UNITED STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-K
 (Mark
One)
 x
                ANNUAL REPORT PURSUANT TO
      SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December
31, 2009
 OR
 o
                TRANSITION REPORT PURSUANT TO
      SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from 
to .
  Commission file number
333-140118
 
 China
Agri-Business, Inc.
 (Exact name of registrant as
specified in its charter)
 
  Maryland
                      
                      20-3912942(State
      or other jurisdiction of
                        incorporation
      or organization)
                      
                      (I.R.S.
      Employer
                        Identification
      No.)In
      the People’s Republic of China:
                        Building
      2, Unit 1, 15th
      Floor
                        Ling
      Xian Xin Cheng, 86 Gaoxin Road
                        Hi-Tech
      Industrial Development Zone
                        Xian, Shannxi, China 710065
                      
                      In
      the United States:
                        11
      East 86th
      Street
                        New York, New York
  10028
 (Address
of principal executive offices) (Zip Code)
  Registrant’s
telephone number, including area code:
 In
the People’s Republic of China:  (86)
029-68596556
 In the United
States:(212)
348-5600




Securities
registered pursuant to Section 12(b) of the Act:
  Title
      of each class
                          
                          Name
      of each exchange on which registeredNone.
                          
                          None.
  Securities
registered pursuant to Section 12(g) of the Act:  None
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes  o  No  x
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes  o  No  x
 
 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.  Yes  x  No  o
 
 Indicated
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 and Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).  Yes  o  No  o
 
 Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this
chapter) is not contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  x
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
  Large
      accelerated filer  o
              
              Accelerated
      filer  oNon-accelerated
      filer  o
              
              Smaller
      reporting company  x(Do
      not check if a smaller reporting company)
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)  Yes  oNo  x
 
 As of
June 30, 2009, the aggregate market value of the registrant’s common stock held
by non-affiliates of the registrant was $738,949, based on the average bid and
asked price of a share of such common stock as reported on the OTC Bulletin
Board.
 
 The
number of shares outstanding of the registrant’s common stock as of March 31,
2010 was 12,958,574.
  
 
 CHINA AGRI-BUSINESS, INC.
 ANNUAL
REPORT ON FORM 10-K
 FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2009
 
 TABLE
OF CONTENTS
 
 PagePART
      IItem  1.
                Business.
                1Item  1A.
                Risk
      Factors.
                7Item  1B.
                Unresolved
      Staff Comments.
                18Item  2.
                Properties.
                18Item  3.
                Legal
      Proceedings.
                19Item  4.
                (Removed
      and Reserved).
                19PART
      IIItem  5.
                Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities.
                20Item  6.
                Selected
      Financial Data.
                21Item  7.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                21Item  7A.
                Quantitative
      and Qualitative Disclosures About Market Risk.
                28Item  8.
                Financial
      Statements and Supplementary Data.
                28Item  9.
                Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure.
                28Item  9A(T).
                Controls
      and Procedures.
                28Item  9B.
                Other
      Information.
                29PART
      IIIItem  10.
                Directors,
      Executive Officers and Corporate Governance.
                30Item  11.
                Executive
      Compensation.
                32Item  12.
                Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.
                33Item  13.
                Certain
      Relationships and Related Transactions, and Director
      Independence.
                34Item  14.
                Principal
      Accounting Fees and Services.
                35PART
      IVItem  15.
                Exhibits,
      Financial Statement Schedules.
                36
 
 *           *           *
 
 Pursuant
to Item 10(f) of Regulation S-K promulgated under the Securities Act of
1933, except as otherwise indicated, we have elected to comply throughout this
Annual Report on Form 10-K with the scaled disclosure requirements applicable to
“smaller reporting companies.”  In this Annual Report on Form 10-K,
unless otherwise stated or the context otherwise requires, the terms “China
Agri,” “we,” “us,” “our,” and the “Company” refer to China Agri-Business, Inc.,
Mei Xin Agri Technology (Shaanxi) Co., Ltd., and Shaanxi Xin Sheng Centennial
Agricultural and Technology Co., Ltd.  References to the “PRC” or
“China” mean the People’s Republic of China.
  
  PART
I
  Item
1.     Business.
  Forward-Looking
Statements
  This
annual report on Form 10-K contains forward-looking statements.  These
statements can be identified by the use of forward-looking terminology such as
“believes,” “plans,” “will,” “intends,” “seek,” “scheduled,” “future,”
“potential,” “continue,” “estimates,” “anticipates,” “hopes,” “goal,”
“objective,” “expects,” “may,” “should,” “could” or “anticipates” or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy that involve risks and uncertainties.  We
caution you that no statements contained in this annual report should be
construed as a guarantee or assurance of future performance or
results.  You should not place undue reliance upon any forward-looking
statements.  Forward-looking statements involve risks and
uncertainties, including those discussed in “Item 1A.  Risk Factors”
and elsewhere throughout this annual report and in other reports we file with
the Securities and Exchange Commission (the “SEC”).  The actual
results that we achieve may differ materially from any forward-looking
statements due to the effect of such risks and uncertainties. These
forward-looking statements are based on current expectations, and, except as
required by law, we assume no obligation to update this information whether as a
result of new information, future events or otherwise.  Readers are
urged to carefully review and consider the various disclosures made by us in
this annual report and in our other reports filed with the SEC that attempt to
advise interested parties of the risks that may affect our business, financial
condition and results of operations.
  Company
History
  China
Agri-Business, Inc. was incorporated in the State of Maryland on December 7,
2005. On March 24, 2006, China Agri formed Mei Xin Agri Technology (Shaanxi)
Co., Ltd. (“Meixin”) in Xi’an city, located in the PRC. Meixin is a wholly-owned
subsidiary of China Agri and a limited liability company organized under the
laws of the PRC. Meixin acts as a management company for our operating business
in the PRC, conducted by Shaanxi Xin Sheng Centennial Agricultural and
Technology Co., Ltd. (“Xinsheng”), in accordance with the management entrustment
agreement described below. Meixin controls all aspects of Xinsheng’s business
and management, and is entitled to all proceeds of Xinsheng’s business and
obligated to fund its operations. China Agri-Business, Inc. is a holding company
with no operations other than acting as a holding company for Meixin and raising
capital for Meixin’s and Xinsheng’s operations. China Agri and Meixin do not own
any equity rights in Xinsheng.
  Xinsheng
was founded on April 22, 2002 as a joint stock limited liability company formed
under the laws of the PRC. Meixin’s control over Xinsheng was established in the
following manner, and in accordance with PRC laws:
  •
              On
      April 18, 2006, Meixin entered into a management entrustment agreement
      (the “Management Agreement”) with Xinsheng. Under the Management
      Agreement, Xinsheng and its shareholders entrusted to Meixin its
      management rights, the rights and powers of its shareholders and board of
      directors, and the right to receive all of Xinsheng’s profits in exchange
      for Meixin’s assumption of responsibility for any losses resulting from
      Xinsheng’s operations and the obligation to pay Xinsheng’s debts if
      Xinsheng is unable to pay those debts as they become
  due.
  1
  •
              On
      April 22, 2006, following a Xinsheng shareholder meeting at which an
      attorney-in-fact was appointed to represent the Xinsheng shareholders,
      China Agri entered into a stock purchase agreement with the
      attorney-in-fact (the “Stock Purchase Agreement”). Pursuant to the Stock
      Purchase Agreement, China Agri issued an aggregate of 5,389,221 shares
      (10,950,897 shares after a 2.032-for-1 forward split in October 2006) of
      common stock to the Xinsheng shareholders in consideration of the
      execution of the Management Agreement between Xinsheng and Meixin.
      Pursuant to the Stock Purchase Agreement and a voting trust and escrow
      agreement (the “Voting Trust and Escrow Agreement”) entered into by the
      parties in connection with the Stock Purchase Agreement, these shares were
      issued in the name of the trustees for the Xinsheng shareholders, which
      trustees also act as the escrow and selling agent for the Xinsheng
      shareholders for the sale of the shares. The trustees are entitled to
      exercise all rights and powers to vote the shares on behalf of the
      Xinsheng shareholders. Each shareholder can request the release of his or
      her shares from the trust. Alternatively, each shareholder can request
      that the trustees sell the shares on behalf of such shareholder and remit
      the proceeds to such shareholder. The entry into the Management Agreement,
      the Stock Purchase Agreement and the Voting Trust and Escrow Agreement,
      and the appointment of the attorney-in-fact, were approved by the Xinsheng
      shareholders at a meeting held on April 10, 2006, in accordance with PRC
      Company Law.  The issuance of China Agri stock to Xinsheng
      shareholders was made in reliance on the exemptions from registration
      under the Securities Act of 1933 provided by Regulation S and/or Section
      (4)(2).  The Xinsheng shareholders are in the process of
      terminating the Voting Trust and Escrow Agreement effective December
      2009.
  The
following diagram sets forth the current corporate structure of the
Company:
  China
      Agri-Business, Inc.100%
      ownershipPRCMei
      Xin Agri
                                Technology
                                (Shaanxi)
      Co., Ltd.Contractual
      Relationship
                                (Management
      Entrustment
                                Agreement)
                              Shaanxi
      Xin Sheng Centennial
                                Agricultural
      and Technology Co.,
                                Ltd.
  At
present, neither China Agri-Business nor Meixin have any existing or planned
business activities other than acting as a holding company and management
company, respectively, for Xinsheng. However, these plans are subject to change
in the future.
  Overview
of Business
  Xinsheng
began producing agricultural application products in 2004. Our business is
concentrated in the growing “Green Food” market in the PRC. Xinsheng
manufactures and sells non-toxic fertilizer, bactericide and fungicide products
used for farming in the PRC. Crops grown with our products are eligible to
qualify for the “AA Green Food” rating administered by the China Green Food
Development Center, an agency under the jurisdiction of the Ministry of
Agriculture of the PRC (however, our products themselves do not bear the “AA
green food” designation).  As an effort to expand our business and
offset the influence of weather conditions, we launched a “New Agriculture –
Generator” initiative in the fourth quarter of 2008, which included the super
chain sales partner program and direct sales stores program.  The
purpose of this campaign is to establish our own sales network by creating
closer relationships with farmers through our super chain and direct sales
stores in the rural areas of China in addition to the traditional sales network,
and we plan to continue to expand this business in the future.  As of
December 31, 2009, the Company had established 103 branded super chain
stores.  A majority of these stores are located in the Shaanxi and
Hunan Provinces.  In addition, the Company established 49 direct sales
stores, which are controlled and managed directly by the Company.  The
direct sales stores are located in the Shaanxi Province.
  The
executive offices of China Agri-Business in the United States are located at 11
East 86th Street, New York, New York 10028. China Agri’s telephone number in the
United States is (212) 348-5600. Xinsheng is located outside of the city of
Xi-an in the Shaanxi Province of the PRC. Xinsheng’s address is Building 2,
Unit 1, 15th Floor, Ling Xian Xin Cheng, Hi-Tech Industrial Development
Zone, Xi-An, China 710065.  Xinsheng’s telephone number is
011-86-29-68596556.
  2
  Our
Organic Biochemical Agricultural Application Products
  We
manufacture and market the following organic biochemical agricultural
application products. Our products are designed to be environmentally friendly,
as explained in further detail below. Within the following five product
categories, we produce more than 50 different agricultural application
products.
  Product
      Brand Name
              
              Description
      and Functionality
              
              Plant
      Suitability
              
              
              Price*Xinsheng
      Luyuan
              
              A
      line of fertilizer product whose primary function is to increase
      agricultural production.
              
