that State
      Harvest will be able to enforce its rights vis-à-vis the consigning shareholders
      in the courts of the PRC, and we are not aware of any cases where these types
      of
      stock consignment agreements have been interpreted by PRC courts.




45





We
      believe that these agreements are enforceable under current PRC law. However,
      none of these kinds of agreements have yet been subject to judicial review
      or
      interpretation. The consignment agreements provide that if there is any
      interpretation of the terms by a PRC court, the agreements should be construed
      in such a way as to give State Harvest as much of the full and actual ownership
      and full beneficial rights and benefits of the consigned stock as is possible,
      so as to approximate full ownership under all applicable law.





In
      the
      event that the consignment agreement is not enforced or is terminated because
      of
      a breach by State Harvest that is not cured, the right to the underlying stock
      would be lost and the economic rights would be terminated. However, such a
      termination would not terminate the separate agreements entered into by Beijing
      Origin, Henan Origin and Changchun Origin to transfer technology from these
      to
      Origin Biotechnology, so even in the event of a termination of a consignment
      agreement, State Harvest would continue to own the applicable PRC entity’s
      technology and intellectual property through Origin Biotechnology, its wholly
      owned subsidiary (see “Technical Service Agreements” below). Also, the
      termination of one shareholder’s consignment agreement does not cause the
      termination of any of the other consignment agreements, so it would only result
      in a reduction in consigned shares under State Harvest’s control.





The
      following is a table of the parties to the consignment agreements:





PRC
                Operating Company
            
            Consigning
                Owner
            
            %
                of Shares ConsignedBeijing
                Origin
            
            Han
                Gengchen
            
            34.4%Yang
                Yasheng
            
            28.675%Yuan
                Liang
            
            25.8%Zhao
                Yuping
            
            3.995%Zhang
                Weidong
            
            3.13%Chen
                Weicheng
            
            1.96%97.96%Changchun
                Origin
            
            Beijing
                Origin
            
            99.0%Han
                Gengchen
            
            1.0%100.0%Henan
                Origin
            
            Beijing
                Origin
            
            90.0%Zhang
                Yingli
            
            4.08%Yang
                Yasheng
            
            3.88%97.96%




46




***Techn*** ***ical
      Service Agreements***





All
      of
      the intellectual property rights of Beijing
      Origin, Changchun Origin and Henan Origin have
      been transferred to Origin Biotechnology pursuant to technical service
      agreements with each of these respective entities dated December 25, 2004.
      The
      purpose of this arrangement was to permit better management and licensing of
      the
      intellectual property that the three assignors have developed. Under the
      technical service agreements, Origin Biotechnology will provide technical
      research and production and distribution services to Beijing Origin, Changchun
      Origin, and Henan Origin. These services include support in the research and
      development of agricultural seeds, analysis of breeding technologies,
      environment and feasibility suggestions, technical tutorials and breeding field
      supervision, market analysis and seed promotion, insect prevention and technical
      education to distributors and farmers. The fees payable under the agreements
      are
      variable, depending on differing formulae for different categories of seeds,
      and
      are to be charged on the sales of certain seed products as of the 2007 fiscal
      year. These agreements are considered intracompany transactions.




**D.** **Property,
      plant and equipment.**




Our
      principal executive offices are located in the Changping District in Beijing
      where we own approximately 10,320 square meters of office space, and the right
      to use approximately 19,250 square meters of land. Our office building and
      the
      right to use the land currently secure a loan of RMB51 million. Our warehouse
      in
      Changchun, Jilin province secures a loan of RMB9 million. Both loans were
      extended by the China Construction Bank Beijing Shangdi Branch to Beijing
      Origin. We also own or lease manufacturing facilities, laboratories, seed
      production and other agricultural facilities, office space, warehouses, research
      stations and breeding centers in Gansu, Henan, Liaoning, Jilin, Inner Mongolia,
      Yunnan, Jiangsu, Shanxi, Sichuan, Hainan, Hubei, Anhui, Hunan and Jiangxi
      provinces, and in Daxing of Beijing. These facilities include approximately
      268,000 square meters of land and approximately 42,800 square meters of office.
      The leased facilities are rented at regular commercial rates, and management
      believes other facilities are available at competitive rates should it be
      required to change locations or add facilities. Poor weather conditions may
      limit our ability to use the land for crop seed production.





We
      also
      have additional new facilities in Chengdu, Sichuan province, including 5,000
      square meters of new office space and a seed processing plant and the right
      to
      use approximately 25,000 square meters of land. The construction of the office
      and warehouse was completed in October 2007.





We
      believe that our existing facilities are adequate to conduct our current and
      foreseeable future business operations.





**ITEM
      4A UNRESOLVED STAFF COMMENTS**





Not
      applicable.




47





**ITEM
      5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS**




*The
      following discussion of our financial results of operations and condition is
      based upon and should be read in conjunction with our consolidated financial
      statements and their related notes included in this Annual Report on Form 20-F.
      This report contains forward-looking statements within the meaning of
      Section 27A of the Securities Act of 1933 and Section 21E of the
      Securities Exchange Act of 1934, including, without limitation, statements
      regarding our expectations, beliefs, intentions or future strategies that are
      signified by the words “expect,” “anticipate,” “intend,” “believe,” or similar
      language. All forward-looking statements included in this Annual Report are
      based on information available to us on the date hereof, and we assume no
      obligation to update any such forward-looking statements. Actual results could
      differ materially from those projected in these forward-looking statements.
      In
      evaluating our business, you should carefully consider the information provided
      under the caption “Risk Factors” in this Annual Report on Form 20-F. We caution
      you that our businesses and financial performance are subject to substantial
      risks and uncertainties.*




**A.** **Operating
      Results**




**Overview**





We
      are a
      leading, technology-focused crop seed company serving China. We currently employ
      innovative plant breeding techniques, modern biotechnology, and innovative
      information and research management to develop and deliver high-yield seeds
      to
      our native farming customer base. Our goal is to lead the industry by providing
      farmers with unique enabling technology and services, producing and protecting
      higher crop yields. Our activities include the specialization in the research
      and development, production, and sales and marketing of crop seeds (corn, rice,
      cotton and canola) throughout the PRC. Our focus remains in the production
      of
      higher quality seed products, whether proprietary or licensed. The majority
      of
      our revenues continue to be from licensed seeds as described under Item 4.B
      “Licensed Seed Products.”





We
      continue to develop our sales and marketing team of 360 employees located in
      12
      sales offices nationwide. Our nationwide distribution network covers most parts
      of China and consists of over 3,800 first-level distributors and over 65,000
      second-level distributors and retailers. Our distributors sell our products
      to
      retailers who in turn sell to farmers, who are end-users of our products. We
      currently provide branded products and technical service to farmers in 29 of
      China’s 31 provinces. We believe that quality of seed and the correct farmer
      application of that seed is the best way to increase product yields and overall
      value to farmers.





The
      fiscal year ended September 30, 2007 was a challenging year for our company
      and
      our industry, especially due to the negative impact of certain new PRC
      regulations and a widespread overproduction of crop seeds by Chinese seed
      producers, which resulted in lower market prices for our products. This industry
      environment caused us to liquidate a portion of our crop seeds at greatly
      reduced prices, which we refer to as scrap sales. As a result, for the year
      ended September 30, 2007, we generated revenues of RMB489 million (US$65.2
      million), decrease of 6.23% from RMB521.9 million (US$66.0 million) in revenues
      generated in the twelve months ended September 30, 2006.




48





With
      regards to our fiscal year 2007 normal product line results, exclusive of
      so-called scrap sales (as described below), normal corn seed products remains
      our strongest product, producing 74.36% of our sales, as compared to 65.03%
      in
      the twelve month ended September 30, 2006 period (unaudited) and 64.79% for
      the
      nine months ended September 30, 2006. The total revenue from corn seed grew
      4.94% to RMB356.17 million in fiscal year 2007 from RMB339.39 million in the
      12
      months ended September 2006. Margins decreased 5.42% from 37.38% in the 12
      months ended September 2006 to 31.96% in fiscal year 2007, mostly as a result
      of
      the increased industry pressure due to the change in government regulations,
      as
      described in more detail below. The total revenue from cotton seed decreased
      1.92% to RMB 31.99 million in fiscal year 2007 from RMB32.62 million in the
      12
      months ended September 2006. Cotton margins increased to 28.43% in fiscal year
      2007 from 27.74% in the twelve month period ending September 30, 2006
      (unaudited). Volume
      decreased slightly from 57.9 million kg in the twelve months ended September
      30,
      2006 (unaudited) to 54.5 million kg in fiscal year 2007. Our first year of
      canola sales showed 454,521 kg with 53.3% margins, resulting in revenues of
      RMB17.96 million.





Our
        rice
        product sales in fiscal year 2007 were the most severely impacted of all
        our
        products. Our revenues for the rice unit, exclusive of scrap sales, for the
        year
        ended September 30, 2007 decreased approximately 50.52% to RMB71.90 million
        from
        RMB145.32 million in the twelve months ended September 30, 2006 (unaudited).
        The
        margin decreased from 19.03% in the twelve months ended September 30, 2006
        (unaudited) to 15.95% in fiscal year 2007. As a result of an overly aggressive
        market assessment and subsequent seed production in previous years for the
        rice
        unit, we had to write down a large amount of inventory from the rice unit
        during
        fiscal year 2007, amounting to RMB75.24 million (US$10.04
        million).





Although
      our scrap sales only amounted to 2.12% of our total revenues for the fiscal
      year
      ended 2007, they materially impacted our overall gross margin by 8.25%.
      Excluding these temporary scrap sales and impairment in inventory, our gross
      margins for the period were 30.09% (unaudited) as compared to our 30.73% gross
      margins for the twelve months ended September 30, 2006 (unaudited).





Operating
      expenses for the year ended September 30, 2007 were RMB178.68 million (US$23.85
      million), representing an increase of 46.39% from RMB122.06 million (US$15.44
      million) for the twelve months ended September 30, 2006 (unaudited).





Main
        increases of the operating expense during the year included the following:
        (1)
        increase in salaries and social insurance of RMB 15.95 million (US$2.13 million)
        due to increase in the total number of employee during the year; (2) increase
        in
        research and development expense of RMB 14.29 million(US$1.91million) which
        is
        included of RMB 2.20 million (US$ 0.29 million) in write-off of Changrong’s
        in-processed research and development; (3) compensation to minority shareholders
        of disposed subsidiaries of RMB 5.84 million (US$0.78 million); (4) increase
        in
        the legal service fee of RMB4.10 million (US$0.53 million); (5) increase
        in the
        service fee of RMB 3.85 million (US$0.51 million) related to Sarbanes Oxley
        Act
        404 compliance as a result of our first year implementation; (6) RMB 2.43
        million (US$0.33 million) in uncollectible debt related to Denong; and (7)
        RMB2.32million (US$0.31 million) in the impairment of long-term assets.




49




Our
      results of operations were materially impacted during fiscal year 2007 by
      certain industry factors. The most significant of these factors was a PRC
      regulation known as Circular (Guo Ban Fa [2006] No 40), or Circular 40, issued
      by the State Council which required separation of local, provincial seed
      administrative authorities from their commercial sales affiliates by 30 June
      2007. Before Circular 40 was promulgated, many seed companies were owned by
      or
      otherwise affiliated with local government authorities responsible for
      regulating the seed industry. To satisfy its international trade commitment
      and
      to create a more fair competition environment, the Chinese government determined
      to separate these companies from the related administrative government
      authorities that had invested in them before June 30, 2007. As a result, many
      of
      these companies liquidated their seeds at lower than expected prices, which
      reduced prices for all sellers in the market. We believe that the effects of
      Circular 40 have substantially run their course and should have only a minimal
      effect on our operating results for future periods. Our results for last year
      were also negatively impacted by an overproduction of crop seed supply in the
      marketplace, which reduced market prices for our products and negatively
      impacted our margins and gross revenues.





**Change
      in Fiscal Year End**





In
      2006,
      our board of directors approved a change to our fiscal year end from December
      31
      to September 30. This change aligned our fiscal year more closely with the
      seasonal nature of our business, as described more thoroughly below. In view
      of
      this change, this Item 5 of our Annual Report compares the consolidated
      financial statements for the 12 months ended September 30, 2007, with the
      consolidated financial statements for the 12 months ended September 30,
      2006 (unaudited). This Item 5 also compares the consolidated financial
      statements for the nine months ended September 30, 2006 (the transition
      period) with the consolidated financial statements for the nine months ended
      September 30, 2005 (unaudited). Although this report does not present the
      consolidated financial statements for the 12 months ended September 30,
      2005, we have included summary information in this Item 5 for these periods
      for comparability purposes because of the seasonality of our business.





Throughout
      this Item 5, data for all periods except for the twelve months ended
      September 30, 2006, are derived from our audited consolidated financial
      statements, which appear in this report. All data for the twelve months ended
      September 30, 2006, are derived from our unaudited consolidated financial
      statements, which are not presented herein.





**Research
      and Development Outlook**





With
      the
      rapid growth of the economy in China, the demands for higher levels of food
      production have increased dramatically. These demands include domestic price
      inflation of food products, the rising consumer desire for higher quality food
      products, the increased need for fuel including the usage of bio-fuels, and
      the
      growing constraints on land. The Chinese central government has taken several
      measures to deal with these issues. Compared with conventional varieties, the
      obvious advantages of GM varieties are high yield, high quality and increased
      disease resistance and herbicide resistance. Farmers plant GM varieties to
      both
      save time and cost, while also reducing the amount of field work. GM corn,
      soybean, and cotton have been widely used in the United States and many other
      countries to guard against insect damage and to increase crop yields. Crop
      yields with the successful application to biotechnology in other developed
      countries have routinely reported increases of over 10%-15%, as reported
      commercially by Monsanto and Syngenta. According to the USDA, planting area
      for
      GM corn increased from 160,000 hectares in 1996 to almost 20 million hectares
      in
      2006 in the United States. Since receiving Chinese government approval, cotton
      that has been genetically modified to guard against damage from insects, such
      as
      the borer, and these varieties are now widely planted in China. GM cotton is
      widely accepted in the Chinese market. The Chinese authorities are beginning
      to
      evaluate GM crop seed research and commercialization in order to meet the
      increasing demand of agricultural products.




50





In
      the
      past year our key focus on biotechnology research has accelerated significantly.
      We seek to become the leader in biotechnology and GM product commercialization
      in China. We expect that genetically modified crop seeds will gain acceptance
      in
      China, and for that reason we have begun biotechnology seed development and
      invested in programs that focus on genetic modifications to improve the yields,
      product quality and insect and disease tolerance of seeds for corn and other
      corps. Development of these biotechnology attributes remains a cornerstone
      aspect of our business strategy for both the long and short term. As a result,
      a
      significant portion of our management resources and attention are dedicated
      to
      building these capabilities firm wide for introduction into the PRC domestic
      crop seed market.





During
      the fiscal year covered by this Annual Report, we established several plant
      genetic engineering technology platforms. These include transforming herbicide
      tolerance, insect resistance, nitrogen efficiency, and drought stress tolerance
      traits into corn inbred lines. We seek to efficiently utilize modern
      biotechnology in China and hope to further expand beyond China in the
      future.





We
      plan
      to efficiently use China’s emerging technology base to utilize the natural
      advantages of operating within China. Currently, we possess exclusive rights
      to
      five genetic traits in various stages of testing and development. BioCentury,
      in
      which we have a 34% minority interest, owns one of the two cotton Bt genes
      approved by Chinese government and is a leading company in genetic cotton
      research, seed production, and marketing in China. We have continued to build
      upon cooperative relationships with several universities and research institutes
      in China. These cooperative arrangements allow us to limit our own exposure
      and
      fixed cost structure and maximize our flexibility in moving towards applicable
      technology. For more information regarding these institutes, see Item 4.B
“Research and Development.”





Under
      relevant regulations, prior to registration and marketing GM crops in China,
      the
      registrant company has to follow the following procedures step by step. And
      each
      step (except the step of laboratory research) has an attached reporting and
      approval process set-up by the Ministry of Agriculture in order to proceed
      to
      the next step (see Item 4.B “Business overview—Genetically Modified Organisms
      Safety Regulations”):




51





1.
            Laboratory
                Research: is defined by genetic manipulations and research work conducted
                under a control system within laboratory.


2.
            Intermediate
                Testing Phase: signifies a small scale test conducted under a regulated
                control system.


3.
            Environmental
                Release Test: means medium scale test conducted under natural condition
                by
                taking relatively secure measures.


4.
            Production
                Test: means relatively large scale test before production and
                application.


5.
            Obtaining
                the safety certificate on genetically modified
                organisms.





Because
      we are considered a domestic company in China, we are afforded the ability
      to
      proceed through all five phases of GM approval, while international entities
      are
      restricted to phases one currently, and forbidden to proceed to phase 2 through
      5. We have already had several products in the phase 2 to phase 4, and one
      product in phase 5. And we expect to be the first company ready to sell and
      produce GM corn seed in China.





We
      have
      been successful in marketing genetically modified BT cotton varieties in China
      and plan to continue to develop other new seed varieties. Upon introduction,
      the
      Bt cotton gene was able to increase yield and production value. As a result,
      the
      farmers were willing to pay more for genetically modified seeds and prices
      increased roughly four-fold for genetically modified cotton seed as compared
      to
      standard hybrid seed. Today, almost all the planted acreage in China utilizes
      genetically modified cotton seed, exclusive of Xinjiang province. We believe
      that other crop seeds can follow similar product adoption patterns.





If
      GM
      seed products are approved by the government on a larger scale and begin to
      gain
      broader acceptance in the market, which we expect will occur in the near future,
      the large biotech companies could likely become more serious competitors.
      However, they may continue to face numerous obstacles in competing with us.
      Foreign-funded companies are currently prohibited from developing or producing
      genetically modified plant seeds, breeding livestock and poultry, or aquatic
      seed according to *Catalog
      Guiding Foreign Investment Industries* (distributed by Ministry of Commence of China in 2007). As a result, we believe
      we are in a position to compete in the genetically modified portion of the
      seed
      market when it becomes meaningful and legally permissible to do so.





As
      part
      of our internal efforts, we developed genetic markers to enhance selection
      of
      disease resistance lines of maize to accelerate the breeding process. In
      addition, last year we implemented a data mining infrastructure to search for
      stable, high yielding hybrids. Our business model draws from existing and new
      technologies using both conventional breeding and advances in biotechnology.
      We
      aim to build upon our current hybrid base where we have accumulated parental
      seeds with advantageous traits optimized to local soil conditions. We have
      roughly 100 total products, both licensed and proprietary, in the market. We
      began to develop our own proprietary hybrid seed varieties in 1998, and as
      of
      December 2007, we have 12 proprietary corn seed products, 12 proprietary rice
      seed products and 2 proprietary canola seed products that are in commercial
      production and distribution. Currently, we have 9 breeding stations and employ
      142 full time research personnel.




52





Our
      accomplishments as a company provide a foundation to launch this development
      into genetically-modified products. Our sales and technical service provide
      a
      platform for us to educate farmers regarding the difference in our product
      offerings. Our agronomists are often a trusted source to educate farmers on
      the
      benefits of genetically modified products. Our accumulated germplasm from
      conventional breeding techniques forms a base to transform our genetic traits.
      Our high-end processing, production, and quality control will continue to ensure
      high-quality seed production. We believe consistent product quality should
      become increasingly important to consumers with more advanced products. Our
      nationwide footprint and data
      mining infrastructure also
      allow for the matching of products with their most appropriate locations
      throughout China. Again, this may become more important with the advent of
      genetically modified products. We believe this should provide stronger products
      for us in the long term and benefit a wider customer base in the future.




**Key
      factors affecting our growth, operating results and financial
      condition**




We
      expect
      our future growth, operating results and financial condition to be driven and
      affected by a number of factors and trends including:




·
            our
                ability to strategically manage our growth and expansion, organically
                or
                through mergers and acquisitions. If we do not manage our growth
                effectively, our growth may slow and we may not be able to achieve
                or
                maintain profitability;




·
                
                ·
              our
                  ability to develop new products through research and development;
                
                our
                  ability to partner, ally, or jointly venture into creation of more
                  advanced bio-technology
                  products;





·
            market
                fluctuations in the demand for and supply of crop seeds in China
                and our
                ability to anticipate market demand and adjust our volume and product
                mix
                to maximize revenues and maintain sufficiently high margins to achieve
                and
                maintain profitability;




·
                
                ·
              our
                  ability to continue to license or acquire crop seeds from third
                  party
                  developers and our ability to develop proprietary crop seeds;
                
                our
                  ability to continue to effectively market and distribute our core
                  products
                  through active agronomic assistance;




·
            future
                consolidations in the crop seed industry in China may give rise to
                new or
                strengthened competitors;




·
            the
                possibility that the crop seed industry in China may favor genetically
                modified seeds over hybrid seeds, and our ability to develop, produce,
                market, and sell such products;




·
            the
                possibility of major natural disasters in China, which may have an
                adverse
                impact on our business and results of operation, as there is currently
                no
                agriculture insurance available in China against natural disasters;




·
            the
                Chinese government’s continuing support for the growth and development of
                the agriculture sector;




53




·
            the
                impact of Chinese regulation affecting our
                industry;




·
            our
                benefits from certain government incentives including tax incentives,
                the
                expiration of which, or changes to which, could have an adverse effect
                on
                our operating results;




·
            the
                possibility that excess supply of one or more of our products in
                our
                markets may drive down prices and reduce our margins, especially
                if we are
                unable to sufficiently differentiate our products from those of our
                competitors to allow us to charge higher prices;
                and




·
            our
                ability to correctly estimate growers’ future needs, and match our product
                varieties and production levels to meet those needs.





**Revenues**





The
      most
      significant factor that affects our sale of crop seeds in China is the demand
      for and supply of crop seeds in China’s agriculture market. As a result, the
      price we are able to demand for our seeds is mainly dependent on the aggregate
      supply of crop seeds, both from us and from our competitors, in relation with
      crop seed demand in any growing season. Any potential fluctuation in the demand
      and supply of seeds in China may cause significant volatility in the pricing
      of
      crop seeds in China and, as a consequence, in our operating results and
      financial condition. In addition, because decisions relating to our production
      volume are made before we know the volume of seed orders and the market price
      for such orders, we face the risk of either over-supplying the market or
      under-supplying the market, which could materially and adversely affect our
      revenues, operating results and ability to achieve or maintain profitability.





For
      the
      fiscal year end September 30, 2007, the aggregate supply of seeds in the markets
      we serve was significantly above the demand for those crop seeds. In addition,
      as the result of a new government regulation enacted in May 2006, all seed
      producers associated with PRC government agencies were required to sever their
      association with such government agencies by June 2007. As a result, many of
      these producers ceased operations and a significant amount of seed was sold
      by
      these producers at lower than expected price levels as these businesses needed
      to liquidate their remaining inventory. The prices in crop seeds for last year’s
      selling season were adversely affected across our industry.





**Deferred
      revenue**




Because
      of our revenue recognition policy, we sometimes carry sizeable deferred revenue
      on our balance sheet. This deferred revenue reflects the value of our canola
      seeds delivered after evidence of a sales arrangement is confirmed, delivery
      to
      the customer is made and full pre-payment from the customer is received, but
      before the final sales price is fixed and determined. This aspect of our revenue
      recognition policy does not have a significant effect when deferred revenues
      in
      the periods being compared maintain roughly the same proportion to overall
      sales. However, when the proportion of our sales classified as deferred revenue
      varies significantly from year to year, as sometimes occurs, our revenues and
      earnings as reported in our financial statements may not exactly reflect our
      operating activities.




54




**Cost
      of revenues**




Our
      cost
      of revenues consists of expenses directly related to our crop seed sales. These
      expenses are primarily made up of the purchase prices for seeds, depreciation
      and amortization, shipping and handling costs, salary and compensation,
      supplies, license fees, and rent.




*Purchase
      price for seeds* .
      The
      purchase price for seeds consists of the price we pay to farmers for the seeds
      they grow for us. The purchase price for seeds is the largest component of
      our
      cost of revenues and is likely to be our most variable element of our cost
      of
      revenues.





*Depreciation
      and amortization* .
      Depreciation consists of depreciation of property, plant and equipment.
      Amortization consists of amortization of our seed license fees.




*Shipping
      and handling* .
      Shipping and handling costs include costs associated with product delivery
      and
      handling cost related to transportation of goods from suppliers
      to factories and factories to factories .




*Salary
      and compensation* .
      Salary
      and compensation expenses include wages, bonuses and other benefits, including
      welfare benefits. Salary and compensation included in our cost of revenues
      relate to our production personnel. We expect that our salary and compensation
      expenses will increase in the future in conjunction with our intended growth.





*License
      Fees.* License
      fees consist of royalty fees paid to independent research and development
      institutions.





*Supplies* .
      Supplies consist of items needed for production and packing costs for the seeds
      we produce.




*Write-down
      of Inventory.* As
      a
      result of the measurement in the market value of inventory, during fiscal year
      2007 we wrote down a significant portion of our seed inventory of RMB77.24
      million (US$ 10.31 million), net
      of
      RMB 7 million (US$
      0.93 million) in inventory reversals during the year, 90.02% of which derived
      from the inventory of Denong.




**Operating
      expenses**




Our
      operating expenses consist of general and administrative expenses, research
      and
      development expenses and selling and marketing expenses. Our operating expenses
      have increased for the year ended September 30, 2007 compared to the same period
      in 2006 primarily due to the inclusion of Denong and Jilin Changrong’s operating
      expenses and increases in professional fees and the impairment in long-term
      assets and the increase in salaries and benefits paid to the employee. While
      we
      had operating expenses from Denong for only a eight month period during the
      fiscal year 2006, we had operating expenses from Denong for the entire twelve
      month fiscal year 2007 and we had included the operating expenses of Jilin
      Changrong for the year of 2007. The monthly run rate remained roughly
      consistent.




55




We
      expect
      our operating expenses to remain consistent to slightly lower for the
      foreseeable future, but the rate of such increase or decline will depend
      primarily on our current business needs, including efforts we may undertake
      to
      expand our business.




*General
      and administrative expenses* .
      General
      and administrative expenses primarily consist of salary, depreciation,
      amortization, legal fees, professional expenses and other expenses, including
      travel and other general business expenses and office supplies.




*Research
      and development expenses* .
      Our
      research and development expenses primarily consist of salary and compensation
      expenses of personnel engaged in the research and development of our proprietary
      crop seeds and future genetically modified products, rent, and depreciation
      of
      plant and equipment attributable to our research and development efforts and
      the
      expenses paid to certain research institutes to carrying research projects
      on
      behalf of Origin during the period. Further in the future, we expect to continue
      our research and development expenses to expand with the company after that
      period given the importance of technology to our product base.




*Selling
      and marketing expenses* .
      Our
      selling and marketing expenses primarily consist of salary and compensation
      for
      our sales and marketing personnel, advertisement and promotion expenses,
      transportation expenses and related marketing expenses. Growth in our selling
      and marketing expenses will depend on our expected market expansion. We expect
      to continue to remain consistent in our sales and marketing efforts in the
      foreseeable future, including our plan to hire additional sales and marketing
      personnel to focus on our new product promotion and market expansion to replace
      previous expenses on advertising and promotion. Our sales and marketing efforts
      were more intense last year as a result of the increased competition in the
      industry. This added on additional costs to the company, as we refocused efforts
      to spend increased time with the end consumer.





**Stock
      option plan and option agreements**




Our
      stock
      options are granted under the Chardan China Acquisition Corp. 2005 Performance
      Equity Plan, which became the Origin Agritech Limited 2005 Performance Equity
      Plan, or the Plan, by operation of law under the terms of our merger with
      Chardan. We adopted the Plan in November 2005, under which we could issue share
      options with the right to purchase up to 1,500,000 ordinary shares to our
      directors, officers, employees, individual consultants and advisors. We granted
      options under the Plan with the right to purchase a total of 974,000 in November
      2005.





All
      of
      the options we granted in November 2005 have an exercise price of $8.75 per
      share and are exercisable for a term of 5 years starting from November 8, 2005.
      All of these options have a vesting period of three to five years. As of
      September 30, 2007, we had options that were vested and immediately exercisable
      for 472,417 ordinary shares. We recorded a total stock-based compensation
      expense of RMB774,000 (US $96,000) for the year ended December 31, 2005,
      RMB3,986,377 (US$504,349) for the nine months ended September 30, 2006, and
      RMB5,283,844 (US $705,190) for the year ended September 30, 2007.




56




**Critical
      Accounting Policies**




The
      discussion and analysis of our financial condition and results of operations
      is
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with U.S. GAAP. The preparation of those financial statements
      requires us to make estimates and judgments that affect the reported amount
      of
      assets and liabilities, revenues and expenses and related disclosure of
      contingent assets and liabilities at the date of our financial statements.
      Actual results may differ from these estimates under different assumptions
      or
      conditions.




Critical
      accounting policies are those that reflect significant judgments or
      uncertainties, and potentially result in materially different results under
      different assumptions and conditions. We have described below what we believe
      are our most critical accounting policies that involve a high degree of judgment
      and the methods of their application. For a description of all of our
      significant accounting policies, see Note 2 to our consolidated financial
      statements.





We
      derive
      revenue primarily from the sale of various crop seeds, including corn, cotton,
      rice and canola in China. We recognize revenue when pervasive evidence of a
      sales arrangement exists, products are delivered, the price is fixed and
      determinable, collectibility is reasonably assured, and the right of return
      has
      expired. Accordingly, we defer revenue recognition until all sale return
      privileges lapse, which generally occurs in May or June, and until the selling
      price has been finalized by our management and confirmation has been issued
      to
      the customer, which generally occurs at the end of our selling season. Because
      of the discount policy we offer to our customers, we sometimes carry a sizeable
      deferred revenue that reflects the value of our crop seeds delivered after
      evidence of a sales arrangement is confirmed, delivery to the customer is made
      and pre-payments from the customer are received, but before the final sales
      price is fixed and determined at the end of the selling season. This aspect
      of
      our revenue recognition policy does not have a significant effect when deferred
      revenues in the periods being compared remain roughly the same proportion to
      overall sales. However, when the proportion of our sales classified as deferred
      revenue varies significantly from year to year, as sometimes occurs, our
      revenues and earnings as reported in our financial statements may not exactly
      reflect our operating activities.





*Impairment
      of long-lived assets.*




We
      review
      our long-lived assets for impairment whenever events or changes in circumstances
      indicate that the carrying amount of an asset may no longer be recoverable.
      When
      these events occur, we measure impairment by comparing the carrying value of
      the
      long-lived assets to the estimated undiscounted future cash flows expected
      to
      result from the use of the asset and eventual disposition. If the sum of the
      expected future cash flows (undiscounted and without interest charges) is less
      than the carrying amount of the asset, an impairment loss, equal to the excess
      of the carrying amount over the fair market value of the asset, is
      recognized.




57





*Write-down
      of Inventory.*





Any
      excess of the cost over the net realizable value of the inventories is
      recognized as a provision for diminution in the value of inventories. Net
      realizable value is the estimated selling price in the normal course of business
      less the estimated costs to completion and the estimated expenses and related
      taxes necessary to make the sale.





As
      a
      result of the significant decrease in the market value of our inventory, during
      fiscal year 2007 we wrote down a significant portion of our seed inventory
      of
      RMB77.24 million (US$ 10.31 million), net of RMB7 million (US$ 0.93 million)
      in
      inventory reversals during the year. 90.02% of this decrease resulted from
      reduction in value of our rice inventory.




*Income
      taxes.*




We
      record
      a valuation allowance to reduce our deferred tax assets to the amount that
      we
      believe to be more likely than not to be realized. In the event we were to
      determine that we would be able to realize our deferred tax assets in the future
      in excess of their recorded amount, an adjustment to our deferred tax assets
      would increase income in the period such determination was made. Likewise,
      should we determine that we would not be able to realize all or part of our
      net
      deferred tax assets in the future, an adjustment to our deferred tax assets
      would be charged to income in the period such determination was made.




*Stock-based
      compensation.*




In
      preparing the consolidated financial statements for 2005, we adopted SFAS
      No. 123 (revised 2004), or SFAS No. 123(R), issued by the FASB in
      December 2004, to measure our issued share options based on the grant-date
      fair value of the options and recognized as compensation expense over the
      requisite service period, with a corresponding addition to equity. We adopt
      the
      Black-Scholes Model to value the fair value of the share options and the
      following major assumptions are adopted: average risk-free rate of return of
      4.47%, expected option life of 3.5 years, volatility rate of 30.79% and no
      dividend yield.




*Embedded
      derivatives*




On
      July
      25, 2007, the Company issued US$40 million of guaranteed senior secured
      convertible notes (the “Notes”) which is due on July 25, 2012. According to the
      Notes Purchase Agreement, the Company is required to redeem part of the
      principal of the Notes if the conversion price is below a certain threshold.
      Whenever the Company redeems the Note, the Company has to pay an interest which
      calculated at the annual interest rate of 16% on the redeemed principal amount.
      Pursuant to SFAS No. 133 “Accounting For Derivative Instruments And Hedging
      Activities” and Emerging Issues Task Force (“EITF”) Issue No. 00-19 “Accounting
      For Derivative Financial Instruments Indexed To And Potentially Settled In
      A
      Company’s Own Stock”, the Company bifurcates the redemption feature from the
      Notes as the redemption feature is determined to be not clearly and closely
      related to the host contract. The redemption feature is recorded at fair value,
      mark-to-market at each reporting period, and are carried a separate line of
      the
      accompanying balance sheet.




58




**Results
      of Operations**





The
      agriculture industry is closely aligned with the biotechnology industry to
      foster product development. Development of these biotechnology attributes
      remains a cornerstone aspect of our business strategy for both the long and
      short term. As a result, a significant portion of our management resources
      and
      attention are dedicated to building these capabilities firm wide for
      introduction into the domestic crop seed market.





Additionally,
      the agricultural industry is seasonal in nature and our quarterly revenues
      and
      costs and expenses as a percentage of our revenues are affected by the seasonal
      fluctuations and seasonable variations in demand for our products. Typically,
      the vast majority of our seed sales for corn, rice, and cotton, which constitute
      almost all of our yearly revenues, take place between October and June. These
      sales are deferred until the third quarter of our fiscal year, when the vast
      majority of our revenues are recognized. As a result, our revenues typically
      reach seasonal peaks in the third quarter of the year. We expect such seasonal
      fluctuations to occur in the foreseeable future.





In
      fiscal
      year 2006, our financial statements were audited for the nine months ended
      September 30, 2006 period, as filed with the SEC in our Transition Report on
      Form 20-F, as a result of a change in our fiscal year end from December to
      September. However, we believe that the comparison between the 12 month ended
      September 30, 2006 and the 12 month ended September 30, 2007 is more meaningful
      to investors, and so this Annual Report provides this comparison in lieu of
      a
      comparison between the nine months ended September 30, 2006 and the 12 months
      ended September 30, 2007.