              Wheat,
      Rice, Maize, Tobacco,  Cotton, Melons and various other fruits
      and vegetables.
              
              $
              61.49/BoxXinsheng
      Lufeng
              
              A
      line of organic soil amendment products whose primary function is as a
      bactericide.
              
              Tomatoes
      and Apples.
              
              $
              38.65/BoxXinsheng
      Huang-jin-gai
              
              A
      line of amino acid fertilizer products designed to help crops absorb
      calcium and to improve their overall quality.
              
              Tomatoes
      and Apples.
              
              $
              32.21/BoxXinsheng
      Jia-tian-xia
              
              A
      line of humic acid fertilizer products designed to improve the overall
      quality of crops
              
              Maize,
      Cotton, Apples, Tomatoes, Watermelon, and various other fruits and
      melons.
              
              $
              32.21/BoxXinsheng
      Bai-le
              
              A
      line of amino acid fertilizer products designed to provide supplementary
      micro-nutrients to crops and to help crops grow with balanced
      nutrition.
              
              Maize,
      Cotton, Apples, Tomatoes, Watermelon, and various other fruits &
      melons.
              
              $
              26.35/Box
 
 * Based
on the rounded currency exchange rate in effect as of March 31, 2010 ($1 =
approximately RMB 6.83). A standard box contains various bottles and bags of the
product. The price per box may vary depending on the contents of the
box.
 
 Our
Xinsheng Luyuan agricultural application products are made of a chemical polymer
combined with active potassium, organic nitrogen and 20 other ingredients,
including chitosan. The key raw material for our products is chitosan, which
consists primarily of polysaccharides extracted from the shells of crustaceans,
such as crabs and shrimp, and mixed with active calcium. Because each of our
products are designed to minimize harm to the environment, use of our products
contributes to the production of healthy and environmentally friendly
crops.
  Studies
performed by our research and development personnel indicate that nitrogen,
phosphorus, potassium and other potentially environmentally harmful nutrients in
traditional chemical fertilizers tend to become soluble in the presence of
water, which can lead to potentially harmful runoff when it rains. Our products,
which contain chitosan, are designed to release nutrients into the soil at a
slower rate, making them less likely to be leached from the soil by rainwater.
The retention of these nutrients improves the effects of both
naturally-occurring and applied nutrients and fertilizers. Our chitosan based
products are also designed to build soil structure, which allows more air to
reach plant roots and increases the soil’s ability to retain water, resulting in
healthier crops. Our products also use chitosan to provide nutrients used by
soil microorganisms, which in turn make mineral nutrients available to
plants.
  Our
agricultural application products are produced and sold in two types of
packaging: (i) polyethylene bottles that are 12 centimeters in height and 5.8
centimeters in diameter and have a net weight of 200 grams and (ii) bags that
are 11 centimeters in length and 8.4 centimeters in width and have a net weight
of 20 grams.
  The raw
materials used in the production of our products are generally available from
local suppliers and accordingly we do not have any long term supply
contracts.
  The
principal advantages of our agricultural application products include their
quality and their potential to reduce farmers’ costs. In addition, our
proprietary blending methods allow our products to mix readily with water so
that they can be sprayed onto crops. This permits our products to be applied
consistently over large areas. Higher yields mean that farmers can plant less
and therefore decrease their costs. We believe our products can ultimately
increase plant growth by up to 20%. These estimates are based on our own testing
and on field trial reports issued on our Xinshing Luyuan product by the
following three independent land and fertilizer working stations in China, for
the years of 2005 and 2004: Shaanxi Chunhua County Land and Fertilizer Working
Station, Shaanxi Province Land and Fertilizer Working Station and Shaanxi
Province Yangling Zone Land and Fertilizer Working Station.
  3
  In
addition, we offer agricultural application products that contain, in addition
to growth-promoting compounds, both bactericides and pesticides. These products
are cost effective because they eliminate the need to purchase separate
pesticides and bactericides.
  Manufacturing
Capacity
  As of
December 31, 2009, Xinsheng’s manufacturing capacity was approximately 540 tons
per year.  Xinsheng has the ability to increase its manufacturing
capacity to approximately 700 tons per year through the use of the facilities of
third party contract manufacturers.  Xinsheng’s manufacturing output
is primarily order driven. Accordingly, Xinsheng uses the facilities contract
manufacturers on an as needed basis, when orders exceed capacity. Xinsheng’s
employees are present to oversee the manufacturing process when facilities of
contract manufacturers are used.
  The
PRC’s “Green Food” Industry
  By the
late 1980s, in an effort to produce more food, the PRC had reached a point where
its farmers were relying heavily on the use of fertilizers and pesticides. This
reliance on fertilizers and pesticides, including the use of environmentally
harmful fertilizers and pesticides, led to the sale of products with dangerous
and high concentrations of harmful chemicals. In addition to creating a
dangerous situation for domestic consumers, it also created problems for the
PRC’s food exporters which, in many cases, were barred from exporting to
countries with minimum acceptable standards for pesticide and chemical
use.
  In 1990,
the PRC Ministry of Agriculture began to encourage the production of “Green
Food”, which is food that is deemed safe, free from pollutants and harmful
chemicals, and of good quality. In 1992, the PRC Ministry of Agriculture
established the China Green Food Development Center to oversee food quality and
the development and management of Green Food at the national and provincial
level in the PRC. In 1993, the Ministry of Agriculture established regulations
on the use of Green Food labeling. In 1996, an identifying trademark for Green
Food was registered in the PRC and put into use. More information regarding the
China Green Food Development Center, including the green food regulatory and
authentication process, is available at the Center’s website at
http://www.greenfood.org.cn/sites/GREENFOOD/. The contents of this website are
not incorporated by reference herein.
  According
to the China Green Food Development Center website, China’s Green Food industry
experienced a rapid growth period from 1997 to 2007. For example, from 2002 to
2007, certified Green Food products and Green Food production enterprises
increased at a rate of 21.8% and 30.8% per year, respectively. By the end of
October 2008, there were 17,647 Green Food products and 6,160 Green Food
production enterprises in China. Approximately 9.4 million hectares, or 7.2% of
the total farm land in China, is used in the production of Green
Food.
  Seasonality
  Our
business is seasonal and order driven. Accordingly, we experience seasonal
fluctuations in our revenues and our operating costs.
  Generally,
our sales peak occurs at the beginning of the planting season, which generally
occurs during the period from March though June. Our sales are typically the
lowest in the period from December through January and are relatively stable for
the rest of the year.
  Adverse
weather conditions and other natural disasters may affect our customers’
planting activities and therefore reduce demand for our products. For example,
our business was negatively impacted during 2008 by the following events: (i)
severe winter weather conditions that existed in China during the end of January
and early February, (ii) the major earth quake on May 12, 2008 whose epicenter
was located in Sichuan province, and (iii) widespread flooding in the central
and southern parts of China in May and June, including the Hunan and Hubei
provinces.
  4
  Employees
  As of
December 31, 2009, Xinsheng had approximately 116 employees, including 58 who
are engaged in sales and marketing activities. Approximately half of our
employees are full-time employees and the remaining half are part-time or
seasonal employees.
  Sales
and Marketing
  We have
traditionally sold our products through wholesale and retail distributors. In
order to market our products, we advertise in newspapers, including national
publications. We have also utilized a limited amount of television advertising,
and distributed brochures, company profiles and promotional videos to farmers.
We also offer free field trials to potential customers for the purpose of
comparing plantings that have applied our products to plantings that have not.
We believe that potential customers are more inclined to purchase our products
after seeing the comparison results. We have a marketing team comprised of
approximately 57 people who demonstrate to our dealers and our direct customers
the correct methods of using our products, and who help address issues that
arise for our dealers and customers in using our products and collect feedback
from them.
  As of
December 31, 2009, we have established relationships with approximately 90
wholesale distributors. Our products are sold in approximately 503 stores
located in 12 provinces in the PRC.
  During
2008 we launched a new sales and marketing initiative “New
Agriculture-Generator” designed to expand our distribution network directly in
the rural areas of China.  The purpose of the campaign is to establish
a closer relationship with farmers through agricultural cooperatives located
throughout the rural areas of China.  One component of this initiative
is the “Super Chain Sales Partner Program.”
  The
“Super Chain Sales Partner Program” is an initiative whereby the Company agrees
to provide a $3,000 advance payment to participating retailers in exchange for
their commitment to purchase and sell approximately $14,000 worth of the
Company’s products per year. Each participating retailer must also agree not to
sell any competing products.  As of December 31, 2009, approximately
61 retailers in Shaanxi province and approximately 42 retailers in Hunan
province have participated in the “Super Chain Sales Partner
Program”.
  Another
component of this initiative is to establish, in conjunction with participating
retailers, a membership system that would enable the Company to measure and
monitor the use of its products by farmers and to improve the Company’s efforts
to provide training and other support services to farmers.
  In
addition, the Company has established 49 direct sales stores which are
controlled and managed directly by the Company.  The direct sales
stores are located in the Shaanxi Province.  We anticipate continuing
to focus our efforts on establishing direct sales stores in
2010.  From the beginning of the year to March 31, 2010, we opened
approximately 200 new direct sales stores in the Shaanxi and Hunan
Provinces.
  Despite
the growth of these initiatives, there can be no assurance that the “New
Agriculture-Generator” campaign, including the “Super Chain Sales Partner
Program” or direct sales stores program, will be successful.
  Government
Regulation
  Fertilizer
Registration Certificates
  In the
PRC, producers of fertilizer and related products must obtain a government
approval known as a fertilizer registration certificate. Accordingly, we have
obtained temporary registration certificates from the PRC’s Ministry of
Agriculture for each of our primary products. The certificates authorize us to
manufacture and distribute our agricultural application products in the PRC. The
term of a temporary fertilizer registration certificate is one (1) year, subject
to annual renewal. There is no assurance that the certificates will be
renewed.
  5
  The
Company’s prior application for a permanent fertilizer registration certificate
was not accepted because the PRC government had not yet established standards
for the Company’s products. The PRC government has since established standards
for the following three of the Company’s five products: Xinsheng Huang-jin-gai,
a line of amino acid fertilizer products, Xinsheng Bai-le, a line of amino acid
fertilizer products, and Xinsheng Jia-tian-xia, a line of humic acid
fertilizer.  The temporary certificates for these products are
eligible for permanent certificates after three years. The Company will seek to
obtain permanent certificates for these products as soon as the Company is
eligible.  Permanent certificates are also required to be renewed
annually.  This renewal process is only a formality.  The
Company will be eligible on October 31, 2011 for Xinsheng Huang-jin-gai, October
31, 2011 for Xinsheng Bai-le, and December 31, 2011 for Xinsheng
Jia-tian-xia.  In the meantime, the Company will continue to apply
annually for temporary certificates. Other than the term of the certificate,
there is no difference in the restrictions applied to temporary certificate
holders and permanent certificate holders.
  Registration
      No.
              
              Trademark/Product
      Name
              
              Expiration
      DateNo.
      (2004) 1485
              
              Xinsheng
      Luyuan
              
              September
      2010No.
      (2004) 1542
              
              Xinsheng
      Lufeng
              
              October
      2010No.
      (2007) 2968
              
              Xinsheng
      Huang-jin-gai
              
              December
      2010No.
      (2007) 2969
              
              Xinsheng
      Bai-le
              
              December
      2010No.
      (2007) 2970
              
              Xinsheng
      Jia-tian-xia
              
              December
      2010
  China
Green Food Development Center “Green Food” Certification
  Although
the Company does not produce “Green Food” products, crops grown by farmers with
the use of our products may qualify for the “AA green food” designation in the
PRC. The green food rating system, which consists of an “A” rating and a more
stringent “AA” rating, is overseen by the China Green Food Development Center,
an agency under the jurisdiction of the Ministry of Agriculture of the PRC. The
“AA” rating indicates that the crops contain minimal chemical residue from
fertilizers. While crops grown using our products may qualify for the “AA green
food” designation, our products themselves do not bear the “AA green food”
designation.  We do not incur additional costs in producing products
that allow farmers crops to qualify for the “AA green food”
designation.
  While we
believe that we maintain all requisite licenses and permits and are in
compliance with all applicable regulations, we may not be able to maintain all
requisite licenses and permits and remain in compliance with all applicable
regulations. Any failure to satisfy those and other regulatory requirements
could have a material adverse effect on our financial condition and results of
operations.
  Competition
  The
industry in which we operate is highly competitive. We compete largely on the
basis of the quality of our products, which results from our processing and
combining raw materials properly. Each of our five product categories has a
different blending process and combination of ingredients.
  6
  We
consider the following companies to be among our primary
competitors:
  Company
      Name
              
              Location
      within PRCWeifang
      Xinde Bio-tech Co., Ltd.
              
              Shandong
      ProvinceShaanxi
      Haide’er Bio-tech Co., Ltd.
              
              Shaanxi
      ProvinceWeifang
      Hengsheng Bio-tech Co., Ltd.
              
              Shandong
      ProvinceZhejiang
      Lanhai Bio-engineering Co., Ltd.
              
              Zhejiang
      ProvinceAiwo
      Beijing Agricultural Technology Co., Ltd.
              
              Beijing
      CityChina
      Green Agriculture, Inc.
              
              Shaanxi
      ProvinceShandong
      Dongyan Kefeng Bio-tech Co., Ltd.
              
              Shangdong
      ProvinceShandong
      Tianda Bio-tech Co., Ltd.
              
              Shangdong
      ProvinceGuangxi
      Beihai Guofa Bio-tech Co., Ltd.
              
              Guangxi
      Province
  Intellectual
Property
  Trademarks
  We own
the rights to the following registered trademarks in the PRC, which we use in
our business and which appear on our product packaging. We do not own the rights
to any registered trademarks in the United States.
  Trademark
              