The
      following table sets forth certain information relating to our results of
      operations, and our consolidated statements of operations as a percentage of
      revenues, for the periods indicated:




Item
            
            
            
            
            **For
                the year ended December 31**
            
            
            **For
                the nine months ended September 30**
            
            **For
                the twelve months ended**
              **September
                30**
            
            **For
                the year ended**
              **September
                30**2003
            
            
            2004
            
            
            2005
            
            
            2005
                (unaudited)
            
            2006
            
            2006
                (unaudited)
            
            2007In
              thousands
                RMB
            
            
            As
                %
              of
                net revenue
            
            
            In
              thousands
                RMB
            
            
            As
                %
              of
                net revenue
            
            
            In
                thousands RMB
            
            
            As
                %
              of
                net revenue
            
            
            In
                thousands RMB
            
            As
                %
              of
                net revenue
            
            In
                thousands RMB
            
            As
                %
              of
                net revenue
            
            In
                thousands RMB
            
            
            As
                %
              of
                net revenue
            
            In
                thousands RMB
            
            
            As
                %
              of
                net revenueConsolidated
                statement of operations and comprehensive income data:Revenues
            
            
            
            
            191,645
            
            
            100.00
            
            
            301,520
            
            
            100.00
            
            
            207,291
            
            
            100.00
            
            
            208,380
            
            100
            
            522,999
            
            100
            
            521,910
            
            
            100.00
            
            489,379
            
            
            100.00Cost
                of revenues
            
            
            
            
            (118,977)
            
            
            (62.08)
            
            
            (178,313)
            
            
            (59.14)
            
            
            (129,162)
            
            
            (62.31)
            
            
            (126,418)
            
            (61)
            
            (362,982)
            
            (69)
            
            (365,726)
            
            
            (70.07)
            
            (462,852)
            
            
            (94.58)Gross profit
            
            
            
            
            72,669
            
            
            37.92
            
            
            123,207
            
            
            40.86
            
            
            78,129
            
            
            37.69
            
            
            81,962
            
            39
            
            160,017
            
            31
            
            156,184
            
            
            29.93
            
            26,527
            
            
            5.42Selling
                and marketing
            
            
            
            
            (13,310)
            
            
            (6.95)
            
            
            (20,390)
            
            
            (6.76)
            
            
            (27,037)
            
            
            (13.04)
            
            
            (18,993)
            
            (9)
            
            (49,651)
            
            (9)
            
            (57,695)
            
            
            (11.05)
            
            (57,994)
            
            
            (11.85)General
                and administrative
            
            
            
            
            (18,948)
            
            
            (9.89)
            
            
            (24,149)
            
            
            (8.01)
            
            
            (28,983)
            
            
            (13.98)
            
            
            (19,712)
            
            (9)
            
            (40,933)
            
            (8)
            
            (50,204)
            
            
            (9.62)
            
            (92,246)
            
            
            (18.85)Research
                and development
            
            
            
            
            (5,288)
            
            
            (2.76)
            
            
            (6,774)
            
            
            (2.25)
            
            
            (6,977)
            
            
            (3.37)
            
            
            (5,963)
            
            (3)
            
            (13,144)
            
            (3)
            
            (14,158)
            
            
            (2.71)
            
            (28,441)
            
            
            (5.81)Total
                operating expenses
            
            
            
            
            (37,546)
            
            
            (19.59)
            
            
            (51,313)
            
            
            (17.02)
            
            
            (62,997)
            
            
            (30.39)
            
            
            (44,668)
            
            (21)
            
            (103,728)
            
            (20)
            
            (122,057)
            
            
            (23.39)
            
            (178,681)
            
            
            (36.51)Other
                operating income
            
            
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            2,309
            
            
            1.11
            
            
            -
            
            -
            
            -
            
            -
            
            -
            
            
            -
            
            -
            
            
            -Income
                from operations
            
            
            
            
            35,122
            
            
            18.33
            
            
            71,894
            
            
            23.84
            
            
            17,441
            
            
            8.41
            
            
            37,294
            
            18
            
            56,289
            
            11
            
            34,127
            
            
            6.54
            
            (152,154)
            
            
            (31.09)Interest
                income
            
            
            
            
            845
            
            
            0.44
            
            
            371
            
            
            0.12
            
            
            886
            
            
            0.43
            
            
            421
            
            0
            
            8,783
            
            2
            
            9,294
            
            
            1.77
            
            10,942
            
            
            2.24Interest
                expenses
            
            
            
            
            (483)
            
            
            (0.25
            
            
            (831)
            
            
            (0.28)
            
            
            (1,829)
            
            
            (0.88)
            
            
            (1,443)
            
            (1)
            
            (5,005)
            
            (1)
            
            (5,391)
            
            
            (1.03)
            
            (21,697)
            
            
            (4.43)Other
                income (expense)
            
            
            
            
            1,137
            
            
            0.59
            
            
            149
            
            
            0.05
            
            
            300
            
            
            0.14
            
            
            62
            
            0
            
            2,893
            
            1
            
            5,441
            
            
            1.04
            
            1,312
            
            
            0.27Equity
                in earnings of associated company
            
            
            
            
            -
            
            
            -
            
            
            1,925
            
            
            0.64
            
            
            879
            
            
            0.42
            
            
            305
            
            0
            
            12,828
            
            2
            
            13,400
            
            
            2.57
            
            (669)
            
            
            (0.14)Changes
                in the fair value of embedded derivatives
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -
            
            -
            
            -
            
            -
            
            
            
            
            
            
            12,601
            
            
            2.57Income
                before income taxes
            
            
            
            
            36,621
            
            
            19.11
            
            
            73,508
            
            
            24.38
            
            
            17,677
            
            
            8.53
            
            
            36,639
            
            18
            
            75,788
            
            14
            
            56,826
            
            
            10.89
            
            (149,665)
            
            
            (30.58)Income
                tax
            
            
            
            
            (7,808)
            
            
            (4.07)
            
            
            (7,698)
            
            
            (2.55)
            
            
            (1,405)
            
            
            (0.68)
            
            
            (1,205)
            
            (1)
            
            (367)
            
            (0)
            
            (566)
            
            
            (0.11)
            
            49
            
            
            0.01Income
                before minority interests
            
            
            
            
            28,813
            
            
            15.03
            
            
            65,810
            
            
            21.83
            
            
            16,272
            
            
            7.85
            
            
            35,434
            
            17
            
            75,421
            
            14
            
            56,260
            
            
            10.78
            
            (149,616)
            
            
            (30.57)Minority
                interests
            
            
            
            
            138
            
            
            0.07
            
            
            (351)
            
            
            (0.12)
            
            
            137
            
            
            0.07
            
            
            (510)
            
            (0)
            
            910
            
            0
            
            1,558
            
            
            0.30
            
            (13,584)
            
            
            (2.78)Net
                income
            
            
            
            
            28,951
            
            
            15.11
            
            
            65,459
            
            
            21.71
            
            
            16,409
            
            
            7.92
            
            
            34,924
            
            17
            
            76,331
            
            15
            
            57,818
            
            
            11.08
            
            (163,200)
            
            
            (33.35)





59





**Twelve
      Months Ended September 30, 2007 Compared To The** **Twelve
      Months Ended September 30, 2006**





Due
      to
      the change of fiscal year-end in 2006 from December 31st to September 30th,
      as
      discussed above, the following section compares items in our financial
      statements for the twelve months ended September 30, 2007 against the twelve
      months ended September 30, 2006 (unaudited).





Our
      results of operations were materially impacted during fiscal year 2007 by the
      industry factors described above. These factors included (1) the State Council
      Circular enforcing the separation of the seed administrative offices from their
      commercial outlets, which led to many of these producers liquidating their
      seeds
      at lower than expected prices, which reduced prices for all sellers in the
      market and (2) an industry-wide overproduction of crop seed entering the fiscal
      year 2007 selling season. These factors affected the entire Chinese crop
      industry in 2007 and led us to liquidate a portion of our crop seeds at greatly
      reduced prices in scrap sales. While these scrap sales only amounted to roughly
      2.12% of our total revenues for the year ended 2007, they materially impacted
      our gross margin by 8.25%. Excluding these scrap sales and the impairment of
      inventory, our gross margins for the period were 30.09% (unaudited) as compared
      to our 30.73% gross margins for the twelve months ended September 30, 2006
      (unaudited).





***Revenues
      & Gross Margin***





Our
      revenues for the year ended September 30, 2007 were RMB489.38 million (US$65.31
      million), a decrease of 6.23% from RMB521.91 million (US$66.03 million) in
      the
      twelve months ended September 30, 2006 (unaudited).





As
      a
      result of the competition in our industry, a portion of our seeds were
      liquidated and sold at greatly reduced prices as scrap sales for use as animal
      feed rather than standard crop seed. The revenue of the seeds sold as scrap
      accounted for revenue of RMB10.37 million (USD1.38 million), and a sales volume
      of 8.36 million kg. While these sales only amounted to 2.12% of our total
      revenues for the year ended 2007, they materially impacted our overall gross
      margin by 8.25%. Besides, during fiscal year 2007 we wrote off a significant
      portion of our seed inventory of RMB77.24 million (US$ 10.31 million), which
      was
      recorded as cost of revenues. Excluding these temporary scrap sales and the
      impairment of inventory, our gross margins for the period were 30.09%
      (unaudited) as compared to our 30.73% gross margins for the twelve months ended
      September 30, 2006 (unaudited).




60





The
      major
      shortfall to our revenue base was due to a 50.52% drop in rice seeds revenues
      from RMB145.32 million (US$ 19.39 million) to RMB71.90 million (US$ 9.6
      million). Gross margins dropped from 19.03% in the twelve months ended September
      30, 2006 to 15.95% in fiscal year 2007. This drop off was due to the changes
      in
      the government policy and the overproduction of seed in the industry. As
      discussed below, we expect that the factors that materially affected these
      sales
      will not recur, or will recur only to a significantly lesser extent, in future
      periods.





Exclusive
      of the scrap sales, revenues from our hybrid corn seeds increased 4.94% from
      RMB339.39 million (USD 45.3 million) (unaudited) in the twelve months ended
      September 30, 2006 to RMB356.17 million (USD 47.7 million) in the fiscal year
      ended 2007. Gross margin of our corn products dropped 5.42% in fiscal year
      2007,
      as compared to the previous twelve month period. Our cotton revenues decreased
      1.93% from RMB 32.62 million (USD 4.13 million) (unaudited) in the twelve months
      ended September 30, 2006 to RMB 31.99 million (USD 4.3 million). The gross
      margin of our cotton products also increased 0.69% in fiscal year 2007, as
      compared to the previous twelve month period. Our first year of canola sales
      resulted in revenues of RMB17.89 million (USD2.39 million) with 53.28% gross
      margins.





The
      revenues resulting from non-scrap seed sales for the twelve months ended
      September 30, 2007 as compared to that of the twelve months ended September
      30,
      2006 were as follows:


Items
              
              Revenues
              
              Gross
                  MarginYear
                  ended September 30, 2007
              
              Twelve
                  months ended September 30, 2006
              
              Growth
              
              Year
                  ended September 30, 2007
              
              Twelve
                  months ended September 30, 2006
              
              Growth(unaudited)
              
              
              
              
              
              (unauditedRMB’000
              
              RMB’000Hybrid
                  Corn seeds*
              
              
              356,173
              
              
              339,394
              
              
              4.94
              %
              
              31.96
              %
              
              37.38
              %
              
              -5.42
              %Hybrid
                  Rice seeds*
              
              
              71,900
              
              
              145,323
              
              
              -50.52
              %
              
              15.95
              %
              
              19.03
              %
              
              -3.08
              %Hybrid
                  Cotton seeds*
              
              
              31,994
              
              
              32,622
              
              
              -1.93
              %
              
              28.43
              %
              
              27.74%**
              
              
              0.69
              %Hybrid
                  Canola seeds*
              
              
              17,885
              
              
              -7
              
              
              
              
              
              53.28
              %
              
              NM
              
              
              NMParental
                  seeds*
              
              
              1,055
              
              
              4,578
              
              
              -76.96
              %Total
                  normal sales*
              
              
              479,008
              
              
              521,910
              
              
              -8.22
              %
              
              30.09
              %
              
              30.73
              %
              
              -0.64
              %


* *exclusive
      of scrap sales*




***exclusive
      of Denong cotton seed sales*





There
      were no scrap sales for the twelve months ended September 30, 2006 (unaudited),
      and the scrap sales and other costs of the year ended September 30, 2007 were
      as
      follows:





Revenue
                of scrap sales
            
            Costs
                of scrap sales and other adjustments
            
            Net
                LossRMB’000
            
            RMB’000
            
            RMB’00010,372
            
            50,750
            
            40,378





61





***Cost
      of Revenue***





Our
      cost
      of revenue for the year ended September 30, 2007 was RMB462.85 million (US$61.67
      million), including the inventory write-down of RMB77.24 million (US$10.31
      million) This was an increase of 26.56% from RMB365.73 million (US$46.27
      million) for the twelve months ended September 30, 2006.





***Gross
      profit***




Our
      gross
      profit for the year ended September 30, 2007 decreased approximately 83.02%
      to
      RMB26.53 million (US$3.54 million) from RMB156.18 million (US$19.76 million)
      for
      the twelve months ended September 30, 2006.





Excluding
      the loss of RMB 40.38 million (USD 5.39 million) in the sales of seeds as scrap
      sales and the inventory write-down of RMB77.24 million (US$ 10.31 million),
      the
      gross profit of the year ended September 30, 2007 were RMB 144.15 million (USD
      19.24 million), representing a decrease of 10.11% from RMB160.36 million
      (US$20.29 million) from the twelve months ended September 30, 2006





***Operating
      expenses***





Operating
      expenses for the year ended September 30, 2007 were RMB178.68 million (US$23.85
      million), representing an increase of 46.39% from RMB122.06 million (US$15.44
      million) (unaudited) for the twelve months ended September 30,
      2006.





Main
        increases of the operating expense during the year included the following:
        (1)
        increase in salaries and social insurance of RMB 15.95 million (US$2.13 million)
        due to increase in the total number of employee during the year; (2) increase
        in
        research and development expense of RMB 14.29 million(US$1.91million) which
        is
        including of RMB 2.20 million (US$ 0.29 million) in write-off of Changrong’s
        in-processed research and development; (3) compensation to minority shareholders
        of disposed subsidiaries of RMB 5.84 million (US$0.78 million); (4)
        increase in the legal service fee of RMB4.10 million (US$0.53 million); (5)
        increase in the service fee of RMB 3.85 million (US$0.51 million) related
        to
        Sarbanes Oxley Act 404 compliance as a result of our first year implementation;
        (6) RMB 2.43 million (US$0.33 million) in uncollectible debt related to Denong;
        and (7) RMB2.32million (US$0.31 million) in the impairment of long-term assets.




***Selling
      and marketing***





Selling
      and marketing expenses for the year ended September 30, 2007 were RMB57.99
      million (US$7.74 million), representing an increase of 0.51 % from RMB57.70
      million (7.30 million) (unaudited) for the year ended September 30,
      2006.




62





***General
      and administrative*** ****




General
      and administrative expenses for the year ended September 30, 2007 were RMB92.25
      million (US$12.31 million), representing an increase of 83.74 % from RMB 50.20
      million (US$6.35 million) (unaudited) for the twelve months ended September
      30,
      2006.





The
        increase was primarily caused by the increase in salaries and social insurance
        fee of RMB 7.41 million (US$0.51 million), compensation to minority shareholders
        of disposed subsidiaries of RMB 5.84 million (US$0.78 million), legal service
        fee of RMB4.10 million (US$0.53 million), increase in the professional service
        fee of RMB 3.85 million (US$0.51 million) related to Sarbanes Oxley Act 404
        compliance, uncollectible debt relate to Denong of RMB2.43 million (US$ 0.33
        million), the increase in the impairment of long-term assets of RMB2.32 million
        (US$0.31 million), as detailed under “Operating expenses”,





***Research
      and development***




Research
      and development expenses for the year ended September 30, 2007 were
      RMB28.44million (US$3.80 million), representing an increase of 100.88 % from
      RMB14.16 million (US$1.79 million) (unaudited) for the twelve months ended
      September 30, 2006. This amounted to 5.8% of our total revenues, which is
      roughly in-line with our research and development strategy. The change between
      these periods is primarily a result of our increased spending on research and
      development.





***Income
      from operations***





As
      a
      result of the impact of the components described above, we had loss from
      operations for the year ended September 30, 2007 of RMB152.15 million (US$20.31
      million), compared with the income from operations of RMB34.13 million (US$4.32
      million) (unaudited) for the twelve months ended September 30, 2006.




***Interest
      expense***




Interest
      expenses for the year ended September 30, 2007 were RMB21.70 million (US$2.90
      million), representing an increase of 302.47 % from RMB5.39 million (US$0.68
      million) (unaudited) for the twelve months ended September 30, 2006. The
      increase in interest expense was primarily attributable to the amount of
      short-term loans outstanding, which increased from RMB106.26 million (US$13.29
      million) as of June 30, 2006 to RMB268.4 million (US$35.82 million) as of
      September 30, 2007 and the amortization of the discount on the convertible
      debt
      of RMB3.57 million (US$0.48 million) for the year ended September 30, 2007. Our
      interest expense
      paid in cash was RMB18.28 million (US$2.44 million). The increase in our
      short-term loans was primarily due to our need to fund our acquisition of Jilin
      Changrong and Jinong.




63





***Share
      of earnings in equity investee companies***




Shares
      of
      earnings in equity investee companies decreased to RMB0.67 million (US$0.1
      million) in the year ended September 30, 2007 from RMB13.40 million (US$1.70
      million) for the twelve months ended September 30, 2006 (unaudited). The
      decrease was primarily due to the increase of the investment in Jilin Changrong,
      which was recorded in the equity method for the nine months ended September
      30,
      2006 with an investment income of RMB11.80 million (US$ 1.49 million). However,
      i n
      April
      2007 we acquired more equity, resulting a total control of 43.95%, and then
      obtained the majority voting power on board. Therefore, Jilin Changrong has
      been
      consolidated into our financial reporting during the year ended September 30,
      2007.





***Other
      income***




Other
      income decreased to RMB1.31 million (US$0.17 million) for the year ended
      September 30, 2007 as compared to RMB5.44 million (US$ 0.69 million) (unaudited)
      for the twelve months ended September 30, 2006 (unaudited),which was mainly
      due
      to decreased sales of corn cobs originating from the Linze Branch, which was
      the
      result of our decreased corn production.





***Income
      taxes***




Income
      taxes for the year ended September 30, 2007 were negative with a value of
      RMB0.05 million (US$0.01 million), as compared with RMB0.57 million (US$0.07
      million) (unaudited) for the twelve months ended September 30, 2006. During
      fiscal year 2007 we incurred an increase in deferred tax assets of RMB8.79
      million (US$1.17 million), which is mainly derived from the recognition of
      Beijing Origin’s tax loss for the year ended September 30, 2007 and other
      temporary differences.


.


The
      applicable tax rate of the PRC enterprise income tax to Beijing Origin is 33.0%
      (30.0% of state income tax plus 3.0% local income tax). However, the majority
      of
      our PRC Operating Companies are entitled to a preferential tax rate of 15.0%,
      and Origin Biotechnology is also entitled to a preferential tax rate of 15%
      as a
      high technology company and is exempted from income tax for 2007. For the nine
      months ended September 30, 2006 and the year ended September 30, 2007, the
      effect of the preferential tax treatment is 24% and 16%.  The
      effective income tax rate for the nine months ended September 30, 2006 and
      the
      year ended September 30, 2007 was 1% and nil, respectively.





***Net
      income***




Our
      net
      loss was RMB163.20 million (US$21.78 million) in the year ended September 30,
      2007, as compared to the net income of RMB57.82 million (US$7.32 million) for
      the twelve months ended September 30, 2006 (unaudited).





**Nine
      Months Ended September 30, 2006 Compared to Nine Months Ended September 30,
      2005**




64





***Revenues***




Our
      revenues for the nine months ended September 30, 2006 increased approximately
      150.98% to RMB523.00 million (US$66.17 million) from RMB208.38 million (US$25.75
      million) in the same period of 2005. Without taking into account the revenue
      of
      RMB153.41 million (US$19.41million) of Denong, our revenues increased
      approximately 77.36% to RMB369.59 million (US$46.76 million) from RMB208.38
      million (US$25.75 million).





The
      77.36% increase in our revenues for the nine months ended September 30, 2006
      as
      compared to our revenues for the nine months ended September 30, 2005 is
      primarily due to the difference in the amount of deferred revenue and
      recognition of those deferred revenues as revenues. Our revenue is recognized
      only after a sale is made and the price is fixed and determinable, which usually
      occurs at the end of the selling season. As a result, we recorded deferred
      revenues amounting to RMB181.58 million (US$22.50 million) as of December 31,
      2005. The above amount of deferred revenue reflects products delivered between
      October and December of 2005 and was recognized in the nine months ended
      September 30, 2006. In 2004, we confirmed final sales prices for a portion
      of
      our products delivered between October and December of that year to customers
      principally located in the southwest region of China, and recognized that
      portion of the sales amounting to RMB89.12 million (US$ 10.77 million) as
      revenue in 2004. As a result, only RMB37.92 million (US$4.58 million) was
      recorded as deferred revenue as of December 31, 2004 and recognized in the
      nine
      months ended September 30, 2005.





With
      respect to our growth on a yearly basis, exclusive of the result of Denong,
      our
      revenues for the twelve months ended September 30, 2006 increased approximately
      24.1% to RMB368.5 million (US$46.62 million) from RMB296.97 million (US$36.7
      million) for the nine months ended September 30, 2005.





***Cost
      of revenues***




The
      cost
      of revenues increased by 183.82% to RMB358.80 million (US$45.40 million) for
      the
      nine months ended September 30, 2006 from RMB126.42 million (US$15.62 million)
      in the same period of 2005. Without taking into account the cost of revenues
      of
      RMB124.03 million (US$15.69 million) of Denong, our cost of revenues increased
      approximately 85.71% to RMB234.77 million (US$29.71 million).





The
      85.71% increase in our cost of revenues for the nine months ended September
      30,
      2006 as compared to our cost of revenues for the nine months ended September
      30,
      2005 is primarily due to the difference in the amount of cost of deferred
      revenue and recognition of such amount of cost of deferred revenues as costs.
      In
      line with the recognition of deferred revenue, we recognized cost of deferred
      revenues of RMB117.39 million (US$14.55 million) during the nine months ended
      September 30, 2006 as compared to RMB20.91 million (US$2.53 million) cost of
      deferred revenue for the nine months ended September 30, 2005.




65





With
      respect to increase of cost of revenues on a yearly basis, exclusive of the
      results of Denong, our cost of revenues for the twelve months ended September
      30, 2006 increased approximately 37.57% to RMB237.52 million (US$30.05 million)
      from RMB172.66 million (US$21.34 million) for the twelve months ended September
      30, 2005.





***Gross
      profit***




Our
      gross
      profit for the nine months ended September 30, 2006 increased approximately
      100.34% to RMB164.20 million (US$20.77 million) from RMB81.96 million (US$10.13
      million) in the same period of 2005. Without taking into account Denong, our
      gross profit increased approximately 64.49% to RMB134.82 million (US$17.05
      million).





Gross
      profit increased 29.0% in twelve months ended September 30, 2006 to RMB160.36
      million (US$20.29 million) from RMB124.32 million (US$15.36 million) in the
      same
      period of 2005.





***Gross
      margin***




As
      a
      percentage of total revenues, our gross margin was 31.39% in the nine months
      ended September 30, 2006, as compared with 39.33% in the same period of 2005.
      The decline in gross margins was the result of the inclusion of the operating
      results of Denong.




***Operating
      expenses*** ****




Operating
      expenses increased by 141.57% to RMB107.91 million (US$13.65 million) for the
      nine months ended September 30, 2006 from RMB44.67 million (US$5.52 million)
      for
      the same period of 2005. The increase in operating expenses was primarily
      attributable to the following factors:





(1)
      the
      inclusion of RMB33.71 million (US$4.27 million) of operating expenses of Denong
      in the eight-month period from the acquisition date of January 24, 2006 to
      September 30, 2006. Without taking into account Denong’s operating expenses, our
      operating expenses increased approximately 66.11% to RMB74.20 million (US$9.38
      million);





(2)
      the
      recognition of transportation fees of deferred revenues. We recognized
      transportation fees of deferred revenues of RMB1.49 million (US$0.19 million)
      during the nine months ended September 30, 2006 as compared to NIL
      transportation fees of deferred revenue in the same period of the prior
      year;





(3)
      the
      inclusion of professional fees of RMB9.68 million (US$ 1.22 million) and stock
      based compensation of RMB3.40 million (US$ 0.43). There were no such
      professional fees and stock based compensation for the nine months ended
      September 30, 2005.




66





Without
      taking into account the above factors, our operating expenses increased
      approximately by 33.56% to RMB59.66 million (US$7.55 million).





*Selling
      and marketing*





Selling
      and marketing expenses increased by 161.45% to RMB49.65 million (US$6.28
      million) for the nine months ended September 30, 2006 from RMB18.99 million
      (US$2.35 million) in the same period of 2005. This increase is primarily due
      to
      (1) the inclusion of RMB17.20 million (US$2.18 million) in selling expenses
      related to Denong; (2) a stock-based compensation of RMB1.40 million (US$0.18
      million); and (3) transportation fees of the deferred revenues amounting to
      RMB1.49 million (US$0.19 million). Other expenses include advertising expenses,
      which rose by RMB2.77 million (US$0.35 million), and transportation fees, which
      increased by RMB2.53 million (US$0.32 million) as a result of a higher volume
      of
      goods delivered.




*General
      and administrative*




General
      and administrative expenses increased by 128.87% to RMB45.11 million
      (US$5.71million) for the nine months ended September 30, 2006 from RMB19.71
      million (US$2.44 million) in the same period of 2005. This increase is primarily
      due to the following reasons: (1) inclusion of RMB12.73 million (US$1.61
      million) in general and administrative expenses related to Denong, (2) audit
      fees of RMB3.04 million (US$ 0.38 million) accrued for the 9 months ended
      September 30, 2006 (the audit fees for 2005 were charged to the fourth quarter
      of 2005), (3) other professional service fees, which increased by RMB6.64
      million (US$0.84 million), and (4) stock-based compensation of RMB1.66 million
      (US$0.21 million).





*Research
      and development*




Research
      and development expenses increased by 120.42% to RMB13.14 million (US$1.66
      million) for the nine months ended September 30, 2006 from RMB5.96 million
      (US$0.74 million) in the same period of 2005. This increase is primarily due
      to
      the increase of RMB3.4 million (US$ 0.44 million) in research and development
      expenses of Origin and the inclusion of RMB3.78 million (US$0.48 million) in
      research and development expenses related to Denong. Without taking into account
      Denong, research and development expenses increased by 57.05% to RMB9.36 million
      (US$ 1.18 million). In addition, stock-based compensation amounted to RMB0.34
      million (US$ 0.04 million).





***Income
      from operations***




As
      a
      result of the foregoing, we had income from operations in the nine months ended
      September 30, 2006 of RMB56.29million (US$7.12 million), compared with income
      from operations of RMB37.29 million (US$4.61 million) in the same period of
      2005.




67




***Interest
      expense***




Interest
      expense increased by 246.81% to RMB5.01million (US$0.63 million) in the nine
      months ended September 30, 2006 from RMB1.44 million (US$0.18 million) in the
      same period of 2005. The increase in interest expense was primarily attributable
      to the amount of short-term loans outstanding, which increased from RMB45.86
      million (US$5.67 million) as of September 30, 2005 to RMB253 million (US$32.01
      million) as of September 30, 2006.




***Share
      of earnings in equity investee companies***




Shares
      of
      earnings in equity investee companies increased to RMB12.83 million (US$1.62
      million) in the nine months ended September 30, 2006 from RMB0.31 million
      (US$0.04 million) in the same period of 2005. This increase was primarily
      attributable to our pro-rata share of earnings in Jilin Changrong of RMB11.80
      million (US$ 1.49 million) for the nine months ended September 30, 2006. We
      acquired 34.76% equity interest in Jilin Changrong in 2006.





***Other
      income***




Other
      income increased to RMB2.89 million (US$ 0.37 million) in the nine months ended
      September 30, 2006 from RMB0.06 million (US$0.01 million) in the same period
      of
      2005. This increase is primarily due to the inclusion of RMB1.88 million
      (US$0.24 million) of other income attributable to Denong for its transfer of
      technology use rights.





***Income
      taxes***




Income
      taxes decreased 69.58% to RMB0.37 million (US$0.05 million) in the nine months
      ended September 30, 2006 from RMB1.21 million (US$0.15 million) in the same
      period of 2005, primarily due to an increase in deferred tax assets of RMB1.06
      million (US$0.13 million) after a reclassification of RMB2.65 million (US$
      0.33
      million) from income tax recoverable brought forward from 2005 to the deferred
      tax assets. This increase mainly derived from the recognition of Beijing
      Origin’s tax loss for the nine months ended September 30, 2006.




The
      applicable tax rate of the PRC enterprise income tax to Beijing Origin is 33.0%
      (30.0% of state income tax plus 3.0% local income tax). However, the majority
      of
      our PRC Operating Companies are entitled to a preferential tax rate of 15.0%,
      and Origin Biotechnology is also entitled to a preferential tax rate of 15%
      as a
      high technology company and is exempted from income tax for 2006. For the nine
      months ended September 30, 2005 and 2006, the effect of the preferential tax
      treatment is 24%.  The
      effective income tax rate for the nine months ended September 30, 2005 and
      2006
      was 3% and 1%, respectively.





***Net
      income***




Our
      net
      income increased by 118.56% to RMB76.33 million (US$9.66 million) in the nine
      months ended September 30, 2006 from RMB34.92 million (US$4.32 million) in
      the
      same period of 2005.




68





**B.** **Liquidity
      and Capital Resources** ****




As
      of
      September 30, 2006 and 2007, we had approximately RMB140.95 million
      (US$17.83 million) and RMB162.31 million (US$21.66 million), respectively,
      in cash and cash equivalents. Our cash and cash equivalents primarily consisted
      of cash on hand and liquid investments with original maturities of three months
      or less that is deposited with banks and other financial institutions. We
      generally deposit our excess cash in interest bearing bank accounts and invest
      in U.S. government bonds. We believe our working capital is sufficient to meet
      our present requirements.




We
      finance our operations through cash generated from operating activities, short
      term borrowings and the proceeds from our issuance of convertible notes in
      July
      2007. We had total short-term borrowings of RMB268.40 million (US$35.82 million)
      and a total long-term borrowings of RMB1.88 million (US$0.25 million). A portion
      of our short-term borrowings (RMB51.00 million) is secured by our land use
      rights and the office building, both of which are in the Zhongguancun Life
      Science Park. A portion of our short-term borrowings (RMB9.00 million) is
      secured by our office building and land use right of Changchun Origin, and
      another portion of our short-term borrowings (RMB108.40 million) is secured
      by
      an account held at Fidelity Investment. Another portion of our short-term
      borrowings (RMB80.00 million) is guaranteed by Gengchen Han and Origin
      Biotechnology. Our long-term borrowings consist of a third-party loan of RMB1.88
      million (US$0.24 million) which is due in 2008 and 2009 by two equal
      installments and bears an interest of 2.4% per annum.




The
      following table shows our cash flows with respect to operating activities,
      investing activities and financing activities in 2003, 2004, 2005, the nine
      months ended September 30, 2005 (unaudited) and September 30, 2006, and the
      12
      months ended September 30, 2006 (unaudited) and September 30, 2007:




Item
              
              
              
              Year
                  ended December 31
              
              Nine
                  months ended September 30
              
              Twelve
                  Month ended September 30
              
              Year
                  ended September 30(In
                  thousands)
              
              2003
              
              2004
              
              2005
              
              2005
                  (unaudited)
              
              2006
              
              2006
                  (unaudited)
              
              2007
              
              2007RMB
              
              RMB
              
              RMB
              
              RMB
              
              RMB
              
              RMB
              
              RMB
              
              US$Net
                  cash (used in) provided byOperating
                  activities
              
              
              (14,961
              )
              
              42,745
              
              
              24,387
              
              
              (19,900
              )
              
              (123,260
              )
              
              (78,973
              )
              
              (169,242
              )
              
              (22,588
              )Net
                  cash (used in) provided by investing activities
              
              
              (32,962
              )
              
              (27,201
              )
              
              (62,722
              )
              
              (39,082
              )
              
              (244,972
              )
              
              (268,612
              )
              
              (90,948
              )
              
              (12,137
              )Net
                  cash (used in) provided by financing activities
              
              
              18,446
              
              
              4,083
              
              
              207,706
              
              
              6,740
              
              
              275,006
              
              
              475,972
              
              
              283,774
              
              
              37,873Net
                  increase(decrease) in cash and
                cash
                  equivalents
              
              
              (29,477
              )
              
              19,627
              
              
              169,371
              
              
              (52,242
              )
              
              (93,226
              )
              
              128,387
              
              
              23,584
              
              
              3,148Cash
                  and cash equivalents,Beginning
                  of year
              
              
              78,698
              
              
              49,221
              
              
              68,848
              
              
              68,848
              
              
              237,828
              
              
              237,828
              
              
              140,953
              
              
              18,812Effect
                  of exchange rate changes on cash and cash 
equivalents
              
              
              -
              
              
              -
              
              
              (391
              )
              
              45
              
              
              (3,649
              )
              
              (4,085
              )
              
              (2,223
              )
              
              (297
              )Cash
                  and cash equivalents, end of year
              
              
              49,221
              
              
              68,848
              
              
              237,828
              
              
              16,651
              
              
              140,953
              
              
              362,130
              
              
              162,314
              
              
              21,663




69




*Operating
      activities* .
      Net
      cash used in operating activities was RMB169.24 million (US$22.59 million)
      in the year ended September 30, 2007 compared to RMB78.97 million (US$9.99
      million) in the twelve months ended September 30, 2006. This decrease was
      primarily due to a decrease in net income of RMB239.53 million (US$29.50
      million), an increase in the inventory of RMB 57.48 million (US$7.67 million),
      a
      decrease in advances from customers of RMB 44.18 million (US$5.90 million),
      a
      decrease in due to growers of RMB20.98 million (US$2.80 million), and a decrease
      in account payables of RMB31.24 million (US$4.17 million), and offset by a
      decrease in advance to growers of RMB28.35 million (US$3,78 million), an
      increase in inventory write down of RMB77.24 million (US$10.31 million) and
      an
      increase in depreciation and amortization of RMB22.03 million (US$2.94 million).
      Net cash used in operating activities was RMB123.26 million (US$15.59
      million) in the nine months ended September 30, 2006 compared to RMB19.90
      million (US$2.46 million) in the same period of 2005. This decrease was
      primarily due to a decrease in deferred revenue of RMB247.36 million (US$31.30
      million), a decrease in advances from customers of RMB 75.39 million (US$9.54
      million), a decrease due to growers of RMB27.40million (US$3.47 million), and
      a
      decrease in other payables and accrued expenses of RMB23.22 million (US$2.94
      million), and offset by an increase in net income of RMB41.41million (US$5.24
      million), an increase in our inventory of RMB215.40 million (US$27.25 million)
      and an increase in prepaid expenses and other current assets of RMB45.17 million
      (US$5.72 million).





*Investing
      activities* . Net
      cash used in investing activities was RMB90.95 million (US$12.14 million) in
      the
      year ended September 30, 2007, of which RMB286.27 million (US$38.21 million)
      was
      used in the purchase of debt securities and RMB297.02 million (US$39.64million)
      was proceeds from sale of the debt securities, RMB31.87 million (US$4.25
      million) was used to acquire a 9.18% interest in Jilinchangrong and 45.41%
      interest in Denong, RMB21.88 million (US$2.92 million) was used to acquire
      a 23
      % interest in Jinong Hi-tech, RMB6.70 million (US$0.89 million) was used to
      acquire a 9 % interest in Biocentury, RMB1.75 million (US$0.23 million) was
      used
      to acquire a 35 % interest in Jilinchangji Seed, RMB 0.12 million (US$0.02
      million) was deposit for the purchase of plant and equipment, RMB36.53 million
      (US$4.88million) was used in the purchase of plant and equipment, and RMB 5.46
      million (US$0.73 million) was used in the purchase of land use right. Net cash
      used in investing activities was RMB268.61 million (US$33.98 million) in the
      twelve months ended September 30, 2006, of which RMB201.54 million (US$25.50
      million) was used in the purchase of debt securities and RMB55.12 million
      (US$6.97 million) was proceeds from sale of the debt securities, RMB36.30
      million (US$4.59 million) was used to acquire a 52.21% interest in Denong,
      RMB
      12.94 million (US$1.64 million) was deposit for the purchase of acquired
      technology, RMB10.43million (US$1.32 million) was used to acquire a 34.7%
      interest in Jilin Changrong, RMB10 million (US$1.27million) was deposit for
      the
      purchase of an equity investment in Jilin Jinong Hi−tech Limited ("Jinong"), RMB
      27.64 million (US$3.50 million) was used in the purchase of plant and equipment,
      and RMB 9.79 million (US$1.24 million) was used in the purchase of intangible
      assets.




70





*Financing
      activities* .
      Net
      cash provided by financing activities was RMB283.77million (US$37.87million)
      in
      the year ended September 30, 2007, which mainly reflects our proceeds from
      short-term borrowings of RMB361.40 million (US$48.23 million) and repayment
      of
      short-term borrowings of RMB346.00 million (US$46.18million), the proceeds
      from
      issuance of convertible bonds of RMB302.38 million (US$40.36 million) and the
      purchase back of treasury stock of RMB29.38 million (US$3.92 million). Net
      cash
      provided by financing activities was RMB475.97 million (US$60.22 million) in
      the
      twelve months ended September 30, 2006, which mainly reflects our proceeds
      from
      short-term borrowings of RMB242.58 million (US$30.69 million) and repayment
      of
      short-term borrowings of RMB41.00 million (US$5.19 million), net cash inflow
      from the Share Exchange Transaction of RMB 159.83 million (US$ 20.22 million),
      the exercise of warrants of RMB324.58 million (US$41.07 million) and the
      additional payment of RMB201.86 million (US$25.54) to the shareholders of State
      Harvest and their designee.





To
      date,
      we have funded our operations through cash flow derived from operations and
      short-term borrowings as well as the US$40 million in proceeds from our sale
      of
      convertible notes in July 2007. Due to the cyclical nature of the cash flow
      inherent in our business, with the majority of cash flow from operations
      received during the second half of the calendar year, which corresponds to
      the
      fourth quarter and the subsequent first quarter of our fiscal year, we use
      bridge loan financings and bank credit facilities to cover operating expenses
      during low-revenue portions of the year, which generally include July through
      December. We believe we can generate sufficient cash flows from operating
      activities and can access sufficient borrowing capacity from local banks to
      satisfy our seasonal liquidity needs.




The
      nature of our business involves cycles in expenses and revenues that are not
      always in phase. Most often in the third calendar quarter of each year, we
      may
      face costs that are in excess of our cash flow sources during that period.
      Whether that occurs, and to what extent it occurs, depends on the amount of
      deposits received from customers compared with the advanced payments made by
      us
      to our seed producing farmers and the final payment for seed procurement. The
      exact timing of these payments is determined by the Chinese lunar calendar,
      which varies from one calendar year to the next. As a result, in some years
      our
      working capital needs are greater than in others. This aspect of the business
      is
      the reason we have customarily relied upon short term bridge loans to cover
      our
      expenses pending receipt of cash payment from farmers at the time of seed
      purchases. We, on a consolidated basis, have had access to sufficient financing
      in the past to manage these cash flow cycles. As discussed above, we have
      consistently repaid our short-term borrowings at or before maturity.





Relevant
      PRC laws and regulations permit payments of dividends by our PRC Operating
      Companies only out of their retained earnings, if any, as determined in
      accordance with PRC accounting standards and regulations. In addition, the
      statutory general reserve fund requires that annual appropriations of 10% to15%
      of net after-tax income be set aside prior to payment of any dividends. As
      a
      result of these and other restrictions under PRC laws and regulations, our
      PRC
      Operating Companies are restricted in their ability to transfer a portion of
      their net assets to us either in the form of dividends, loans or advances.




71




Even
      though we currently do not require any such dividends, loans or advances from
      our PRC Operating Companies, we may in the future require additional cash
      resources from our PRC Operating Companies due to changes in business
      conditions, to fund future acquisitions or developments, or merely to declare
      and pay dividends or distributions to our shareholders, although we currently
      have no intention to do so.




**C.** **Research
      and Development, Patents and Licenses, etc.**




We
      focus
      our research and development efforts on agro-biotechnology, crop breeding and
      the development of new crop seeds. In November 2001, we established a new seed
      research and development center in Tongzhou, Beijing, which conducts in research
      and development of crop commercial breeding. In September 2005, we established
      the “Origin Life Science Research Center” in Zhong Guan Cun, Beijing, the
      principal activities of which include crop gene engineering, molecular
      marker-assisted breeding, and molecular identification. We also have sixteen
      breeding stations located in different regions with seven being used for corn,
      four for rice, two for cotton, two for canola and one winter nursery for these
      different seed products.





We
      have
      established technological cooperative relationships with three universities
      and
      sixteen research institutes in China, including China Agricultural University
      and Chinese Academy of Sciences. We employ 49 full time research personnel.
      Our
      research and development expenditures were $0.82 million, $0.87 million, $1.66
      million and $3.80 million in each of the years ended December 31, 2004, and
      2005, and for the nine months ended September 30, 2006, and the year ended
      September 30, 2007, respectively. The increase in our research and development
      spending is a result of the further efforts in the research and development
      of
      self-developed seed rights and the further cooperation with universities and
      other research institutes.




**D.** **Trend
      Information** **.**




Other
      than as disclosed elsewhere in this Annual Report, we are not aware of any
      trends, uncertainties, demands, commitments or events for the period from
      October 1, 2006 to September 30, 2007 that are reasonably likely to have a
      material effect on our net revenues, income, profitability, liquidity or capital
      resources, or that caused the disclosed financial information to be not
      necessarily indicative of future operating results or financial conditions,
      or
      that had the trends relating to the current-year increases in expenses and
      reduction in revenues and profits.




**E.** **Off-balance
      Sheet Arrangements** **.**





We
      do not
      have any outstanding derivative financial instruments, off-balance sheet
      guarantees, interest rate swap transactions or foreign currency forward
      contracts. We do not engage in trading activities involving non-exchange traded
      contracts.




**F.** **Tabular
      Disclosure of Commitments and Contingencies** **.**




72
 
  We have various contractual obligations that will affect
          our
          liquidity.  The following table sets forth our contractual obligations as
          of September 30, 2007.


Payments
                    due by September 30,
  WithinTotal
              
              2008
              
              2009
              
              2010
              
              2011
              
              2012
              
              ThereafterRMB’000
              
              RMB’000
              
              RMB’000
              
              RMB’000
              
              RMB’000
              
              RMB’000
              
              RMB’000Operating
                  Lease Obligations
              
              
              18,446
              
              
              4,075
              
              
              1,221
              
              
              851
              
              
              746
              
              
              615
              
              
              10,938Capital
                  Commitments (1)
              
              
              8,001
              
              
              8,001Purchase
                  Obligations (5)
              
              
              42,083
              
              
              5,000
              
              
              5,000
              
              
              5,000
              
              
              5,000
              
              
              5,000
              
              
              17,083Convertible
                  Notes (4)
              
              
              314,350
              
              
              2,920
              
              
              2,920
              
              
              2,920
              
              
              2,920
              
              
              302,670Short-Term
                  Debt Obligations (2)
              
              
              268,400
              
              
              268,400Long-Term
                  Debt Obligations (3)
              
              
              1,880
              
              
              
              
              
              940
              
              
              940Total
              
              
              653,160
              
              
              288,396
              
              
              10,081
              
              
              9,711
              
              
              8,666
              
              
              308,285
              
              
              28,021





(1)
            Includes
                capital commitments for purchase of plant, building construction,
                equipment, land use rights and technology use rights.(2)
            Represents
                short term loans from China Construction Bank Shangdi Branch, Beijing
                Bank
                Shangdi Branch and Beijing Bank.(3)
            Represents
                a third party’s loan repayable in 2008 and 2009 by two equal installments
                and bearing interest of 2.4% per annum. The borrowings are not secured.(4)
            On
                July 25, 2007, the Company issued US$40 million of guaranteed senior
                secured convertible notes which mature on July 25, 2012. The Notes
                bear
                interest at the rate of 1% per annum, payable semi-annually in
                arrears.(5)
            On
                March 6, 2006, Changrong entered into a contract with the Corn Research
                Institution of Jilin Academy of Agricultural Science to pay RMB5million
                every year from 2006 to 2016 for R&D activities on behalf of
                Changrong.





In
      January 2008, the Company entered into a patent license agreement with the
      China
      Academy of Agriculture Science, or CAAS, to market the phytase GM corn within
      China for RMB6,000,000. Meanwhile, the Company entered into a technical service
      agreement with CAAS. Pursuant to the technical service agreement, CAAS shall
      provide related technical support for the breeding and production of the phytase
      GM corn to the Company for RMB4 million.




73





We
      identified the existence of potential contingent tax liabilities arising from
      our reverse merger in November 2005. We determined that these contingent tax
      liabilities were more likely than remote. As of December 31, 2005, we estimate
      such contingent tax liabilities to be in the range of RMB39.06 million (US$4.84
      million) to RMB64.22 million (US$7.96 million). Consequently, RMB39.06 million
      (US$4.84 million) was included in income tax payable on our balance sheet and
      was charged to equity because such liabilities were part of the recapitalization
      in connection with our reverse merger. We do not expect to incur tax liabilities
      at the higher end of the range, based on information currently
      available.




**ITEM
      6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES**




**A.
      Directors and Senior Management.**




The
      following table sets forth certain information regarding our directors and
      executive officers as of December 31, 2007.




Name
              
              Age
              
              PositionGengchen
                  Han
              
              52
              
              Chairman
                  of the Board and Co-Chief Executive OfficerYasheng
                  Yang**1**
              
              44
              
              Vice
                  Chairman of the BoardLiang
                  Yuan**2**
              
              50
              
              Director,
                  President and Co-Chief Executive OfficerBailiang
                  Zhang
              
              66
              
              Independent
                  DirectorDafang
                  Huang
              
              65
              
              Independent
                  DirectorKerry
                  S. Propper
              
              32
              
              DirectorSteven
                  Urbach
              
              31
              
              Independent
                  DirectorMichael
                  W. Trimble
              
              50
              
              Independent
                  DirectorRemo
                  Richli
              
              44
              
              Independent
                  DirectorJing
                  Chen**3**
              
              42
              
              Chief
                  Financial Officer







1.
      Yasheng Yang was appointed as Vice Chairman of the Board and relinquished his
      role as Director, President, Treasurer and Chief Operating Officer, effective
      November 23, 2007.




2.
      Liang
      Yuan was appointed as Co-Chief Executive Officer and President and relinquished
      his role as Executive Vice Chairman, effective November 23, 2007.




3.
      Jing
      Chen was appointed as Chief Financial Officer, effective December
      15, 2007 ,
      to
      replace Youqiang Wang, who resigned from his position as Chief Financial Officer
      of Origin effective December 15, 2007.





*Gengchen
      Han* is the
      Chairman and Co-Chief Executive Officer of Origin. Dr. Han is also the Executive
      Chairman of Beijing Origin and its affiliated companies, a position that he
      has
      held since founding the business in 1997. Dr. Han has more than 20 years of
      experience in research and development of hybrid seed products, particularly
      corn seed. From 1982 until 1984, Dr Han was a lecturer at the Henan Agriculture
      University. From 1984 to 1987, Dr. Han received his Ph.D. degree in Plant
      Breeding and Cytogenics from Iowa State University. From 1989 until 1990 he
      worked for the International Maize and Wheat Improvement Center, or CIMMYT,
      in
      Mexico. He worked for Pioneer Hi-bred International from 1990 to 1996; his
      positions there included Regional Technical Coordinator for Asia/Pacific and
      Regional Supervisor for China Business.




74





*Yasheng
      Yang* is a
      director and Vice Chairman of Origin. Mr. Yang previously served as President
      and Chief Operating Officer of Origin from 2005 to 2007. He is also an executive
      officer of each of our PRC Operating Companies since 1998, where he is
      principally responsible for advertising and marketing. Prior to joining Beijing
      Origin, from 1995 to 1997, he worked in the Fujian province government as an
      officer, where he specialized in the areas of technology, medicine and
      education.





*Liang
      Yuan* is a
      director, the Co-Chief Executive Officer and President of Origin. Mr. Yuan
      previously served as Executive Vice Chairman of Origin from 2005 to 2007. He
      is
      also an executive officer of Beijing Origin and its affiliated companies since
      1997, where he is principally responsible for infrastructure and public
      relations. Prior to joining Beijing Origin, Mr. Yuan was at the Fujian Economic
      Research Institute from 1985 to 1997, where he was in charge of the research
      and
      development of the regional economy in Fujian province.





*Bailiang
      Zhang* has been
      a director of Origin since November 2005. Mr. Zhang has been a professor at
      Henan Agriculture University since 1985, and he served as president from 1994
      to
      2003. He is also acting as a representative of the National People’s Congress.
      As a result of his work in the field of agriculture, he has received numerous
      honors, including the 51 Labor Medal, one of the highest awards given to Chinese
      citizens in recognition of significant contributions to the welfare of the
      country.





*Dafang
      Huang* has been
      a director of Origin since November 2005. Mr. Huang has been CAAS Professor
      since 1995. From 1995 to 2005, Mr. Huang was the director of the
      Biotechnology Research Institute located in Beijing. From 1993 to 1995, Mr.
      Huang was the Deputy Director and CAAS Professor of the Institute of Plant
      Protection. From 1986 to 1988 and in 1992, Mr. Huang was a visiting scientist
      at
      Cornell University and the Boyce Thompson Institute. From 1960 to 1965, Mr.
      Huang was studying at the Beijing Agriculture University in the Department
      of
      Plant Pathology.





*Kerry
      S. Propper* has been
      a director of Origin since November 2005. He was a founder and has been the Executive
      Vice President and a
      director of Chardan since its inception in December 2003. From March 2005
      through September 2005, Mr. Propper served as the Chief Financial Officer,
      secretary and a member of the board of directors of Chardan North China
      Acquisition Corp. which acquired HLS Systems International Ltd. in September
      2007.  Since September 2007, Mr. Propper has served as a director of HLS
      Systems International Ltd. (OTCBB: HLSYF). Since March 2005, Mr. Propper has
      been the chief executive officer, secretary and a member of the board of
      directors of Chardan South China Acquisition Corp.  Mr. Propper has been
      the owner and chief executive officer of Chardan Capital Markets LLC (formerly
      known as Gramercy Group), a New York based broker-dealer, since July 2003.
      He
      has also been a managing member of SUJG, Inc., an investment company, since
      April 2005. Since November 2006, Mr. Propper has served as the executive vice
      president of mergers and acquisitions of Shine Media Acquisition Corp., a
      blank-check company listed on the OTCBB.  Since December, 2005, Mr. Propper
      has served as a special advisor to Jaguar Acquisition Corp., a blank-check
      company listed on the OTCBB.  Mr. Propper also sits on the board of
      directors of Cablecom, a Shandong Province based cable operator and
      consolidator. Mr. Propper was a founder, and from February 1999 to July 2003
      owner and managing director of Windsor Capital Advisors, a full service
      brokerage firm also based in New York. Mr. Propper also founded The Private
      Capital Group LLC, a small private investment firm specializing in hard money
      loans and convertible preferred debt and equity offerings for small public
      companies, in May 2000 and was affiliated with it until December 2003. From
      July
      1997 until February 1999, Mr. Propper worked at Aegis Capital Corp., a
      broker-dealer and member firm of the NASD. Mr. Propper is on the advisory board
      of NTWK, a software company with operations in Pakistan. Mr. Propper received
      his B.A. in Economics and International Studies from Colby College.




75





*Steven
      Urbach* has been
      a director of Origin since November 2005. He is currently a principal and
      President and Chief Financial Officer of Chardan Capital Markets, LLC, which
      he
      founded with Kerry S. Propper in February 2003.  In addition, he is a
      managing partner of Cornix Management, LLC, a multi-strategy hedge fund. From
      February 1999 to February 2003, Mr. Urbach was a Senior Trader at Windsor
      Capital Advisors, LLC, a firm specializing in making markets in Nasdaq
      securities. From September 1997 until February 2000, Mr. Urbach worked at Chase
      Manhattan Bank as an analyst and portfolio manager.





*Michael
      W. Trimble* has been
      a director of Origin since May 2006. Dr. Trimble is the founder of Trimble
      Genetics International LLC, or Trimble Genetics, and has been the President
      of
      Trimble Genetics since 2001. Trimble Genetics is a plant genetics research
      company. Dr. Trimble is a leader in plant genetics research with over
      twenty-eight years of experience in crop breeding and the agricultural seed
      industry. Dr. Trimble is an inventor of numerous patents in the field of plant
      genetics. He also serves as a director for the African Agricultural Technology
      Foundation in Nairobi, Kenya. Dr. Trimble graduated with a Ph.D. degree from
      the
      University of Minnesota and also completed graduate programs at Purdue
      University and Iowa State University.





*Remo
      Richli* has been
      a director of Origin since November 2005. He is a Partner of Bridgelink AG,
      an
      international mergers and acquisitions firm headquartered in Switzerland. His
      activities include the acquisition and divestiture of companies as well as
      raising funds, including private equity deals. He
      previously worked
      in the United
      States as a
      financial expert at RP Associates in San Diego, a venture capital firm focusing
      on corporate finance and financial structures. During his time with RP
      Associates, Mr. Richli also served as chief financial officer of one of its
      portfolio companies. From 1993 to 1999, Mr. Richli owned a consulting firm
      engaged in corporate finance consultancy for mid-sized companies and acted
      as
      the Chief Executive Officer of client companies on a consulting basis. From
      1991
      to 1993, Mr. Richli was a director at the Department of Finance in Switzerland.
      He studied in Switzerland and in the United States and holds several degrees
      in
      Business and Economics.




76





*Jing
      Chen* has been
      the Chief Financial Officer of Origin since December 2006. Ms. Chen comes to
      Origin from ShanghaiMed iKang Healthcare, Inc., a leading healthcare management
      service provider in China, where she served as Senior Director of Finance
      beginning in 2006. In that role, Ms. Chen had overall financial and accounting
      management responsibilities for 29 business units. Prior to iKang, she was
      Director of Finance for eLong, Inc., a Beijing-based online travel service
      provider. At eLong, Ms. Chen established and subsequently upgraded financial
      management systems for the eLong’s 14 business units. She was instrumental in
      preparing eLong for its successful U.S. initial public offering in October
      2004.
      After eLong’s initial public offering, Ms. Chen implemented various financial
      controls and corporate governance policies to comply with the Sarbanes-Oxley
      Act
      of 2002. Prior to eLong, Ms. Chen worked at Eli Lilly Asia. Ms. Chen received
      an
      MBA degree from the City University in Seattle, Washington.





***Voting
      Agreement***





In
      November 2005, we entered into a voting agreement with Dr. Han Gengchen and
      Messrs. Yang Yasheng and Yuan Liang. For more information, please see Item
      7.B,
“Major Shareholders and Related Party Transactions — Related Party Transactions
— Voting Agreement.”





**B.
      Compensation.**




The
      aggregate cash compensation paid to our directors and executive officers as
      a
      group was RMB3,956,442 (US$528,033) for the twelve months ended September 30,
      2007. In addition, no options were granted to our directors and executive
      officers during that period.




***2005
      Performance Equity Plan***





Chardan
      adopted its 2005 Performance Equity Plan on October 28, 2005. After the closing
      of the merger of Chardan with and into Origin, the 2005 Performance Equity
      Plan
      became that of Origin by operation of law under the terms of the merger.





On
      November 8, 2005, our Stock Option Committee decided that options would be
      granted under a standard form of option agreement pursuant to the 2005
      Performance Equity Plan to certain of our employees. The table set forth below
      summarizes our outstanding options for directors as of September 30, 2007.
      All
      of the options granted to directors have a vesting period of three
      years.





**Name**
            
            **Ordinary
                Shares Underlying Outstanding Option**
            
            **Exercise
                Price**
            
            **Grant
                Date**
            
            **Expiration
                Date**Gengchen
                Han
            
            
            75,000
            
            $
            8.75/Share
            
            
            November
                8, 2005
            
            
            November
                8, 2010Liang
                Yuan
            
            
            30,000
            
            $
            8.75/Share
            
            
            November
                8, 2005
            
            
            November
                8, 2010Yasheng
                Yang
            
            
            60,000
            
            $
            8.75/Share
            
            
            November
                8, 2005
            
            
            November
                8, 2010Steven
                Urbach
            
            
            15,000
            
            $
            8.75/Share
            
            
            November
                8, 2005
            
            
            November
                8, 2010Kerry
                Propper
            
            
            20,000
            
            $
            8.75/Share
            
            
            November
                8, 2005
            
            
            November
                8, 2010Remo
                Richli
            
            
            25,000
            
            $
            8.75/Share
            
            
            November
                8, 2005
            
            
            November
                8, 2010Bailiang
                Zhang
            
            
            15,000
            
            $
            8.75/Share
            
            
            November
                8, 2005
            
            
            November
                8, 2010Dafang
                Huang
            
            
            15,000
            
            $
            8.75/Share
            
            
            November
                8, 2005
            
            
            November
                8, 2010





77




**C.
      Board Practices.**




***Terms
      of directors and executive officers***





Our
      directors are not subject to a term of office and hold office until the next
      annual meeting of shareholders or until such director’s earlier resignation,
      removal from office, death or incapacity. Any vacancy on the board of directors
      resulting from death, resignation, removal or other cause and any newly created
      directorship resulting from any increase in the authorized number of directors
      between meetings of shareholders may be filled either by the affirmative vote
      of
      a majority of all the directors then in office (even if less than a quorum)
      or
      by a resolution of shareholders.





Our
      officers are appointed by the board of directors and hold office until their
      successors are duly elected and qualified, but may be removed at any time,
      with
      or without cause, by resolution of directors. Any vacancy occurring in any
      office may be filled by resolution of directors.





***Employment
      Agreements***





Each
      of
      Dr. Han and Messrs. Yuan and Yang have entered into employment agreements with
      us. Dr. Han is employed as the chairman and co-chief executive officer, Mr.
      Yuan
      as the co-chief executive officer and president and Mr. Yang as the vice
      chairman. The agreements have a term of three years commencing as of January
      1,
      2005, and provide for an annual salary of $250,000 for each of them and a
      discretionary cash bonus based on growth in the combined companies’ per-share
      value, achievement of growth and business targets, satisfaction of company
      capital requirements and other criteria. The executives are entitled to
      insurance benefits, five weeks’ vacation, a car and reimbursement of business
      expenses and, if necessary, relocation expenses. The agreements are terminable
      by Origin for death, disability and cause. The executive may terminate for
      good
      reason, which includes Origin’s breach, the executive’s loss of his seat on the
      board of directors, and change of control. In the event of termination for
      good
      reason or without cause, the executive will receive compensation and benefits
      under his or her employment agreement through the earlier of two years from
      the
      date of termination or through the term of the agreement. The agreements contain
      provisions for the protection of confidential information and a three-year
      non-competition period within China. In the purchase agreement, there is an
      additional non-competition agreement applicable to these persons for the greater
      of five years after consummation or two years after employment that includes
      Hong Kong and Taiwan, in addition to China.




***Board
      committees*** ****




Our
      board
      of directors has established an Audit Committee, a Stock Option Committee and
      a
      Nominations Committee. Pursuant to a vote by the board of directors taken at
      a
      board meeting held March 16, 2007, the Stock Option Committee was changed into
      the Compensation Committee.




78




*Audit
      Committee*





The
      members of our Audit Committee are Remo Richli (chairman), Steven Urbach and
      Michael W. Trimble. Our board of directors has determined that all of our Audit
      Committee members are independent directors within the meaning of Nasdaq
      Marketplace Rule 4200(a)(15) and meet the criteria for independence set forth
      in
      Rule 10A-3(b)(1) of the Securities Exchange Act of 1934.





The
      board
      of directors has determined that each of Messrs. Richli, Urbach and Trimble
      has
      an understanding of generally accepted accounting principles and financial
      statements, the ability to assess the general application of such principles
      in
      connection with our financial statements, including estimates, accruals and
      reserves, experience in analyzing or evaluating financial statements of similar
      breadth and complexity as our financial statements, an understanding of internal
      controls and procedures for financial reporting and an understanding of Audit
      Committee functions.





The
      board
      of directors believes that Mr. Richli qualifies as an “audit committee financial
      expert” within the meaning of all applicable rules. The board of directors
      believes that Mr. Richli has financial expertise from his degrees in business,
      his activities as a chief executive officer and chief financial officer of
      various companies, and his consulting activities in the areas of accounting,
      corporate finance, capital formation and corporate financial
      analysis.





We
      adopted an Audit Committee charter, amended by the board of directors at the
      board meeting held on August 16, 2007, under which the Audit Committee is
      responsible for reviewing the scope, planning and staffing of the audit and
      preparation of our financial statements. This includes consultation with
      management, the auditors and other consultants and professionals involved in
      the
      preparation of the financial statements and reports. The Audit Committee is
      responsible for performing oversight of our relationship with our independent
      auditor. The Audit Committee also has a general compliance oversight role in
      assuring that our directors, officers and management comply with our code of
      ethics, reviews and approves related party transactions, deals with complaints
      regarding accounting, internal controls and auditing matters, and oversees
      compliance with accounting and legal requirements applicable to us.





Pursuant
      to the terms of its charter, as amended, the Audit Committee’s responsibilities
      include, among other things:




·
            annually
                reviewing and reassessing the adequacy of the Audit Committee’s formal
                charter;


·
            reviewing
                our annual audited financial statements with our management and our
                independent auditors and the adequacy of our internal accounting
                controls;


·
            reviewing
                analyses prepared by management and independent auditors concerning
                significant financial reporting issues and judgments made in connection
                with the preparation of our financial
                statements;


·
            the
                engagement of the independent auditor;


·
            reviewing
                the independence of the independent
                auditors;


·
            reviewing
                our auditing and accounting principles and practices with the independent
                auditors and reviewing major changes to our auditing and accounting
                principles and practices as suggested by the independent auditor
                or our
                management;


·
            the
                appointment of the independent auditor;


·
            approving
                professional services provided by the independent auditors, including
                the
                range of audit and non-audit fees; and


·
            reviewing
                all related party transactions on an ongoing basis for potential
                conflicts
                of interest.




79




The
      Audit
      Committee will pre-approve the services to be provided by our independent
      auditors going forward. The Audit Committee also will also review and recommend
      to the board of directors whether or not to approve transactions between us
      and
      any officer or director that occurs outside the ordinary course of
      business.





*Compensation
      Committee*





In
      2005,
      we established a Stock Option Committee with Steven Urbach and Remo Richli
      as
      its members. Pursuant to a vote by the board of directors taken at a board
      meeting held March 16, 2007, the Stock Option Committee was changed into the
      Compensation Committee. The purpose of the Stock Option Committee was to
      administer our stock option plans, including authority to make and modify awards
      under such plans. Initially, our only such plan was the 2005 Performance Equity
      Plan, as assumed by Origin in the merger with Chardan. The members of our
      Compensation Committee are Steven Urbach (chairman), Michael W. Trimble and
      Bailiang Zhang. Under the new Compensation Committee charter, our Compensation
      Committee is responsible for:




·
            reviewing
                and making recommendations to our board of directors regarding our
                compensation policies and forms of compensation provided to our directors,
                officers and other senior employees;


·
            reviewing
                and determining performance-based awards and compensation for our
                officers
                and other employees;


·
            reviewing
                and determining share-based compensation (including the 2005 Performance
                Equity Plan) for our directors, officers, employees and
                consultants;


·
            administering
                our equity incentive plans (including the 2005 Performance Equity
                Plan) in
                accordance with the terms thereof; and


·
            such
                other matters that are specifically delegated to the Compensation
                Committee by our board of directors from time to
                time.





*Nominating
      Committee*





Our
      Nominating Committee consists of Steven Urbach, Remo Richli and Michael W.
      Trimble. The Nominating Committee is responsible for overseeing the selection
      of
      persons to be nominated to serve on our board of directors. The Nominating
      Committee will identify, evaluate and recommend candidates to become members
      of
      the Board of Directors with the goal of creating a balance of knowledge and
      experience.




80




Pursuant
      to a vote by the board of directors taken at a board meeting held March 16,
      2007, the Nominating Committee charter was amended. Pursuant to the terms of
      its
      charter, as amended, the Nominating Committee’s responsibilities include, among
      other things:





·
            actively
                seeking and evaluating qualified individuals to become new directors
                as
                needed;


·
            reviewing
                current directors’ suitability when their terms expire or one has a
                significant change in status;


·
            making
                recommendations with respect to succession planning for the co-chief
                executive officer and other officers; and


·
            such
                other matters that are specifically delegated to the Nominating Committee
                by our board of directors from time to
                time.





***Summary
      of Significant Differences in Corporate Governance Practices for Purposes of
      Rule 4350 of the Nasdaq Marketplace Rules***





We
      are
      incorporated under the laws of the British Virgin Islands. Our ordinary shares
      are registered with the SEC and are listed on the NASDAQ Global Select Market.
      As a result, our corporate governance framework is subject to laws of the
      British Virgin Islands, or BVI, and the securities laws and regulations of
      the
      United States.





Under
      Rule 4350 of the Nasdaq Marketplace Rules, a foreign private issuer may follow
      its home country practice in lieu of the requirements of Rule 4350. Rule 4350
      requires U.S. domestic listed companies have a majority of independent directors
      on its board of directors. We are not required to have a majority of independent
      directors on our board of directors under BVI laws. However, currently, five
      of
      our nine directors are independent directors under applicable Nasdaq rules.





Under
      Rule 4350, a U.S. domestic issuer must solicit proxies and provide proxy
      statements for all meetings of shareholders. There are no such mandatory
      requirements under BVI laws. Our board of directors convened an annual meeting
      of shareholders on September 10, 2007. There were no specific items that our
      board of directors requested the shareholders to vote on. We did not provide
      proxy statements for the meeting.





**D.** **Employees** **.**





We
      had
      511, 743 and 945 employees as of December 31, 2005, 2006 and 2007,
      respectively. We plan to hire additional employees as we expand. Substantially
      all of our employees are located in China. The following table sets forth the
      number of our employees categorized by our areas of operations and as a
      percentage of our workforce as of December 31, 2007:




81




Areas
                of Operations
            
            Number
                of Employees
            
            Percentage
                of TotalResearch
                and Development
            
            
            142
            
            
            15.03
            %Sales
                and Marketing
            
            
            360
            
            
            38.10
            %Production
            
            
            255
            
            
            26.98
            %Quality
                Control
            
            
            12
            
            
            1.27
            %Others
            
            
            176
            
            
            18.62
            %Total
            
            
            945
            
            
            100.00
            %





From
      time
      to time, we also employ part-time employees, including independent contractors
      to support our research and development and production activities, and other
      temporary employees. During the fiscal year ended December 31, 2007, we had
      an
      aggregate of 46 temporary employees.





We
      offer
      our employees additional annual merit-based bonuses based on the overall
      performance of our company, his or her department and the individual. We are
      required by applicable PRC regulations to contribute amounts equal to 28%,
      12%,
      16%, 2%, 0.8% and 0.8%, of our employees’ aggregate salary to a pension
      contribution plan, a medical insurance plan, a housing fund, an unemployment
      insurance plan, a personal injury insurance plan and a maternity insurance
      plan,
      respectively, for our employees.





Our
      employees are not covered by any collective bargaining agreement. We believe
      that we have a good relationship with our employees.





**E.** **Share
      ownership.**





The
      following table sets forth information with respect to the beneficial ownership
      of our ordinary shares as of December 31, 2007, by:





·
            each
                of our directors and executive officers who beneficially own our
                ordinary
                shares; and





·
            each
                person known to us to own beneficially more than 5.0% of our ordinary
                shares.




**Shares
                Beneficially Owned (*****)****Number**
            
            **Percentage
                of Total****Directors
                and Executive Officers:**Gengchen
                Han
              *Chairman
                of the Board and Co-Chief Executive Officer*(1)
                (2)
            
            
            3,379,400
            
            
            14.4
            %Yasheng
                Yang
              *Vice
                Chairman of the Board and Director*(1)
                (3)
            
            
            1,946,550
            
            
            8.3
            %Liang
                Yuan
              *Co-Chief
                Executive Officer, President and Director*(1)
                (4)
            
            
            3,336,400
            
            
            14.2
            %Kerry
                S. Propper
              *Director*(5)
            
            
            157,042
            
            
            0.67
            %Steven
                Urbach
              *Director*(6)
            
            
            38,000
            
            
            0.16
            %Michael
                W. Trimble Director (7)
            
            
            9,332
            
            
            0.04
            %**Principal
                Shareholders:**Heartland
                Associates
            
            
            2,691,990
            
            
            11.47
            %Royce
                and Associates
            
            
            1,431,270
            
            
            6.10
            %Citadel
                (8)
            
            
            2,605,203
                (9
            )
            
            9.99%
                (9
            )




82







*
      Beneficial ownership and percentage is determined in accordance with Rule 13d-3
      under the Securities Exchange Act of 1934, as amended.





(1)
            Unless
                otherwise indicated, the business address of each of the individuals
                is
                c/o 21 Shengmingyuan Road, Changping District, Beijing PRC
                102206.





(2)
            The
                shares reported in the above table are held by Dr. Han through a
                personal
                holding company, Sinodream Limited, a company formed under the laws
                of the
                British Virgin Islands of which he is the sole shareholder, officer
                and
                director. Therefore, Dr. Han will have voting and dispositive authority
                over all the shares.





(3)
            The
                shares reported in the above table are held by Mr. Yang through a
                personal
                holding company, Leekdon Limited, a company formed under the laws
                of the
                British Virgin Islands of which he is the sole shareholder, officer
                and
                director. Therefore, Mr. Yang will have voting and dispositive authority
                over all the shares.





(4)
            The
                shares reported in the above table are held by Mr. Yuan through a
                personal
                holding company, Bonasmart Limited, a company formed under the laws
                of the
                British Virgin Islands of which he is the sole shareholder, officer
                and
                director. Therefore, Mr. Yuan will have voting and dispositive authority
                over all the shares.





(5)
            The
                business address of Mr. Propper is 59 Horatio Street New York, New
                York
                10014.





(6)
            The
                business address of Mr. Urbachis17
                State Street, Suite 1600, New York, NY
                10004.





(7)
            The
                business address of Mr. Trimble is 6159 Brandywine Drive, Johnston,
                IA
                50131.




(8)
            According
                to a Schedule 13G filed by Citadel with the SEC on February 13, 2008,
                Citadel is a subsidiary of Citadel Holdings Ltd., a Cayman Islands
                company, or CH, which in turn is a subsidiary of Citadel Kensington
                Global
                Strategies Fund Ltd., a Bermuda company, or CKGSF. According to that
                Schedule 13G, none of CKGSF or CH has any control over the voting
                or
                disposition of securities held by Citadel. The address of Citadel
                is c/o
                Citadel Investment Group, L.L.C., 131 S. Dearborn Street, 32nd Floor,
                Chicago, Illinois 60603.




83


(9)
            According
                to the Schedule 13G filed by Citadel with the SEC on February 13,
                2008, as
                of December 31, 2007, Citadel beneficially owned $40,000,000 in principal
                amount of the notes, collectively convertible into 3,478,260 ordinary
                shares at the current conversion price. Notwithstanding the foregoing,
                the
                number of shares beneficially owned by Citadel was equal to 2,605,203,
                or
                9.99% of our issued and outstanding ordinary shares because, as set
                forth
                in the Investor Rights Agreement, dated July 25, 2007 between us,
                certain
                of our shareholders and Citadel, Citadel is not entitled to convert
                any
                portion of the notes for any number of our ordinary shares that,
                upon
                giving effect to such conversion, would cause the aggregate number
                of our
                ordinary shares owned by Citadel and its affiliates to exceed 9.99%
                of our
                outstanding ordinary shares immediately after giving effect to such
                conversion.





None
      of
      the above shareholders have voting rights that differ from the voting rights
      of
      other shareholders. For information regarding stock options granted to them
      and
      other employees, see Item 6.B above.





**ITEM
      7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS**




**A.** **Major
      shareholders.**




Please
      refer to Item 6.E “Directors, Senior Management and Employees — Share
      Ownership.”




**B.** **Related
      party transactions** **.**




***Stock
      Consignment Agreements***




In
      order
      to comply with PRC regulations, we operate our business in China through our
      PRC
      Operating companies. We have entered into stock consignment agreements with
      our
      PRC Operating Companies other than Origin Biotechnology. The following is a
      summary of the material provisions of these agreements, which are also discussed
      under Item 4.C of this Annual Report.




The
      stock
      consignment agreements give State Harvest control over the shares of the three
      PRC Operating Companies. The agreements give State Harvest the right to manage
      in all respects the shares held in title by the shareholders, including all
      shareholder rights to call meetings of shareholders, to submit shareholder
      proposals, to elect directors, to vote the shares on all matters and to exercise
      all other rights of a shareholder in respect of the consigned shares. More
      specifically, the consignment agreements give State Harvest the right to select,
      replace and increase the number of the directors, supervisors and recommend
      new
      director and supervisor persons, and to exercise management rights, controlling
      rights and decision-making power over the shares of the PRC Operating Companies.
      The shareholders agreed not to interfere with State Harvest’s exercise of its
      rights and to cooperate fully and promptly to permit State Harvest to exercise
      its authority over the consigned shares. This includes all limitations on the
      ability of each consignee to transfer or dispose of the shares other than to
      State Harvest, give guarantees using the shares, consign the shares to another,
      alter their ownership proportions in any way, dispose of any rights in the
      ownership of the shares, agree to any debt, waive rights or restructure the
      shares. State Harvest has the right to take all action in respect of the
      consigned shares to avoid any damage or infringement of its rights, including
      in
      the event of the consigning shareholder’s bankruptcy. State Harvest, under the
      consignment agreements, has all rights in the consigned shares, including rights
      to profits, interest, dividends, bonuses and residual assets. If in the future
      any stock subject to the consignment agreements can be legally transferred
      to
      State Harvest, then without further action or payment by State Harvest, it
      shall
      be transferred to State Harvest in whole or in part for no additional
      consideration to the consigning shareholder. The term of each consignment
      agreement is initially three years, but is automatically renewed indefinitely
      until both consigners and the consignee agree to terminate. For more information
      about the stock consignment agreements, See Item 8.01 “Other Events” of our Form
      8-K filed with the Securities and Exchange Commission on August 8,
      2005.




84




***Techn*** ***ical
      Service Agreements***





As
      part
      of the reorganization of our PRC Operating Companies, all of the intellectual
      property rights of Beijing Origin, Changchun Origin and Henan Origin have been
      and will continue to be transferred to Origin Biotechnology pursuant to
      technology service agreements dated December 25, 2004. The purpose of this
      was
      to permit the better management and licensing of the intellectual property
      that
      the three assignors have developed. Under the technology agreements, Origin
      Biotechnology will provide technical research and production and distribution
      services for the seeds produced by the group. These services will include
      support in the research and development of agricultural seeds, analysis of
      breeding technologies, environment and feasibility suggestions, technical
      tutorials and breeding field supervision, market analysis and seed promotion,
      insect prevention and technical education to distributors and farmers. The
      initial term is for three years, but the agreements are automatically renewed
      unless both parties agree to a termination. The fees payable under the
      agreements are variable, depending on differing formulae for different
      categories of seeds. Generally, the fees will be as follows: RMB1.2 Yuan per
      kilogram of corn sold by the party receiving the technical services; RMB6 Yuan
      per kilogram of rice sold by the party receiving the technical service and
      RMB12
      Yuan per kilogram of cotton sold by the party receiving the technical services.
      The fees are to be confirmed and paid at the end of each growing season. The
      service agreements have been changed in late 2007 and now only charged fees
      on
      the sales related to the seed rights owned by Biotech.





***Corn
      Originator Agreement***





Beijing
      Origin entered into this agreement with Trimble Genetics International LLC,
      or
      Trimble Genetics, a plant genetics research company. Michael W. Trimble, one
      of
      our directors, is the founder and president of Trimble Genetics and currently
      owns 100% of its equity interest. Under this agreement, Beijing Origin hires
      Trimble Genetics as its agent to test, promote, license and collect research
      fees on hybrids involving inbred lines of corn developed by Beijing Origin.
      Trimble Genetics retains fifty percent of such research fees and pays the
      remaining fifty percent to Beijing Origin. This agreement is immaterial in
      amount or significance. Up to the date of this Annual Report, we have not made
      any payment or incurred any payment liability to Trimble Genetics under this
      agreement.