              Registration
      Number
              
              Expiration
      DateXinsheng
      Shi ji
              
              3412688
              
              July
      2014Xinsheng
      Luyuan
              
              4734942
              
              September
      2015Xinsheng
      Lufeng
              
              4734940
              
              September
      2015Xinsheng
      Huang-jin-gai
              
              6213163
              
              August
      2022Xinsheng
      Bai-le
              
              6212924
              
              August
      2022Xinsheng
      Jia-tian-xia
              
              6213164
              
              August
      2022New
      Agriculture - Generator
              
              6952690
              
              September
      2023
  Patents
  We own
the rights to one patent in the PRC for “Zero-tillage Fertilizing Equipment”
(PRC Patent Number: 330398), which is a type of seeding machine, the use of
which prevents soil erosion. We do not currently use this patent or the
Zero-tillage Fertilizing Equipment in our business. We have not yet determined
whether and when this patent may be utilized in our business. We do not own the
rights to any patents in the United States.
  Licensed
Rights
  We
acquired a new product license to produce potassium and magnesium fertilizer on
February 14, 2010 at a cost of approximately $117,000.  We intend
to explore other licensing opportunities for existing products in the
future.
  Research
and Development
  We have a
research and development team consisting of six full time employees and five
consultants. This team is responsible for formulating our organic biochemical
agricultural application products and developing new products.
  We have
spent approximately $6,393 and $25,418 on research and development for the years
ended December 31, 2008 and 2009, respectively.
  Item
1A.        Risk Factors.
  An
investment in our common stock involves significant risks. Before deciding to
invest in shares of our common stock, investors should carefully consider and
all other information set forth herein, including the following risks, which
represent all known material risks. If any of the events or developments
described below occurs, our business, financial condition and results of
operations may suffer. In that case, the value of our common stock may decline
and investors could lose all or part of their investment.
  7
  You
should carefully consider the risks described below in conjunction with the
other information in this annual report on Form 10-K and our consolidated
financial statements included in it.  The risks discussed below also
include forward-looking statements, and our actual results may differ
substantially from those discussed in, or implied by, the forward-looking
statements. See “Item 1.  Business — Forward-Looking
Statements.”
  Our
business operations are conducted entirely in the PRC. Because China’s economy
and its laws, regulations and policies are different from those typically found
in the west and are continually changing, we face certain risks, as summarized
below.
  RISKS
RELATED TO OUR BUSINESS:
  Our
limited operating history makes evaluating our business and prospects difficult,
and our past results may not be indicative of our future
performance.
  Xinsheng,
our operating company in the PRC, commenced operations in 2004. Accordingly, we
are subject to the risks and challenges inherent in the establishment of a new
business enterprise.  We have a limited operating history and our
business model and ability to achieve satisfactory results of operations is
unproven.  Unanticipated problems, expenses, and delays are frequently
encountered in establishing a new business and marketing and developing
products. These include, but are not limited to, competition, the need to
develop customers and market expertise, market conditions, sales, marketing and
governmental regulation.  For these reasons, our results of operations
to date may not provide a reasonable basis for you to evaluate our business and
financial performance.
  We
rely principally on dividends and other distributions paid by our operating
subsidiary to fund any cash and financing requirements we may have, and any
limitation on the ability of our operating subsidiary to pay dividends to us and
ultimately to our shareholders could have a material adverse effect on our
ability to conduct our business.
  We are a
holding company, and we rely principally on dividends and other distributions
paid by our operating subsidiary for our cash requirements, including the funds
necessary to service any debt we may incur.  If our operating
subsidiary incurs its own debt in the future, the instrument governing the debt
may restrict its ability to pay dividends or make other distributions to us and
ultimately to our shareholders.  In addition, the PRC tax authorities
may require Meixin to adjust its taxable income under the management entrustment
agreement currently in place in a manner that would materially and adversely
affect Meixin’s ability to pay dividends and other distributions to us and,
ultimately, our shareholders.
  The PRC
government imposes controls on the convertibility of the RMB into foreign
currencies and the remittance of currency out of China. Under our current
corporate structure, our income is primarily derived from dividend payments from
our operating subsidiary. Shortages in the availability of foreign currency may
restrict the ability of our operating subsidiary to remit sufficient foreign
currency to pay dividends or other payments to us. If the foreign exchange
control system prevents our operating subsidiary to pay dividends or other
payments to us, we may not be able to pay dividends in foreign currencies to our
shareholders.
  Furthermore,
relevant PRC laws, rules and regulations permit our operating subsidiary to pay
dividends to the Company only out of its accumulated profits, if any, determined
in accordance with Chinese accounting standards and regulations.  In
addition, our operating subsidiary is required to set aside 10% of its after-tax
profits each year, if any, to fund a statutory reserve until such reserve
reaches 50% of its registered capital.  These reserves are not
distributable as cash dividends.
  Due to
our operating company’s agricultural industry status, the National Tax Bureau in
Xi’an High-Tech Development Zone has granted the company exemptions from the
enterprise income taxes on dividends derived by foreign investors from foreign
invested enterprises since 2006.  Each year the Company must re-apply
for exemption status.  There can be no assurance that the exemption
will be granted in future years.  Any significant increase of the tax
rate applicable to our operating subsidiary, any imposition of withholding tax
on dividends payable by our operating subsidiary to us, or any PRC tax on our
global income as a “resident enterprise” could have a material adverse effect on
our financial condition, results of operations and our ability to pay dividends
to shareholders in the future.
  8
  Any
limitation on our operating subsidiary’s ability to pay dividends or make other
distributions to us and ultimately to our shareholders could materially and
adversely limit our ability to grow, make investments or acquisitions that could
be beneficial to our business, or otherwise fund and conduct our
business.
  We
rely on a contractual arrangement with Xinsheng for our operations in China,
which may not be as effective in providing control over Xinsheng as direct
ownership, and we may have limited recourse against Xinsheng if it violates our
contractual arrangement.
  We
operate our business in China through a contractual agreement called a
Management Entrustment Agreement between Xinsheng and our subsidiary in China,
Meixin. All of our business in China is conducted through, and all of our
revenues are generated by, Xinsheng. We have no equity control over
Xinsheng.
  The
Management Entrustment Agreement terminates upon the earlier of: (i) the
termination date of Xinsheng’s business, (ii) mutual agreement by Xinsheng and
Meixin to terminate the Agreement, or (iii) Meixin acquiring a greater than 51%
equity interest in Xinsheng’s shares.  If the Management Entrustment
Agreement is terminated, our ability to conduct our business would be
compromised.
  In
addition, if Xinsheng fails to perform under the Management Entrustment
Agreement, we may have to rely on legal remedies under Chinese law, which we
cannot be sure would be available.  For example, Xinsheng could refuse
to operate Meixin in an acceptable manner or to pay the amounts due under our
contractual arrangements.  Because our contractual arrangements are
governed by PRC law and provide for the resolution of disputes through
arbitration in China, if Xinsheng fails to perform its obligation under our
contractual arrangements, we may have to rely on rememdies under PRC law,
including seeking specific performance and claiming damages.  In
addition, the PRC generally has substantially less experience related to the
enforcement of contractual rights through its judiciary or the arbitration
process as compared to the United States.  This inexperience presents
the risk that the judiciary or arbitrators in the PRC may be reluctant to
enforce contractual rights, interpret these rights and remedies differently than
what was intended by the parties to the agreements, or find that such
contractual agreements do not comply with restrictions in current PRC
laws.  A PRC court may also set aside an arbitration award by reason
of any defect the court considers to be present in the arbitration
proceeding.  Any legal proceeding may result in substantial costs,
disruptions to our business, damage to our reputation and diversion of our
resources.
  Our
contractual arrangement with Xinsheng may be deemed illegal by the PRC
government.
  There are
substantial uncertainties regarding the interpretation and application of
current and future PRC laws and regulations, including regulations governing the
validity and enforcement of contractual arrangements similar to the Management
Entrustment Agreement. As the PRC economy continues to transition from a planned
economy to a more market-oriented economy, the PRC government has implemented
and continues to implement various measures to encourage economic growth and
guide the allocation of resources including permitting foreign companies to
conduct operations in China and own limited amounts of PRC entities. While the
PRC government has expanded a foreign company’s ability to conduct business in
China, there can be no assurance that the PRC government will continue to permit
such foreign business involvement or that the different levels of PRC government
will treat contractual arrangements, like the Management Entrustment Agreement,
in a similar fashion. For instance, foreign ownership of PRC entities involved
in certain industries is limited without getting government approval. Currently,
no such limitations apply to the Company’s industry. There can be no assurance
that the PRC government will not institute such ownership limitations in the
future and find that the Management Entrustment Agreement is not “effective”
ownership and the agreement to be in violation of PRC law. Additionally, the law
in China is not as settled and court cases do not act as precedent for future
cases. If we are determined not to be in compliance with PRC law, the PRC
government could levy fines, revoke our business and operating licenses, require
us to discontinue or restrict our operations, restrict our right to collect
revenues, require us to restructure our business, corporate structure or
operations, or impose additional conditions or requirements, or take other
regulatory or enforcement actions against us that could be harmful to our
business.
  9
  We
may not be able to maintain our revenues and profitability as we operate in a
highly competitive industry.
  We are
principally engaged in the manufacture and marketing of organic biochemical
agricultural application products and we face competition from numerous other
companies. Many of our competitors have greater financial resources, longer
operating histories, and larger customer bases than we do.  In
addition, competition may intensify as our competitors enter into business
combinations or alliances and established companies in other markets expand into
our markets.  We may be unsuccessful in our attempts to compete, which
would have a material adverse impact on our business and financial
condition.
  We
are continuing expansion of our super chain sales partner program and direct
sales stores program and we do not have any prior experience in the retail
business.
  In 2008
we launched our “New Agriculture – Generator” program, which includes the super
chain sales partner program and direct sales stores program.  We plan
to continue to expand our network of stores in 2010.  We do not have
any track record in the retail business and there can be no assurance that our
Company will be successful in partnering with, planning, building or operating
the stores.  The successful operation of our stores is subject to
various contingencies, many of which are beyond our control. These contingencies
include the ability to secure suitable locations on a timely basis and on
satisfactory terms, the ability to hire, train and retain qualified personnel
and the successful integration of our stores with our existing marketing and
distribution network. There can be no assurance that suitable locations will be
available or that our retail operations will continue to be successfully
implemented or integrated with our existing operations. The costs associated
with acquiring, assimilating and opening new stores may adversely affect our
profitability. The planned expansion of our sales channel may not produce the
revenues, earnings, or business synergies that we anticipate which could cause
our business and financial condition to be materially and adversely
affected.
  The
successful implementation of this business plan will require the dedication of
significant time of our senior management, which may cause senior management to
divert their attention from the normal daily operations of our agricultural
product manufacturing business which could adversely impact our overall business
operations.
  We
may not be able to effectively control and manage our planned
growth.
  We have
limited operational, administrative and financial resources, which may be
inadequate to sustain the growth we want to achieve.  If our business
and markets grow and develop, it will be necessary for us to finance and manage
expansion accordingly. In addition, we may face challenges in managing our
expanding product and service offerings and in integrating any businesses we
acquire with our own. Such growth would place increased demands on our existing
management, employees and facilities. Our failure to meet these demands could
interrupt or adversely affect our operations and cause production backlogs,
longer product development time frames and administrative inefficiencies.
Additionally, failure to execute our planned growth strategy could have a
material adverse effect on our financial condition and results of
operation.
  We
may not be able to access on satisfactory terms, or at all, the credit and
capital markets if needed to support our expansion efforts.
  Although
we believe that our existing cash resources will be sufficient to meet our
existing operating requirements for the foreseeable future, we are seeking
opportunities to expand our manufacturing and distribution capabilities in the
PRC that may require an investment beyond our existing cash resources. We may
rely upon access to the credit and capital markets as a source of liquidity for
the portion of our working capital and debt repayment requirements,
infrastructure needs and consideration for acquisitions and strategic
investments not provided by cash from operations or investments, and could seek
additional equity or debt financing. We may not be able to obtain financing on
satisfactory terms or at all. If we issue securities to raise capital, our
existing stockholders may experience dilution or the new securities may have
rights senior to those of our common stock. In addition, the terms of these
securities could impose restrictions on our operations or our ability to raise