85




*Corn
      Inbred License
      Agreement*




Beijing
      Origin entered into this agreement with Trimble Genetics on August 26, 2002.
      Under this agreement Trimble Genetics grants a non-exclusive license to Beijing
      Origin to use, maintain or increase certain corn inbred lines, or inbreds.
      Beijing Origin may, subject to express prior written approval of Trimble
      Genetics, allow any person or entity to use, maintain or increase the inbreds.
      Beijing Origin agrees to pay Trimble Genetics annual research fees on or before
      August 31. Research fees payable under this agreement for each inbred is based
      on a percentage of the full retail price. This agreement is immaterial in amount
      or significance. Up to the date of this Annual Report, we have not made any
      payment or incurred any payment liability to Trimble Genetics under this
      agreement. Beijing Origin and Trimble Genetics approved an addendum on February
      24, 2003 in connection with the provision of sweet corn inbreds and hybrids
      by
      Trimble Genetics to Beijing Origin for production and marketing in China. And
      Origin paid Trimble Genetics RMB23, 933 (US$ 3,193) for the research of the
      license seeds from August 1, 2006 to July 31, 2007.





***Corn
      Inbred and Hybrid Transfer and Use Agreement***





Beijing
      Origin entered into this agreement with Trimble Genetics on September 6, 2002.
      Under this agreement, Trimble Genetics provides corn inbreds and hybrids to
      Beijing Origin for experimental testing purposes. The agreement applies to
      all
      corn inbreds and hybrids transferred from Trimble Genetics to Beijing Origin
      previously, currently or in the future. If a hybrid from the testing proves
      to
      be marketable, the parties will negotiate a license agreement. If for any
      reason, it is not possible to conclude a license agreement, Beijing Origin
      agrees to return all remnant inbred seed and to destroy any inbreds or hybrids
      that may have originated from the material provided by Trimble Genetics. This
      agreement is immaterial in amount or significance. Up to the date of this Annual
      Report, we have not made any payment or incurred any payment liability to
      Trimble Genetics under this agreement.





***New
      Corn Seed Liyu 35 Joint Development Agreement***





Beijing
      Origin entered into three Joint Development agreements with Liyu on March 30,
      2006 to jointly develop a new hybrid cord seed, Liyu 35. The proprietary right
      to the seed developed under this agreement belongs to Liyu but Beijing Origin
      has exclusive production and marketing rights to this variety of seed. The
      agreement has no fixed term or termination date, but the agreement automatically
      terminates if the seeds produced by Beijing Origin are less than 3 million
      kilograms for three consecutive years, subject to limited exceptions. The fees
      payable by Beijing Origin represent a percentage of revenues from the sale
      of
      the varieties and plus a flat fee.





***Joint
      Development Agreements***





Beijing
      Origin is a party to three joint development agreements with Corn Research
      Institute of Li County in Hebei Province, China, to develop new hybrid corn
      seeds. Corn Research Institute of Li County was incorporated as Liyu on May
      2004, of which a 30% equity interest was owned by Yang Yasheng, one of our
      major
      shareholders and directors. Yang Yasheng transferred his 30% interest to Beijing
      Origin on September 2004. On March 11, 2004, Corn Research Institute of Li
      County, Liyu and Beijing Origin entered into an agreement pursuant to which
      all
      the rights and obligations of Corn Research Institute of Li County under the
      three joint development agreements were assumed by Liyu after the dissolution
      of
      Corn Research Institute of Li County. In accordance with these joint development
      agreements, the parties agreed to jointly develop six varieties of new corn
      hybrid seeds, Liyu 26, Liyu 16, Liyu 6, Liyu 15, Li 168, and Li yu35. The
      proprietary rights to the varieties of seeds developed under these agreements
      belongs to Corn Research Institute of Li County, now Liyu but Beijing Origin
      has
      exclusive right to production and marketing of these seeds. The fees payable
      by
      Beijing Origin represent a percentage of revenues from the sale of the
      varieties, and plus a flat fee with respect to Liyu 26 and Liyu 16. The
      agreements have no fixed term or termination date. The agreements may be
      terminated for breach by either party. We may terminate the agreements at any
      time, in effect, by not producing seeds, without penalty. The
      amount of fees paid to Liyu under these agreements were $1.08 million, $1.49
      million, $0.55million and $0.77 million for the years ended December 31,
      2004, and 2005, for the nine months ended September 30, 2006 and for the year
      ended September 30, 2007, respectively.




86





***Technology
      Transfer Agreement***





Beijing
      Origin, or its predecessor, entered into this agreement with Henan Agriculture
      University in 1998. Henan Agriculture University currently owns a 2.04% equity
      interest in Beijing Origin. Under this agreement, the proprietary right to
      the
      new variety of seed, Yuyu 22, belongs to Henan Agriculture University. Beijing
      Origin has the right to propagate, produce and sell the new corn variety. The
      fee payable under this agreement is RMB20 per mu (unit of area equivalent to
      0.164 of an acre) of seed production area per year. There is no fixed term
      or
      termination date of this agreement. And Origin had paid RMB19,520, nil and
      RMB212,240 for the use right of Yuyu 22 for the year ended December 31, 2005,
      the nine months ended September 30, 2006 and the year ended September 30, 2007.





***Amounts
      due from and to minority shareholders of Denong***





As
      of
      September 30, 2007, amounts due to minority shareholders of Denong are RMB7.40
      million (US$ 0.99 million). The amounts represent temporary fund by four
      minority shareholders of Denong and are payable on demand with no interest.





***Loan
      Agreement***





In
      January 2006, Beijing Origin entered into a loan agreement with certain
      shareholders of Jilin Changrong. Under this agreement, Beijing Origin provided
      a
      loan of RMB6.5 million (US$ 0.82 million) to these shareholders of Jilin
      Changrong to set up Jilin Changrong. The loan will be repaid within 3 years
      with
      an interest rate which will be equivalent to the bank interest rate on the
      date
      of repayment, and the interest income of Origin on the loan was RMB825,213
      (US$110,134) for the year ended September 30, 2007.




87





***Voting
      Agreement***





In
      November 2005, Origin entered into a voting agreement with Dr. Han Gengchen
      and
      Messrs. Yang Yasheng and Yuan Liang, or the Shareholders, each of whom is one
      of
      our directors and executive officers. Pursuant to this voting agreement, the
      Shareholders agree to vote in favor of the following items:





(A)
      the
      election to Origin’s board of directors of the following two individuals: (i)
      Kerry Propper; and (ii) one nominee designated by Mr. Propper;
      and





(B)
      in
      the event that any of the persons nominated as described above is unable or
      unwilling to serve as a director, Mr. Propper has the right to designate the
      alternative or successor nominee.





This
      voting agreement will remain in effect until the third anniversary of the
      acquisition of State Harvest by Origin on November 8, 2005, at which time it
      terminates automatically.





**C.** **Interests
      of experts and counsel.**




Not
      applicable.




**ITEM
      8. FINANCIAL INFORMATION**




**A.** **Consolidated
      statements and other financial information.**




We
      have
      appended consolidated financial statements filed as part of this Annual Report.
      See Item 18 “Financial Statements.”





***Legal
      Proceedings*** ****




On
      December 30, 2000, Lin
      Ze
      Xian Origin Seed Technology Development Co., Ltd., or Lin Ze Origin, entered
      into a guarantee agreement with Agriculture Bank of China Lin Ze Branch to
      guarantee a loan extended by Agriculture Bank of China Lin Ze Branch to Lin
      Ze
      Xian Seed Company. Lin Ze Origin subsequently merged into Beijing Origin, which
      assumed the rights and obligations of Lin Ze Origin by operation of law under
      the guarantee agreement. Upon the borrower Lin Ze Xian Seed Company’s
      announcement of bankruptcy, we were required to repay the outstanding loan.
      On
      December 28, 2001, we were ordered by the Lin Ze Xian People’s Court to pay
      approximately RMB2, 872,000 (US$383,301) to Agricultural Bank of China Lin
      Ze
      Branch in fulfillment of the guarantee obligation. The civil judgment of the
      Zhangyi Intermediate People’s Court suspended this decision pending final
      outcome of Lin Ze Xian Seed Company’s bankruptcy hearings. On March 19, 2007,
      the civil judgment of the Zhangye Intermediate People’s Court made a final
      decision that Lin Ze Xian Seed Company shall pay RMB244,767.29 (US$32,667)
      to
      Agricultural Bank of China Lin Ze Branch, and Beijing Origin shall be jointly
      and severally liable to pay the money in fulfillment of the guarantee
      obligation.




88





Except
      as
      disclosed above, we are currently not a party to any material legal or
      administrative proceedings, and we are not aware of threatened material legal
      or
      administrative proceedings against us. We may from time to time become a party
      to various legal or administrative proceedings arising in the ordinary course
      of
      our business.





***Dividend
      Policy***





We
      have
      never declared or paid any dividends, nor do we have any present plan to pay
      any
      cash dividends on our ordinary shares in the foreseeable future. We currently
      intend to retain most, if not all, of our available funds and any future
      earnings to operate and expand our business.





Our
      board
      of directors may by resolution authorize payment of dividends if the directors
      are satisfied, on reasonable grounds, that Origin will, immediately after the
      distribution of dividends, satisfy the solvency test as stipulated in Section
      56
      of the BVI Business Companies Act and any of our applicable contractual
      obligations. Even if our board of directors decides to pay dividends, the form,
      frequency and amount will depend upon our future operations and earnings,
      capital requirements and surplus, general financial condition, contractual
      restrictions and other factors that the board of directors may deem
      relevant.





**B.
      Significant changes.**




We
      have
      not experienced any significant changes since the date of our audited
      consolidated financial statements included in this Annual
      Report.




**ITEM
      9. THE OFFER AND LISTING**




**A.** **Offering
      and listing details.**




The
      common stock, warrants and units of Chardan, our predecessor, were quoted on
      the
      Over the Counter Bulletin Board, or OTCBB, under the symbols of CAQC, CAQCW
      and
      CAQCU, respectively. Chardan’s units commenced public trading on March 22, 2004,
      and its common stock and warrants commenced public trading on March 29, 2004.
      On
      November 8, 2005, Chardan merged with and into Origin for the purpose of
      redomestication out of the United States, as described above under “History and
      development of the company” of Item 4 A. On November 8, 2005, Origin’s ordinary
      shares were approved to be listed on the then Nasdaq National Market under
      the
      ticker symbol of SEED. As of January 9, 2006, approximately 8,041,000 of the
      8,050,000 warrants that were then issued and outstanding were exercised at
      a
      price of $5.00 per warrant. Holders of the few remaining warrants that were
      not
      exercised were paid $.01 per warrant and the warrants were extinguished. On
      June
      26, 2007, Origin’s ordinary shares were approved for listing on the NASDAQ
      Global Select Market, where they continue to trade under the SEED ticker
      symbol.





The
      following table provides the high and low trading prices for Origin’s common
      stock, and historical prices for the common stock, warrants and units of Chardan
      for the periods indicated below.




89




**The
                OTCBB Price per Common Stock**
            
            **The
                OTCBB Price per Warrant**
            
            **The
                OTCBB Price per Unit**
            
            **Nasdaq
                (2)**
              **Price
                per Share****High**
            
            **Low**
            
            **High**
            
            **Low**
            
            **High**
            
            **Low**
            
            **High**
            
            **Low***Annual
                Market Prices**Year
                2004 (from March 22, 2004)*
            
            6.65
            
            4.65
            
            1.90
            
            0.61
            
            6.95
            
            5.70
            
            N/A
            
            N/A*Year
                2005 (until November 8, 2005)*
            
            10.38
            
            6.20
            
            5.06
            
            1.60
            
            20.20
            
            9.30
            
            N/A
            
            N/A*Year
                2005 (from November 8, 2005)*
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            13.80
            
            8.75*Transition
                period from January 1, 2006 through September 30,
                2006)(1)*
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            18.35
            
            9.31*Year
                2007 (until September 30, 2007)**Quarterly
                Market Prices****First
                Quarter 2004*
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            6.25
            
            5.99
            
            N/A
            
            N/A*Second
                Quarter 2004*
            
            5.00
            
            4.65
            
            1.05
            
            0.64
            
            6.95
            
            6.03
            
            N/A
            
            N/A*Third
                Quarter 2004*
            
            4.94
            
            4.75
            
            0.85
            
            0.61
            
            6.80
            
            5.70
            
            N/A
            
            N/A*Fourth
                Quarter 2004*
            
            6.65
            
            4.85
            
            2.03
            
            0.62
            
            10.60
            
            6.00
            
            N/A
            
            N/A*First
                Quarter 2005*
            
            8.20
            
            6.10
            
            3.21
            
            1.60
            
            14.35
            
            9.30
            
            N/A
            
            N/A*Second
                Quarter 2005*
            
            9.10
            
            7.30
            
            3.35
            
            2.00
            
            15.50
            
            12.25
            
            N/A
            
            N/A*Third
                Quarter 2005*
            
            9.74
            
            7.85
            
            8.60
            
            3.75
            
            30.00
            
            14.86
            
            N/A
            
            N/A*Fourth
                Quarter 2005*
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            13.80
            
            8.75*First
                Quarter 2006*
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            18.35
            
            11.48*Second
                Quarter 2006*
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            17.74
            
            12.18*Third
                Quarter 2006*
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            14.54
            
            9.31*First
                Quarter 2007 ended December 31, 2006*
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            15.12
            
            10.15*Second
                Quarter 2007 ended March 31, 2007*
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            11.88
            
            7.13*Third
                Quarter 2007 ended June 30, 2007*
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            9.25
            
            7.55*Fourth
                Quarter 2007 ended September 30, 2007*
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            9.95
            
            6.54*First
                Quarter 2008 ended December 31, 2007**Monthly
                Market Prices*January
                2006
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            17.70
            
            11.48February
                2006
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            18.35
            
            15.35March
                2006
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            17.50
            
            14.94April
                2006
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            17.74
            
            16.10May
                2006
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            17.36
            
            13.16June
                2006
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            15.00
            
            12.18July
                2006
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            14.54
            
            9.40August
                2006
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            12.00
            
            9.31September
                2006
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            12.46
            
            10.57October
                2006
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            11.99
            
            10.69November
                2006
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            15.12
            
            10.57December
                2006
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            12.85
            
            10.15January
                2007
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            11.88
            
            8.61February
                2007
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            9.24
            
            7.25March
                2007
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            9.47
            
            7.13April
                2007
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            9.25
            
            8.55May
                2007
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            9.09
            
            7.55June
                2007
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            8.65
            
            7.74July
                2007
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            9.95
            
            8.05August
                2007
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            9.04
            
            7.75September
                2007
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            8.34
            
            6.54October
                2007
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            14.99
            
            7.25November
                2007
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            8.95
            
            5.23December
                2007
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            7.95
            
            5.49January
                2008
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            N/A
            
            12.09
            
            6.24




(1)
      During this transition period, we changed our fiscal year end to September
      30.




(2)
      From
      November 8, 2005 to June 25, 2007, our ordinary shares were traded on the Nasdaq
      Global Market. Since June 26, 2007, our ordinary shares have been traded on
      the NASDAQ Global Select Market.





**B.** **Plan
      of distribution.**




Not
      applicable.




**C.** **Markets.**




See
      Item
      9.A above.





**D.** **Selling
      shareholders.**




Not
      applicable.




90




**E.** **Dilution.**




Not
      applicable.




**F.** **Expenses
      of the issue.**




Not
      applicable.




**ITEM
      10. ADDITIONAL INFORMATION**




**A.** **Share
      capital.**




Not
      applicable.




**B.** **Memorandum
      and articles of association.**




We
      incorporate by reference into this Annual Report the description of our amended
      and restated memorandum and articles of association contained in our 20-F annual
      report, as amended, initially filed with the Commission on July 14, 2006.




**C.** **Material
      contracts.**




We
      have
      not entered into any material contracts other than in the ordinary course of
      business and other than those described in Item 4, “Information on the Company,”
Item 7, “Major Shareholders and Related Party Transactions,” filed (or
      incorporated by reference) as exhibits to this Annual Report or otherwise
      described or referenced in this Annual Report.




**D.** **Exchange
      controls.** **




***British
      Virgin Islands***





There
      are
      no material exchange controls restrictions on payment of dividends, interest
      or
      other payments to the holders of our ordinary or preferred shares or on the
      conduct of our operations in the BVI, where we are incorporated. There are
      no
      material BVI laws that impose any material exchange controls on us or that
      affect the payment of dividends, interest or other payments to nonresident
      holders of our ordinary or preferred shares. BVI law and our amended and
      restated memorandum and articles of association impose no material limitations
      on the right of non-residents or foreign owners to hold or vote our ordinary
      or
      preferred shares.





***China***




91





China’s
      government imposes control over the convertibility of Renminbi into foreign
      currencies. Under the current unified floating exchange rate system, the China
      Foreign Exchange Transaction Center, authorized by the People’s Bank of China,
      publishes a daily exchange rate for Renminbi, or the PBOC Exchange Rate, based
      on the weighted average of quotations from all the market makers in the
      inter-bank foreign exchange market before open quotation. Financial institutions
      authorized to deal in foreign currency may enter into foreign exchange
      transactions at exchange rates within an authorized range above or below the
      PBOC Exchange Rate according to market conditions.





Pursuant
      to the Foreign Exchange Control Regulations issued by the State Council on
      January 29, 1996 and effective as of April 1, 1996 (and amended on January
      14, 1997) and the Administration of Settlement, Sale and Payment of Foreign
      Exchange Regulations which came into effect on July 1, 1996 regarding foreign
      exchange control, or the Regulations, conversion of Renminbi into foreign
      exchange by foreign investment enterprises for current account items, including
      the distribution of dividends and profits to foreign investors of joint
      ventures, is permissible upon the proper production of qualified commercial
      vouchers or legal documents as required by the Regulations. Foreign investment
      enterprises are permitted to remit foreign exchange from their foreign exchange
      bank account in China upon the proper production of, inter alia, the board
      resolutions declaring the distribution of the dividend and payment of profits.
      Conversion of Renminbi into foreign currencies and remittance of foreign
      currencies for capital account items, including direct investment, loans, and
      security investment, is still subject to the approval of SAFE, or any authorized
      local branches, or the Branches, in each such transaction. On January 14, 1997,
      the State Council amended the Foreign Exchange Control Regulations and added,
      among other things, an important provision as Article 5 which provides that
      the
      State shall not impose restrictions on recurring international payments and
      transfers under current accounts.




Under
      the
      Regulations, foreign investment enterprises are required to open and maintain
      separate foreign exchange accounts for capital account items (but not for other
      items). In addition, foreign investment enterprises may only buy, sell and/or
      remit foreign currencies at those banks authorized to conduct foreign exchange
      business upon the production of valid commercial documents and, in the case
      of
      capital account item transactions, document approval from SAFE or the Branches.




Currently,
      foreign investment enterprises are required to apply to SAFE for “foreign
      exchange registration certificates for foreign investment enterprises.” With
      such foreign exchange registration certificates (which are granted to foreign
      investment enterprises upon fulfilling specified conditions and which are
      subject to review and renewal by SAFE or its Branches on an annual basis) or
      with the foreign exchange sales notices from SAFE (which are obtained on a
      transaction-by-transaction basis), FIEs may open foreign exchange bank accounts
      (the advance examination and approval for the opening of foreign exchange
      current accounts has been cancelled according to the Notice of SAFE on Adjusting
      Policies Concerning the Administration of Foreign Exchange Current Accounts,
      which came into effect on May 1, 2006) and enter into foreign exchange
      transactions at banks authorized to conduct foreign exchange business to obtain
      foreign exchange for their needs.




**E.** **Taxation.**




92




*The
      following is a general summary of certain material British Virgin Islands
      and*  *U.S.
      federal income tax considerations. The discussion is not intended to
      be,*  *nor
      should it be construed as, legal or tax advice to any
      particular*  *prospective
      shareholder. The discussion is based on laws and relevant*  *interpretations
      thereof in effect as of the date hereof, all of which are*  *subject
      to change or different interpretations, possibly with
      retroactive*  *effect.
      The discussion does not address United States state or local tax
      laws,*  *or
      tax laws of jurisdictions other than the British Virgin Islands and the
      United*  *States.*




***British
      Virgin Islands Taxation***




The
      British Virgin Islands, or BVI, does not impose a withholding tax on dividends
      paid by us to holders of our ordinary or preferred shares, nor does the BVI
      levy
      any capital gains or income taxes on us.





Further,
      a holder of our ordinary or preferred shares who is not a resident of the BVI
      is
      exempt from the BVI income tax on dividends paid with respect to the ordinary
      or
      preferred shares. Holders of ordinary or preferred shares are not subject to
      the
      BVI income tax on gains realized on the sale or disposition of the ordinary
      or
      preferred shares.





Our
      ordinary and preferred shares are not subject to transfer taxes, stamp duties
      or
      similar charges in the BVI. However, as a business company, we are required
      to
      pay the BVI government an annual license fee based on the number of shares
      we
      are authorized to issue.





There
      is
      no income tax treaty or convention currently in effect between the United States
      and the BVI.





**United
      States federal income taxation**




This
      discussion describes the material U.S. federal income tax consequences of the
      purchase, ownership and disposition of our ordinary shares. This discussion
      does
      not address any aspect of U.S. federal gift or estate tax, or the state, local
      or foreign tax consequences of an investment in our ordinary shares. This
      discussion applies to you only if you hold and beneficially own our ordinary
      shares as capital assets for tax purposes. This discussion does not apply to
      you
      if you are a member of a class of holders subject to special rules, such as:




·
            dealers
                in securities or currencies;


·
            traders
                in securities that elect to use a mark-to-market method of accounting
                for
                securities holdings;


·
            banks
                or other financial institutions;


·
            insurance
                companies;


·
            tax-exempt
                organizations;


·
            partnerships
                and other entities treated as partnerships for U.S. federal income
                tax
                purposes or persons holding ordinary shares through any such
                entities;


·
            persons
                that hold ordinary shares as part of a hedge, straddle, constructive
                sale,
                conversion transaction or other integrated
                investment;


·
            U.S.
                Holders (as defined below) whose functional currency for tax purposes
                is
                not the U.S. dollar;


·
            persons
                liable for alternative minimum tax; or


·
            persons
                who actually or constructively own 10% or more of the total combined
                voting power of all classes of our shares (including ordinary shares)
                entitled to vote.




93




This
      discussion is based on the U.S. Internal Revenue Code of 1986, as amended,
      which
      we refer to in this discussion as the Code, its legislative history, existing
      and proposed regulations promulgated thereunder, published rulings and court
      decisions, all as currently in effect. These laws are subject to change,
      possibly on a retroactive basis. In addition, this discussion relies on our
      assumptions regarding the value of our shares and the nature of our business
      over time.




You
      should consult your own tax advisor concerning the particular U.S. federal
      income tax consequences to you of the purchase, ownership and disposition of
      our
      ordinary shares, as well as the consequences to you arising under the laws
      of
      any other taxing jurisdiction.




For
      purposes of the U.S. federal income tax discussion below, you are a “U.S.
      Holder” if you beneficially own ordinary shares and are:




·
            a
                citizen or resident of the United States for U.S. federal income
                tax
                purposes;


·
            a
                corporation, or other entity taxable as a corporation, that was created
                or
                organized in or under the laws of the United States or any political
                subdivision thereof;


·
            an
                estate the income of which is subject to U.S. federal income tax
                regardless of its source; or


·
            a
                trust if (a) a court within the United States is able to exercise
                primary supervision over its administration and one or more U.S.
                persons
                have the authority to control all substantial decisions of the trust,
                or
                (b) the trust has a valid election in effect to be treated as a U.S.
                person.





If
      you
      are not a U.S. person, please refer to the discussion below under “Non-U.S.
      Holders.”




For
      U.S.
      federal income tax purposes, income earned through a foreign or domestic
      partnership or other flow-through entity is attributed to its owners.
      Accordingly, if a partnership or other flow-through entity holds ordinary
      shares, the tax treatment of the holder will generally depend on the status
      of
      the partner or other owner and the activities of the partnership or other
      flow-through entity.




***U.S.
      Holders***




*Dividends
      on ordinary shares*




We
      do not
      anticipate paying dividends on our ordinary shares or indirectly on our ordinary
      shares in the foreseeable future. See “Dividend policy.”




94




Subject
      to the “Passive Foreign Investment Company” discussion below, if we do make
      distributions and you are a U.S. Holder, the gross amount of any distributions
      you receive on your ordinary shares will generally be treated as dividend income
      if the distributions are made from our current or accumulated earnings and
      profits, calculated according to U.S. federal income tax principles. Dividends
      will generally be subject to U.S. federal income tax as ordinary income on
      the
      day you actually or constructively receive such income. However, if you are
      an
      individual and have held your ordinary shares for a sufficient period of time,
      dividend distributions on our ordinary shares will generally constitute
      qualified dividend income taxed at a preferential rate (generally 15% for
      dividend distributions before January 1, 2011) as long as our ordinary shares
      continue to be readily tradable on the NASDAQ Global Select Market and certain
      other conditions apply. You should consult your own tax adviser as to the rate
      of tax that will apply to you with respect to dividend distributions, if any,
      you receive from us.




We
      do not
      intend to calculate our earnings and profits according to U.S. tax accounting
      principles. Accordingly, distributions on our ordinary shares, if any, will
      generally be taxed to you as dividend distributions for U.S. tax purposes.
      Even
      if you are a corporation, you will not be entitled to claim a dividends-received
      deduction with respect to distributions you receive from us. Dividends generally
      will constitute foreign source passive income for U.S. foreign tax credit
      limitation purposes.




*Sales
      and other dispositions of ordinary shares*




Subject
      to the “Passive Foreign Investment Company” discussion below, when you sell or
      otherwise dispose of ordinary shares, you will generally recognize capital
      gain
      or loss in an amount equal to the difference between the amount realized on
      the
      sale or other disposition and your adjusted tax basis in the ordinary shares,
      both as determined in U.S. dollars. Your adjusted tax basis will generally
      equal
      the amount you paid for the ordinary shares. Any gain or loss you recognize
      will
      be long-term capital gain or loss if your holding period in our ordinary shares
      is more than one year at the time of disposition. If you are an individual,
      any
      such long-term capital gain will be taxed at preferential rates. Your ability
      to
      deduct capital losses will be subject to various limitations.




*Passive
      Foreign Investment Company*




If
      we
      were a PFIC, in any taxable year in which you hold our ordinary shares, as
      a
      U.S. Holder, you would generally be subject to adverse U.S. tax consequences,
      in
      the form of increased tax liabilities and special U.S. tax reporting
      requirements.




We
      will
      be classified as a PFIC in any taxable year if either: (1) the average
      percentage value of our gross assets during the taxable year that produce
      passive income or are held for the production of passive income is at least
      50%
      of the value of our total gross assets or (2) 75% or more of our gross income
      for the taxable year is passive income (such as certain dividends, interest
      or
      royalties). For purposes of the first test: (1) any cash, cash equivalents,
      and
      cash invested in short-term, interest-bearing debt instruments or bank deposits
      that is readily convertible into cash, will generally count as producing passive
      income or held for the production of passive income and (2) the average value
      of
      our gross assets is calculated based on our market capitalization. We will
      be
      treated as owning our proportionate share of the assets and earning our
      proportionate share of the income of any other corporation in which we own,
      directly or indirectly, 25% or more (by value) of the stock.




95




We
      believe that we were not a PFIC for the taxable year 2007. However, there can
      be
      no assurance that we will not be a PFIC for the taxable year 2008 and/or later
      taxable years, as PFIC status is re-tested each year and depends on the facts
      in
      such year. For example, we would be a PFIC for the taxable year 2008 if the
      sum
      of our average market capitalization, which is our share price multiplied by
      the
      total number of our outstanding shares, and our liabilities over that taxable
      year was not more than twice the value of our cash, cash equivalents, and other
      assets producing passive income or held for production of passive income. We
      could also be a PFIC for any taxable year if the gross income that we and our
      subsidiaries earn from passive investments is substantial in comparison with
      the
      gross income from our business operations.




If
      we
      were a PFIC, you would generally be subject to additional taxes and interest
      charges on certain “excess distributions” we make and on any gain realized on
      the disposition or deemed disposition of your ordinary shares, regardless of
      whether we continue to be a PFIC in the year in which you receive an “excess
      distribution” or dispose of or are deemed to dispose of your ordinary shares.
      Distributions in respect of your ordinary shares during a taxable year would
      generally constitute “excess distributions” if, in the aggregate, they exceed
      125% of the average amount of distributions in respect of your ordinary shares
      over the three preceding taxable years or, if shorter, the portion of your
      holding period before such taxable year.




To
      compute the tax on “excess distributions” or any gain, (1) the “excess
      distribution” or the gain would be allocated ratably to each day in your holding
      period, (2) the amount allocated to the current year and any tax year before
      we
      became a PFIC would be taxed as ordinary income in the current year, (3) the
      amount allocated to other taxable years would be taxable at the highest
      applicable marginal rate in effect for that year, and (4) an interest charge
      at
      the rate for underpayment of taxes for any period described under (3) above
      would be imposed with respect to any portion of the “excess distribution” or
      gain that is allocated to such period. In addition, if we were a PFIC, no
      distribution that you receive from us would qualify for taxation at the
      preferential rate discussed in the “Dividends on ordinary shares” section above.




If
      we
      were a PFIC in any year, and if you are a U.S. Holder, you would be required
      to
      make an annual return on IRS Form 8621 regarding your ordinary shares. However,
      we do not intend to generate, or share with you, information that you might
      need
      to properly complete IRS Form 8621. You should consult with your own tax adviser
      regarding reporting requirements with regard to your ordinary shares.




If
      we
      were a PFIC in any year, you would generally be able to avoid the “excess
      distribution” rules described above by making a timely so-called
“mark-to-market” election with respect to your ordinary shares provided our
      ordinary shares are “marketable.” Our ordinary shares will be “marketable” as
      long as they remain regularly traded on the NASDAQ Global
      Select Market. If you made this election in a timely fashion, you would
      generally recognize as ordinary income or ordinary loss the difference between
      the fair market value of your ordinary shares on the first day of any taxable
      year and their value on the last day of that taxable year. Any ordinary income
      resulting from this election would generally be taxed at ordinary income rates
      and would not be eligible for the reduced rate of tax applicable to qualified
      dividend income. Any ordinary losses would be limited to the extent of the
      net
      amount of previously included income as a result of the mark-to-market election,
      if any. Your basis in the ordinary shares would be adjusted to reflect any
      such
      income or loss. You should consult with your own tax adviser regarding potential
      advantages and disadvantages to you of making a “mark-to-market” election with
      respect to your ordinary shares. Separately, if we were a PFIC in any year,
      you
      would be able to avoid the “excess distribution” rules by making a timely
      election to treat us as a so-called “Qualified Electing Fund”, or QEF. You would
      then generally be required to include in gross income for any taxable year
      (1) as ordinary income, your pro rata share of our ordinary earnings for
      the taxable year, and (2) as long-term capital gain, your pro rata share of
      our net capital gain for the taxable year. However, we do not intend to provide
      you with the information you would need to make or maintain a QEF election
      and
      you will, therefore, not be able to make or maintain such an election with
      respect to your ordinary shares.




96




***Non-U.S.
      Holders***




If
      you
      beneficially own ordinary shares and are not a U.S. Holder for U.S. federal
      income tax purposes, or a Non-U.S. Holder, you generally will not be subject
      to
      U.S. federal income tax or withholding on dividends received from us with
      respect to ordinary shares unless that income is considered effectively
      connected with your conduct of a U.S. trade or business and, if an applicable
      income tax treaty so requires, as a condition for you to be subject to U.S.
      federal income tax with respect to income from your ordinary shares, such
      dividends are attributable to a permanent establishment that you maintain in
      the
      United States. You generally will not be subject to U.S. federal income tax,
      including withholding tax, on any gain realized upon the sale or exchange of
      ordinary shares, unless:




·
            
            that
                gain is effectively connected with the conduct of a U.S. trade or
                business
                and, if an applicable income tax treaty so requires as a condition
                for you
                to be subject to U.S. federal income tax with respect to income from
                your
                ordinary shares, such gain is attributable to a permanent establishment
                that you maintain in the United States;
                or




·
            
            you
                are a nonresident alien individual and are present in the United
                States
                for at least 183 days in the taxable year of the sale or other disposition
                and either (1) your gain is attributable to an office or other fixed
                place of business that you maintain in the United States or (2) you
                have a
                tax home in the United States.





If
      you
      are engaged in a U.S. trade or business, unless an applicable tax treaty
      provides otherwise, the income from your ordinary shares, including dividends
      and the gain from the disposition of ordinary shares, that is effectively
      connected with the conduct of that trade or business will generally be subject
      to the rules applicable to U.S. Holders discussed above. In addition, if you
      are
      a corporation, you may be subject to an additional branch profits tax at a
      rate
      of 30% or any lower rate under an applicable tax treaty.





***U.S.
      information reporting and backup withholding rules***





In
      general, dividend payments with respect to the ordinary shares and the proceeds
      received on the sale or other disposition of those ordinary shares may be
      subject to information reporting to the IRS and to backup withholding (currently
      imposed at a rate of 28%). Backup withholding will not apply, however, if you
      (1) are a corporation or come within certain other exempt categories and, when
      required, can demonstrate that fact or (2) provide a taxpayer identification
      number, certify as to no loss of exemption from backup withholding and otherwise
      comply with the applicable backup withholding rules. To establish your status
      as
      an exempt person, you will generally be required to provide certification on
      IRS
      Form W-9, W-8BEN or W-8ECI, as applicable. Any amounts withheld from payments
      to
      you under the backup withholding rules will be allowed as a refund or a credit
      against your U.S. federal income tax liability, provide that you furnish the
      required information to the IRS.





97




HOLDERS
      OF OUR ORDINARY SHARES SHOULD CONSULT WITH THEIR OWN TAX ADVISORS REGARDING
      THE
      APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS
      AS WELL AS ANY TAX CONSEQUENCES RESULTING FROM PURCHASING, HOLDING OR DISPOSING
      OF THE ORDINARY SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF THE TAX LAWS
      OF ANY STATE, LOCAL OR FOREIGN JURISDICTION AND INCLUDING ESTATE, GIFT, AND
      INHERITANCE LAWS.




**F.** **Dividends
      and paying agents.**




Not
      applicable.




**G.** **Statement
      by experts.**




Not
      applicable.




**H.** **Documents
      on display.**




We
      have
      filed this Annual Report on Form 20-F with the SEC under the Securities Exchange
      Act of 1934, as amended, or the Exchange Act. Statements made in this Annual
      Report as to the contents of any document referred to are not necessarily
      complete. With respect to each such document filed as an exhibit to this Annual
      Report, reference is made to the exhibit for a more complete description of
      the
      matter involved, and each such statement shall be deemed qualified in its
      entirety by such reference.




We
      are
      subject to the informational requirements of the Exchange Act as a foreign
      private issuer and file reports and other information with the SEC. Reports
      and
      other information filed by us with the SEC, including this Annual Report on
      Form
      20-F, may be inspected and copied at the public reference room of the SEC at
      450
      Fifth Street N.W. Washington D.C. 20549.




You
      can
      also obtain copies of this Annual Report on Form 20-F by mail from the Public
      Reference Section of the SEC, 450 Fifth Street, N.W., Washington D.C. 20549,
      at
      prescribed rates. Additionally, copies of this material may be obtained from
      the
      SEC’s Internet site at http://www.sec.gov. The SEC’s telephone number is
      1-800-SEC-0330.




**I.** **Subsidiaries
      information.**




Not
      Applicable.




98




**ITEM
      11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**




**Interest
      rate risk**




Our
      exposure to market rate risk for changes in interest rates relates primarily
      to
      the interest income generated by excess cash invested in short term money market
      accounts and certificates of deposit. We have not used derivative financial
      instruments in our investment portfolio. Interest earning instruments carry
      a
      degree of interest rate risk. We have not been exposed nor do we anticipate
      being exposed to material risks due to changes in interest rates. However,
      our
      future interest income may fall short of expectations due to changes in interest
      rates.




**Foreign
      currency risk**




Substantially
      all our revenues and expenses are denominated in Renminbi and a substantial
      portion of our cash is kept in Renminbi, but a portion of our cash is also
      kept
      in U.S. dollars. Although we believe that, in general, our exposure to foreign
      exchange risks should be limited, the value of our shares will be affected
      by
      the foreign exchange rate between U.S. dollars and Renminbi. For example, to
      the
      extent that we need to convert U.S. dollars into Renminbi for our operational
      needs and the Renminbi appreciates against the U.S. dollar at that time, our
      financial position and the price of our shares may be adversely affected.
      Conversely, if we decide to convert our Renminbi into U.S. dollars for the
      purpose of declaring dividends on our shares or otherwise and the U.S. dollar
      appreciates against the Renminbi, the U.S. dollar equivalent of our earnings
      in
      China would be reduced.




We
        have
        recorded RMB1,203,197 (US$ 160,580) of foreign exchange losses in our net
        income
        for the twelve months ended September 30, 2007, due to the recent revaluation
        of
        the Renminbi against the U.S. dollar by the PRC government. The PRC government
        may further readjust the current rate at which Renminbi-U.S. dollar exchanges
        are fixed, as well as re-evaluate its decades-old policy of using a fixed-rate
        regime to govern foreign currency transactions, although the PRC government
        has
        not committed itself to take any such action currently. Since we have not
        engaged in any hedging activities, we may experience economic loss as a result
        of any foreign currency exchange rate fluctuations.




**Inflation**





In
      recent
      years, China has not experienced significant inflation, and thus inflation
      has
      not had a significant effect on our business during the past three years.
      According to the China Statistical Bureau, China’s overall national inflation
      rate, as represented by the general consumer price index, was approximately
      3.9%, 1.8%, 1.3% and 4.6% in 2004 and 2005, the nine months ended September
      30,
      2006 and the fiscal year ended September 30, 2007, respectively. Sustained
      or
      increased inflation in China may have an adverse impact on China’s economy,
      which could affect demand for our products or services or increase our cost
      of
      services or operating expenses. As we have not previously operated during a
      period of significant inflation, we cannot predict with confidence the effect
      that such inflation may have on our business. ****




99





**ITEM
      12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES**




Not
      Applicable.




**PART
      II**




**ITEM
      13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES**




Not
      Applicable.




**ITEM
      14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS**





The
      rights of securities holders have not been materially changed during the period
      covered by this Annual Report.





In
      July
      2007, we entered into a Notes Purchase Agreement with Citadel. For more
      information and a description of the Notes issued in that transaction, please
      see Item 4.A “Information on the Company — History and development of the
      company.”





**ITEM
      15. CONTROLS AND PROCEDURES******





(a) *Disclosure
      Controls and Procedures:* As of
      September 30, 2007 (the “Evaluation Date“), the Company conducted an evaluation
      (under the supervision and with the participation of the Company’s management,
      including the Co-Chief Executive Officer and Chief Financial Officer), pursuant
      to Rule 13a-15 promulgated under the Securities Exchange Act of 1934, as amended
      (the “Exchange Act“), of the effectiveness of the design and operation of the
      Company’s disclosure controls and procedures. As the Company’s personnel did not
      possess the knowledge in the application of derivative accounting in accordance
      with Financial Accounting Standard 133-Accounting for Derivative Instruments
      and
      Hedging Activities. The management concluded that Company did not maintain
      an
      effective control environment with respect to the accounting for derivative
      as
      at September 30, 2007. As a result, this control deficiency resulted in a
      material adjustment in the Company’s annual consolidated financial statements.
      Based upon this evaluation, the Company’s Co-Chief Executive Officer and Chief
      Financial Officer concluded that the Company’s disclosure controls and
      procedures were ineffective.





(b) *Report of Origin’s Management on Internal Control over Financial
      Reporting:* Origin’s
      Board of Directors and management are responsible for establishing and
      maintaining adequate internal control over financial reporting as of September
      30, 2007. The Company’s internal control system was designed to provide
      reasonable assurance to the Company’s management and Board of Directors
      regarding the reliability of financial reporting and the preparation and fair
      presentation of its published consolidated financial statements.




100





All
      internal control systems, no matter how well designed, have inherent
      limitations. Therefore, even those systems determined to be effective may not
      provide or detect misstatements and can only provide reasonable assurances
      with
      respect to financial statement preparation and presentation. Also, projections
      of any evaluation of effectiveness to future periods are subject to the risk
      that controls may become inadequate because of changes in conditions, or that
      the degree of compliance with the policies or procedures may deteriorate.





Origin’s
      management assessed the effectiveness of the Company’s internal control over
      financial reporting as of September 30, 2007. In making this assessment, it
      used
      the criteria established in Internal Control - Integrated Framework issued
      by
      the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
      Based on the evaluation under these criteria, management has identified one
      material weakness in the Company’s internal control over financial statement
      closing process, which is further described below.





The
      Company’s personnel did not possess the knowledge in the application of
      derivative accounting in accordance with Financial Accounting Standard
      133-Accounting for Derivative Instruments and Hedging Activities. The management
      concluded that Company did not maintain an effective control environment with
      respect to the accounting for derivative as at September 30, 2007. As a result,
      this control deficiency resulted in a material adjustment in the Company’s
      annual consolidated financial statements.





Based
      upon this evaluation, the management concluded that the Company’s internal
      control over financial reporting were ineffective. We are planning for the
      complete remediation of the above issue in 2008 by seeking people with expertise
      in this aspect.





Management’s
      assessment of and conclusion on the effectiveness of internal control over
      financial reporting did not include the internal controls over Jilin Changrong,
      which was acquire on April 11, 2007, and which is included in the consolidated
      balance sheets of Origin as of September 30, 2007, and the related consolidated
      statements of income and comprehensive income, stockholders’ equity, and cash
      flows for the year ended September 30, 2007. Changrong constituted 4% and 12
      %
      of total assets and net assets, respectively, as of September 30, 2007, and
      28%
      and (8%) of revenues and net loss, for the year ended September 30, 2007.
      Management did not assess the effectiveness of internal control over financial
      reporting of Changrong because of the acquisition, which was completed on April
      11, 2007.




101




BDO
      McCabe Lo Limited, our independent registered public accounting firm, has issued
      an attestation report which is included in Item 18 of this Annual Report on
      Form
      20-F.





(c) *Changes in internal control over financial reporting* :
      There
      were no changes to our internal control over financial reporting that occurred
      during the period covered by this Form 20-F that have materially affected,
      or
      are reasonably likely to materially affect, our internal control over financial
      reporting.




**ITEM
      16A. AUDIT COMMITTEE FINANCIAL EXPERT.**





The
      board
      of directors believes that Remo Richli, a member of our Audit Committee, meets
      the criteria for an “audit committee financial expert” as established by the SEC
      and is an independent director.




Mr. 
      Richli will not be deemed an “expert” for any purpose, including, without
      limitation, for purposes of Section 11 of the Securities Act of 1933, as
      amended, as a result of being designated or identified as an audit committee
      financial expert. The designation or identification of Mr. Richli as an audit
      committee financial expert does not impose on him any duties, obligations or
      liability that are greater than the duties, obligations and liability imposed
      on
      him as a member of our Audit Committee and board of directors in the absence
      of
      such designation or identification. The designation or identification of
      Mr. Richli as an audit committee financial expert does not affect the
      duties, obligations or liability of any other member of our Audit Committee
      or
      board of directors and Mr. Richli is independent.




**ITEM
      16B. CODE OF ETHICS.**





On
      January 18, 2007, our board of directors adopted a code of ethics for senior
      executive and financial officers, including our co-chief executive officers
      and
      our principal financial officer (i) to promote the honest and ethical
      conduct of our senior executive and financial officers, including the ethical
      handling of actual or apparent conflicts of interest between personal and
      professional relationships, (ii) to promote full, fair, accurate, timely
      and understandable disclosure in periodic reports required to be filed with
      or
      submitted to the SEC and in other public communications by us; (iii) to
      promote compliance with all applicable laws, rules and regulations that
      apply to us and our senior executive and financial officers; (iv) to deter
      wrongdoing; and (v) to promote prompt internal reporting of breaches of,
      and accountability for adherence to, this code. A copy of the code of ethics
      is
      filed as an exhibit to this Annual Report.




On
      January 18, 2007, our board of directors also adopted a code of conduct for
      our
      employees, including directors and officers. The purpose of this code of conduct
      is to provide a summary of certain of our key policies and procedures and to
      help ensure lawful and ethical conduct. A copy of the code of conduct is filed
      as an exhibit to this Annual Report.




**ITEM
      16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES.**




**(a)**  **Audit
      Fees.**




102





The
      aggregate fees billed for the nine months ended September 30, 2006 for
      professional services rendered by BDO McCabe Lo Limited for the review of the
      financial statements of the six months ended June 30, 2006 and for the audit
      of
      the financial statements of the nine months ended September 30, 2006 of Origin
      Agritech Limited were $0.38 million. And the audit fees billed for the year
      ended September 30, 2007 for professional services rendered by BDO McCabe Lo
      Limited for the performance the audit of internal control system and the
      financial statements of the year ended September 30, 2007 of Origin Agritech
      Limited were $0. 73 million.





**(b)**  **Audit
      - Related Fees**





The
      aggregate fees billed for the year ended September 30, 2007 for professional
      services rendered by BDO McCabe Lo Limited for the performance of agree-upon
      procedures for the quarterly financial statements during the year ended
      September 30, 2007 were $0.11 million.




**(c)**  **Tax
      Fees**





We
      did
      not enter into any engagement in 2004, 2005, 2006 or 2007 for professional
      services rendered by our principal accountant for tax compliance, tax advice
      or
      tax planning.





**(d)**  **All
      Other Fees**





No
      fees
      were billed in either of the last two fiscal years for products and services
      provided by our principal accountant, other than the services reported in
      paragraphs (a) through (b) of this Item 16C for 2004, 2005, 2006, and
      the fiscal year ended September 30, 2007.





**(e)**  **Audit
      Committee Pre-Approval Policies and Procedures.**





Our
      Audit
      Committee pre-approves all auditing services and permitted non-audit services
      to
      be performed for us by our independent auditor, including the fees and terms
      thereof (subject to the de minimums exceptions for non-audit services described
      in Section 10A(i)(l)(B) of the Exchange Act that are approved by our Audit
      Committee prior to the completion of the audit).





**(f)**  Not
      applicable.





**ITEM
      16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
      COMMITTEES.**





We
      have
      not been granted an exemption from the applicable listing standards for the
      Audit Committee of our board of directors.





**ITEM
      16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
      PURCHASERS.**





None.




103





**PART
      III**




**ITEM
      17. FINANCIAL STATEMENTS**




We
      have
      elected to provide financial statements pursuant to Item 18.




**ITEM
      18. FINANCIAL STATEMENTS**




The
      consolidated financial statements for the Company and its subsidiaries are
      included at the end of this Annual Report.







**ITEM
      19. EXHIBITS**




**Index
      to Exhibits**




**Exhibit****Number**
            
            **Description**1.1
            
            
            Memorandum
                and Articles of Association of Origin Agritech Limited re-registered
                under
                the new Business Companies Act of the British Virgin Islands as of
                July
                10, 2006 (Incorporated by reference to Exhibit 1.1 of our Annual
                Report
                20-F (file no.000-51576)
                filed with the Securities and Exchange Commission on July 14,
                2006)2.1
            
            
            Specimen
                Common Stock Certificate (Incorporated by reference to Exhibit 4.2
                of our
                Registration Statement S-4/A (file no. 333-124709) filed with the
                Securities and Exchange Commission on August 22, 2005)2.2
            
            
            Indenture,
                dated July 25, 2007, between Origin, State Harvest and The Bank of
                New
                York2.3
            
            
            Registration
                Rights Agreement, dated July 25, 2007, between Origin, State Harvest
                and
                Citadel2.4
            
            
            Amendment
                of Registration Rights Agreement2.5
            
            
            Second
                Amendment of Registration Rights Agreement2.6
            
            
            Third
                Amendment of Registration Rights Agreement2.7
            
            
            Investor
                Rights Agreement, dated July 25, 2007, between Origin, certain major
                shareholders of Origin and Citadel2.8
            
            
            Notes
                Purchase Agreement, dated July 25, 2007, between Origin and Citadel4.1
            
            
            2005
                Performance Equity Plan (Incorporated by reference to Annex D of
                the proxy
                statement/prospectus included in our Registration Statement S-4/A
                (file
                no. 333-124709) filed with the Securities and Exchange Commission
                on
                September 27, 2005)




104




4.2
            
            
            Form
                of Employee Share Option Agreement of Origin Agritech Limited
                (Incorporated by reference to Exhibit 4.2 of our Annual Report 20-F
                (file
                no.000-51576)
                filed with the Securities and Exchange Commission on July 14,
                2006)4.3
            
            
            Technical
                Service Agreement between Origin Biotechnology and Beijing Origin
                (Incorporated by reference to Exhibit 10.14 of our Registration Statement
                S-4/A (file no. 333-124709) filed with the Securities and Exchange
                Commission on August 22, 2005)4.4
            
            
            Technical
                Service Agreement between Origin Biotechnology and Henan Origin
                (Incorporated by reference to Exhibit 10.15 of our Registration Statement
                S-4/A (file no. 333-124709) filed with the Securities and Exchange
                Commission on August 22, 2005)4.5
            
            
            Technical
                Service Agreement between Origin Biotechnology and Changchun Origin
                (Incorporated by reference to Exhibit 10.16 of our Registration Statement
                S-4/A (file no. 333-124709) filed with the Securities and Exchange
                Commission on August 22, 2005)4.6
            
            
            Form
                of Stock Consignment Agreement (Incorporated by reference to Exhibit
                10.17
                of our Registration Statement S-4/A (file no. 333-124709) filed with
                the
                Securities and Exchange Commission on August 22, 2005)4.7
            
            
            Employment
                Agreement between Origin and Dr. Han Gengchen (Incorporated by reference
                to Exhibit 10.20 of our Registration Statement S-4/A (file no. 333-124709)
                filed with the Securities and Exchange Commission on July 7,
                2005).4.8
            
            
            Employment
                Agreement between Origin and Mr. Yang Yasheng (Incorporated by reference
                to Exhibit 10.21 of our Registration Statement S-4/A (file no. 333-124709)
                filed with the Securities and Exchange Commission on July 7,
                2005)4.9
            
            
            Employment
                Agreement between Origin and Mr. Yuan Liang (Incorporated by reference
                to
                Exhibit 10.22 of our Registration Statement S-4/A (file no. 333-124709)
                filed with the Securities and Exchange Commission on July 7,
                2005)4.10
            
            
            Form
                of Voting Agreement among Origin and Dr. Han and Messrs. Yang and
                Yuan
                (Incorporated by reference to Exhibit 10.24 of our Registration Statement
                S-4/A (file no. 333-124709) filed with the Securities and Exchange
                Commission on July 7, 2005)4.11
            
            
            Form
                Corn Seed Production Booking Contract(Incorporated
                by reference to Exhibit 10.26 of our Registration Statement S-4/A
                (file
                no. 333-124709) filed with the Securities and Exchange Commission
                on
                August 22, 2005)4.12
            
            
            Technology
                Transfer Agreement between Henan Agriculture University and Beijing
                Origin
                (YuYu22)(Incorporated by reference to Exhibit 10.27 of our Registration Statement
                S-4/A (file no. 333-124709) filed with the Securities and Exchange
                Commission on August 22, 2005)4.13
            
            
            Joint
                Development agreement with Corn Research Institute of Li County
                (1stAgreement)(Incorporated by reference to Exhibit 10.28 of our Registration Statement
                S-4/A (file no. 333-124709) filed with the Securities and Exchange
                Commission on August 22, 2005)4.14
            
            
            Joint
                Development Agreement with Corn Research Institute of Li County
                (2ndAgreement)(Incorporated
                by reference to Exhibit 10.29 of our Registration Statement S-4/A
                (file
                no. 333-124709) filed with the Securities and Exchange Commission
                on
                September 16, 2005)4.15
            
            
            Joint
                Development Agreement with Hubei Province Shiyan Agricultural Sciences
                Institute (EYu10)(Incorporated by reference to Exhibit 10.30 of our Registration Statement
                S-4/A (file no. 333-124709) filed with the Securities and Exchange
                Commission on September 16, 2005)4.16
            
            
            Form
                Equity Transfer Agreement between Beijing Origin and shareholders
                of
                Denong Zhengcheng Seed Co., Ltd. pursuant to which Beijing Origin
                acquired
                52.21% equity interest in Denong Zhengcheng Seed Co., Ltd. dated
                as of
                January 16, 2006 (Incorporated by reference to Exhibit 4.16 of our
                Annual
                Report 20-F (file no.000-51576)
                filed with the Securities and Exchange Commission on July 14,
                2006)




105




4.17
              
              
              Equity
                  Transfer Agreement between Beijing Origin and Jilin Academy of
                  Agriculture
                  Science dated as of December 6, 2005(Incorporated by reference to Exhibit 4.17 of our Annual Report
                  20-F (file
                  no.000-51576)
                  filed with the Securities and Exchange Commission on July 14,
                  2006)4.18
              
              
              Equity
                  Transfer Agreement between Beijing Origin and China National Center
                  for
                  Biotechnology Development dated as of December 28, 2004 (Incorporated
                  by
                  reference to Exhibit 4.18 of our Annual Report 20-F (file no.000-51576)
                  filed with the Securities and Exchange Commission on July 14,
                  2006)4.19
              
              
              Capital
                  Contribution Agreement (Incorporated by reference to Exhibit 4.19
                  of our
                  Annual Report 20-F (file no.000-51576)
                  filed with the Securities and Exchange Commission on July 14,
                  2006)4.20
              
              
              New
                  Corn Seed Liyu 35 Joint Development Agreement between Beijing Origin
                  and
                  Shijiazhuang Liyu Technology Development Co., Ltd. dated as of
                  March 30,
                  2006 (Incorporated by reference to Exhibit 4.20 of our Annual Report
                  20-F
                  (file no.000-51576)
                  filed with the Securities and Exchange Commission on July 14,
                  2006)4.21
              
              
              Joint
                  Development Agreement between Beijing Origin and Corn Research
                  Institute
                  of Li County dated January 31, 2002 (Incorporated by reference
                  to Exhibit
                  4.21 of our Annual Report 20-F (file no.000-51576)
                  filed with the Securities and Exchange Commission on July 14,
                  2006)4.22
              
              
              Joint
                  Development Agreement between Beijing Origin and Corn Research
                  Institute
                  of Li County dated January 9, 2003 (Incorporated by reference to
                  Exhibit
                  4.22 of our Annual Report 20-F (file no.000-51576)
                  filed with the Securities and Exchange Commission on July 14,
                  2006)4.23
              
              
              Technology
                  Transfer and Cooperation Agreement Concerning a New Corn Hybrid
                  Yuyu 20
                  (Incorporated by reference to Exhibit 4.23 of our Annual Report
                  20-F (file
                  no.000-51576)
                  filed with the Securities and Exchange Commission on July 14,
                  2006)4.24
              
              
              Renminbi
                  Capital Loan Contract (Incorporated by reference to Exhibit 4.24
                  of our
                  Annual Report 20-F (file no.000-51576)
                  filed with the Securities and Exchange Commission on July 14,
                  2006)4.25
              
              
              Mortgage
                  Contract (Incorporated by reference to Exhibit 4.25 of our Annual
                  Report
                  20-F (file no.000-51576)
                  filed with the Securities and Exchange Commission on July 14,
                  2006)4.26
              
              
              Form
                  of Hybrid Corn Seed Sales Contract (Incorporated by reference to
                  Exhibit
                  4.26 of our Annual Report 20-F (file no.000-51576)
                  filed with the Securities and Exchange Commission on July 14,
                  2006)4.27
              
              
              Corn
                  Hybrid Seed Production Booking Contract Dated April 4, 2006 between
                  Beijing Origin and Jilin Changrong (Incorporated by reference to
                  Exhibit
                  4.26 of our Annual Report 20-F (file no.000-51576)
                  filed with the Securities and Exchange Commission on February 15,
                  2007)4.28
              
              
              Share
                  Transfer Agreement and Supplementary Agreement Dated June 13, 2006
                  between
                  Beijing Origin and China M&A Management Holdings, Inc. (Incorporated
                  by reference to Exhibit 4.28 of our Annual Report 20-F (file no.000-51576)
                  filed with the Securities and Exchange Commission on February 15,
                  2007)4.29
              
              
              Renminbi
                  Capital Loan Contract Dated July 24, 2006 between Beijing Origin
                  and China
                  Construction Bank Corporation Beijing Shangdi Sub-Branch (Incorporated
                  by
                  reference to Exhibit 4.29 of our Annual Report 20-F (file no.000-51576)
                  filed with the Securities and Exchange Commission on February 15,
                  2007)4.30
              
              
              Mortgage
                  Contract Dated July 18, 2006 between Beijing Origin and China Construction
                  BankCorporation
                  Beijing Shangdi Sub-Branch (Incorporated by reference to Exhibit
                  4.30 of
                  our Annual Report 20-F (file no.000-51576)
                  filed with the Securities and Exchange Commission on February 15,
                  2007)




106




4.31
              
              
              Loan
                  Contract Dated September 14, 2006 between Beijing Origin andBank
                  of Beijing Shangdi Sub-Branch(Incorporated by reference to Exhibit 4.31 of our Annual Report
                  20-F (file
                  no.000-51576)
                  filed with the Securities and Exchange Commission on February 15,
                  2007)4.32
              
              
              Loan
                  Contract Dated February 13, 2006 between Denong and Deyang City
                  Commercial
                  Bank (Incorporated by reference to Exhibit 4.32 of our Annual Report
                  20-F
                  (file no.000-51576)
                  filed with the Securities and Exchange Commission on February 15,
                  2007)4.33
              
              
              Loan
                  Agreement Dated January 19, 2006 and Supplementary Agreement Dated
                  November 9, 2006 between Beijing Origin and Individuals (Incorporated
                  by
                  reference to Exhibit 4.33 of our Annual Report 20-F (file no.000-51576)
                  filed with the Securities and Exchange Commission on February 15,
                  2007)4.34
              
              
              Form
                  of Incentive Stock Option Agreement4.35
              
              
              Form
                  of Nonqualified Share Option Agreement4.36
              
              
              Form
                  Share Transfer Agreement between Beijing Origin and shareholders
                  of Jilin
                  Changrong High-tech Seed Limited pursuant to which Beijing Origin
                  acquired
                  9.18% equity interest in Jilin Changrong Hi-tech Seed
                  Limited4.37
              
              
              Share
                  Transfer Agreement Dated December 25, 2006 between Beijing Origin
                  and
                  Yanjun Song, one of Denong’s shareholder4.38
              
              
              Renminbi
                  Capital Loan Contract Dated July 6, 2007 between Beijing Origin
                  Seed
                  Limited and China Construction Bank Corporation Beijing Shangdi
                  Sub-Branch4.39
              
              
              Mortgage
                  Contract Dated July 6, 2007 between Changchun Origin Seed Limited
                  and
                  China Construction Bank Corporation Beijing Shangdi
                  Sub-Branch4.40
              
              
              Renminbi
                  Capital Loan Contract Dated July 25, 2007 between Beijing Origin
                  Seed
                  Limited and China Construction Bank Corporation Beijing Shangdi
                  Sub-Branch4.41
              
              
              Guarantee
                  Contract Dated July 25, 2007 between Beijing Origin State Harvest
                  Biotechnology Limited and China Construction Bank Corporation Beijing
                  Shangdi Sub-Branch4.42
              
              
              Renminbi
                  Capital Loan Contract Dated September 29, 2007 between Beijing
                  Origin Seed
                  Limited and China Construction Bank Corporation Beijing Shangdi
                  Sub-Branch4.43
              
              
              Guarantee
                  Contract Dated September 29, 2007 between Beijing Origin State
                  Harvest
                  Biotechnology Limited and China Construction Bank Corporation Beijing
                  Shangdi Sub-Branch4.44
              
              
              Renminbi
                  Capital Loan Contract Dated November 18, 2007 between Beijing Origin
                  Seed
                  Limited and China Construction Bank Corporation Beijing Shangdi
                  Sub-Branch4.45
              
              
              Mortgage
                  Contract Dated November 18, 2007 between Beijing Origin Seed Limited
                  and
                  China Construction Bank Corporation Beijing Shangdi
                  Sub-Branch4.46
              
              
              Renminbi
                  Capital Loan Contract Dated November 13, 2007 between Beijing Origin
                  Seed
                  Limited and China Construction Bank Corporation Beijing Shangdi
                  Sub-Branch4.47
              
              
              Guarantee
                  Contract Dated November 13, 2007 between Beijing Origin State Harvest
                  Biotechnology Limited and China Construction Bank Corporation Beijing
                  Shangdi Sub-Branch4.48
              
              
              Renminbi
                  Capital Loan Contract Dated November 13, 2007 between Beijing Origin
                  State
                  Harvest Biotechnology Limited and China Construction Bank Corporation
                  Beijing Shangdi Sub-Branch




107




8.1
              
              
              Updated
                  List of subsidiaries11.1
              
              
              Code
                  of Ethics (Incorporated by reference to Exhibit 11.1 of our Annual
                  Report
                  20-F (file no. 000-51576) filed with the Securities and Exchange
                  Commission on February 15, 2007)11.2
              
              
              Code
                  of Conduct (Incorporated by reference to Exhibit 11.2 of our Annual
                  Report
                  20-F (file no. 000-51576) filed with the Securities and Exchange
                  Commission on February 15, 2007)12.1
              
              
              CEO
                  Certification Pursuant to Rule 13a-14(a) (17 CFR 240.13a-14(a)) (17
                  CFR 240.13a-14(a)) or Rule 15d-1(a) (17 CFR
                  240.15d-14(a))12.2
              
              
              CFO
                  Certification Pursuant to Rule 13a-14(a) (17 CFR 240.13a-14(a)) or
                  Rule 15d-1(a) (17 CFR 240.15d-14(a))13.1
              
              
              CEO
                  Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
                  200213.2
              
              
              CFO
                  Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
                  200215.1
              
              
              Consent
                  of Deloitte Touche Tohmatsu CPA Ltd. to incorporation of its report
                  on the
                  Registrant's consolidated financial statements into Registrant's
                  Registration Statements on Form S-815.2
              
              
              Consent
                  of BDO McCabe Lo Limited to incorporation of its report on the
                  Registrant's consolidated financial statements into Registrant's
                  Registration Statements on
                  Form S-8


108




**SIGNATURE**




The
      registrant hereby certifies that it meets all of the requirements for filing
      on
      Form 20-F and that it has duly caused and authorized the undersigned to sign
      this Annual Report on its behalf.




Date:
                February 27, 2008
            ORIGIN
                AGRITECH LIMITED/s/
                Liang YuanName:
            Liang
                YuanTitle:
            Co-Chief
                Executive Officer


109


**ORIGIN
      AGRITECH LIMITED**





**Reports
      of Independent Registered Public Accounting Firms** **Consolidated
      Financial Statements**




**For
      the year ended December 31, 2005,** **nine
      months ended September 30, 2006 and year ended September 30,
      2007**





110




**ORIGIN
      AGRITECH LIMITED**





**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**


CONTENTS
              
              
              PAGEREPORTS
                  OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
              
              
              F−1CONSOLIDATED
                  BALANCE SHEETS AS OF SEPTEMBER 30, 2006AND
                  2007
              
              
              F−4CONSOLIDATED
                  STATEMENTS OF OPERATIONS FORTHE
                  YEAR ENDED DECEMBER 31, 2005,THE
                  NINE MONTHS ENDED SEPTEMBER 30, 2006 ANDTHE
                  YEAR ENDED SEPTEMBER 30, 2007
              
              
              F−5CONSOLIDATED
                  STATEMENTS OF SHAREHOLDERS’ EQUITY ANDCOMPREHENSIVE
                  INCOME FOR THE YEAR ENDEDDECEMBER
                  31, 2005, THE NINE MONTHS ENDEDSEPTEMBER
                  30, 2006 AND THE YEAR ENDED SEPTEMBER 30, 2007
              
              
              F−6CONSOLIDATED
                  STATEMENTS OF CASH FLOWS FORTHE
                  YEAR ENDED DECEMBER 31, 2005,THE
                  NINE MONTHS ENDED SEPTEMBER 30, 2006 ANDTHE
                  YEAR ENDED SEPTEMBER 30, 2007
              
              
              F−7NOTES
                  TO THE CONSOLIDATED FINANCIAL STATEMENTS
              
              
              F−9
 111
  **REPORT
          OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
  TO
          THE
          BOARD OF DIRECTORS AND SHAREHOLDERS OF
 ORIGIN
          AGRITECH LIMITED
  We
          have
          audited the accompanying consolidated statements of operations, shareholders'
          equity and comprehensive income, and cash flows of Origin Agritech Limited
          and
          its subsidiaries and variable interest entities (the "Company") for the
          year
          ended December 31, 2005, all expressed in Renminbi. These financial statements
          are the responsibility of the Company's management. Our responsibility
          is to
          express an opinion on these consolidated financial statements based on
          our
          audits.
  We
          conducted our audits in accordance with the standards of the Public Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audit to obtain reasonable assurance about whether the
          financial
          statements are free of material misstatement. The Company is not required
          to
          have, nor were we engaged to perform, an audit of its internal control
          over
          financial reporting. Our audits include consideration of internal control
          over
          financial reporting as a basis for designing audit procedures that are
          appropriate in the circumstances, but not for the purpose of expressing
          an
          opinion on the effectiveness of the Company's internal control over financial
          reporting. Accordingly, we express no such opinion. An audit also includes
          examining, on a test basis, evidence supporting the amounts and disclosures
          in
          the financial statements, assessing the accounting principles used and
          significant estimates made by management, as well as evaluating the overall
          financial statement presentation. We believe that our audits provide a
          reasonable basis for our opinion.
  In
          our
          opinion, such consolidated financial statements present fairly, in all
          material
          respects, the results of operations and cash flows of the Company for the
          year
          ended December 31, 2005 in conformity with accounting principles generally
          accepted in the United States of America.
  The
          accompanying consolidated statements of operations and cash flows of Origin
          Agritech Limited and its subsidiaries and variable interest entities for
          the
          nine months ended September 30, 2005 were not audited by us and, accordingly,
          we
          do not express an opinion on them.
  /s/
          Deloitte Touche Tohmatsu CPA Ltd.
 Beijing,
          the People's Republic of China
 July
          14,
          2006


F-1




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**




TO
      THE
      BOARD OF DIRECTORS AND SHAREHOLDERS OF


ORIGIN
      AGRITECH LIMITED





We
      have
      audited the accompanying consolidated balance sheets of Origin Agritech Limited
      and its subsidiaries and variable interest entities (the "Company") as of
      September 30, 2006 and 2007 and the related consolidated statements of
      operations, shareholders' equity and comprehensive income, and cash flows for
      the nine months ended September 30, 2006 and the year ended September 30, 2007,
      all expressed in Renminbi. We have also audited the Company’s internal control
      over financial reporting as of September 30, 2007, based on criteria established
      in Internal Control - Integrated Framework issued by the Committee of Sponsoring
      Organizations of the Treadway Commission (the COSO criteria). The Company’s
      management is responsible for these financial statements, for maintaining
      effective internal control over financial reporting, and for its assessment
      of
      the effectiveness of internal control over financial reporting, included in
      the
      accompanying Management’s Report on Internal Control Over Financial Reporting.
      Our responsibility is to express an opinion on these financial statements and
      an
      opinion on the Company’s internal control over financial reporting based on our
      audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      financial statements are free of material misstatement and whether effective
      internal control over financial reporting was maintained in all material
      respects. Our audits of the financial statements included examining, on a test
      basis, evidence supporting the amounts and disclosures in the financial
      statements, assessing the accounting principles used and significant estimates
      made by management, as well as evaluating the overall financial statement
      presentation. Our audit of internal control over financial reporting included
      obtaining an understanding of internal control over financial reporting,
      assessing the risk that a material weakness exists, and testing and evaluating
      the design and operating effectiveness of internal control based on the assessed
      risk. Our audit also included performing such other procedures as we consider
      necessary in the circumstances. We believe that our audits provide a reasonable
      basis for our opinions.





A
      company’s internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles. A company’s internal control over
      financial reporting includes those policies and procedures that (1) pertain
      to
      the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (3) provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use, or disposition of the company’s
      assets that could have a material effect on the financial
      statements.




Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.





A
      material weakness is a deficiency, or a combination of deficiencies, in internal
      control over financial reporting, such that there is a reasonable possibility
      that a material misstatement of the company’s annual or interim financial
      statements will not be prevented or detected on a timely basis. The following
      material weakness has been identified and included in the management’s
      assessment.





·
            The
                Company did not maintain an effective control and management oversight
                process to ensure complex accounting transactions are researched
                and
                recorded in accordance with Financial Accounting Standard 133 - Accounting
                for Derivative Instruments and Hedging Activities. The Company’s personnel
                did not possess the knowledge in the application of derivative accounting.
                This control deficiency resulted in a material adjustment to the
                consolidated financial statements.




F-2




This
      material weakness was considered in determining the nature, timing, and extent
      of audit tests applied in our audit of the 2007 financial statements, and our
      opinion regarding the effectiveness of the Company’s internal control over
      financial reporting does not affect our opinion on those consolidated financial
      statements.





As
      indicated in the accompanying Management’s Report on Internal Control over
      Financial Reporting, management’s assessment of and conclusion on the
      effectiveness of internal control over financial reporting did not include
      the
      internal controls of Jilin Changrong High-Tech Seed Company Limited, which
      was
      acquired on April 11, 2007, and which is included in the consolidated balance
      sheets of the Company as of September 30, 2007, and the related consolidated
      statements of operations, shareholders’ equity and comprehensive income, and
      cash flows for the year then ended. Jilin Changrong High-Tech Seed Company
      Limited constituted 4% and 12% of total assets and net assets, respectively,
      as
      of September 30, 2007, and 28% and (8%) of revenues and net loss, respectively,
      for the year then ended. Management did not assess the effectiveness of internal
      control over financial reporting of Jilin Changrong High-Tech Seed Company
      Limited because of the timing of the acquisition, which was completed on April
      11, 2007. Our audit of internal control over financial reporting of the Company
      also did not include an evaluation of the internal control over financial
      reporting of Jilin Changrong High-Tech Seed Company Limited.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of the Company
      as
      of September 30, 2006 and 2007 and the result of its operations and its cash
      flows for the nine months ended September 30, 2006 and the year ended September
      30, 2007, in conformity with accounting principles generally accepted in the
      United States of America. Also in our opinion, because of the effect of the
      material weakness described above, the Company did not maintain effective
      internal control over financial reporting as of September 30, 2007, based on
      the
      COSO criteria.





We
      do not
      express an opinion or any other form of assurance on management’s statements
      referring to any corrective actions taken by the Company after the date of
      management’s assessment.