additional funds on acceptable terms.
  10
  Market
disruptions such as those recently experienced in the United States and abroad
may increase our cost of borrowing or adversely affect our ability to access
sources of liquidity. If we are unable to raise additional capital when
required, if any of our lenders are unable to meet their obligations to provide
loans to us under the terms of an agreement, if we are unable to access credit
at competitive rates, or at all, or if our short-term or long-term borrowing
costs dramatically increase, we may have to delay, scale back or discontinue our
expansion plans and our business may be adversely affected.
  If
we fail to effectively expand our current operations and capacity to satisfy
demand for our products, our results of operations and business prospects could
be impaired.
  Our
future success depends on our ability to expand our business to address the
growth in demand for our products. Because our industry is highly competitive,
if we are unable to increase our production capabilities to meet increased
demand for our products, we may lose existing customers, as well as potential
additional customers, to competitors with greater production
capacities.  If we lose our existing customers our revenues could
decrease and accordingly our overall financial performance could be
significantly impaired. In addition, we currently rely on distributors to
distribute our products to multiple end users.
  Our
ability to add production capacity and increase output is subject to significant
risks and uncertainties, including:
  ·
              the
      availability of additional funding to build manufacturing facilities and
      purchase raw materials on favorable terms or at
  all;
  ·
              our
      management and minimization of delays and cost overruns caused by problems
      with our suppliers of raw materials and third-party vendors;
      and
  ·
              our
      receipt of any necessary government approvals or permits that may be
      required to expand our operations in a timely manner or at
      all.
  If we
cannot successfully implement additional production capacity increases
efficiently and cost-effectively, we will be unable to satisfy any increased
demand for our products, which could significantly impair our financial
performance.
  If
our projections regarding the future market demand for our products are
inaccurate, our operating results and our overall business may
suffer.
  We have a
capital investment plan in anticipation of rapid growth in the market for
organic agricultural products in the PRC.  The expansion of our
internal manufacturing, marketing and sales capabilities has required
significant up-front fixed costs.  If market demand for our products
does not increase as quickly as we have anticipated and align with our expanded
capacity, we may be unable to offset these costs and to achieve economies of
scale, and our operating results may be adversely affected as a result of high
operating expenses, reduced margins and underutilization of
capacity.  Our ability to meet such excess customer demand could also
depend on our ability to raise additional capital and effectively scale our
manufacturing operations.
  Our
business is dependent upon our brand recognition and trademarks.
  Our
trademarked brands have gained recognition in the PRC. However, the protection
of intellectual property rights in the PRC may not be as effective as those in
the U.S. or other countries. The unauthorized use of our brands could harm our
business and competitive position. We cannot guarantee that counterfeiting or
imitation of our products will not occur in the future or that we will be able
to detect it and resolve it effectively. Any related litigation could be time
consuming, costly, and unsuccessful.
  11
  We
may be subject to intellectual property infringement claims.
  We also
cannot guarantee that our products will not infringe patents, copyrights or
other intellectual property rights held by third parties. Third parties may
initiate litigation against us alleging infringement of their proprietary
rights. In the event of a successful claim of infringement and our failure or
inability to develop non-infringing products or license the infringed or similar
technology on a timely basis, our business could be harmed. In addition, even if
we are able to license the infringed or similar technology, license fees could
be substantial and may adversely affect our results of operations.
  The
potential consequences for intellectual property infringement under Chinese law
include the following: the Company may become the subject of a court order or
decree publicly denouncing the infringing activity; the Company may be required
to indemnify the infringed party for losses caused by the infringing activity;
confiscation/seizure of the Company’s assets and income derived from the
infringing activity; and potential criminal liability.
  We
do not own any patents related to our products.
  The
patent application process in China requires patent applicants to disclose
substantial information regarding the subject matter of the patent application.
In addition, patent applications in China are published and become part of the
public record.  We believe that that applying for patents in the PRC
involves risk because the PRC does not provide sufficient enforcement against
infringement upon intellectual property.  Accordingly, we do not own
any patents related to our products because applying for patent protection would
reveal our proprietary methods and techniques and subject us to increased risk
of infringement.  However, we may nevertheless face severe pricing
pressure from copycat products if our competitors are able to copy and implement
our proprietary methods and techniques.
  We
depend on the services of our senior management team and our business may be
severely disrupted if we lose their services.
  Our
success depends heavily on the continuing services of our senior management
team, in particular our president and chief executive officer, Liping
Deng.  We rely on his industry and business experience as well as his
relationships with key business contacts and relevant government
authorities.  Some of our officers and directors engage in other
businesses or board service and serve on the boards of directors of other public
companies.  If our management’s other businesses require them to
devote substantial amounts of time to such affairs, it could limit their ability
to devote time to our company and could have a negative impact on our business
and financial results. Additionally, if one or more of our executives are unable
or unwilling to continue in their present positions, we may not be able to
replace them in a timely manner or at all, and our business and ability to
execute our acquisition strategy may be materially and adversely
affected.  In addition, if any member of our senior management team or
another key professional joins a competitor or forms a competing company, we may
lose valuable industry and business know-how that is critical to our acquisition
strategy.  Any of the above risks may have a material adverse effect
on our business, cash flow, financial condition, results of operations and
prospects.
  We
may not be able to hire and retain qualified personnel.
  The
agricultural chemicals business is specialized and requires the employment of
personnel with significant scientific and operational experience in the
industry. Accordingly, we must attract, recruit and retain a sizeable workforce
of technically and scientifically competent employees.  Our ability to
effectively implement our business strategy will depend upon, among other
factors, the successful recruitment and retention of additional management and
other key personnel that have the necessary scientific, technical and
operational skills and experience with the fertilizer industry.  These
individuals are difficult to find in the PRC and we may not be able to retain
such skilled employees.  If we are unable to hire individuals with the
requisite experience we may not be able to produce enough products to optimize
profits, research and development initiatives may be delayed and we may
encounter disruptions in production and research which will negatively impact
our financial condition.
  12
  We
do not presently maintain fire, theft, product liability or any other property
insurance, which leaves us with exposure in the event of loss or damage to our
properties or claims filed against us.
  We do not
maintain fire, theft, product liability or other insurance of any kind. We bear
the economic risk with respect to loss of or damage or destruction to our
property and to the interruption of our business as well as liability to third
parties for damage or destruction to them or their property that may be caused
by our personnel or products. Such liability could be substantial and the
occurrence of such loss or liability may have a material adverse effect on our
business, financial condition and prospects. While product liability lawsuits in
the PRC are rare, and we have never experienced a significant failure of our
products, there can be no assurance that we would not face liability in the
event of the failure of any of our products.
  Risks
related to doing business in the PRC:
  Our
success depends upon the development of the PRC’s agricultural
industry.
  The PRC
is currently the world’s most populous country and one of the largest producers
and consumers of agricultural products. Despite the Chinese government’s
emphasis on agricultural self-sufficiency, inadequate port facilities and lack
of warehousing and cold storage facilities may impede the growth of the domestic
agricultural trade. We rely on local farmers in the PRC to purchase our
products, which are generally purchased under a cash-on-delivery basis or on
credit. Accordingly, any difficulties farmers in the PRC experience in selling
their produce could reduce the demand for our products and hinder the ability of
the farmers to pay us on a timely basis.
  Changes
in the policies of the PRC government could have an adverse effect on our
business.
  Policies
of the PRC government can have significant effects on the economic conditions of
the PRC. Although the PRC government has been pursuing economic reform policies
and transitioning to a market-oriented economy, there is no assurance that the
government will continue to pursue such policies or that such policies may not
be significantly altered, especially in the event of a change in leadership,
social or political disruption, or other circumstances affecting the PRC’s
political, economic and social conditions. Our business could be adversely
affected by changes in PRC government policies, including but not limited to
changes in policies relating to taxation, currency conversion, imports and
exports, and ownership of private enterprises.
  PRC
laws and regulations governing our current business operations are sometimes
vague and subject to interpretation, and any changes in PRC laws and regulations
may have a material and adverse effect on our business.
  There are
substantial uncertainties regarding the interpretation, application and
enforcement of PRC laws and regulations, including but not limited to the laws
and regulations governing our business. These laws and regulations are sometimes
vague and are subject to future changes, and their official interpretation and
enforcement by the various branches of the PRC government may involve
substantial uncertainty. The PRC legal system is based in part on governmental
policies and internal rules some of which are not published on a timely basis or
at all. New laws, regulations, rules and policies that affect existing and
proposed future businesses may also be applied retroactively. We cannot predict
with certainty what effect existing or new PRC laws or regulations may have on
our business. In addition, there is less published guidance regarding PRC laws
as compared to laws in the United States, and prior rulings and interpretations
of PRC laws may not necessarily carry the same precedential value as in the
United States.
  Demand
for our products may decrease if the PRC government changes the requirements for
the “Green Food” rating.
  Crops
that are grown using our products may be considered as “all-natural,” “organic,”
or “green”, and accordingly may qualify for the “AA Green Food” rating, which is
administered by the Green Food Development Center of the PRC Ministry of
Agriculture. Should the PRC government change the current Green Food rating
standards, crops grown with our products may not qualify for the Green Food
rating, which would adversely affect our business.
  13
  We
are required to obtain fertilizer registration certificates for our products
from the PRC government that are subject to annual renewal.
  In the
PRC, manufacturers of fertilizers and related products must obtain a government
approval known as a fertilizer registration certificate. Since 2004, we have
obtained temporary registration certificates from the PRC’s Ministry of
Agriculture for each of our primary products which authorize us to manufacture
and distribute our agricultural application products throughout the PRC. The
term of a temporary fertilizer registration certificate is one (1) year, subject
to annual renewal. There is no assurance that the certificates will be
renewed.  See “Description of Business – Government Regulation” for
more information.
  Xinsheng’s
tax exemption in the PRC is subject to annual renewal and may not be granted in
the future.
  Xinsheng
is subject to a 25% standard enterprise income tax in the PRC. However, due to
Xinsheng’s agricultural related activities, the National Tax Bureau in Xi’an
High-Tech Development Zone has granted Xinsheng annual exemptions from this tax
for the years ending December 31, 2007, 2008 and 2009. We have applied for a tax
exemption for 2010 and we expect that this application will be
approved.
  However,
there is no assurance that we will continue to receive the tax exemption in
future years. Without the tax exemption, our financial results would be
materially and adversely affected. For purposes of comparison, had we been
subject to the 25% tax, our operating cash flow and net income for the years
ended December 31, 2009 and 2008 would each have been reduced by approximately
$385,000 and $387,600,
respectively.
  Our
business is subject to severe weather conditions, disease, and other natural
catastrophes in China.
  Our
products are used for agricultural purposes, and accordingly our business is
exposed to the risk of severe weather conditions, disease, and other natural
catastrophes in the PRC. Natural catastrophes may include hail storms, floods,
droughts, windstorms, earthquakes, fires, insect infestations, disease and other
events, each of which tends to be unpredictable.
  Cold
weather and other unusual weather conditions, particularly during or prior to
the spring plowing season, can significantly affect the purchasing decisions of
the Company’s customers, and can have a material adverse effect on our financial
results, as we experienced during 2008.
  The
recent economic downturn may materially and adversely affect our
business.
  The
Chinese economy has experienced a slowing growth rate due to a number of
factors, including but not limited to instability in the global financial
markets and economic and monetary policies adopted by the Chinese government
aimed at preventing overheating of the Chinese economy and
inflation.
  We cannot
predict how long the downturn will last, the timing of any subsequent recovery,
or how much of an impact the downturn will have on our business and demand for
our products. To the extent that the downturn reduces spending on produce with
the “Green Food” designation, which tends to be more expensive than products
without the designation, demand for our products could be affected.
  The
economic downturn and financial market instability have generally made the
business climate more volatile and more costly. One result of the deterioration
in the global equity and credit markets is that obtaining any additional debt or
equity financing has become more difficult, more costly, and more potentially
dilutive to our existing investors. Failure to secure any necessary financing in
a timely manner and on favorable terms could have a material adverse effect on
our growth strategy and require us to delay or abandon our expansion
plans.
  14
 