BDO
      McCabe Lo Limited


Hong
        Kong, February 27, 2008





F-3


**CONSOLIDATED
      BALANCE SHEETS**


**(In
      thousands, except number of share and per share data)**





**September
                30,****2006**
            
            **2007**
            
            **2007****RMB**
            
            **RMB**
            
            **US$**AssetsCurrent
                assets:Cash
                and cash equivalents
            
            
            140,953
            
            
            162,314
            
            
            21,663Debt
                securities (note 3)
            
            
            146,816
            
            
            133,968
            
            
            17,880Accounts
                receivable, less allowances for doubtful amounts RMB1,388 and RMB1,876
                as
                of September 30, 2006 and 2007, respectively
            
            
            12,467
            
            
            2,750
            
            
            367Due
                from related parties (note 4)
            
            
            6,868
            
            
            7,384
            
            
            986Advances
                to suppliers (note 5)
            
            
            3,559
            
            
            1,029
            
            
            137Advances
                to growers
            
            
            49,250
            
            
            24,452
            
            
            3,263Inventories
                (note 6)
            
            
            343,575
            
            
            449,207
            
            
            59,952Income
                tax recoverable (note 19)
            
            
            2,186
            
            
            1,760
            
            
            235Prepaid
                expenses and other current assets (note 7)
            
            
            12,766
            
            
            11,459
            
            
            1,529Total
                current assets
            
            
            718,440
            
            
            794,323
            
            
            106,012Land
                use rights, net (note 8)
            
            
            16,923
            
            
            21,554
            
            
            2,877Plant
                and equipment, net (note 9)
            
            
            125,425
            
            
            143,043
            
            
            19,091Equity
                investments (note 10)
            
            
            38,888
            
            
            58,882
            
            
            7,858Goodwill
                (note 1)
            
            
            10,900
            
            
            16,665
            
            
            2,224Due
                from related parties (note 4)
            
            
            6,500
            
            
            7,325
            
            
            978Acquired
                intangible assets, net (note 11)
            
            
            29,878
            
            
            43,057
            
            
            5,746Deferred
                income tax assets (note 19)
            
            
            4,042
            
            
            12,828
            
            
            1,712Other
                assets (note 12)
            
            
            33,130
            
            
            13,306
            
            
            1,776Total
                assets
            
            
            984,126
            
            
            1,110,983
            
            
            148,274Liabilities,
                minority interests and shareholders’ equityCurrent
                liabilities:Short-term
                borrowings (note 13)
            
            
            253,000
            
            
            268,400
            
            
            35,821Accounts
                payable
            
            
            22,012
            
            
            14,365
            
            
            1,917Due
                to growers
            
            
            38,794
            
            
            17,811
            
            
            2,377Due
                to related parties (note 4)
            
            
            10,335
            
            
            4,233
            
            
            565Advances
                from customers
            
            
            76,143
            
            
            82,187
            
            
            10,970Deferred
                revenues
            
            
            24,101
            
            
            23,238
            
            
            3,101Income
                tax payable
            
            
            39,059
            
            
            39,059
            
            
            5,213Other
                payables and accrued expenses (note 15)
            
            
            46,187
            
            
            50,054
            
            
            6,680Total
                current liabilities
            
            
            509,631
            
            
            499,347
            
            
            66,644Long-term
                borrowings (note 13)
            
            
            1,880
            
            
            1,880
            
            
            251Convertible
                notes, net of discount of RMB126,763 as of
              September
                30, 2007 (note 14)
            
            
            -
            
            
            173,669
            
            
            23,178Embedded
                derivatives-redemption feature (note 14)
            
            
            -
            
            
            86,937
            
            
            11,603Other
                long-term liabilities (note 16)
            
            
            1,000
            
            
            3,458
            
            
            461Total
                liabilities
            
            
            512,511
            
            
            765,291
            
            
            102,137Minority
                interests
            
            
            13,049
            
            
            48,775
            
            
            6,510Commitments
                and contingencies (note 23)Shareholders’
                equity:Preferred
                stock (no par value;1,000,000 shares authorized, none
                issued)
            
            
            -
            
            
            -
            
            
            -Common
                stock (no par value; 60,000,000 shares authorized, 23,472,910 shares
                issued and outstanding as of September 30, 2006; 23,472,910 shares
                issued
                and 22,974,059 outstanding as of September 30, 2007)
            
            
            -
            
            
            -
            
            
            -Additional
                paid-in capital
            
            
            340,810
            
            
            377,324
            
            
            50,359Retained
                earnings (deficit)
            
            
            121,796
            
            
            (41,404
            )
            
            (5,526
            )Treasury
                stock at cost (498,851 shares) (note 18)
            
            
            -
            
            
            (29,377
            )
            
            (3,921
            )Accumulated
                other comprehensive loss
            
            
            (4,040
            )
            
            (9,626
            )
            
            (1,285
            )Total
                shareholders’ equity
            
            
            458,566
            
            
            296,917
            
            
            39,627Total
                liabilities, minority interests and shareholders’ equity
            
            
            984,126
            
            
            1,110,983
            
            
            148,274





The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-4


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(In
      thousands, except number of share and per share data)**





**Year
                ended December 31,**
            
            **Nine
                months ended September 30,**
            
            **Year
                ended September 30,****2005**
            
            **2005**
            
            **2006**
            
            **2007**
            
            **2007****RMB**
            
            **RMB**
            
            **RMB**
            
            **RMB**
            
            **US$****(unaudited)**Revenues
            
            
            207,291
            
            
            208,380
            
            
            522,999
            
            
            489,379
            
            
            65,313Cost
                of revenues
            
            
            (129,162
            )
            
            (126,418
            )
            
            (362,982
            )
            
            (462,852
            )
            
            (61,773
            )Gross
                profit
            
            
            78,129
            
            
            81,962
            
            
            160,017
            
            
            26,527
            
            
            3,540Operating
                expenses:Selling
                and marketing
            
            
            (27,037
            )
            
            (18,993
            )
            
            (49,651
            )
            
            (57,994
            )
            
            (7,740
            )General
                and administrative
            
            
            (28,983
            )
            
            (19,712
            )
            
            (40,933
            )
            
            (92,246
            )
            
            (12,311
            )Research
                and development
            
            
            (6,977
            )
            
            (5,963
            )
            
            (13,144
            )
            
            (28,441
            )
            
            (3,796
            )Total
                operating expenses
            
            
            (62,997
            )
            
            (44,668
            )
            
            (103,728
            )
            
            (178,681
            )
            
            (23,847
            )Other
                operating income
            
            
            2,309
            
            
            -
            
            
            -
            
            
            -
            
            
            -Income
                (loss) from operations
            
            
            17,441
            
            
            37,294
            
            
            56,289
            
            
            (152,154
            )
            
            (20,307
            )Interest
                expense
            
            
            (1,829
            )
            
            (1,443
            )
            
            (5,005
            )
            
            (21,697
            )
            
            (2,896
            )Share
                of earnings in equity investee companies
            
            
            879
            
            
            305
            
            
            12,828
            
            
            (669
            )
            
            (89
            )Interest
                income
            
            
            886
            
            
            421
            
            
            8,783
            
            
            10,942
            
            
            1,460Other
                income
            
            
            300
            
            
            62
            
            
            2,893
            
            
            1,312
            
            
            175Changes
                in the fair value of embedded derivatives
            
            
            -
            
            
            -
            
            
            -
            
            
            12,601
            
            
            1,682Income
                (loss) before income taxes and minority interests
            
            
            17,677
            
            
            36,639
            
            
            75,788
            
            
            (149,665
            )
            
            (19,975
            )Income
                tax expense (note 19)Current
            
            
            (1,313
            )
            
            (1,563
            )
            
            (1,428
            )
            
            (8,737
            )
            
            (1,166
            )Deferred
            
            
            (92
            )
            
            358
            
            
            1,061
            
            
            8,786
            
            
            1,173Income
                tax expense
            
            
            (1,405
            )
            
            (1,205
            )
            
            (367
            )
            
            49
            
            
            7Income
                (loss) before minority interests
            
            
            16,272
            
            
            35,434
            
            
            75,421
            
            
            (149,616
            )
            
            (19,968
            )Minority
                interests
            
            
            137
            
            
            (510
            )
            
            910
            
            
            (13,584
            )
            
            (1,813
            )Net
                income (loss)
            
            
            16,409
            
            
            34,924
            
            
            76,331
            
            
            (163,200
            )
            
            (21,781
            )Net
                income (loss) per share - basic (note 20)
            
            
            RMB1.52
            
            
            RMB3.49
            
            
            RMB3.25
            
            
            RMB(7.01
            )
            $
            US(0.94
            )Net
                income (loss) per share - diluted (note 20)
            
            
            RMB1.46
            
            
            RMB3.49
            
            
            RMB3.03
            
            
            RMB(7.01
            )
            $
            US(0.94
            )Shares
                used in calculating basic net income (loss) per share
            
            
            10,786,719
            
            
            10,000,000
            
            
            23,472,910
            
            
            23,268,062
            
            
            23,268,062Shares
                used in calculating diluted net income (loss) per share
            
            
            11,220,157
            
            
            10,000,000
            
            
            25,187,753
            
            
            23,268,062
            
            
            23,268,062Cash
                dividend per share
            
            
            RMB0.73
            
            
            -
            
            
            -
            
            
            -
            
            
            -








The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-5


**CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’ EQUITY**


**AND
      COMPREHENSIVE INCOME**


**(In
      thousands, except number of share and per share data)**




**Additional**
            
            **Retained**
              **Earnings**
            
            **Accumulated**Other
            
            
            
            **Total****Common
                stock**
            
            **Paid-in**
            
            **(Deficit)**
            
            **Comprehensive**
            
            **Treasury**
            
            **Shareholders’**
            
            **Comprehensive****Shares**
            
            **Amount**
            
            **Capital**
            
            **(note
                22)**
            
            **Loss**
            
            **Stock**
            
            **Equity**
            
            **Income
                (Loss)**Balance
                as of January 1, 2005
            
            
            10,000
            
            
            83
            
            
            100,000
            
            
            36,893
            
            
            -
            
            
            -
            
            
            136,976
            
            
            -Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            16,409
            
            
            -
            
            
            -
            
            
            16,409
            
            
            16,409Recapitalization
                in connection with the Share Exchange Transaction (note 1)
            
            
            15,090,000
            
            
            (83
            )
            
            113,324
            
            
            -
            
            
            -
            
            
            -
            
            
            113,241
            
            
            -Issuance
                of common shares upon exercise of Warrants (note 21)
            
            
            2,793,868
            
            
            -
            
            
            112,872
            
            
            -
            
            
            -
            
            
            -
            
            
            112,872
            
            
            -Issuance
                of common shares upon conversion of Unit Purchase Options (note
                21)
            
            
            309,325
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Share-based
                compensation expense
            
            
            -
            
            
            -
            
            
            774
            
            
            -
            
            
            -
            
            
            -
            
            
            774
            
            
            -Cumulative
                translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (391
            )
            
            -
            
            
            (391
            )
            
            (391
            )Deemed
                distribution (note 1)
            
            
            -
            
            
            -
            
            
            (80,877
            )
            
            -
            
            
            -
            
            
            -
            
            
            (80,877
            )
            
            -Cash
                dividend
            
            
            -
            
            
            -
            
            
            -
            
            
            (7,837
            )
            
            -
            
            
            -
            
            
            (7,837
            )
            
            -Balance
                as of December 31, 2005
            
            
            18,203,193
            
            
            -
            
            
            246,093
            
            
            45,465
            
            
            (391
            )
            
            -
            
            
            291,167For
                the year ended December 31, 2005
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            16,018Net
                income
            
            
            -
            
            
            -
            
            
            
            
            
            76,331
            
            
            -
            
            
            -
            
            
            76,331
            
            
            76,331Issuance
                of common shares upon exercise of Unit Purchase Options (note
                21)
            
            
            19,833
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Issuance
                of common shares upon exercise of Warrants (note 21)
            
            
            5,249,884
            
            
            -
            
            
            211,712
            
            
            -
            
            
            -
            
            
            -
            
            
            211,712
            
            
            -Share-based
                compensation expense
            
            
            -
            
            
            -
            
            
            3,986
            
            
            -
            
            
            -
            
            
            -
            
            
            3,986
            
            
            -Cumulative
                translation adjustment
            
            
            -
            
            
            -
            
            
            
            
            
            -
            
            
            (3,649
            )
            
            
            
            
            (3,649
            )
            
            (3,649
            )Deemed
                distribution (note 1)
            
            
            -
            
            
            -
            
            
            (120,981
            )
            
            -
            
            
            -
            
            
            -
            
            
            (120,981
            )
            
            -Balance
                as of September 30, 2006
            
            
            23,472,910
            
            
            -
            
            
            340,810
            
            
            121,796
            
            
            (4,040
            )
            
            -
            
            
            458,566For
                the nine months ended September 30, 2006
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            72,682Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (163,200
            )
            
            -
            
            
            -
            
            
            (163,200
            )
            
            (163,200
            )Issuance
                of convertible notes(Note
                14)
            
            
            -
            
            
            -
            
            
            31,230
            
            
            -
            
            
            -
            
            
            -
            
            
            31,230
            
            
            -Share-based
                compensation expense
            
            
            -
            
            
            -
            
            
            5,284
            
            
            -
            
            
            -
            
            
            -
            
            
            5,284
            
            
            -Cumulative
                translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (5,586
            )
            
            -
            
            
            (5,586
            )
            
            (5,586
            )Treasury
                stock (note 18)
            
            
            (498,851
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (29,377
            )
            
            (29,377
            )
            
            -Balance
                as of September 30, 2007
            
            
            22,974,059
            
            
            -
            
            
            377,324
            
            
            (41,404
            )
            
            (9,626
            )
            
            (29,377
            )
            
            296,917For
                the year endedSeptember
                30, 2007
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (168,786
            )In
                US$
            
            
            
            
            
            -
            
            
            50,359
            
            
            (5,526
            )
            
            (1,285
            )
            
            (3,921
            )
            
            39,627
            
            
            (22,526
            )




The
      accompanying notes are an integral part of these consolidated financial
      statements.




F-6




**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





**(In
      thousands)**





**Year
                ended December 31,**
            
            **Nine
                months ended**
              **September
                30,**
            
            **Year
                ended September 30,****2005**
            
            **2005**
            
            **2006**
            
            **2007**
            
            **2007****RMB**
            
            **RMB**
            
            **RMB**
            
            **RMB**
            
            **US$****(unaudited)**Operating
                activities:Net
                income (loss)
            
            
            16,409
            
            
            34,924
            
            
            76,331
            
            
            (163,200
            )
            
            (21,781
            )Adjustments
                to reconcile net income (loss) to net cash provided by (used in)
                operating
                activities:Depreciation
                and amortization
            
            
            6,754
            
            
            4,284
            
            
            11,677
            
            
            22,032
            
            
            2,940Loss
                (gain) on disposal of plant and equipment
            
            
            (26
            )
            
            347
            
            
            146
            
            
            851
            
            
            114Gain
                on disposal of acquired intangible assets
            
            
            -
            
            
            -
            
            
            -
            
            
            (104
            )
            
            (14
            )Gain
                on disposal of debt securities
            
            
            -
            
            
            -
            
            
            (394
            )
            
            (3,339
            )
            
            (446
            )Change
                in the fair value of embedded derivatives
            
            
            -
            
            
            -
            
            
            -
            
            
            (12,601
            )
            
            (1,682
            )Impairment
                on receivables
            
            
            125
            
            
            -
            
            
            (116
            )
            
            2,464
            
            
            329Inventory
                write down
            
            
            1,685
            
            
            3,522
            
            
            4,194
            
            
            77,244
            
            
            10,309Impairment
                on intangible assets
            
            
            -
            
            
            -
            
            
            -
            
            
            2,325
            
            
            310Interest
                capitalized in plant and equipment
            
            
            (1,207
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Interest
                expense on convertible notes
            
            
            -
            
            
            -
            
            
            -
            
            
            4,127
            
            
            551Written-off
                of acquired research & development expenses
            
            
            -
            
            
            -
            
            
            1,297
            
            
            2,196
            
            
            293Minority
                interests
            
            
            (137
            )
            
            510
            
            
            (910
            )
            
            13,584
            
            
            1,813Share-based
                compensation expense
            
            
            774
            
            
            -
            
            
            3,986
            
            
            5,284
            
            
            705Share
                of earnings in equity investee companies
            
            
            (879
            )
            
            (305
            )
            
            (12,828
            )
            
            669
            
            
            89Changes
                in operating assets and liabilities:Accounts
                receivable, net
            
            
            -
            
            
            -
            
            
            (9,954
            )
            
            8,323
            
            
            1,111Due
                from related parties
            
            
            (2,588
            )
            
            86
            
            
            (754
            )
            
            (516
            )
            
            (69
            )Advances
                to growers
            
            
            -
            
            
            (7,141
            )
            
            (49,250
            )
            
            28,354
            
            
            3,784Advances
                to suppliers
            
            
            (36,982
            )
            
            (7,620
            )
            
            25,533
            
            
            2,530
            
            
            338Inventories
            
            
            (121,563
            )
            
            94,012
            
            
            215,400
            
            
            (57,477
            )
            
            (7,671
            )Income
                tax recoverable
            
            
            4,166
            
            
            6,196
            
            
            1,180
            
            
            426
            
            
            57Prepaid
                expenses and other current assets
            
            
            (4,734
            )
            
            (3,147
            )
            
            45,173
            
            
            7,510
            
            
            1,002Deferred
                income tax assets
            
            
            92
            
            
            (357
            )
            
            (3,715
            )
            
            (8,786
            )
            
            (1,173
            )Other
                assets
            
            
            (70
            )
            
            (321
            )
            
            1,484
            
            
            75
            
            
            10Accounts
                payable
            
            
            6,081
            
            
            (19,860
            )
            
            (56,994
            )
            
            (31,238
            )
            
            (4,169
            )Due
                to growers
            
            
            (17,162
            )
            
            (83,357
            )
            
            (27,401
            )
            
            (20,983
            )
            
            (2,800
            )Due
                to related parties
            
            
            (1,497
            )
            
            8,538
            
            
            688
            
            
            (6,102
            )
            
            (814
            )Advances
                from customers
            
            
            24,060
            
            
            (15,259
            )
            
            (75,388
            )
            
            (44,182
            )
            
            (5,897
            )Deferred
                revenues
            
            
            143,662
            
            
            (37,903
            )
            
            (247,364
            )
            
            (863
            )
            
            (115
            )Income
                tax payable
            
            
            (960
            )
            
            (1,175
            )
            
            (192
            )
            
            -
            
            
            -Other
                long-term liabilities
            
            
            -
            
            
            2,000
            
            
            (1,872
            )
            
            2,458
            
            
            328Other
                payables and accrued expenses
            
            
            8,384
            
            
            2,126
            
            
            (23,217
            )
            
            (303
            )
            
            (40
            )Net
                cash provided by (used in) operating activities
            
            
            24,387
            
            
            (19,900
            )
            
            (123,260
            )
            
            (169,242
            )
            
            (22,588
            )




The
      accompanying notes are an integral part of these consolidated financial
      statements.





F-7




**CONSOLIDATED
      STATEMENT OF CASH FLOWS**





**(In
      thousands)**





**Year
                ended December 31,**
            
            **Nine
                months ended**
              **September
                30,**
            
            **Year
                ended September 30,****2005**
            
            **2005**
            
            **2006**
            
            **2007**
            
            **2007****RMB**
            
            **RMB**
            
            **RMB**
            
            **US$****(unaudited)**Investing
                activities:Dividends
                received
            
            
            -
            
            
            -
            
            
            1,200
            
            
            1,200
            
            
            160Purchase
                of plant and equipment
            
            
            (43,198
            )
            
            (25,062
            )
            
            (9,504
            )
            
            (36,526
            )
            
            (4,875
            )Purchase
                of debt securities
            
            
            -
            
            
            -
            
            
            (201,544
            )
            
            (286,270
            )
            
            (38,206
            )Loan
                to shareholders of an equity investee
            
            
            -
            
            
            -
            
            
            (6,500
            )
            
            (825
            )
            
            (110)-Proceeds
                from disposal of plant and equipment
            
            
            94
            
            
            (200
            )
            
            1,015
            
            
            8,002
            
            
            1,068Proceeds
                from disposal of acquired intangible assets
            
            
            -
            
            
            -
            
            
            -
            
            
            267
            
            
            36Proceeds
                from sale of debt securities
            
            
            -
            
            
            -
            
            
            55,122
            
            
            297,020
            
            
            39,641Purchase
                of land use rights
            
            
            (5,701
            )
            
            (2,456
            )
            
            (5,379
            )
            
            (5,458
            )
            
            (728
            )Acquisition
                of cost method investment
            
            
            (5,676
            )
            
            (5,676
            )
            
            -
            
            
            -
            
            
            -Acquisition
                of equity method investment
            
            
            -
            
            
            -
            
            
            (10,430
            )
            
            (30,330
            )
            
            (4,048
            )Deposit
                for purchase of a subsidiary
            
            
            (2,000
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Deposits
                for purchase of acquired technology
            
            
            (1,995
            )
            
            -
            
            
            (10,940
            )
            
            -
            
            
            -Deposits
                for purchase of plant and equipment
            
            
            (1,325
            )
            
            (5,188
            )
            
            (4,341
            )
            
            (122
            )
            
            (16
            )Business
                acquisition, net of cash acquired
            
            
            -
            
            
            -
            
            
            (36,298
            )
            
            (31,872
            )
            
            (4,254
            )Deposit
                for purchase of equity investment
            
            
            -
            
            
            -
            
            
            (10,000
            )
            
            -
            
            
            -Purchase
                of intangible assets
            
            
            (2,921
            )
            
            (500
            )
            
            (7,373
            )
            
            (6,034
            )
            
            (805
            )Net
                cash used in investing activities
            
            
            (62,722
            )
            
            (39,082
            )
            
            (244,972
            )
            
            (90,948
            )
            
            (12,137
            )Financing
                activities:Proceeds
                from short-term borrowings
            
            
            77,000
            
            
            65,420
            
            
            231,000
            
            
            361,400
            
            
            48,233Repayment
                of short-term borrowings
            
            
            (55,000
            )
            
            (58,680
            )
            
            (41,000
            )
            
            (346,000
            )
            
            (46,178
            )Repayment
                of third party loans
            
            
            -
            
            
            -
            
            
            (10,693
            )
            
            (6,256
            )
            
            (835
            )Proceeds
                from long-term borrowings
            
            
            1,880
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                cash inflow from the Share Exchange Transaction, net of transaction
                costs
                (note 1)
            
            
            159,831
            
            
            -
            
            
            -
            
            
            -
            
            
            -Proceeds
                from issuance of convertible bonds
            
            
            -
            
            
            -
            
            
            -
            
            
            302,384
            
            
            40,357Cash
                dividend
            
            
            (7,837
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Dividend
                paid to minority owners
            
            
            (163
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Deemed
                distribution (note 1)
            
            
            (80,877
            )
            
            -
            
            
            (120,981
            )
            
            -
            
            
            -Advance
                from a shareholder
            
            
            8,276
            
            
            -
            
            
            -
            
            
            1,623
            
            
            217Advance
                from minority shareholders of Denong
            
            
            -
            
            
            -
            
            
            4,968
            
            
            -
            
            
            -Repayment
                to a shareholder
            
            
            (8,276
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Exercise
                of warrants
            
            
            112,872
            
            
            -
            
            
            211,712
            
            
            -
            
            
            -Repurchase
                of treasury stock
            
            
            -
            
            
            -
            
            
            -
            
            
            (29,377
            )
            
            (3,921
            )Net
                cash provided by financing activities
            
            
            207,706
            
            
            6,740
            
            
            275,006
            
            
            283,774
            
            
            37,873Net
                increase (decrease) in cash and cash equivalents
            
            
            169,371
            
            
            (52,242
            )
            
            (93,226
            )
            
            23,584
            
            
            3,148Cash
                and cash equivalents, beginning of year
            
            
            68,848
            
            
            68,848
            
            
            237,828
            
            
            140,953
            
            
            18,812Effect
                of exchange rate changes on cash and cash equivalents
            
            
            (391
            )
            
            45
            
            
            (3,649
            )
            
            (2,223
            )
            
            (297
            )Cash
                and cash equivalents, end of year
            
            
            237,828
            
            
            16,651
            
            
            140,953
            
            
            162,314
            
            
            21,663Supplemental
                disclosure of cash flow information:Income
                taxes paid
            
            
            4,700
            
            
            1,782
            
            
            2,382
            
            
            8,311
            
            
            1,109Interest
                paid
            
            
            3,036
            
            
            2,360
            
            
            4,852
            
            
            18,280
            
            
            2,492


The
      accompanying notes are an integral part of these consolidated financial
      statements.




F-8


**(In
      thousands, except number of share, per share data and unless otherwise
      stated)**





**1.**
            **ORGANIZATION
                AND PRINCIPAL ACTIVITIES**





Origin
                Agritech Limited (“Agritech”), incorporated under the laws of the British
                Virgin Islands, and its subsidiaries and variable interest entities
                (together, the “Company”) are engaged in hybrid crop seed development,
                production and distribution. As of September 30, 2007, details of
                the
                Company’s subsidiaries and variable interest entities are as follows:





Date
                of
            
            Place
                ofincorporation
            
            incorporation
            
            Percentage
            
            PrincipalName
            
            or
                establishment
            
            or
                establishment
            
            of
                ownership
            
            ActivitySubsidiary:State
                Harvest Holdings Limited
            
            October
                6, 2004
            
            British
                Virgin
            
            100%
            
            Investment
                holding(“State
                Harvest”)
            
            
            
            IslandsBeijing
                Origin State Harvest
            
            December
                1, 2004
            
            People’s
                Republic
            
            100%
            
            Hybrid
                seedBiotechnology
                Limited (“Biotech”)
            
            
            
            of
                China (“PRC”)
            
            
            
            technologydevelopmentVariable
                interest entity:Beijing
                Origin Seed Limited (note (i))
              (“Beijing
                Origin”)
            
            December
                26, 1997
            
            PRC
            
            -
            
            Hybrid
                crop seed development,production
                anddistributionSubsidiaries
                held by Beijing OriginHenan
                Origin Cotton Technology Development Limited (note (i))
            
            March
                2, 2001
            
            PRC
            
            92.04%
            
            Hybrid
                crop seed development, production and distributionChangchun
                Origin Seed Technology Development Limited (note (i)) (“Changchun
                Origin”)
            
            April
                29, 2003
            
            PRC
            
            99%
            
            Hybrid
                crop seed development, production anddistributionJilin
                Changrong Hi-tech Seed Limited (“Changrong”)
            
            January
                24, 2006
            
            PRC
            
            43.95%
            
            Hybrid
                crop seed development, production and distributionDenong
                Zhengcheng Seed Limited (note (ii)) (“Denong”)
            
            June
                21, 2000
            
            PRC
            
            97.62%
            
            Hybrid
                crop seed development, production anddistributionSubsidiaries
                held by Denong:Guizhou
                Denong Seed Limited
              (note
                (ii))
            
            January
                2, 2001
            
            PRC
            
            98.20%
            
            Hybrid
                crop seed development, production and distributionHunan
                Denong Seed Limited
              (note
                (ii))
            
            January
                16, 2001
            
            PRC
            
            100%
            
            Hybrid
                crop seed development, production and
                distribution




Note
      (i):  Beijing
      Origin Seed Limited, Henan Origin Cotton Technology Development Limited and
      Changchun Origin Seed Technology Development Limited are collectively referred
      to as “Beijing Origin”.





Note
      (ii):  Denong
      Zhengcheng Seed Limited and its subsidiaries are collectively referred to as
      “Denong”.




F-9





**1.**
            **ORGANIZATION
                AND PRINCIPAL ACTIVITIES -
                Continued**




***The
      Share Exchange Transaction***




On
      December 20, 2004, Chardan China Acquisition Corp. (“Chardan”) entered into a
      Stock Purchase Agreement with State Harvest, and all the stockholders of State
      Harvest for Chardan’s acquisition of State Harvest. For the acquisition, Chardan
      formed its wholly−owned subsidiary, Agritech. On November 8, 2005, the closing
      date of the acquisition (the “Closing Date” ), Chardan merged with and into
      Agritech for the purpose of redomestication out of the United States. The
      redomestication merger was achieved by a one-for-one exchange of all the
      outstanding common stock of Chardan for common stock of Agritech and the
      assumption of all the rights and obligations of Chardan by Agritech, including
      assumption of the outstanding warrants of Chardan. Immediately after the
      redomestication merger, Agritech acquired all the common stock of State Harvest
      by the issuance of shares and payments of cash consideration to the then
      shareholders of State Harvest (“State Harvest Shareholders”) or their designee,
      making it a wholly owned subsidiary (the “Share Exchange Transaction”). State
      Harvest Shareholders and their designee were paid an aggregate of US$10,000
      in
      cash, using the funds held in the trust account of Chardan, and were issued
      an
      aggregate of 10,000,000 shares of Agritech common stock for all the outstanding
      common stock of State Harvest. The Share Exchange Transaction was accounted
      for
      as a reverse acquisition in which State Harvest was deemed to be the accounting
      acquirer and Agritech the legal acquirer. The payments of the cash consideration
      are accounted for as a deemed distribution.




Of
                the cash portion of the purchase price, US$250 has been held back
                for one
                year by Agritech to secure certain indemnification obligations of
                State
                Harvest Shareholders and their designee. Other than the issuance
                of the
                above-mentioned 10,000,000 shares, Agritech has issued 200,000 shares
                to a
                financial advisor in connection with the Share Exchange
                Transaction.





As
                a result of the Share Exchange Transaction the historical consolidated
                financial statements of the Company for the periods prior to the
                Closing
                Date are those of State Harvest and its majority owned subsidiaries
                and
                its variable interest entity, Beijing Origin and all references to
                the
                consolidated financial statements of the Company apply to the historical
                consolidated financial statements of State Harvest, its majority
                owned
                subsidiary and Beijing Origin prior to the Closing Date and the
                consolidated financial statements of Agritech and its majority owned
                subsidiaries and Beijing Origin subsequent to the Closing Date. The
                Company’s equity components are stated in terms of State Harvest before
                the Closing Date, with an adjustment to reflect the effects of the
                reverse
                acquisition on the equity components at the Closing
                Date.





As
                Chardan was a non−operating public shell company before the Share Exchange
                Transaction, no goodwill has been recorded in connection with the
                Share
                Exchange Transaction and the costs incurred in connection with such
                transaction have been charged directly to equity as there was sufficient
                equity to absorb the costs. The net book value of acquired assets
                and
                liabilities pursuant to the Share Exchange Transaction is as
                follows:





**RMB**Net
                assets acquired:Cash
            
            
            163,517Other
                current assets
            
            
            6,201Due
                to State Harvest Shareholders and their designee
            
            
            (2,022
            )Other
                payables and accrued expenses
            
            
            (965
            )166,731Less:Transaction
                costs paid in cash
            
            
            (14,431
            )Tax
                effect of the Share Exchange Transaction
            
            
            (39,059
            )113,241




F-10




**1.**
            **ORGANIZATION
                AND PRINCIPAL ACTIVITIES -
                Continued**





Additional
      purchase price payments would be made to State Harvest Shareholders and their
      designee, up to an aggregate of US$15,000 if either of the following occurs
      during any fiscal year of Agritech after the Closing Date until December 31,
      2008 (or June 30, 2009 if the fiscal year is changed to a July 1−June 30 fiscal
      year) from funds generated in the additional financing or from operational
      earnings as described below:





(1)
            If
                Agritech receives at least US$40,000 in gross proceeds in additional
                financing as a result (i) of the call of the issued and outstanding
                public
                warrants assumed by Agritech at the closing; (ii) Agritech’s successful
                completion of a follow-on offering; or (iii) a private investment
                into
                Agritech by a strategic investor (“Financing Adjustment”), then Agritech
                will pay an additional US$15,000 to State Harvest Shareholders and
                their
                designee; or





(2)
            If
                Origin generates net positive cash flow of US$2,000 or more on a
                consolidated basis (“Earnings Adjustment”), then State Harvest
                Shareholders and their designee will be entitled to receive 75% of
                the net
                positive cash flow up to a maximum of US$7,500 per fiscal year and
                US$15,000 in the aggregate.





If
                both an Earnings Adjustment and a Financing Adjustment occur, the
                maximum
                aggregate amount to be paid to State Harvest Shareholders from one
                or both
                adjustments is US$15,000.





As
                of September 30, 2006, Agritech received US$40,218 (equivalent to
                approximately RMB324,584) in gross proceeds as a result of the call
                of the
                issued and outstanding warrants assumed by Agritech on the Closing
                Date
                (note 21). Accordingly, Agritech paid an additional US$15,000 (equivalent
                to approximately RMB120,981) to State Harvest Shareholders and their
                designee. The payments of the additional purchase price are accounted
                for
                as a deemed distribution.





As
                further additional purchase price, certain State Harvest Shareholders
                and
                their designee will be issued an aggregate of 1,500,000 shares of
                common
                stock of Agritech for any of the next four years if, on a consolidated
                basis, Agritech generates after-tax profits (excluding after-tax
                operating
                profits from any subsequent acquisitions of securities that have
                a
                dilutive effect and before the expenses of this transaction and director
                and employee option expense) of at least the following
                amounts:





**After-tax
                profit**US$Twelve
                months ended June 30,2006
            
            
            11,0002007
            
            
            16,000Twelve
                months ending June 30,2008
            
            
            21,0002009
            
            
            29,000





Although
      the outcome for the twelve months ended June 30, 2006 has been achieved, the
      Board decided that the 1,500,000 shares of common stock will not be issued
      upon
      a wavier signed by those certain State Harvest Shareholders and their designee
      but they do not waive or modify in any respect other additional stock purchase
      price.





The
      management considered the after-tax profit has not been achieved for the twelve
      months ended June 30, 2007.


F-11





**1.**
            **ORGANIZATION
                AND PRINCIPAL ACTIVITIES -
                Continued**





***Reorganization
      of State Harvest prior to the Share Exchange
      Transaction***





On
      December 1, 2004, State Harvest established Beijing Origin State Harvest
      Biotechnology Limited (“BioTech”), a wholly foreign owned enterprise under the
      laws of the PRC with an operating period of 20 years.





PRC
      regulations restrict direct wholly foreign ownership of seed industry in the
      PRC. In order to comply with these regulations while allowing foreign indirect
      participation, State Harvest conducts substantially all of its business through
      its variable interest entity, Beijing Origin.





Beijing
      Origin entered into Technical Service Agreements with BioTech. Under these
      agreements, BioTech shall provide, with its own technical research resource
      and
      team, technical services for the production and distribution of agricultural
      seeds during the period of the agreements. In return, Beijing Origin is required
      to pay BioTech service fee calculated according to the weight of corn, rice
      and
      cotton seeds sold by the Beijing Origin.





In
      addition, State Harvest has been assigned 97.96% voting rights by the
      shareholders of Beijing Origin through a consignment agreement which includes
      the following terms: (1) The shares of Beijing Origin cannot be transferred
      without the approval of State Harvest; (2) State Harvest has the right to
      appoint all directors and senior management personnel of Beijing Origin and
      (3)
      The shareholder rights including voting rights require the transfer of the
      shares of Beijing Origin to State Harvest or any party designated by State
      Harvest within three years upon the removal of the PRC legal restriction.





Through
      the consignment agreements described above, State Harvest is deemed the sole
      beneficiary of Beijing Origin resulting in Beijing Origin being deemed a
      subsidiary of State Harvest under the requirements of Financial Interpretation
      46 (Revised) Consolidation of Variable Interest Entities” issued by the
      Financial Accounting Standards Board (“FASB”). The agreements described above
      provided for effective control of Beijing Origin to be transferred to State
      Harvest at December 25, 2004. Neither State Harvest nor BioTech had any
      operating activity prior to entering into the consignment agreements with
      Beijing Origin. In substance, State Harvest has substantially all the same
      shareholders of Beijing Origin. This transaction has been accounted for on
      a
      basis similar to a reorganization between entities under common control.
      Accordingly, State Harvest’s consolidated financial statements are prepared by
      including the consolidated financial statements of Beijing Origin through
      December 24, 2004, and subsequently the Company’s consolidated financial
      statements include the financial statements of State Harvest, its majority
      owned
      subsidiary and Beijing Origin through the date of the Share Exchange
      Transaction. All the revenue of the Company has been generated from Beijing
      Origin and its subsidiaries, which is also accounted for 77% and 84% of the
      total assets of the Company as at 30 September 2006 and 2007
      respectively.




*Business
      acquisition*





Acquisition
      of Denong





On
      January 24, 2006, Beijing Origin acquired 52.21% of the equity interest in
      Denong for RMB41,766. The financial statements of Denong have been consolidated
      into Agritech since that date. Denong is engaged in development, production
      and
      distribution of hybrid seeds including hybrid rice, cotton and canola seeds
      in
      the southwest region of the PRC.





On  October
      1, 2006, Beijing Origin acquired an additional 42.42% of the equity interest
      in
      Denong for RMB10,404. On December 25, 2006 Beijing Origin further acquired
      another 2.99% of the equity interest in Denong for RMB2,392, bringing its total
      ownership to approximately 97.62%.





The
      subsequent acquisitions of Denong have facilitated the management of the Company
      to, integrate the business of rice seeds into the Company and improve
      efficiencies at the key business units in the southwest region of the
      PRC.


F-12





**1.**
            **ORGANIZATION
                AND PRINCIPAL ACTIVITIES -
                Continued**





The
      Company has allocated the purchase prices to share of estimated fair values
      of the acquired assets and liabilities for the acquisitions of Denong as
      follows:





**Acquired**
              **52.21%
                on**
              **January
                24, 2006**
            
            **Acquired**
              **42.42%
                on**
              **October
                1, 2006**
            
            **Acquired**
              **2.99%
                on**
              **December
                25, 2006****RMB**
            
            **RMB**
            
            **RMB**Cash
                and cash equivalents
            
            
            1,810
            
            
            2,002
            
            
            266Account
                receivables
            
            
            1,251
            
            
            6,427
            
            
            649Advances
                to suppliers
            
            
            14,110
            
            
            3,236
            
            
            295Inventories
            
            
            109,891
            
            
            62,769
            
            
            8,943Prepaid
                expenses and other current assets
            
            
            24,767
            
            
            2,906
            
            
            198Plant
                and equipment
            
            
            10,149
            
            
            4,387
            
            
            556Intangible
                assets
            
            
            18,116
            
            
            8,271
            
            
            843Goodwill
            
            
            10,900
            
            
            -
            
            
            1,073Accounts
                payable
            
            
            (22,861
            )
            
            (19,746
            )
            
            (1,679
            )Advances
                from customers
            
            
            (91,801
            )
            
            (12,899
            )
            
            (1,065
            )Other
                payable and accrued expenses
            
            
            (34,566
            )
            
            (46,949
            )
            
            (7,687
            )41,766
            
            
            10,404
            
            
            2,392Supplemental
                information:Cash
                paid
            
            
            41,766
            
            
            10,404
            
            
            2,392Cash
                acquired
            
            
            (3,468
            )
            
            -
            
            
            -Cash
                paid, net of cash acquired
            
            
            38,298
            
            
            10,404
            
            
            2,392




The
      following table presents the details of the share of estimated fair value of
      the
      intangible assets acquired in the acquisitions of Denong. All purchased
      intangible assets are amortized using the straight-line method.





**Acquired**
              52.21%
                on
              January
                24, 2006
            
            **Acquired**
              **42.42%
                on October 1, 2006**
            
            **Acquired**
              **2.99%
                on**
              **December
                25, 2006**
            
            **Estimated**
              **useful
                life**RMB
            
            **RMB**
            
            **RMB**
            
            **(in
                year)**Technology
                rights for licensedseeds
            
            
            11,485
            
            
            4,456
            
            
            484
            
            
            5-6In-processed
                research anddevelopment
                products(note
                (iii))
            
            
            1,297
            
            
            776
            
            
            74
            
            
            -Distribution
                network
            
            
            5,334
            
            
            3,039
            
            
            285
            
            
            1418,116
            
            
            8,271
            
            
            843




Note
      (iii):  In-processed
      research and development products were expensed in general and administrative  expenses
      immediately upon acquisition.


F-13





**1.**
            **ORGANIZATION
                AND PRINCIPAL ACTIVITIES -
                Continued**





Acquisition
      of Changrong





On
      April
      11, 2007, Beijing Origin further acquired 9.18% of the equity interest in
      Changrong for consideration of RMB22,040. Together with the existing 34.77%
      equity interest held, the acquisition brought the total direct equity interest
      to 43.95%. Beijing Origin obtained control over Changrong by receiving a
      majority of the board voting rights of 60%. The results of Changrong have been
      consolidated into the financial statements of the Company since that date.
      As a
      result of the acquisition, the Company was able to improve the efficiencies
      at
      its key business units in the northeast region of the PRC.





The
      Company has allocated the purchase price to share of estimated fair values
      of
      the acquired assets and liabilities for the acquisition of 9.18% of the equity
      interest of Changrong as follows:





**RMB**Cash
                and cash equivalents
            
            
            327Account
                receivables
            
            
            44Advances
                to suppliers
            
            
            326Inventories
            
            
            14,572Prepaid
                expenses and other current assets
            
            
            625Plant
                and equipment
            
            
            325Intangible
                assets
            
            
            9,118Goodwill
            
            
            4,692Accounts
                payable
            
            
            (2,097
            )Advances
                from customers
            
            
            (4,611
            )Other
                payable and accrued expenses
            
            
            (1,281
            )22,040Supplemental
                information:Cash
                paid
            
            
            22,040Cash
                acquired
            
            
            (3,564
            )Cash
                paid, net of cash acquired
            
            
            18,476





The
      following table presents the details of the share of estimated fair value of
      the
      intangible assets acquired in the acquisition of Changrong. All purchased
      intangible assets are amortized using the straight-line method.





**9.18%
                on Changrong**
            
            **Estimated**
              **Useful
                life****RMB**
            
            **(in
                year)**Technology
                rights for licensed seeds
            
            
            4,922
            
            
            6In-processed
                research and development products (note (iv))
            
            
            2,196
            
            
            -Distribution
                network
            
            
            236
            
            
            6Trademark
            
            
            1,764
            
            
            Indefinite9,118





Note
                  (iv):
              In-processed
                  research and development products were expensed in research and
                  development expenses immediately upon
                  acquisition.





F-14





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING
                POLICIES**





Principles
                of consolidation





The
                consolidated financial statements of the Company are prepared in
                accordance with accounting principles generally accepted in the United
                States of America (“US GAAP”), include the assets, liabilities, revenues,
                expenses and cash flows of all subsidiaries and variable interest
                entities. Intercompany balances, transactions and cash flows are
                eliminated on consolidation.





Convenience
                translation into United States
                dollars





The
      consolidated financial statements are presented in Renminbi. The translation
      of
      Renminbi amounts into United States dollar amounts has been made for the
      convenience of the reader and has been made at the exchange rate quoted by
      the
      noon buying rate in New York city for the cable transfers as certified for
      customs purposes by the Federal Reserve Bank of New York on September 28, 2007
      of RMB7.4928 to US$1.00. Such translation amounts should not be construed as
      representations that the Renminbi amounts could be readily converted into United
      States dollar amounts at that rate or any other rate.




Use
        of
        estimates





The
      preparation of the consolidated financial statements in conformity with US
      GAAP
      requires management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities and disclosure of contingent assets and
      liabilities at the date of the consolidated financial statements and the
      reported amounts of revenues and expenses during the reporting period. Estimates
      are adjusted to reflect actual experience when necessary. Significant accounting
      estimates reflected in the Company’s consolidated financial statements include
      inventory valuation, useful lives of plant and equipment and acquired intangible
      assets, the valuation allowance for deferred income tax assets and the valuation
      of embedded derivatives of the convertible notes. Actual results could differ
      from those estimates.




Cash
        and cash equivalents




Cash
      and
      cash equivalents consist of cash on hand, cash accounts, interest bearing
      savings accounts, time certificates of deposit and debt securities with a
      maturities of three months or less when purchased.




Debt
        securities





The
      Company classifies its debt securities into held-to-maturity and available
      for
      sales.





Held-to-maturity
      securities are those securities in which the Company has positive intent and
      ability to hold the security to maturity. Held-to-maturity
      securities are recorded at amortized cost, adjusted for the amortization or
      accretion of premiums or discounts. Any decline in the market of any
      held-to-maturity security below cost, that is deemed to be other than temporary,
      results in a reduction in the carrying amount to fair value. The impairment
      is
      charged to earnings and a new cost basis for the security is established.
      Premiums and discounts are amortized or accreted over the life of the related
      held-to-maturity security as an adjustment to yield using the straight-line
      method.





Available-for-sale
      securities are measured at fair value and unrealized holding gains and losses
      is
      excluded from earnings and reported as a net amount in a separate component
      of
      shareholders’ equity until realized. Other than temporary impairments in value
      of available-for-sale securities are included in earnings.




F-15




**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES -
                Continued**




*Inventories*







Inventories
      are stated at the lower of cost, determined by weighted-average method, or
      market. Working-in-progress and finished goods inventories consist of raw
      materials, direct labor and overhead associated with the manufacturing process.




Prepaid
        expenses and other current assets




Prepaid
      expenses and other current assets consist principally of advance to staff,
      prepayments and other miscellaneous receivables.




*Land
        use rights, net*


Land
      use
      rights are recorded at cost less accumulated amortization. Amortization is
      provided over the term of the land use right agreements on a straight-line
      basis
      for the beneficial period.




*Plant
        and equipment, net*




Plant
      and
      equipment are recorded at cost less accumulated depreciation and amortization.
      Maintenance and repairs are charged to expense as incurred. Depreciation and
      amortization are calculated on a straight-line basis over the following
      estimated useful lives:





Plant
                and building
            
            20-40
                yearsMachinery
                and equipment
            
            10-15
                yearsFurniture
                and office equipment
            
            5
                yearsMotor
                vehicles
            
            5-8
                yearsLeasehold
                improvements
            
            Shorter
                of the useful lives or the lease
                term





The
      Company constructs certain of its facilities. In addition to costs under
      construction contracts, external costs directly related to the construction
      of
      such facilities, including duty and tariff, and equipment installation and
      shipping costs, are capitalized. Depreciation is recorded at the time assets
      are
      placed in service.




*Leases*





Leases
      are classified at the inception date as either a capital lease or an operating
      lease. For the lessee, a lease is a capital lease if any of the following
      conditions exist: a) ownership is transferred to the lessee by the end of the
      lease term, b) there is a bargain purchase option, c) the lease term is at
      least
      75% of the property’s estimated remaining economic life or d) the present value
      of the minimum lease payments at the beginning of the lease term is 90% or
      more
      of the fair value of the leased property to the lessor at the inception date.
      A
      capital lease is accounted for as if there was an acquisition of an asset and
      an
      incurrence of an obligation at the inception of the lease. All other leases
      are
      accounted for as operating leases. The Company has no capital leases for any
      of
      the periods presented.


F-16




**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES -
                Continued**




*Goodwill*




Goodwill
      is the excess of purchase price over the fair value of net assets acquired.
      The
      Company adopts Statement of Financial Accounting Standards (“SFAS”) No. 142
“Goodwill and Other Intangible Assets”, which requires the carrying value of
      goodwill to be evaluated for impairment on an annual basis, using a
      fair-value-based approach. No impairment of goodwill has been identified during
      any of the periods presented.




*Acquired
        intangible assets, net*





Acquired
      intangible assets primarily consist of purchased technology rights and
      distribution network and are stated at cost less accumulated amortization.
      Amortization is calculated on a straight-line basis over the estimated useful
      lives of these assets and recorded in cost of revenues and selling and marketing
      expenses, as appropriate.




*Valuation
        of long-lived assets*





The
      Company reviews the carrying value of long-lived assets to be held and used,
      including other intangible assets subject to amortization, when events and
      circumstances warrants such a review. The carrying value of a long-lived asset
      is considered impaired when the anticipated undiscounted cash flow from such
      asset is separately identifiable and is less than its carrying value. In that
      event, a loss is recognized based on the amount by which the carrying value
      exceeds the fair market value of the long-lived asset and intangible assets.
      Fair market value is determined primarily using the anticipated cash flows
      discounted at a rate commensurate with the risk involved. Losses on long-lived
      assets and intangible assets to be disposed of are determined in a similar
      manner, except that fair market values are reduced for the cost to
      dispose.




*Embedded
        derivatives*





On
      July
      25, 2007, the Company issued US$40,000 of guaranteed senior secured convertible
      notes (the “Notes”) which is due on July 25, 2012. According to the Notes
      Purchase Agreement, the Company is required to redeem part of the principal
      of
      the Notes if the conversion price is below a certain threshold. Whenever the
      Company redeems the Note, the Company has to pay an interest which calculated
      at
      the annual interest rate of 16% on the redeemed principal amount (note 14).
      Pursuant to SFAS No. 133 “Accounting For Derivative Instruments And Hedging
      Activities” and Emerging Issues Task Force (“EITF”) Issue No. 00-19 “Accounting
      For Derivative Financial Instruments Indexed To And Potentially Settled In
      A
      Company’s Own Stock”, the Company bifurcates the redemption feature from the
      Notes as the redemption feature is determined to be not clearly and closely
      related to the host contract. The redemption feature is recorded at fair value,
      mark-to-market at each reporting period, and are carried a separate line of
      the
      accompanying balance sheet.




Revenue
        recognition





The
      Company derives its revenue primarily from the sale of various branded
      conventional seeds and branded seeds with biotechnology traits.





Revenue
      is recognized when pervasive evidence of an arrangement exists, products have
      been delivered, the price is fixed or determinable, collectibility is reasonably
      assured and the right of return has expired. The Company generally determines
      the selling price after the goods are delivered to the customers. Accordingly,
      the Company defers revenue until the selling price has been finalized with
      the
      customers.





The
      estimated amounts of revenues billed in excess of revenues recognized are
      recorded as deferred revenues.


F-17





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES -
                Continued**




Government
        subsidies





A
      government subsidy is recognized only when there is reasonable assurance that
      the enterprise will comply with any conditions attached to the grant and the
      grant will be received.





The
      Company receives government subsidies in the form of funds for research and
      development activities and subsidies which reduce the cost of land use rights
      and the cost of plant and equipment.





(a)
            The
                Company received RMB859 to fund research and development activities
                for
                the year ended December 31, 2005 and no government subsidies have
                been
                received for the nine months ended September 30, 2006 and the year
                ended
                September 30, 2007.





(b)
            The
                Company received a government subsidy of RMB1,543 for the year ended
                December 31, 2005, in a form of a reduction in the cost of plant
                and
                equipment. No government subsidies have been received for the nine
                months
                ended September 30, 2006 and the year ended September 30,
                2007.





(c)
            The
                Company received a government incentive of RMB300 for the year ended
                December 31, 2005 for the achievement of obtaining a listing status
                in the
                overseas stock market. Such amounts are recorded as other income.
                No
                government subsidies have been received for the nine months ended
                September 30, 2006 and the year ended September 30,
                2007.




*Cost
        of revenues*




Cost
      of
      revenues consists of expenses directly related to crop seed sales, including
      the
      purchase prices for seeds, depreciation and amortization, impairment of
      inventory, shipping and handling costs, salary and compensation, supplies,
      license fees, and rent.




*Research
        and development costs*





Research
      and development costs relating to the development of new products and processes,
      including significant improvements and refinements to existing products, are
      expensed as incurred.




*Advertising
        costs*





Advertising
      costs are expensed when incurred. Advertising costs included in selling and
      marketing expenses were RMB4,288, RMB3,288 (unaudited), RMB7,534 and RMB4,941
      respectively for the year ended December 31, 2005, the nine months ended
      September 30, 2005 and 2006, and the year ended September 30, 2007.




Shipping
        and handling costs





The
      Company includes shipping and handling costs as either cost of goods sold or
      selling and administrative expenses depending on the nature of the expenses.
      Shipping and handling costs which relate to transportation of products to
      customers’ locations is charged to selling and marketing expenses and shipping
      and handling which relate to the transportation of corn seed to factories from
      suppliers and from one factory to another is charged to cost of revenues.





For
      the
      year ended December 31, 2005, the nine months ended September 30, 2005 and
      2006
      and year ended September 30, 2007, the shipping and handling cost included
      in
      selling and marketing expenses were RMB5,870, RMB4,347 (unaudited), RMB11,189
      and RMB8,287, respectively.





F-18





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES -
                Continued**




*Allowance
        for doubtful account*





The
      Company regularly monitors and assesses the risk of not collecting amounts
      owed
      to the Company by customers. This evaluation is based upon a variety of factors
      including: an analysis of amounts current and past due along with relevant
      history and facts particular to the customer. Based upon the results of this
      analysis, the Company records an allowance for uncollectible accounts for this
      risk.




*Income
        taxes*





Deferred
      income taxes are recognized for the future tax consequences of temporary
      differences between the tax bases of assets and liabilities and their reported
      amounts in the consolidated financial statements, net of operating loss carry
      forwards and credits. Deferred tax assets are reduced by a valuation allowance
      when, in the opinion of management, it is more likely than not that some portion
      or all of the deferred tax assets will not be realized. Current income taxes
      are
      provided for in accordance with the laws of the relevant tax
      authorities.




*Foreign
        currency translation*





The
      functional currency of the Company excluding Agritech and State Harvest is
      Renminbi. Monetary assets and liabilities denominated in currencies other than
      Renminbi are translated into Renminbi at the rates of exchange ruling at the
      balance sheet date. Transactions in currencies other than Renminbi are converted
      into Renminbi at the applicable rates of exchange prevailing the transactions
      occurred. Transaction gains and losses are recognized in the consolidated
      statements of operations.





The
      functional currency of Agritech and State Harvest are maintained in United
      State
      dollars. Assets and liabilities are translated at the exchange rates at the
      balance sheet date, equity accounts are translated at historical exchange rates
      and revenues, expenses, gains and losses are translated using the average rate
      for the period. Translation adjustments are reported as cumulative translation
      adjustments and are shown as a separate component of other comprehensive loss
      in
      the consolidated statements of shareholders’ equity and comprehensive income.
      The Company has chosen Renminbi as its reporting currency.




*Comprehensive
        income*





Comprehensive
      income is defined to include all changes in equity except those resulting from
      investments by owners and distributions to owners. Comprehensive income for
      the
      years or period presented has been disclosed within the consolidated statements
      of shareholders’ equity and comprehensive income separately.




Income
        per share





Basic
      income per share is computed by dividing net income by the weighted average
      number of common shares outstanding during the years or period. Diluted income
      per share gives effect to all dilutive potential common shares outstanding
      during the years or period. The weighted average number of common shares
      outstanding is adjusted to include the number of additional common shares that
      would have been outstanding if the dilutive potential common shares had been
      issued. In computing the dilutive effect of potential common shares, the average
      stock price for the period is used in determining the number of treasury shares
      assumed to be purchased with the proceeds from the exercise of options.


F-19





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES -
                Continued**




Share-based
        compensation





The
      Company adopts “SFAS” No. 123 (revised 2004) (“SFAS No. 123(R)”), ‘‘Share-based
      Payment’’, which requires that share-based payment transactions with employees,
      such as share options, be measured based on the grant-date fair value of the
      equity instrument issued and recognized as compensation expense over the
      requisite service period, with a corresponding addition to equity. Under this
      method, compensation cost related to employee share options or similar equity
      instruments is measured at the grant date based on the fair value of the award
      and is recognized over the period during which an employee is required to
      provide service in exchange for the award, which generally is the vesting
      period.




Recently
        issued accounting pronouncements





In
      June
      2006, the EITF reached a consensus on Issue No. 06-3, “How Taxes Collected from
      Customers and Remitted to Governmental Authorities Should Be Presented in the
      Income Statement (That Is, Gross versus Net Presentation)”, or EITF 06-3. EITF
      06-3 requires that entities present these taxes in the income statement on
      either a gross or net basis, based on their accounting policy. If such taxes
      are
      significant, and are presented on a gross basis, the amounts of those taxes
      should be disclosed. The consensus is effective for interim and annual reporting
      periods beginning after December 15, 2006. The Company does not expect the
      adoption of this statement will have a material effect on the Company’s
      financial position or results of operations.




In
      July
      2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation
      No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 clarifies
      the accounting for uncertainty in income taxes recognized in an enterprise’s
      financial statements in accordance with FASB Statement No. 109, Accounting
      for
      Income Taxes. FIN 48 prescribes a recognition threshold and measurement
      attribute for the financial statement recognition and measurement of a tax
      position taken or expected to be taken in a tax return. This Interpretation
      also
      provides guidance on derecognition, classification, interest and penalties,
      accounting in interim periods, disclosure, and transition. This Interpretation
      is effective for fiscal years beginning after December 15, 2006, with earlier
      adoption permitted. The Company is currently evaluating the provisions of FIN
      48.




In
      September 2006, FASB issued SFAS No. 157, “Fair Value Measurements” This
      Statement defines fair value, establishes a framework for measuring fair value
      in generally accepted accounting principles (GAAP), and expands disclosures
      about fair value measurements. This Statement applies under other accounting
      pronouncements that require or permit fair value measurements. The definition
      of
      fair value retains the exchange price notion in earlier definitions of fair
      value. This Statement emphasizes that fair value is a market-based measurement,
      not an entity-specific measurement. This Statement is effective for financial
      statements issued for fiscal years beginning after November 15, 2007, and
      interim periods within those fiscal years. Earlier application is encouraged.
      The Company does not expect the adoption of this statement will have a material
      effect on the Company’s financial position or results of
      operations.




F-20


**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES -
                Continued**




In
      February 2007, FASB issued SFAS No.159, “The fair value option for Financial
      Assets and Financial Liabilities-Including an amendment of FASB Statement
      No.115”. This statement permits entities to choose to measure many financial
      instruments and certain other items at fair value. The objective is to improve
      financial reporting by providing entities with the opportunity to mitigate
      volatility in reported earnings caused by measuring related assets and
      liabilities differently without having to apply complex hedge accounting
      provisions. This statement is expected to expand the use of fair value
      measurement, which is consistent with the Boards long-term measurement
      objectives for accounting for financial instruments. The Company does not expect
      the adoption of this statement will have a material effect on the Company’s
      financial position or results of operations.




On
      June 27, 2007, the FASB reached a final consensus on EITF Issue 07-3,
“Accounting for Advance Payments for Goods or Services to Be Used in Future
      Research and Development Activities” (“EITF 07-03”). Currently, under FASB
      Statement No. 2, “Accounting for Research and Development Costs”,
      nonrefundable advance payments for future research and development activities
      for materials, equipment, facilities, and purchased intangible assets that
      have
      no alternative future use are expensed as incurred. EITF 07-03 addresses whether
      such non-refundable advance payments for goods or services that have no
      alternative future use and that will be used or rendered for research and
      development activities should be expensed when the advance payments are made
      or
      when the research and development activities have been performed. The consensus
      reached by the FASB requires companies involved in research and development
      activities to capitalize such non-refundable advance payments for goods and
      services pursuant to an executory contractual arrangement because the right
      to
      receive those services in the future represents a probable future economic
      benefit. Those advance payments will be capitalized until the goods have been
      delivered or the related services have been performed. Entities will be required
      to evaluate whether they expect the goods or services to be rendered. If an
      entity does not expect the goods to be delivered or services to be rendered,
      the
      capitalized advance payment will be charged to expense. The consensus on EITF
      07-03 is effective for financial statements issued for fiscal years beginning
      after December 15, 2007, and interim periods within those fiscal years.
      Earlier application is not permitted. Entities are required to recognize the
      effects of applying the guidance in EITF 07-03 prospectively for new contracts
      entered into after the effective date. The Company is currently evaluating
      the
      impact of EITF 07-03 on its financial position and results of operations
      following adoption.




On
      December 4, 2007, the FASB issued SFAS No. 141 (revised 2007) (“SFAS No.
      141(R)”), “Business Combinations” and SFAS No. 160, “Non controlling Interests
      in Consolidated Financial Statements”. Statement 141(R) improves reporting by
      creating greater consistency in the accounting and financial reporting of
      business combinations, resulting in more complete, comparable, and relevant
      information for investors and other users of financial statements. To achieve
      this goal, the new standard requires the acquiring entity in a business
      combination to recognize all (and only) the assets acquired and liabilities
      assumed in the transaction; establishes the acquisition-date fair value as
      the
      measurement objective for all assets acquired and liabilities assumed; and
      requires the acquirer to disclose to investors and other users all of the
      information they need to evaluate and understand the nature and financial effect
      of the business combination. Statement 141(R) also will reduce the complexity
      of
      existing GAAP. The newly issued standard includes both core principles and
      pertinent application guidance, eliminating the need for numerous EITF issues
      and other interpretative guidance. Statement 160 improves the relevance,
      comparability, and transparency of financial information provided to investors
      by requiring all entities to report noncontrolling (minority) interests in
      subsidiaries in the same way—as equity in the consolidated financial statements.
      Moreover, Statement 160 eliminates the diversity that currently exists in
      accounting for transactions between an entity and noncontrolling interests
      by
      requiring they be treated as equity transactions. The two standards will be
      effective for fiscal years beginning after December 15, 2008 and earlier
      adoption is prohibited The Company is currently evaluating the impact of SFAS
      141(R) and SFAS No. 160 on its financial position and results of operations
      following adoption.


F-21




**3.**  **DEBT SECURITIES**





The
      Company’s investments in debt securities consist of investments in US Government
      Agencies and Corporate bonds which are classified as follows:





December
                31,
            
            September
                30,2005
            
            2006
            
            2007RMB
            
            RMB
            
            RMBHeld-to-maturity
                investmentsUS
                Government Agencies bonds, at amortized cost
            
            
            -
            
            
            143,455
            
            
            111,436Available-for-sale
                securityUS
                Corporate bonds, at fair value
            
            
            -
            
            
            3,361
            
            
            22,532-
            
            
            146,816
            
            
            133,968





The
      fair
      value of the held-to-maturity investment as of September 30, 2006 and 2007
      were
      RMB141, 990 and RMB111, 494, respectively. Based on the evaluation and the
      Company’s ability and intent to hold these investments for a reasonable period
      of time sufficient for a forecasted recovery of fair value, the Company does
      not
      consider held-to-maturity investments to be impaired at September 30, 2006
      and
      2007. The held-to-maturity investment at September 30, 2006 and 2007 has
      remaining contractual maturities of less than one year.





During
      the nine months ended September 30, 2006, the Company sold certain investments
      of RMB54,728 (amortized cost) near their maturity during the period with
      realized profit of RMB394 in order to liquidate the securities for an additional
      capital to a subsidiary, Biotech. There is no held-to-maturity investment
      liquidated before its maturity during the year ended September 30,
      2007.





A
      corporate bond with maturity date in 2047 was purchased during the year ended
      September 30, 2007 was classified under available-for-sale as the Company has
      no
      intent to hold it to its maturity. The unrealised holding gains and losses
      were
      nil as at September 30, 2006 and 2007. The proceeds from sales of
      available-for-sale securities were nil and RMB3, 415 for the nine months ended
      September 30, 2006 and the year ended September 30, 2007. The gross realized
      gains on the sales were nil and RMB54 for the nine months ended September 30,
      2006 and the year ended September 30, 2007, respectively





Included
      in the held-to-maturity investments, approximately RMB115,728 and RMB111,436
      has
      been pledged for bank loan as of September 30, 2006 and 2007,
      respectively.





F-22




**4.**  **RELATED
      PARTY BALANCES AND TRANSACTIONS**





(1)
            Amounts
                due from related parties as of September 30, 2006 and 2007 are as
                follows:




Name
                of related party
            
            Relationship
            
            September
                30,2006
            
            2007RMB
            
            RMBShijiazhuang
                Liyu Technology Development Co., Ltd. (“Liyu”)
            
            
            (iii
            )
            
            4,120
            
            
            755Biocentury
                Transgence (China)Co.,
                Ltd. (“Biocentury”)
            
            
            (v
            )
            
            7
            
            
            -Minority
                shareholders of Denong (note a)
            
            
            
            
            
            2,741
            
            
            5Jilin
                Jinong High Technology Development Co., Ltd. (“Jinong”) (note
                b)
            
            
            (iii
            )
            
            -
            
            
            6,624Shareholders
                of Jilin Changrong High-Tech Co., Ltd. (“Changrong”)
            
            
            (vi
            )
            
            6,500
            
            
            7,32513,368
            
            
            14,709Reclassified
                to non-current assets
            
            
            
            
            
            (6,500
            )
            
            (7,325
            )6,868
            
            
            7,384





Note
      (a):  The
      amount represents receivable from a group of minority shareholders for unpaid
      capital of a subsidiary of Denong. The balance is payable on demand with
      interest free.





Note
      (b):  The
      amount represents the temporary loan to Jinong, which is payable on demand
      with
      interest free.


F-23





**4.**
            **RELATED
                PARTY BALANCES AND TRANSACTIONS -
                Continued**





(2)
            Amounts
                due to related parties as of September 30, 2006 and 2007 are as
                follows:





Name
                of related party
            
            Relationship
            
            September
                30,2006
            
            2007RMB
            
            RMBMinority
                shareholder of Denong (note c)
            
            
            
            
            
            7,709
            
            
            1,059He
                Nan Agriculture University
            
            
            (iv
            )
            
            100
            
            
            91Yuan
                Liang
            
            
            (i
            )
            
            20
            
            
            30Company
                controlled by Han Geng
              Chen
            
            
            
            
            
            660
            
            
            626Company
                controlled by Yuan Liang
            
            
            
            
            
            660
            
            
            626Company
                controlled by Yang Ya
              Sheng
            
            
            
            
            
            385
            
            
            365Other
                shareholders of State Harvest
            
            
            (ii
            )
            
            174
            
            
            165Biocentury
            
            
            (v
            )
            
            273
            
            
            1,269Changrong
            
            
            (vi
            )
            
            354
            
            
            -Jilin
                Changji Seed Limited
              (“Changji”)
            
            
            (iii
            )
            
            -
            
            
            210,335
            
            
            4,233





Note
                (c):
            This
                is the amount temporarily funded by minority shareholders of Denong.
                The
                amount is payable on demand with interest free.





(3)
            Transactions
                with related parties for the year ended December 31, 2005, nine months
                ended September 30, 2005 and 2006 and the year ended September 30,
                2007
                are as follows:




(a)  Sales




Name
                of related party
            
            Relationship
            
            Year
                ended
              December
                31,
            
            Nine
                months ended
              September
                30,
            
            Year
                ended
              September
                30,2005
            
            2005
            
            2006
            
            2007(unaudited)RMB
            
            RMB
            
            RMB
            
            RMBBiocentury
            
            
            (v
            )
            
            -
            
            
            -
            
            
            1,234
            
            
            1,992Jinong
            
            
            (iii
            )
            
            -
            
            
            -
            
            
            -
            
            
            398-
            
            
            -
            
            
            1,234
            
            
            2,390





(b)  Purchases




Name
                of related party
            
            Relationship
            
            Year
                ended
              December
                31,
            
            Nine
                months ended
              September
                30,
            
            Year
                ended
              September
                30,2005
            
            2005
            
            2006
            
            2007(unaudited)RMB
            
            RMB
            
            RMB
            
            RMBBiocentury
            
            
            (v
            )
            
            -
            
            
            -
            
            
            2,989
            
            
            20,271Liyu
            
            
            (iii
            )
            
            -
            
            
            -
            
            
            -
            
            
            3Changji
            
            
            (iii
            )
            
            -
            
            
            -
            
            
            -
            
            
            2-
            
            
            -
            
            
            2,989
            
            
            20,276





F-24





**4.**
            **RELATED
                PARTY BALANCES AND TRANSACTIONS -
                Continued**





(c)  Technology
      usage fees




Name
                of related party
            
            Relationship
            
            Year
                ended
              December
                31,
            
            Nine
                months ended
              September
                30,
            
            Year
                ended
              September
                30,2005
            
            2005
            
            2006
            
            2007(unaudited)RMB
            
            RMB
            
            RMB
            
            RMBLiyu
            
            
            (iii
            )
            
            4,958
            
            
            1,300
            
            
            201
            
            
            5,776He
                Nan AgricultureUniversity
            
            
            (iv
            )
            
            302
            
            
            100
            
            
            -
            
            
            200Minority
                shareholderof
                Denong
            
            
            
            
            
            -
            
            
            -
            
            
            -
            
            
            1,024Biocentury
            
            
            (v
            )
            
            -
            
            
            -
            
            
            -
            
            
            9755,260
            
            
            1,400
            
            
            201
            
            
            7,975





The
      above
      amounts relate to technology usage fees paid to certain related party research
      centers for the exclusive right to use certain seed technologies.





(d)  Consulting
      service fee




Name
                of related party
            
            Relationship
            
            Year
                ended
              December
                31,
            
            Nine
                months ended
              September
                30,
            
            Year
                ended
              September
                30,2005
            
            2005
            
            2006
            
            2007(unaudited)RMB
            
            RMB
            
            RMB
            
            RMBChardan
                Capital LLC
            
            
            (viii
            )
            
            242
            
            
            -
            
            
            -
            
            
            -





(e)  Purchases
      of intangible assets




Name
                of related party
            
            Relationship
            
            Year
                ended
              December
                31,
            
            Nine
                months ended
              September
                30,
            
            Year
                ended
              September
                30,2005
            
            2005
            
            2006
            
            2007(unaudited)RMB
            
            RMB
            
            RMB
            
            RMBLiyu
            
            
            (iii
            )
            
            N/A
            
            
            N/A
            
            
            -
            
            
            1,000





(f)  Purchases
      of plant and equipment




Name
                of related party
            
            Relationship
            
            Year
                ended
              December
                31,
            
            Nine
                months ended
              September
                30,
            
            Year
                ended
              September
                30,2005
            
            2005
            
            2006
            
            2007(unaudited)RMB
            
            RMB
            
            RMB
            
            RMBJinong
            
            
            (iii
            )
            
            N/A
            
            
            N/A
            
            
            -
            
            
            790





F-25





**4.**
            **RELATED
                PARTY BALANCES AND TRANSACTIONS -
                Continued**





(g)  Interest
      income




Name
                of related party
            
            Relationship
            
            Year
                ended
              December
                31,
            
            Nine
                months ended
              September
                30,
            
            Year
                ended
              September
                30,2005
            
            2005
            
            2006
            
            2007(unaudited)RMB
            
            RMB
            
            RMB
            
            RMBShareholder
                of Changrong
            
            
            (vii
            )
            
            N/A
            
            
            N/A
            
            
            -
            
            
            825





(4)
      Relationship between the Company and related parties is as
      follows:




(i)
            Being
                a principal shareholder and director of the
                Company.




(ii)
            Being
                State Harvest Shareholders, other than Han Geng Chen, Yuan Liang
                and Yang
                Ya Sheng.




(iii)
            Being
                equity investees of the Company.




(iv)
            Being
                a minority shareholder of Beijing
                Origin.




(v)
            Being
                an investment of the Company with less than 20% equity interest before
                October 19, 2006. After October 19, 2006 when the Company further
                acquired
                9% equity interest, the investee has become an associate of the Company.
                The Company considered that they have the ability to exercise significant
                influence over the operating policies of Biocentury subsequent to
                December
                31, 2005. Accordingly, the transactions subsequent to December 31,
                2005
                and balances as of September 30, 2006 and 2007 were identified as
                related
                party transactions and balances.




(vi)
            Being
                an equity investee of the Company before April 11,
                2007.




(vii)
            Being
                minority shareholder of Changrong.




(viii)
            Being
                an affiliate of a former member of management of the
                Company.




**5.**
            **ADVANCES
                TO SUPPLIERS**





Advances
      to suppliers consist of the following:




September
                30,2006
            
            2007RMB
            
            RMBPurchases
                of materials
            
            
            1,667
            
            
            126Prepayments
                for advertisement
            
            
            24
            
            
            226Others
            
            
            1,868
            
            
            6773,559
            
            
            1,029





Advances
      to suppliers mainly represent deposits paid but the materials and services
      have
      not yet been provided to the Company.





F-26





**6.**
            **INVENTORIES**





Inventories
      consist of the following:




September
                30,2006
            
            2007RMB
            
            RMBWork
                in progress and supplies
            
            
            113,200
            
            
            234,955Finished
                goods
            
            
            230,375
            
            
            214,252343,575
            
            
            449,207





As
      of
      September 30, 2006 and 2007, goods already delivered to customers but still
      recorded in finished goods, were RMB12,412 and RMB16,892, respectively. As
      the
      Company does not recognize revenue until the selling prices of respective goods
      have been finalized with the customers, goods delivered to customers before
      the
      year ends will be transferred to cost of revenues when related revenue is
      recognized.





The
      Company made allowances of RMB12,145 and RMB77,244 as of September 30, 2006
      and
      2007 respectively based on the assessment of the lower of cost or the
      market.





**7.**
            **PREPAID
                EXPENSES AND OTHER CURRENT
                ASSETS**





Prepaid
      expenses and other current assets consist of the following:





September
                30,2006
            
            2007RMB
            
            RMBAdvances
                to staff for business use
            
            
            8,706
            
            
            4,992Deposit
                for technology usage fees
            
            
            -
            
            
            516Due
                from former minority shareholders of Denong
            
            
            2,376
            
            
            -Refundable
                deposit for a canceled project
            
            
            -
            
            
            1,841Prepaid
                research and development expense
            
            
            -
            
            
            2,083Other
                prepaid expenses
            
            
            1,684
            
            
            2,02712,766
            
            
            11,459




**8.**
            **LAND
                USE RIGHTS, NET**





Land
      use
      rights, net consist of the following:




September
                30,2006
            
            2007RMB
            
            RMBLand
                use rights
            
            
            17,884
            
            
            23,058Accumulated
                amortization
            
            
            (961
            )
            
            (1,504
            )Land
                use rights, net
            
            
            16,923
            
            
            21,554





Land
      use
      rights with net values of RMB2,916 and RMB8,325 have been pledged as collateral
      for bank loans of Beijing Origin as of September 30, 2006 and 2007,
      respectively.


F-27





**9.**
            **PLANT
                AND EQUIPMENT, NET**





Plant
      and
      equipment, net consist of the following:





September
                30,2006
            
            2007RMB
            
            RMBPlant
                and building
            
            
            86,856
            
            
            103,075Machinery
                and equipment
            
            
            26,853
            
            
            32,165Furniture
                and office equipment
            
            
            9,429
            
            
            12,398Motor
                vehicles
            
            
            14,452
            
            
            20,502Leasehold
                improvements
            
            
            492
            
            
            658Total
            
            
            138,082
            
            
            168,798Accumulated
                depreciation and amortization
            
            
            (22,758
            )
            
            (35,688
            )Construction
                in progress
            
            
            10,101
            
            
            9,933Plant
                and equipment, net
            
            
            125,425
            
            
            143,043





Included
        in plant and building, net values of RMB42,845 and RMB56,226 have been pledged
        for bank loans of Beijing Origin as of September 30, 2006 and 2007,
        respectively.  The
        depreciation expenses for the year ended December 31, 2005, nine months ended
        September 30, 2005 and 2006 and the year ended September 30, 2007 were RMB5,352,
        RMB3,909 (unaudited), RMB6,660 and RMB11,427, respectively.





Construction
      in progress relates to the production facilities under construction by the
      Company.





**10.**
            **EQUITY
                INVESTMENTS**





Long-term
      investments consist of the following:


September
                30,2006
            
            2007RMB
            
            RMBEquity
                method investment
            
            
            24,892
            
            
            58,882Cost
                method investment
            
            
            13,996
            
            
            -Total
            
            
            38,888
            
            
            58,882




Equity
      method investment





Liyu





In
      2004,
      the Company purchased 30% equity interest in Liyu from one of its principal
      shareholders, Yang Ya Sheng, for RMB30. The Company accounts for its ownership
      in Liyu under the equity method. For the nine months ended September 30, 2006
      and the year ended September 30, 2007, the Company recorded its pro-rata share
      of earnings in Liyu of RMB1,026 and RMB286 respectively. The Company also
      received dividends of RMB1,200 from Liyu for each of the nine months ended
      September 30, 2006 and the year ended September 30, 2007. The dividend received
      was accounted for as a reduction in cost of investment.


F-28





**10.**
            **EQUITY
                INVESTMENTS - Continued**





Changrong





In
      2006,
      the Company acquired a 34.77% equity interest in Changrong for RMB10,430. The
      Company recorded its pro-rata share of earnings (losses) in Changrong of
      RMB11,802 and RMB(3,764) for the nine months ended September 30, 2006 and for
      the period from October 1, 2006 to April 10, 2007, respectively. The summarized
      financial information of Jilin Changrong for 2006 is as follows:





September
                30,2006RMBCurrent
                assets
            
            
            85,469Non-current
                assets
            
            
            81Current
                liabilities
            
            
            (21,518
            )-Net
                assets
            
            
            64,032





Nine
                months ended September 30,2006RMBRevenues
            
            
            109,182Cost
                of revenues
            
            
            (68,175
            )Gross
                profit
            
            
            41,007Total
                operating expenses
            
            
            (5,126
            )Other
                expenses, net
            
            
            (1,849
            )Income
                before taxes
            
            
            34,032Income
                tax expense
            
            
            -Net
                income
            
            
            34,032





On
                April 11, 2007, Beijing Origin acquired further equity interest in
                Changrong and obtained controlling interest by receiving a majority
                of the
                board voting rights of 60%. The results of Changrong have been
                consolidated into the financial statements of the Company from a
                voting
                right model since that date (note
                1).