 Inflation
in the PRC could negatively affect our profitability and growth.
  A
resumption of the rapid economic growth experienced in the PRC prior to the
global economic downturn can lead to growth in the money supply and rising
inflation. In reaction to inflationary pressures, the PRC government has imposed
controls in the past on bank credits, limits on loans for fixed assets,
restrictions on state bank lending, and restrictions on funds flowing into the
PRC. Such policies can potentially lead to a slowing of economic growth. In
addition, in October 2004, the People’s Bank of China, the PRC’s central bank,
raised interest rates for the first time in nearly a decade and indicated in a
statement that the measure was prompted by inflationary concerns in the domestic
economy. Future rises in interest rates by the central bank would likely slow
economic activity in China which could, in turn, materially increase our costs
and also reduce demand for our products.
  Our
operating results will suffer if the price of raw materials increases and we
cannot pass the increased cost through to our customers.
  The
primary raw materials included in our products are active potassium, organic
nitrogen, chitosan and other supplementary material. The prices for these raw
materials are subject to market forces largely beyond our control, including
energy costs, organic chemical feedstock, market demand, and freight costs. The
prices for these raw materials may fluctuate significantly based upon changes in
these forces. Our operating results may be seriously harmed if we are unable to
pass any raw material price increases through to our customers due to lower
margins from our sales. If we are forced to increase prices of our products due
to increases in the prices of raw materials, the demand for our products could
decrease, which could materially harm our operations and financial
results.
  PRC
governmental control of currency conversion may affect our business and
financial results.
  The PRC
government imposes controls on the convertibility of Renminbi (“RMB”) into
foreign currencies and the remittance of currency out of the PRC. We receive
substantially all of our revenues in RMB, which is currently not a freely
convertible currency. Shortages in the availability of foreign currency may
restrict our ability to remit sufficient foreign currency to pay dividends, or
otherwise satisfy foreign currency denominated obligations. Under existing PRC
foreign exchange regulations, payments of current account items, including
profit distributions, interest payments and expenditures from trade-related
transactions can be made in foreign currencies without prior approval from the
PRC State Administration of Foreign Exchange (“SAFE”) by complying with certain
procedural requirements. However, approval from appropriate government
authorities is required where RMB is to be converted into foreign currency and
remitted out of the PRC to pay expenses generally above $30,000, and for return
of capital. The procedure followed by the Company for remitting currency out of
the PRC is as follows: (i) the Company submits a fund remittance application to
SAFE for approval, (ii) upon receipt of the approval document from SAFE, the
Company submits the SAFE approval document to the bank at which the Company
maintains a foreign exchange account, and (iii) the bank then processes the
transfer. Approval is not required for ordinary and reasonable business
expenditures less than $30,000. For amounts greater than $30,000, the factors
considered in granting approval include the purpose and amount of the transfer.
There are no set guidelines as to what purposes or amounts greater than $30,000
will be approved. In the event that the Company is not permitted to remit funds
out of the PRC due to SAFE restrictions, the Company’s ability to meet its
payment obligations to its service providers and creditors may be
affected.
  The PRC
government may also at its discretion restrict access in the future to foreign
currencies for current account transactions. If the foreign exchange control
system prevents us from obtaining sufficient foreign currency to satisfy our
currency demands, we may not be able to pay certain expenses as they come
due.
  The
fluctuation of the RMB against the U.S. dollar may affect our operating results
and financial condition.
  The value
of the RMB against the U.S. dollar and other currencies fluctuates and is
affected by, among other things, changes in the PRC’s political and economic
conditions. As we rely entirely on revenues earned in the PRC, any significant
revaluation of the RMB may materially and adversely affect our cash flows,
revenues and financial condition. For example, to the extent that we need to
convert U.S. dollars we receive from an offering of our securities into RMB,
appreciation of the RMB against the U.S. dollar would reduce the amount of RMB
we receive upon conversion. Conversely, if we need to convert RMB into U.S.
dollars and the U.S. dollar appreciates against the RMB, the U.S. dollar
equivalent of the RMB we convert would be reduced. In addition, the depreciation
of significant U.S. dollar denominated assets could result in a charge to our
income statement and a reduction in the value of these assets.
  15
  In July,
2005, the PRC government changed its policy of pegging the value of the RMB to
the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate against
a basket of certain foreign currencies. While the international reaction to the
RMB revaluation has generally been positive, there remains significant
international pressure on the PRC government to adopt an even more flexible
currency policy, which could result in a further and more significant
fluctuation of the value of the RMB against the U.S. dollar.
  Because
our principal assets are located outside of the U.S. and most of our directors
and officers reside outside of the U.S., it may be difficult to pursue legal
action against the Company and its directors and officers.
  Our
operating subsidiary is located in the PRC and substantially all of its assets
are located in the PRC. In addition, most of our directors and officers reside
in the PRC. It may therefore be difficult for investors in the U.S. to enforce
their legal rights based on the civil liability provisions of the U.S. Federal
securities laws against us in the courts of either the U.S. or the PRC and, even
if civil judgments are obtained in U.S. courts, to enforce such judgments in PRC
courts. Further, it is unclear if extradition treaties now in effect between the
U.S. and the PRC would permit effective enforcement against us or our officers
and directors of criminal penalties under U.S. laws or otherwise.
  Lack
of bank deposit insurance in the PRC puts our cash reserves at risk of
loss.
  We
maintain bank accounts in China whose balances are not insured and are not
protected by FDIC insurance or other insurance. As of December 31, 2009, we held
the equivalent of approximately $9,599,000 in U.S. dollars in bank accounts in
China.  If a Chinese bank holding our funds were to experience
insolvency or closure, it may not permit us to withdraw our funds which would
result in a loss of such funds and a reduction of our net assets.
  Risks
related to our common stock:
  The
trading market for our common stock is relatively illiquid and the market price
of our common stock has been and will likely continue to be
volatile.
  There is
relatively low trading volume in our common stock, and the price of our common
stock has and is likely to continue to fluctuate significantly. These
circumstances may make it difficult for shareholders to sell shares of our
common stock when desired or at attractive prices. During 2008 and 2009, the
trading price of our common stock as quoted on the OTC Bulletin Board ranged
from a low of $0.10 per share to a high of $1.50 per share.
  The price
for our common stock may fluctuate in response to a number of events and
factors, including but not limited to: quarterly variations in our operating
results; announcements of technological innovations or new products by us or our
competitors; the operating and stock price performance of other companies that
investors may deem comparable to us, including companies with business
activities in the PRC; news reports relating to trends in our markets or general
economic conditions. Additionally, volatility or a lack of positive performance
in our stock price may adversely affect our ability to retain key
employees.
  In
addition, there is no guarantee that our common stock will remain quoted on the
OTC Bulletin Board. If our common stock does not remain quoted on the OTC
Bulletin Board, it would become even more difficult to sell when desired or at
attractive prices.
  The
number of shares of common stock available for resale and issuable upon
conversion or exercise of our notes and warrants may adversely affect the price
of our common stock.
  On April
22, 2006, we issued 5,389,221 shares of our common stock (approximately
10,950,897 shares after giving effect to our forward stock split on October 31,
2006) as consideration for the Management Agreement with Xinsheng. Of this
amount, 9,099,749 shares are presently held in a trust and can be released from
the trust and are eligible for resale pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended.
  16
  As
indicated in Note 11 to the Consolidated Financial Statements for the year ended
December 31, 2009 included herein, we have 1,378,580 common stock purchase
warrants outstanding with exercise prices ranging from $1.00 to $2.00. Of these
warrants, 1,378,580 shares of our common stock issuable upon exercise of the
warrants may be sold under Rule 144 beginning six months after exercise and
500,000 shares of our common stock issuable upon exercise of the Warrants have
been registered for resale. In addition, we have convertible notes outstanding
in an aggregate principal amount of $500,000, which are convertible into up to
1,000,000 shares of common stock at a conversion price of $0.50 per share. Some
of the shares of our common stock issuable upon conversion of the Notes have
been registered for resale upon conversion. In October 2009, we issued a warrant
to purchase 1,000 shares of our common stock at an exercise price per share of
$1.00.
  The
exercise of the warrants by the warrant holders and the conversion of the Notes
by the Note holders would have a dilutive effect on our existing shareholders.
In addition, the number of shares of common stock available for resale by the
Xinsheng shareholders, as well as the number of shares issuable upon conversion
of our outstanding notes or exercise of our outstanding warrants may adversely
affect the price of our common stock and may make it more difficult for us to
raise additional capital on favorable terms.
  We
are authorized to issue 4,900,000 shares of an “undesignated” class of stock
which may adversely affect the voting power or other rights of the holders of
common stock.
  Our
certificate of incorporation authorizes our board of directors to designate and
issue one or more series of preferred stock, having rights and preferences as
the board may determine in accordance with Maryland law. Our board of directors
is empowered, without stockholder approval, to issue such preferred stock with
rights that could adversely affect the voting power or other rights of the
holders of our common stock. In addition, the undesignated stock could be
utilized, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control. As of this date, no shares of the undesignated
stock are outstanding and no designation has been made as to any characteristics
these shares may have in the future.
  Our
common stock falls within the definition of penny stock.
  The SEC
has adopted regulations which generally define “penny stock” to be an equity
security that has a market price of less than $5.00 per share. Our common stock
falls within the definition of penny stock and accordingly is subject to rules
that impose additional sales practice requirements on broker-dealers who sell
such securities.
  Before a
broker-dealer can sell a penny stock, SEC rules require the firm to first
approve the customer for the transaction and receive from the customer a written
agreement to the transaction. The firm must furnish the customer a document
describing the risks of investing in penny stocks. The firm must tell the
customer the current market quotation, if any, for the penny stock and the
compensation the firm and its broker will receive for the trade. Finally, the
firm must send monthly account statements showing the market value of each penny
stock held in the customer’s account.
  Consequently,
the “penny stock” rules may restrict the ability of broker-dealers to sell our
common stock and may affect the ability of investors to sell their common stock
in the secondary market.
  We
are not likely to pay cash dividends in the foreseeable future.
  We
currently intend to retain any future earnings for use in the operation and
expansion of our business. We do not expect to pay any cash dividends in the
foreseeable future but will review this policy as circumstances dictate. Should
we decide in the future to do so, as a U.S. based holding company, our ability
to pay dividends and meet other obligations depends upon the receipt of
dividends or other payments from our operating subsidiary. In addition, our
operating subsidiary is subject to restrictions under PRC law on its ability to
make distributions to us, including restrictions on the conversion of local
currency into U.S. dollars or other hard currency and other regulatory
restrictions.
  17
  If
we fail to maintain an effective system of internal control over financial
reporting, we may not be able to accurately report our financial results. As a
result, current and potential investors could lose confidence in our financial
reporting, which could harm our business and have an adverse effect on our stock
price.
  Pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to annually
furnish a report by our management on our internal control over financial
reporting.  Such report must contain, among other matters, an
assessment by our principal executive officer and our principal financial
officer on the effectiveness of our internal control over financial reporting,
including a statement as to whether or not our internal control over financial
reporting is effective as of the end of our fiscal year.  This
assessment must include disclosure of any material weakness in our internal
control over financial reporting identified by management.  In
addition, under current SEC rules, we will be required to obtain an attestation
from our independent registered public accounting firm as to our internal
control over financial reporting for our annual report on Form 10-K for our
fiscal year ending December 31, 2010.  Performing the system and
process documentation and evaluation needed to comply with Section 404 is both
costly and challenging.  During the course of our testing we may
identify deficiencies which we may not be able to remediate in time to meet the
deadline imposed by the Sarbanes-Oxley Act of 2002 for compliance with the
requirements of Section 404.  In addition, if we fail to maintain the
adequacy of our internal controls, as such standards are modified, supplemented
or amended from time to time, we may not be able to ensure that we can conclude
on an ongoing basis that we have effective internal controls over financial
reporting in accordance with Section 404 of the Sarbanes-Oxley Act of
2002.  Failure to achieve and maintain an effective internal control
environment could also cause investors to lose confidence in our reported
financial information, which could have a material adverse effect on the price
of our common stock.
  Item
1B.        Unresolved Staff
Comments.
  Not
applicable to smaller reporting companies.
  Item
2.      
    Properties.
  There is
no private land ownership in PRC. Land in the PRC is owned by the government and
cannot be sold to any individual or entity. Instead, the government grants or
allocates landholders a “land use right,” which is sometimes referred to
informally as land ownership. Land use rights are granted for specific purposes
and for limited periods. Each period may be renewed at the expiration of the
initial and any subsequent terms. Granted land use rights are transferable and
may be used as security for borrowings and other obligations. Generally
speaking, there are four primary ways of obtaining land use rights in the
PRC:
  ·
              Grant
      of the right to use land;
  ·
              Assignment
      of the right to use land;
  ·
              Lease
      of the right to use land; and
  ·
              Allocated
      land use rights.
  Xinsheng
does not own any land use rights.
  As of
December 31, 2009, Xinsheng owns its office buildings, valued at cost of RMB
1,800,183 (approximately $263,727), manufacturing machinery and office
equipment, valued at cost of RMB 504,399 (approximately $54,203) and vehicles,
valued at cost of RMB 1,522,087 (approximately $222,986) based on the exchange
rate in effect as of December 31, 2009.
  Xinsheng
leased its office space (approximately 7,300 square feet) in Building 2,
Unit 1, 15th Floor, Ling Xian Xin Cheng, Hi-tech Industrial Development
Zone in Xi-an, Shaanxi Province, for an annual rent of RMB 366,390
(approximately $53,640) from Shaanxi Heng Xing Property Management Co., Ltd. The
term of the lease was three years and expires on March 31, 2011.  The
Company terminated this lease on October 1, 2009 after relocating to its new
office buildings.  See Note 4 to the Consolidated Financial Statements
for the year ended December 31, 2009 included herein.  On October 1,
2009, the Company signed a new lease with the same landlord for an office space
(approximately 344 square feet) at an annual rent of RMB 12,000 (approximately
$1,758).  This lease has a term of one year, expiring on September 30,
2010.
  18
  Xinsheng
leases its operating and testing space (approximately 2,600 square feet),
located at the Xi’an Vegetable Research Institute, 2 Ouyan Road, Xian, Shaanxi,
China, for an annual rent of RMB 38,500 (approximately $5,640). The lease
expired on March 31, 2010.  As of the date of filing of this Annual
Report on Form 10-K, the Company is still in negotiations with the landlord to
extend this lease.
  Xinsheng
leases its manufacturing space (approximately 22,600 square feet), located at
Sanyuan Cotton Company, 16 Shihua Road, Chemistry District, Sanyuan County,
Shaanxi Province, for an annual rent of RMB 90,000 (approximately $13,176). The
lease expires on December 31, 2010.
  On
October 21, 2009, Xinsheng received an approval letter from the Bureau of
Foreign Trade and Economic Cooperation of Lantian County of Xinsheng’s
application to purchase land use rights in Lantian County to establish the
“Xinsheng Centennial Industrial Zone”.  Xinsheng intends to purchase
the land use rights of 66 acres for 30 years.  The land use right
purchase cost is expected to be approximately 28,000,000 RMB ($4.1
million).  In addition, the estimated cost for relocation of local
dwellers is approximately 2,040,000 RMB ($299,000).  As of the date of
filing of this Annual Report on Form 10-K, this transaction has not been
finalized due to local government delays.
  China
Agri’s executive offices in the United States are located at 11 East 86th
Street, New York, New York 10028. Michael Segal, one of our directors, allows us
to use the space rent free.
  We
believe that our facilities are suitable for our current operations. However,
our expansion plans contemplate the need for additional space as we increase
production.
  Item
3.           Legal
Proceedings.
  There are
no material pending legal proceedings to which we are a party or to which any of
our property is subject and to the best of our knowledge, no such actions
against us are contemplated or threatened.
  Item
4.           (Removed and
Reserved).
  19
  PART
II
  Item
      5.
              Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities.
  Our
common stock began quoting on the OTC Bulletin Board (“OTCBB”) on October 17,
2007 under the symbol CHBU.OB. The price range per share of common stock
presented below represents the highest and lowest intra-day prices for the
Company’s common stock as quoted on the OTCBB. Such over-the-counter market
quotations may reflect inter-dealer prices, without markup, markdown or
commissions and may not necessarily represent actual transactions. Our common
stock is traded relatively infrequently and accordingly the market for our
common stock may not be indicative of a liquid trading market. The closing price
of our common stock as quoted on the OTCBB on April 13, 2010 was
$0.79.
  High
      Sales
                    Price
                
                
                Low
      Sales PriceYear
      Ended December 31, 2009:4th
      Quarter
                
                $
                0.74
                
                
                $
                0.383rd
      Quarter
                
                $
                1.01
                
                
                $
                0.322nd
      Quarter
                
                $
                0.54
                
                
                $
                0.111st
      Quarter
                
                $
                0.25
                
                
                $
                0.10Year
      Ended December 31, 2008:4th
      Quarter
                
                $
                0.55
                
                
                $
                0.103rd
      Quarter
                
                $
                0.51
                
                
                $
                0.252nd
      Quarter
                
                $
                1.50
                
                
                $
                0.421st
      Quarter
                
                $
                1.00
                
                
                $
                0.40
  Number
of Shareholders
  As of
March 31, 2010, there were 12,958,574 shares of our common stock issued and
outstanding and 7 active holders of record of our common stock.  The
number of active record holders was determined from the records of our transfer
agent and does not include beneficial owners of common stock whose shares are
held in the names of the Xinsheng trustees, security brokers, dealers, and
registered clearing agencies.
  The
Xinsheng trustees act as trustees on behalf of approximately 57 shareholders in
the PRC, but are considered by our transfer agent to be one shareholder of
record.  In addition, all of our common shares held by brokerage
firms, banks and other financial institutions in the United States and Canada as
nominees for beneficial owners are considered to be held of record by Cede &
Co. in respect of brokerage firms, banks and other financial institutions in the
United States. Cede & Co. is also considered to be one shareholder of
record.
  The
Company’s transfer agent is Securities Transfer Corporation, 2591 Dallas
Parkway, Suite 102, Frisco, TX 75034, telephone number: (469)
633-0101.
  Dividends
  We have
not declared or paid any cash dividends on our common stock. We currently intend
to retain all earnings, if any, for use in our business operations and we do not
anticipate declaring any dividends in the foreseeable future.
  The
payment of dividends is contingent on the ability of our PRC based operating
subsidiary to obtain approval to send monies out of the PRC. The PRC’s national
currency, called the Yuan or Renminbi, is not a freely convertible currency. The
PRC government imposes controls on the convertibility of renminbi into foreign
currencies and, in certain cases, the remittance of currency out of the
PRC.
  20
  Equity
Compensation Plan Information
  We do not
have any stock option, bonus, profit sharing, pension or similar plan. However,
we may adopt such a plan in the future to attract and retain members of
management, directors or key employees.
  Recent
Sales of Unregistered Securities
  The
following issuance of shares were exempt from registration under section 4(2) of
the Securities Act or Regulation D promulgated thereunder as
indicated:
  Private
Placement of Warrants
  On
October 9, 2009, we issued to Legend Merchant Group, Inc. warrants to purchase
up to 1,000 shares of common stock at an exercise price equal to $1.00 per share
for services rendered and waiving registration rights.  The foregoing
issuance was exempt from registration under Section 4(2) of the Securities
Act.
  Item
6.           Selected
Financial Data.
  Not
applicable to smaller reporting companies.
  Item
7.           Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
  The
following discussion should be read in conjunction with the Consolidated
Financial Statements and notes thereto included herein. All information
presented herein is based on the Company’s fiscal calendar. Unless otherwise
stated, references in this report to particular years or quarters refer to the
Company’s fiscal years ended in December and the associated quarters of those
fiscal years.
  Overview
  China
Agri-Business, Inc. was incorporated in the State of Maryland on December 7,
2005. On March 24, 2006, we formed a wholly-owned subsidiary under the laws of
China, registered in the city of Xi’an, called Mei Xin Agri Technology (Shaanxi)
Co., Ltd. (“Meixin”).  On April 18, 2006, Meixin signed a Management
Entrustment Agreement with Shaanxi Xin Sheng Centennial Agricultural and
Technology Co., Ltd. (“Xinsheng”), a company organized under the laws of China.
Under that agreement, Meixin acquired management control of Xinsheng.
Consequently, Xinsheng is our operating company in China.
  Meixin
controls Xinsheng's business and management, is entitled to the proceeds of
Xinsheng's business and is obligated to fund Xinsheng’s operations, including
any losses. However, China Agri and Meixin do not own any equity rights in
Xinsheng.
  Xinsheng
develops, manufactures and markets fertilizer, bactericide and fungicide
products used for farming in China. These products are designed to be less
harmful to the environment than traditional fertilizers, and to increase
agricultural output and reduce costs. Our fertilizer products are made of a
chemical polymer combined with active potassium, organic nitrogen and other
ingredients, including polysaccharides extracted from the shells of crustaceans
and mixed with active calcium.
  Although
we do not produce “Green Food” products, crops grown by farmers with the use of
our products may qualify for the “AA green food” designation in the PRC. The
green food rating system, which consists of an “A” rating and a more stringent
“AA” rating, is overseen by the China Green Food Development Center, an agency
under the jurisdiction of the Ministry of Agriculture of the PRC. The “AA”
rating indicates that the crops contain minimal chemical residue from
fertilizers. While crops grown using our products may qualify for the “AA green
food” designation, our products themselves do not bear the “AA green food”
designation.  We do not incur additional costs in producing products
that allow farmers crops to qualify for the “AA green food”
designation.
  21
  We also
initiated a “New Agriculture – Generator” initiative in the fourth quarter of
2008, which included the super chain sales partner program and direct sales
stores program.  The purpose of this campaign is to establish our own
sales network by creating closer relationships with farmers through our super
chain and direct sales stores in the rural areas of China in addition to the
traditional sales network, and we plan to continue to expand this business in
the future.  As of December 31, 2009, the Company had established 103
branded super chain stores.  A majority of these stores are located in
the Shaanxi and Hunan Provinces.  In addition, the Company established
49 direct sales stores, which are controlled and managed directly by the
Company.  The direct sales stores are located in the Shaanxi
Province.
  Results
of Operations
 
 Year
Ended December 31, 2009 as compared to Year Ended December 31, 2008
 
 Comparison of Gross Profit
for the Year Ended December 31, 2009 and 2008
 
 2009
                          
                          
                          2008Sales
                          
                          $
                          3,038,560
                          
                          
                          $
                          2,922,385Cost
      of Goods Sold
                          
                          
                          1,065,599
                          
                          
                          
                          817,472Gross
      Profit
                          
                          $
                          1,972,961
                          
                          
                          $
                          2,104,913Gross
      Profit Margin
                          
                          
                          64.93
                          %
                          
                          
                          72.03
                          %
 
 Sales
 
 Sales for
the year ended December 31, 2009 totaled $3,038,560, an increase of $116,175, or
4%, as compared to sales of $2,922,385 for the year ended December 31, 2008. The
year over year increase in sales is attributable to positive responses to our
“New Agriculture-Generator” campaign offset by lower sales through the
traditional sales network. Sales from our “Super Chain Sales Partner Program”,
which was designed to expand our distribution network directly and to establish
a closer relationship with farmers through agricultural cooperatives in the
rural areas of China, amounted $619,637, approximately 20% of total sales in
2009. Sales from our “Direct Sales Store Program” amounted $414,356,
approximately 14% of total sales in 2009. As of December 31, 2009, the Company
had established 103 branded super chain stores, a majority of those stores are
located at Shannxi Province (local province) and Hunan Province. In addition,
the Company established 49 direct sales stores, which are controlled and managed
directly by the Company. These direct sales stores are located in the Shannxi
Province.
 
 Cost
of Goods Sold,  Gross Profit and Gross Profit Margin
 
 Cost of
goods sold for the year ended December 31,  2009 totaled $1,065,599,
an increase of $248,127, or  30% as compared to cost of goods sold of
$817,472 for the year ended December 31, 2008. The increase in cost of goods
sold and decrease of gross profit margin was attributable to our new direct
sales stores. To attract more farmers to our direct sales stores, we sell
fertilizer products made by other company in our direct sales stores. For the
third party made fertilizer products, the gross margin rate is approximately
20%. During 2009, total purchased third party products included in the cost of
goods sold amounted $297,906. Followings are analysis of our gross profit margin
in 2009 (We did not have direct sale stores in 2008).
 
 Total
                          
                          
                          Direct
      Sale
                            Stores
                          
                          
                          Branded
                            Stores
                          
                          
                          Traditional
                            Sales2009
      Sales
                          
                          $
                          3,038,560
                          
                          
                          $
                          414,356
                          
                          
                          $
                          619,637
                          
                          
                          $
                          2,004,567Cost
      of Goods Sold
                          
                          
                          1,065,599
                          
                          
                          
                          297,418
                          
                          
                          
                          182,143
                          
                          
                          
                          586,038Gross
      Profit
                          
                          $
                          1,972,961
                          
                          
                          $
                          116,938
                          
                          
                          $
                          437,494
                          
                          
                          $
                          1,418,529Gross
      Profit Margin
                          
                          
                          64.93
                          %
                          
                          
                          28.22
                          %
                          
                          
                          70.60
                          %
                          
                          
                          70.76
                          %
  22
 
 Gross
profit for the year ended December 31,  2009 was $1,972,961, a
decrease of $131,952, or 6%, as compared to gross profit of $2,104,913 for the
year ended December 31,  2008. The decrease in gross profit was
attributable to our new selling efforts explained above.
 
 Gross
profit margin, which is measured as the ratio of gross profit to sales, was
64.93% for the year ended December 31,  2009, a decrease of 7.10
percentage points as compared to 72.03% for the year ended December 31,
2008.  The decrease also resulted from our selling efforts mentioned
above. We expect that our gross profit is to decrease continuously in the coming
year with the expansion of our direct sales stores.
 
 Comparison of Net Income for
the Year Ended December 31, 2009 and 2008
 
 2009
                    
                    
                    2008Gross
      Profit
                    
                    $
                    1,972,961
                    
                    
                    $
                    2,104,913Selling
      and marketing
                    
                    
                    212,754
                    
                    
                    
                    316,272Professional
      fees
                    
                    
                    228,587
                    
                    
                    
                    174,869Depreciation
      and amortization expenses
                    
                    
                    46,602
                    
                    
                    
                    60,947Other
      general and administrative expenses
                    
                    
                    220,099
                    
                    
                    
                    177,190Total
      selling, general and administrative expenses
                    
                    
                    708,042
                    
                    
                    
                    729,278Income
      from operations
                    
                    
                    1,264,919
                    
                    
                    
                    1,375,635Interest
      income
                    
                    
                    23,315
                    
                    
                    
                    28,107Interest
      expense
                    
                    
                    (225,288
                    )
                    
                    
                    (58,403
                    )Loss
      on disposal of assets
                    
                    
                    (8,685
                    )
                    
                    
                    -Net
      Income
                    
                    $
                    1,054,261
                    
                    
                    $
                    1,345,339
 
 Selling
and marketing
 
 Selling
and marketing expenses were $212,754 in 2009, a decrease of $103,518, as
compared $316,272 in 2008. The
decrease of selling and marketing expense was primarily attributable to the
launch of our “Super Chain Sales Partner Program” during fourth quarter of 2008.
Approximately $190,000 in expenses were in connection with this initiative
during the fourth quarter.
 