Biocentury





On
      October 19, 2006, Origin acquired an additional 19% of the entity interest
      in
      Biocentury, a high-tech precursors in China’s transgenic plant industry.
      Together with the acquisition of 7% entity interest in 2004 and 8% in 2005,
      Origin owns 34% of Biocentury and accounts for the investment in Biocentury
      under the equity method. For the year ended September 30, 2007, the Company
      recorded its pro-rata share of earnings in Biocentury of RMB4,919.




Jinong





On
      January 1, 2007, Jilin Academy of Agricultural Sciences transferred 23% of
      the
      equity interest of Jinong to the Beijing Origin for RMB21,880. The Company
      accounts for its investment in Jinong under the equity method, and for the
      year
      ended September 30, 2007 the Company recorded its pro-rata share of losses
      in
      Jinong of RMB2,128.


F-29


**10.**
            **EQUITY
                INVESTMENTS - Continued**




*Changji*





On
      October 25, 2006, Changchun Origin acquired 35% of the equity interest in
      Changji for RMB1,750. The Company accounts for the investment in Changji under
      the equity method, and for the year ended September 30, 2007, the Company
      recorded its pro-rata share of earnings in Changji of RMB18.




Cost
        method investment





In
      2004,
      the Company acquired an 8% of the equity interest in Biocentury for a cash
      consideration of RMB8,320. The Company and Biocentury completed this transaction
      on October 8, 2004 upon obtaining the necessary government approvals. In 2005,
      the Company acquired an additional 7% of the equity interest in Biocentury
      for a
      cash consideration of RMB5,676. On August 4, 2005, the Company obtained
      necessary government approval and completed the acquisition. The Company had
      accounted for its investment in Biocentury at cost before October 19, 2006.
      On
      October 19, 2006, the Company acquired an additional 19% of the equity interest
      in Biocentury and accounted for the investment in Biocentury under the equity
      method, after secured an aggregate equity interest of 34%.





**11.**
            **ACQUIRED
                INTANGIBLE ASSETS, NET**





Acquired
      intangible assets consist of the following:




September
                30,2006
            
            2007RMB
            
            RMBTechnology
                rights for licensed seeds
            
            
            29,150
            
            
            51,217Distribution
                network
            
            
            5,334
            
            
            6,975Trademark
            
            
            -
            
            
            1,764Others
            
            
            1,356
            
            
            1,51835,840
            
            
            61,474Accumulated
                amortization
            
            
            (5,935
            )
            
            (16,066
            )Impairment
                provision
            
            
            (27
            )
            
            (2,351
            )Acquired
                intangible assets, net
            
            
            29,878
            
            
            43,057





Amortization
      expense for the year ended December 31, 2005, nine months ended September 30,
      2005 and 2006 and the year ended September 30, 2007 were RMB1,015, RMB923
      (unaudited), RMB4,400 and RMB10,158 respectively.





Impairment
      provision for the nine months ended September 30, 2006 and the year ended
      September 30, 2007 were RMB27 and RMB2,324, respectively. It related to seed
      rights for which no active market existed.





Amortization
      expense on these intangible assets for each of the next five years is as
      follows:





Year
                ending September 30,
            
            **RMB**2008
            
            
            11,5962009
            
            
            10,8282010
            
            
            8,8202011
            
            
            6,2862012
            
            
            2,750Total
            
            
            40,280





F-30


The
      Company enters into technology transfer and usage agreements with strategic
      partners. The Company pays up-front fees for the exclusive rights to certain
      seed technologies. Amounts are then amortized over an average usage period
      of 5
      years into cost of revenues.





**12.**
            **OTHER
                ASSETS**





Other
      assets consist of the following:


September
                30,2006
            
            2007RMB
            
            RMBPrepaid
                lease
            
            
            
            
            
            775
            
            
            645Deposits
                for purchase of acquired intangible assets
            
            
            Note
                (i
            )
            
            10,940
            
            
            1,400Deposits
                for purchase of plant and equipment
            
            
            
            
            
            4,341
            
            
            4,463Deposits
                for leased properties and land use rights
            
            
            
            
            
            7,049
            
            
            6,718Deposits
                for equity investment in Jinong
            
            
            Note
                (ii
            )
            
            10,000
            
            
            -Others
            
            
            
            
            
            25
            
            
            8033,130
            
            
            13,306





Note
      (i):  The
      Company entered into technology transfer agreements with certain investors
      of
      new seed products and paid deposits.





Note
      (ii):  The
      Company paid a deposit of RMB10,000 to one of the shareholder of Jinong to
      acquire 23% equity interest in Jinong. The transaction was completed on January
      1, 2007.





**13.**
            **BORROWINGS**


September
                30,2006
            
            2007RMB
            
            RMBShort-term
                borrowings
            
            
            253,000
            
            
            268,400Long-term
                borrowings
            
            
            1,880
            
            
            1,880





Short-term
      borrowings





As
      of
      September 30, 2007, short-term borrowings were comprised of secured bank loans
      of RMB 60,000, and unsecured bank loan of RMB208,400, of which RMB100,000 under
      Beijing Origin has been guaranteed by a principal shareholder and director,
      Han
      Gengchen and a subsidiary, Biotech. The secured loan was secured by the
      Company’s land use rights of RMB8,325 (note 8), the plant and equipment of
      RMB56,226 (note 9) and debt securities of RMB111,436 (note 3). The annual
      interest rate ranged from 5.85% to 7.29%.





As
      of
      September 30, 2006, short-term borrowings were comprised of secured bank loans
      of RMB133,000, and unsecured bank loan of RMB120,000, of which RMB100,000 under
      Beijing Origin has been guaranteed by a principal shareholder and director,
      Han
      Gengchen and a subsidiary, Biotech. The secured loan was secured by the
      Company’s land use rights of RMB2,916 (note 8), the plant and equipment of
      RMB42,845 (note 9) and debt securities of RMB115,728 (note 3). The annual
      interest rate ranged from 4.5% to 7.44%.





Interest
      expense and weighted average interest rate for the nine months ended September
      30, 2006 and year ended September 30, 2007 were RMB5,005 and 5.95%, and
      RMB21,697 and 6.24 %, respectively.




Long-term
        borrowings





As
      of
      September 30, 2006 and 2007, long-term borrowings were comprised of a third
      party’s loan of RMB1,880 repayable on October 25, 2008 and 2009 by two equal
      installments and bear interest at 2.4% per annum. The borrowings are not
      secured.


F-31





**14.**
            **CONVERTIBLE
                NOTES**





On
      July
      25, 2007, the Company issued US$40,000 of guaranteed senior secured convertible
      notes (the “Notes”) which is due on July 25, 2012. The Notes are secured by the
      shares of certain of the Company’s subsidiaries. The Notes bear interest at the
      rate of 1% per annum, payable semi-annually in arrears whereas the effective
      interest rate is 13% per annum. The Notes are convertible into shares of common
      stock of the Company at an initial conversion price of US$11.50 per share,
      and
      the conversion price is subject to adjustment in certain circumstances,
      including semi-annual reset (the “Reset Date”) of the conversion price as at
      June 30 or December 31 of any year, commencing with December 31, 2008 and upon
      occurrence of certain dilutive events, in each case subject to certain
      conditions. Upon the occurrence of specified asset sale, change of control
      or
      termination of trading, the Notes holders may require the Company to repurchase
      all or a portion of their Notes.





At
      each
      Reset Date, if the conversion rate is adjusted so that each US$100 principal
      amount of the Notes shall be convertible into more than 11,738 shares of common
      stock, the Company shall be required to redeem the Notes (the “Mandatory
      Redemption”) on a pro rata basis at the redemption price which is determined as
      the difference between the aggregate principal amount of Notes outstanding
      on
      such Mandatory Redemption Date and the product of 4,692,234 shares and the
      conversion price on such Mandatory Redemption Date. Furthermore, at maturity
      date, the Company shall be required to redeem any outstanding principal at
      the
      redemption amount determined so that it represents for the Note holders a gross
      yield of 16% on a semi-annual basis. Pursuant to SFAS No. 133 “Accounting For
      Derivative Instruments And Hedging Activities” and EITF Issue No. 00-19
“Accounting For Derivative Financial Instruments Indexed To And Potentially
      Settled In A Company’s Own Stock”, this redemption feature is treated as an
      embedded derivative and is separately presented as a long term liability in
      the
      consolidated balance sheet. As of the issuance date of July 25, 2007 and
      September 30, 2007, the fair value of the redemption feature was RMB99,858
      and
      RMB86,937, respectively.





The
      change in the fair value of the embedded derivative amounted to RMB12,601 was
      charged to the consolidated statement of operations. The fair values of the
      redemption feature estimated on the issuance date which was July 25, 2007 and
      September 30, 2007 using binomial model are as follows:





As
                of
              July
                25, 2007
            
            As
                of
              September
                30, 2007Risk-free
                rate of return
            
            
            4.78
            %
            
            4.24
            %Time
                to expiration
            
            
            5
                years
            
            
            4.82
                yearsVolatility
                rate
            
            
            49.12
            %
            
            49.12
            %Dividend
                yield
            
            
            -
            
            
            -





Unless
      in
      the occurrence of triggering events mentioned above, the Notes may not be
      redeemed by the Company, in whole or in part at any time prior to July 25,
      2012.





Although
      the convertible notes can be converted into 3,478,260 shares at the initial
      conversion price of US$11.50 per share, the effective conversion price of the
      convertible notes was US$7.70 per share. In accordance with EITF 98-5 and EITF
      00-27, the value of the beneficial conversion features of the convertible notes
      on issuance date would be RMB 31,230, which was separately recorded as an equity
      item in the balance sheet.





The
      discount associates with the issuance of the convertible notes amounted to
      RMB131,087 is being amortized throughout July 25, 2012, using the effect
      interest method. Amortization of the Note discount for the year ended September
      30, 2007 was RMB3,570, which as reflected in the interest expenses.





The
      Notes
      interest for the year ended September 30, 2007 was RMB557.





F-32





**15.**  **OTHER
      PAYABLES AND ACCRUED EXPENSES**





Other
      payables and accrued expenses consist of:




September
                30,2006
            
            2007RMB
            
            RMBPayable
                for purchase of plant and equipment
            
            
            
            
            
            5,808
            
            
            2,722Payable
                for purchase of land use rights
            
            
            
            
            
            620
            
            
            -Professional
                fee payable
            
            
            
            
            
            4,275
            
            
            8,180Salaries
                payable
            
            
            
            
            
            3,613
            
            
            5,925Accrued
                welfare benefits
            
            
            
            
            
            324
            
            
            -Accrued
                staff bonus
            
            
            
            
            
            -
            
            
            1,905Accrued
                interest
            
            
            
            
            
            3,245
            
            
            2,534Accrued
                compensation expenses
            
            
            
            
            
            -
            
            
            995Other
                taxes payable
            
            
            
            
            
            1,052
            
            
            1,422Deposits
                from growers
            
            
            
            
            
            5,251
            
            
            5,398Due
                to former shareholders of Denong
            
            
            
            
            
            1,977
            
            
            7,396Payable
                for labor union and education expenses
            
            
            
            
            
            1,290
            
            
            1,569Joining
                deposit from distributors of Denong
            
            
            
            
            
            454
            
            
            1Loans
                from employees of Denong
            
            
            Note
                (i
            )
            
            2,916
            
            
            360Loans
                from employees of Beijing
            
            
            Note
                (ii
            )
            
            -
            
            
            1,623Loans
                from third parties
            
            
            Note
                (iii
            )
            
            7,700
            
            
            4,000Payable
                for a guaranteed loan for third party (note 16)
            
            
            
            
            
            2,872
            
            
            -Others
            
            
            
            
            
            4,790
            
            
            6,02446,187
            
            
            50,054





Note
                (i):
            RMB2,916
                and RMB360 were borrowed from employees of Denong with interest of
                12.5%
                per annum at the year ended September 30, 2006 and 2007
                respectively.





Note
                  (ii):
              RMB1,623
                  was borrowed from employees of Beijing Origin with interest free,
                  unsecured and have no fixed repayment
                  terms.





Note
                (iii):
            RMB7,700
                and RMB4,000 were borrowed from third party companies with interest
                free,
                unsecured and have no fixed repayment terms at the year ended September
                30, 2006 and 2007 respectively.




**16.**
            **OTHER
                LONG-TERM LIABILITIES**





The
      company received RMB1,000 from Beijing Financial Administration Bureau for
      a
      research project during the fiscal year of 2006. In June 2007, the company
      received an additional RMB1,000 from Beijing Financial Administration Bureau
      for
      the same research project. The project is in progress and the management expects
      that it will not be completed within one year. The management considers it
      is
      appropriate to record it under long-term liability until it has satisfied all
      the conditions attached to the subsidy.





In
      November 2006, the company received RMB1,458 for a construction project from
      Minister of Agriculture of the PRC. The management expects the project will
      not
      be completed within one year and it is appropriate to record it under long-term
      liability until it has satisfied all the conditions attached to the subsidy.





F-33





**16.**
            **OTHER
                LONG-TERM LIABILITIES -
                Continued**





In
      December 2000, the Company signed an agreement to be a guarantor on a loan
      given
      to Linze Xian Seed Company by Agriculture Bank of China Linze Branch. Upon
      Linze
      Xian Seed Company’s announcement of bankruptcy, the Company was required to
      repay the outstanding loan. On December 28, 2001 the Company was ordered by
      the
      Linze People’s Court to pay RMB2,872 to Agricultural Bank of China Linze Branch
      in fulfillment of the guarantee obligation. The civil judgment of the Zhangye
      Intermediate People’s Court suspended this decision pending final outcome of
      Linze Seed Company’s bankruptcy hearings. In 2002, the final judgment was made
      by the court, and accordingly, the company recorded a provision of RMB2,872.
      As
      of September 30, 2006, the management considers the payable may be made within
      one year and suitable to classify it as current liability.





On
      March
      19, 2007, the lawsuit was concluded by the Zhangye Intermediate People’s Court
      that the Company was not liable to the guaranteed loan and the provision of
      RMB
      2,629 previously recorded was released to general and administrative in the
      consolidated statement of operations for the year ended September 30,
      2007.




**17.**
            **SHARE
                OPTION PLAN**





On
      November 8, 2005, the Company adopted the 2005 Performance Equity Plan (the
      “Plan”) which allows the Company to offer a variety of incentive awards to
      employees. Options to purchase 1,500,000 ordinary shares are authorized under
      the Plan. On the same day, options to purchase 974,000 ordinary shares were
      granted under the terms of the Plan. All such options were priced at US$8.75
      per
      share and expire 5 years from the date of grant and vest over a period of 3
      to 5
      years. No further share options have been granted subsequent to November 8,
      2005. Options to purchase 526,000 ordinary shares are available under the Plan
      as of September 30, 2006 and 2007.





A
      summary
      of the share option activity under the Plan is as follows:





Options
                outstanding
            
            **Exercise
                price**RMB
            
            US$Options
                outstanding at December 31, 2005
            
            
            974,000
            
            
            70.77
            
            
            8.75Options
                granted
            
            
            -
            
            
            -
            
            
            -Options
                exercised
            
            
            -
            
            
            -
            
            
            -Options
                cancelled/forfeited/expired
            
            
            -
            
            
            -
            
            
            -Options
                outstanding at September 30, 2006
            
            
            974,000
            
            
            70.77
            
            
            8.75





Options
                granted
            
            
            -
            
            
            -
            
            
            -Options
                exercised
            
            
            -
            
            
            -
            
            
            -Options
                cancelled/forfeited/expired
            
            
            (45,000
            )
            
            -
            
            
            -Options
                outstanding at September 30, 2007
            
            
            929,000
            
            
            70.77
            
            
            8.75Options
                vested and exercisableAt
                September 30, 2006
            
            
            -
            
            
            -
            
            
            -At
                September 30, 2007
            
            
            472,417
            
            
            70.77
            
            
            8.75





F-34





**17.**
            **SHARE
                OPTION PLAN - Continued**





The
      following table summarizes information with respect to options outstanding
      at  September
      30, 2007:





Options
                outstanding and exercisableNumber
                outstanding
            
            Weighted
                average remaining
              contractual
              life
                years
            
            Weighted
                average
              fair
                value as of
              November
                8, 2005,
              the
                grant dateRMB
            
            US$Exercise
                price:RMB70.77
                (US$8.75)
            
            
            929,000
            
            
            3.12
            
            
            21.76
            
            
            2.69





The
      aggregate intrinsic value as of 30 September 2007 is US$ Nil. No options have
      been exercised during the nine months ended September 30, 2006 and the year
      ended September 30, 2007.





The
      fair
      value of each option granted is estimated on the date of grant using the
      Black-Scholes Option Pricing Model:





Options
                granted (weighted average)Average
                risk-free rate of return
            
            
            4.47
            %Expected
                option life
            
            
            3.5
                yearsVolatility
                rate
            
            
            30.79
            %Dividend
                yield
            
            
            -





The
      Company recorded share-based compensation expense of RMB3,986 and RMB5,284
      for
      the nine months ended September 30 2006 and the year ended September 30, 2007.
      As of September 30, 2006 and 2007, there were RMB14,282 and RMB7,986 of total
      unrecognized compensation expense related to non-vested share-based compensation
      arrangement under the Plan. The unrecognized compensation expense is expected
      to
      be recognized over a weighted-average period of 1.58 years.




**18.**
            **TREASURY
                STOCK**





During
      the year ended September 30, 2007, the Company repurchased 498,851 common stock
      of the Company with a total cost of RMB29,377 under the approval of the Board
      of
      Directors. The Company recorded the entire purchase price of the treasury stock
      as a reduction of equity.




**19.**
            **INCOME
                TAXES**





Agritech
      and its subsidiary, State Harvest are incorporated in the British Virgin Islands
      and are not subject to taxation under the British Virgin Islands. State
      Harvest’s subsidiary and State Harvest’s variable interest entity, Beijing
      Origin Seed Limited and its major owned subsidiaries (together, the “PRC
      entities”) were incorporated in the PRC and governed by the PRC
      laws.





The
      applicable tax rate of the PRC Enterprise Income Tax (“EIT”) to Beijing Origin
      Seed Limited is 33% (30% of state income tax plus 3% local income tax). However,
      preferential tax treatment of Beijing Origin Seed Limited as “high technology”
company has been agreed with the relevant tax authorities. Beijing Origin Seed
      Limited is entitled to a preferential tax rate of 15%. As a result of these
      preferential tax treatments, the reduced tax rates applicable to Beijing Origin
      Seed Limited for 2005, 2006 and 2007 are 15%.





F-35




**19.**
            **INCOME
                TAXES - Continued**





According
      to the document Gan Di Shui Suo Jian Mian Zi (2001) No. 107, Zhang Shi Di Shui
      Zheng Jian Mian Zi (2002) No. 2 and (2003) No. 1 and Zhang Shi Di Shui Han
      (2006) No.44 of Carry through the Advantage Tax Treatment of West Development
      Strategy, Lin Ze Branch is entitled to a preferential tax rate of
      15%.





According
      to the document Cheng Guo Shui Shen (2004) 11, Cheng Du Branch of Beijing Origin
      Seed Limited is entitled to a preferential tax rate of 15% as “high technology”
company for 2005, 2006 and 2007.





According
      to the document Chang Guo Shui (Gao Xin) Zi (2004) 001, Chang Chun Origin Seed
      Technology Development Co., Ltd. is qualified as “high technology” company, and
      was exempted from EIT for 2005 and entitled to a preferential tax rate of 15%
      as
“high technology” company for 2006 and 2007.





According
      to the document Beijing Guo Shui No. 9365987, BioTech is entitled to a
      preferential tax rate of 15% as “high technology” company, and is exempted from
      Foreign Enterprise Income Tax for 2006 and 2007.





According
      to the document Yu Guo Shui (Gao Xin) Zi 410102726997823, Henan Origin Cotton
      Technology Development Limited is entitled to a preferential tax rate of 15%
      as
      a “high-tech” company. Shen Yang Branch is subject to income tax at a statutory
      rate of 33%.





According
      to the document Cheng Gao Di Shui (2006) No. 73, Denong Zhengcheng Seeds Limited
      is exempted from Enterprise Income Tax for 2006 and 2007.





According
      to the document Qin Di Shui Zhi Zi (2003) No.43 and Guo Shui Fa (2002) No.47
      of
      Carry through the Advantage Tax Treatment of West Development Strategy, Gui
      Zhou
      Denong Seeds Limited, a subsidiary of Denong is entitled to a preferential
      tax
      rate of 15% for 2006 and 2007.





According
      to the document Nan Shi Guo Shui Han (2004) No.1131 and Gui Zheng Fa (2001)
      No.100 of Carry through the Advance Tax Treatment of West Development Strategy,
      Guang Xi Branch of Denong is exempted from Income Tax for 2006 and 2007.





According
      to the document Chang Ke Fa (2006) No.41 in conjunction with document Cai Shui
      (1994) No. 1, Changong is identified as a “high technology” company, thus
      entitled to a preferential tax rate of 15%.





On
      March
      1, 2007, the Fifth Plenary Session of the Tenth National People’s Congress
      passed the Corporate Income Tax Law of the PRC (“new tax law”) which will take
      effect on 1 January 2008. As a result of the new tax law, the statutory income
      tax rate will change from 33% to 25% with effect from 1 January 2008. The
      preferential tax rate currently enjoyed by the Company will be gradually
      transitioned to the new standard rate of 25% over a five-year transitional
      period. In addition, from article 28 of the new tax law stated that the income
      tax rate of the “high technology” company will be remained at 15%. As most of
      the subsidiaries and variable interest entities operating in the PRC are
      currently recognized as “high technology” companies under the existing Income
      Tax Law of the PRC, the management reasonably believed that these subsidiaries
      and variable interest entities can transit this status under the new tax law.
      Accordingly, the carrying amount of the deferred tax assets and liabilities,
      as
      a result of the change in tax rate, is reflected in the consolidated statements
      of operations of the Company for year ended September 30, 2007.





Had
      all
      the above tax holidays and concessions not been available, the tax charges
      would
      have been higher by RMB5,391, RMB9,160 (unaudited), RMB18,189 and RMB9,320
      and
      the basic net income (loss) per share would have been lower (higher) by RMB0.50,
      RMB0.91 (unaudited), RMB0.77 and RMB (0.40) for the year ended December 31,
      2005, nine months ended September 30, 2005 and 2006 and the year ended September
      30, 2007 respectively.





The
      diluted net income (loss) per share for the year ended December 31, 2005, the
      nine months ended September 30, 2005 and 2006 and the year ended September
      30,
      2007 would have been lower (higher) by RMB0.48, RMB0.91 (unaudited), RMB0.72
      and
      RMB(0.40) respectively.





F-36





**19.**
            **INCOME
                TAXES - Continued**





The
      provision for income taxes consists of the following:





Year
                ended
              December
                31,
            
            Nine
                months ended September 30,
            
            Year
                ended
              September
                30,2005
            
            2005
            
            2006
            
            2007RMB
            
            RMB
            
            RMB
            
            RMBCurrent
            
            
            1,313
            
            
            1,563
            
            
            1,428
            
            
            8,737Deferred
            
            
            92
            
            
            (358
            )
            
            (1,061
            )
            
            (8,786
            )1,405
            
            
            1,205
            
            
            367
            
            
            (49
            )





The
      principal components of the deferred income tax assets are as
      follows:





September
                  30,2006
              
              2007RMB
              
              RMBNon-current
                  deferred tax assets:Net
                  operating loss carry forward
              
              
              12,551
              
              
              21,747Impairment
                  on inventory
              
              
              253
              
              
              14,353Others
              
              
              1,399
              
              
              5,579Non-current
                  deferred income tax assets
              
              
              14,203
              
              
              41,679Valuation
                  allowances
              
              
              (10,161
              )
              
              (28,851
              )Net
                  non-current deferred income tax assets
              
              
              4,042
              
              
              12,828





As
      of
      September 30, 2006, the Company assessed the tax position and reclassified
      an
      income tax recoverable of RMB2, 653 brought forward from 2005 to deferred tax
      asset.





The
      Company did not have any significant temporary differences relating to deferred
      tax liabilities as of September 30, 2006 and 2007.





A
      significant portion of the deferred tax assets recognized relates to net
      operating loss and credit carry forwards. The Company operates through the
      PRC
      entities and the valuation allowance is considered on each individual basis.
      Where a valuation allowance was not recorded, the Company expects to generate
      sufficient taxable income in the future.


F-37





**19.**
            **INCOME
                TAXES - Continued**





The
      net
      operating loss attributable to those PRC entities can only be carried forward
      for a maximum period of five years. Tax losses of non-PRC entities can be
      carried forward indefinitely. The expiration period of unused tax losses is
      as
      follows:





September
                30,2006
            
            2007RMB
            
            RMBCalendar
                year ending,2007
            
            
            6,211
            
            
            6,2112008
            
            
            4,526
            
            
            4,5262009
            
            
            11,227
            
            
            11,2272010
            
            
            1,225
            
            
            1,2252011
            
            
            30,402
            
            
            30,4022012
            
            
            -
            
            
            74,983Tax
                losses that can be carried forward indefinitely
            
            
            -
            
            
            -53,591
            
            
            128,574


.





Reconciliation
      between total income tax expenses and the amount computed by applying the
      statutory income tax rate to income before taxes is as follows:





Year
                  ended December 31,
              
              Nine
                  months ended September 30,
              
              Year
                  ended
                September
                  30,2005
              
              2005
              
              2006
              
              2007(unaudited)%
              
              %
              
              %
              
              %Statutory
                  rate
              
              
              33
              
              
              33
              
              
              33
              
              
              33Effect
                  of preferential tax treatment
              
              
              (30
              )
              
              (25
              )
              
              (24
              )
              
              (15
              )Effect
                  of different tax jurisdiction
              
              
              10
              
              
              -
              
              
              3
              
              
              (2
              )Permanent
                  book-tax difference
              
              
              6
              
              
              (3
              )
              
              1
              
              
              1Change
                  in valuation allowance
              
              
              (17
              )
              
              (2
              )
              
              (13
              )
              
              (14
              )Under
                  (over) provision in prior year
              
              
              6
              
              
              -
              
              
              1
              
              
              (3
              )Effective
                  income tax rate
              
              
              8
              
              
              3
              
              
              1
              
              
              -





F-38





**20.**
            **INCOME
                (LOSS) PER SHARE**





The
      following table sets forth the computation of basic and diluted income (loss)
      per share for the years indicated:





Year
                  ended December 31,
              
              Nine
                  months ended
                September
                  30,
              
              Year
                  ended
                September
                  30,2005
              
              2005
              
              2006
              
              2007(unaudited)RMB
              
              RMB
              
              RMB
              
              RMBNet
                  income (loss) (numerator), basic and diluted
              
              
              16,409
              
              
              34,924
              
              
              76,331
              
              
              (163,200
              )Shares
                  (denominator), basic:Common
                  stock outstanding
              
              
              10,786,179
              
              
              10,000,000
              
              
              23,472,910
              
              
              22,974,059Weighted
                  average common stockoutstanding
                  used in computingbasic
                  income per share
              
              
              10,786,719
              
              
              10,000,000
              
              
              23,472,910
              
              
              23,268,062Shares
                  (denominator), diluted:Weighted
                  average common stock outstanding
              
              
              10,786,719
              
              
              10,000,000
              
              
              23,472,910
              
              
              23,268,062Earnings
                  contingency (note 1)
              
              
              -
              
              
              -
              
              
              1,500,000
              
              
              -Incremental
                  weighted averagecommon
                  stock from potentialexercise
                  of warrants (note 21)
              
              
              433,438
              
              
              10,000,000
              
              
              -
              
              
              -Share
                  options (note 17)
              
              
              -
              
              
              
              
              
              214,843
              
              
              -Weighted
                  average common stockoutstanding
                  used in computingdiluted
                  income per share
              
              
              11,220,157
              
              
              10,000,000
              
              
              25,187,753
              
              
              23,268,062Net
                  income per share-basic
              
              
              RMB1.52
              
              
              RMB3.49
              
              
              RMB3.25
              
              
              RMB
                  (7.01
              )Net
                  income per share-diluted
              
              
              RMB1.46
              
              
              RMB3.49
              
              
              RMB3.03
              
              
              RMB
                  (7.01
              )




For
      the
      years prior to the date of the Share Exchange Transaction, the number of shares
      included in the income per share calculations above has been retroactively
      restated to reflect the number of shares to which State Harvest Shareholders
      and
      their designee are entitled at the date of the Share Exchange
      Transaction.





As
      disclosed in note 1, the Share Exchange Transaction during 2005 provides for
      additional purchase price payments in the form of common stock, the issuance
      of
      which is contingent upon attainment of certain amounts of earnings and such
      issuance of common stock has been waived by the potential share owners.
      Accordingly, the above diluted income per share calculations have excluded
      these
      contingently issuable shares for 2007. As disclosed in note 21, there are
      no  Unit
      Purchase Options outstanding as of September 30, 2006 and 2007.





At
      September 30, 2007, the effect of conversion and exercise of the Company’s
      outstanding convertible notes and options are not included as their effect
      is
      anti-dilutive. The number of dilutive common stock that would be added to the
      weighted average common stock outstanding if their effect was not anti-dulitive
      is 2,347,209.





F-39





**21.**
            **WARRANTS
                AND UNIT PURCHASE OPTIONS**





As
      a part
      of the Share Exchange Transaction, Agritech assumed 4,025,000 shares of common
      stock, 8,050,000 Redeemable Common Stock Purchase Warrants (“Warrants”) and
      350,000 Unit Purchase Options (“UPO”) issued by Chardan. There was no
      remeasurement required for these assumed Warrants and UPO because such
      assumption is part of the recapitalization in connection with the Share Exchange
      Transaction.





Each
      Warrant will entitle the holder to purchase from Agritech one share of common
      stock at an exercise price of US$5 commencing on the date of the Share Exchange
      Transaction. The Warrants will be redeemable at a price of US$0.01 per Warrant
      upon 30 days’ notice after the Warrants become exercisable, only in the event
      that the last sale price of the common stock is at least US$8.50 per share
      for
      any 20 trading days within a 30 trading day period ending on the third day
      prior
      to the date on which notice of redemption is given. 2,793,868 Warrants were
      exercised before December 31, 2005 and were converted into 2,793,868 shares
      of
      common stock. In addition, 5,249,884 warrants were exercised during January
      1,
      2006 to January 9, 2006 and none warrants were exercised subsequent to January
      9, 2006.





UPO
      were
      granted and recorded in connection with the initial public offering of Chardan
      in 2004 to the underwriters for nominal consideration. UPO may be exercised
      for
      cash or cashless basis at the holders’ option such that the holders may use the
      appreciated value of the UPO to exercise the option without the payment of
      cash.
      UPO are convertible into shares and Warrants at the discretion of the Company
      and the UPO holders. 328,784 UPO were converted into 309,325 shares and 7,332
      Warrants before December 31, 2005 without any cash consideration. There is
      no UPO
      converted into shares and warrants  since
      January 1, 2006.





As
      of
      December 31, 2005, there were 21,216 UPO and 5,263,464 Warrants outstanding.
      As
      of September 30, 2006 and 2007, there were  no
      UPO
      and warrants outstanding.




**22.**
            **EMPLOYEE
                BENEFIT PLAN AND PROFIT
                APPROPRIATION**





Full
      time
      employees of the PRC entities participate in a government mandated
      multi-employer defined contribution plan pursuant to which certain pension
      benefits, medical care, unemployment insurance, employee housing fund and other
      welfare benefits are provided to employees. Chinese labor regulations require
      the Company to accrue for these benefits based on certain percentages of the
      employees’ salaries. The total provisions for such employee benefits were
      RMB2,605, RMB2,140 (unaudited), RMB4,137, and RMB8,296  for
      the
      year ended December 31, 2005, nine months ended September 30, 2005 and 2006
      and
      the year ended September 30, 2007, respectively.





Pursuant
      to the laws applicable to the PRC, the PRC entities, other than BioTech, must
      make appropriations from after-tax profit to non-distributable reserves funds
      including: (i) the statutory surplus reserve and; (ii) the statutory public
      welfare fund. Subject to the limits of 50% of the entity’s registered capital,
      the statutory surplus reserve fund requires annual appropriations of 10% and
      the
      statutory public welfare fund requires annual appropriations of 5% of after-tax
      profit (as determined under accounting principles generally accepted in the
      PRC
      (“PRC GAAP”) at each year-end). The Company’s wholly foreign owned subsidiary,
      BioTech, however subject to the law applicable to foreign invested enterprises
      in the PRC, was required annual appropriation of the general reverse fund,
      no
      less than 10% of after-tax profit (as determined under PRC GAAP at each
      year-end). These reserve funds can only be used for specific purposes of
      enterprise expansion and staff welfare and are not distributable as cash
      dividends. Appropriations to these reserves by the PRC entities were RMB4,348
      for the year ended December 31, 2005. No appropriation has been made for the
      nine months ended September 30, 2005 and 2006 and the year ended September
      30,
      2007.


F-40




**23.**
            **COMMITMENTS
                AND CONTINGENCIES**





(a) Capital
      commitments





As
                of September 30, 2007, capital commitments for the purchase of long-term
                assets are as follows:





**RMB**Plant
                  and building construction
              
              
              5,891Equipment
              
              
              1,310Technology
                  use rights
              
              
              8008,001





(b)  Operating
      lease




The
      Company acquired certain land use rights for seed development and office
      premises under non-cancellable leases. Rental expenses under operating leases
      for the year ended December 31, 2005, nine months ended September 30, 2005
      and
      2006 and the year ended September 30, 2007 were RMB2,134, RMB1,847(unaudited),
      RMB2,768 and RMB13,562, respectively.





As
      of
      September 30, 2007, the Company was obligated under operating leases requiring
      minimum rental as follows:





**RMB**Year
                ending September 30,2008
            
            
            4,0752009
            
            
            1,2212010
            
            
            8512011
            
            
            7462012
            
            
            615Thereafter
            
            
            10,93818,446





F-41





**23.**
            **COMMITMENTS
                AND CONTINGENCIES -
                Continued**





(c)  On
      March
      6, 2006, Changrong entered into a contract with the Corn Research Institution
      of
      Jilin Academy of Agricultural Science to pay RMB5,000 every year from 2006
      to
      2016 for research and development activities.





(d) Contingent
      tax liabilities





The
      Company assesses the contingent tax liabilities that may arise from the Share
      Exchange Transaction and considers such contingent tax liabilities are more
      likely than remote. As of December 31, 2005, such contingent tax liabilities
      are
      reasonably possible to be in the range of RMB39,059 to RMB64,218. Consequently,
      RMB39,059 was included in the income tax payable in the accompanying
      consolidated balance sheet and was charged to the equity because the assumption
      of such liabilities by the Company is part of the recapitalization in connection
      with the Share Exchange Transaction. The Company does not expect to incur tax
      liabilities at the higher end of the range, based on the information currently
      available.





**24.**
            **SUBSEQUENT
                EVENT**





No
      material subsequent event occurred subsequent to September 30,
      2007.





**25.**
            **FAIR
                VALUE OF FINANCIAL
                INSTRUMENTS**





The
      carrying amounts of cash and cash equivalents, debt securities, accounts
      receivable and accounts payable are reasonable estimates of their fair
      value. All the financial instruments are for trade purposes.





When
      the
      convertible notes are issued, the fair value of the convertible bond is
      determined using a market interest rate; this amount is carried as liability
      on
      the amortized cost basis until expiration of the Notes.





**26.**
            **SEGMENT
                AND GEOGRAPHIC INFORMATION**





The
      Company’s main products include hybrid corn, rice and cotton seeds, which have
      been organized as one reporting segment since they have similar nature and
      production procedures, with similar economic characteristics. The Company’s
      chief operating decision maker, the Chief Executive Officer, receives and
      reviews the result of the operation for all products as a whole when making
      decisions about allocating resources and assessing performance of the Company.
      In accordance with SFAS No. 131, “Disclosures About Segments of an Enterprise
      and Related Information”, the Company is not required to report the segment
      information for the products as it is impractical to do so.





All
      of
      the Company’s sales and all of the Company’s long-lived assets are located in
      the PRC.





The
      Company had no customers which accounted for 10% or more of the Company’s
      revenues for any of the years presented in the consolidated financial
      statements.




F-42





**27.**
            **OPERATING
                RISK**




*Concentrations
      of credit risk*




Financial
      instruments that subject the Company to concentrations of credit risk consist
      primarily of cash and cash equivalents and debt securities. The Company
      maintains its cash and cash equivalents and debt securities with high-quality
      institutions. Deposits placed with banks may exceed the amount of insurance
      provided on such deposits. Generally these deposits may be redeemed upon demand
      and therefore bear minimal risk.




*Country
      risk*




The
      Company has significant investments in PRC. The operating results of the Company
      may be adversely affected by changes in the political and social conditions
      in
      PRC and by changes in Chinese government policies with respect to laws and
      regulations, anti-inflationary measures, currency conversion and remittance
      abroad, and rates and methods taxation, among other things. There can be no
      assurance, however, those changes in political and other conditions will not
      result in any adverse impact.




F-43