 Professional
fees
 
 Professional
fees consist of audit and review fees, legal and attorney fees, director fee and
contracted professional service fees. Total professional fees was $228,587 in
2009, an increase of $53,718, or 31% as compared to $174,869 in 2008. We expect
such expenses will remain high in the future as a public company.
 
 Other
General and Administrative Expenses
 
 Other
general and administrative expenses generally consist of: wages and related
benefits, research and development expenses, rent and utility expenses, office
expenses, bad debt expense, and travel and miscellaneous expenses. Other general
and administrative expenses were $220,099 for the year ended December 31, 2009,
an increase of $42,909, or 24%, as compared to $177,190 for the year ended
December 31, 2008. Higher other general and administrative expenses in 2009 were
attributable to the increase of $25,346 in research and development
expenses.
  23
 
 Interest
expense
 
 Interest
expense was $225,288 in 2009, which consisted of amortization of deferred
financing costs of $106, 147, amortization of fair value of warrants of $75,458,
amortization of beneficial conversion feature of $25,023 and loan interest of
$18,660. These expenses relate to the convertible notes issued in September
2008. Total such expenses in 2008 was $58,403. The Company paid $15,000 interest
to the investors in September 2009.
 
 Net
income
 
 Net
income for the year ended December 31, 2009 was $1,054,261, a decrease of
$291,078, or 22% as compared to net income of $1,345,339 for the year ended
December 31, 2008. The decrease in net income was primarily due to the increase
in  cost of goods sold and the increase in non cash interest expense
as explained above.
 
 Liquidity
and Capital Resources
 
 As of
December 31, 2009, 87% of the Company’s assets consisted of cash and cash
equivalents, as compared to 85% as of December 31, 2008. As of December 31,
2009, our cash and cash equivalents amounted to $9,625,657, an increase of
$1,313,021 as compared to $8,312,636 as of December 31, 2008.
 
 Net cash
provided by operating activities was $1,295,912 and $1,549,516 for the year
ended December 31, 2009 and 2008, respectively. The decrease resulted from the
reduction in net income in 2009.
 
 Net cash
provided by investing activities was $4,923 for the year ended December 31,
2009. The Company received total proceeds of $131,760 from the disposal of
unused equipment and product rights in the first quarter of 2009. Cash used in
investing activities for the acquisition of property, plant and equipment was
$126,837 and $5,300 for the year ended December 31, 2009 and 2008,
respectively.
 
 Net cash
used in financing activities was $2,803 for the year ended December 31, 2009. It
was the repayment to a mortgage loan from a bank. Net cash provided by financing
activities was $312,638 for the year ended December 31, 2008. This amount
reflects the proceeds of $500,000 from a private placement of convertible notes
and warrants (as described in more detail below), less financing costs of
$187,362.
 
 Foreign
currency translation
 
 Xinsheng’s
functional currency is the Chinese Yuan, or Renminbi (“RMB”). The appreciation
of the RMB against the U.S. dollar will have a positive effect on our cash
position, and vice versa. For the year ended December 31, 2009, the exchange
rate had a positive impact of $14,563 on our cash flows.  By
comparison, for the year ended December 31, 2008, the exchange rate had a
positive impact of $471,334 on our cash flows.
 
 Tax-exempt
status in the PRC
 
 Xinsheng
is subject to a 25% standard enterprise income tax in the PRC. However, due to
Xinsheng’s agricultural activities, the National Tax Bureau in Xi’an High-Tech
Development Zone has granted Xinsheng annual exemptions from this tax for the
years ending December 31, 2009 and 2008.
 
 For
purposes of comparison, had we been subject to the 25% tax, our operating cash
flow and net income for the year ended December 31, 2009 and 2008 would each
have been reduced by approximately $385,235 and $387,626,
respectively.
 
 Private
Placement of Convertible Notes and Warrants
 
 On
September 29, 2008, the Company completed the sale of 3% unsecured convertible
notes in an aggregate principal amount of $500,000, and Series C warrants to
purchase 500,000 shares of common stock, to two accredited investors. The
Company received net proceeds of $431,500 after the deduction of Placement Agent
commissions of $40,000, Placement Agent expense allowance of $25,000, and an
escrow agent fee of $3,500.
  24
 
 The Notes
mature two years from the date of issuance and bear interest at the rate of 3%
per annum, payable annually in cash or in shares of common stock, subject to
approval of the holder. Overdue interest shall bear interest at the rate of 15%
per annum. Overdue principal shall bear interest at the rate of 8% per annum.
The Notes are convertible at the option of the holder into the common stock of
the Company at an initial conversion price of $0.50 per share. The conversion
price is subject to adjustment upon the occurrence of stock splits,
combinations, dividends and subsequent offerings.
 
 The
Series C warrants have a term of three years and are exercisable into shares of
common stock at an an exercise price of $1.50 per share. Upon exercise of a
Series C warrant, in addition to receiving shares of common stock, each Series C
warrant holder shall be issued a Series D warrant to purchase additional shares
of common stock in an amount equal to the number of Series C warrants exercised.
The Series D warrants, if issued shall have a term of three years and an
exercise price of $2.00 per share. The exercise price of the warrants is subject
to adjustment upon the occurrence of stock splits, combinations, dividends and
subsequent offerings, as set forth in the warrants. No Series D warrants have
been issued as of the date of this filing.
 
 The
Company shall have the right to prepay the Notes at 110% of the outstanding
principal amount any time prior to the maturity date and upon 30 days prior
written notice to the holders. The Company may call for the termination of any
unexercised portion of the Series C warrants upon consummation of a subsequent
offering by the Company of not less than $7,500,000 in gross proceeds and upon
30 days written notice to the holders. Upon termination of any unexercised
Series C warrants, the warrant holders would not receive any Series D warrants,
any shares underlying the Series C or Series D warrants, or any other
securities.
 
 In
connection with the transaction, the Company agreed to prepare and file a
registration statement with the Securities and Exchange Commission (the “SEC”)
within 60 days following the final closing date. In addition, if the
registration statement was not declared effective within 120 days from the
filing date, the Company was subject to monthly cash liquidated damages payments
equal to 2% of the purchase price paid by each investor, subject to a maximum of
24%. On February 13, 2009, the Company filed a registration statement on Form
S-1 to register the shares underlying the convertible notes and warrants. In
response to SEC comment letters, the Company filed amendments to the
registration statement on Form S-1. The Company and the investors entered into
agreements extending the date of the Form S-1 was required to become effective
to October 30, 2009. The registration statement on Form S-1 was declared
effective on November 16, 2009. The Company accrued $734 liquidated damages
under the registration rights agreement payable to the investors as of December
31, 2009.
 
 The
Company recorded the $149,615 relative fair value of the warrants ($78,136 for
the Series C warrants; $71,479 for the Series D warrants) and the $49,615
intrinsic value of the beneficial conversion feature as additional paid in
capital. No Series D warrants have been issued as of the date of this
filing.
 
 The
$149,615 fair value of the Series C and Series D warrants was calculated using a
Black-Scholes option pricing model and the following assumptions: risk-free
interest rate of 2.26%; expected stock price volatility of 130.69%; stock price
of $0.40 per share; exercise price of $1.50 per share for the Series C warrants
and $2.00 per share for the Series D warrants; and term of 3 years.
 
 In
connection with the private placement, the placement agent received warrants to
purchase 80,000 shares of the Company’s common stock at an exercise price of
$1.00 per share for a term of three years. The $19,920 fair value of these
warrants (calculated using the same assumptions described above except for the
exercise price) was charged to deferred financing costs and added to additional
paid in capital. On October 9, 2009, the Company issued warrants to purchase
1,000 shares of the Company’s common stock at an exercise price of $1.00 per
share for a term of three years for services rendered and waiving registration
rights. The $426 fair value of these warrants (calculated using the same
assumptions described above except for the exercise price) was charged to
current financing cost and added to additional paid in capital.
  25
 
 Long-term
Debt
 
 Long-term
debt represents a mortgage payable to Xian Commerce Bank in connection with
Xinsheng’s acquisition of a building in August 2009. The 10-year mortgage, which
had an initial balance of $117,200 (800,000 RMB) and is secured by the building,
bears interest at an annual rate of 6.53% and is due in monthly installments of
interest and principal of approximately $1,330 to August 6, 2019. As of December
31, 2009, the unpaid long term debt balance was $114,397.
 
 Expansion
plan
 
 On
October 21, 2009, Xinsheng received an approval letter from the Bureau of
Foreign Trade and Economic Cooperation of Lantian County of Xinsheng’s
application to purchase land use rights in Lantian County to establish “Xinsheng
Centennial Industrial Zone”.  Xinsheng intends to purchase the land
use rights for 66 acres for a term of 30 years.  The land use right
purchase cost is expected to be approximately $4.1 million (28,000,000
RMB).  In addition, the estimated cost for relocation of local
dwellers is estimated will be approximately $299,000 (2,040,000 RMB). As the
date of this Form 10K filing, the transaction is not finalized due to the delay
in processing by the local government.
 
 Sources
of Liquidity
 
 We
presently do not have any available credit, bank financing or other external
sources of liquidity. We believe that our existing cash resources will be
sufficient to meet our existing operating requirements for the foreseeable
future. However, we are seeking opportunities to expand our manufacturing and
distribution capabilities in the PRC that may require an investment beyond our
existing cash resources. Accordingly, we expect that we will require additional
funding through additional equity and/or debt financings. However, there can be
no assurance that  any additional financing will become available to
us, and if available, on terms acceptable to us.
 
 The
conversion of our outstanding notes and exercise of our outstanding warrants
into shares of common stock would have a dilutive effect on our common stock,
which could in turn reduce our ability to raise additional funds on favorable
terms. In addition, the subsequent sale on the open market of any shares of
common stock issued upon conversion of our outstanding notes and exercise of our
outstanding warrants could impact our stock price which could in turn reduce our
ability to raise additional funds on favorable terms.
 
 Any
financing, if available, may involve restrictive covenants that may impact our
ability to conduct our business or raise additional funds on acceptable terms.
If we are unable to raise additional capital when required or on acceptable
terms, we may have to delay, scale back or discontinue our expansion plans and
our business may be adversely affected.
 
 Critical
Accounting Policies and Estimates
 
 Financial
Reporting Release No. 60, Cautionary Advice Regarding
Disclosure About Critical Accounting Policies, published by the SEC,
recommends that all companies include a discussion of critical accounting
policies used in the preparation of their financial statements. Policies
determined to be critical are those policies that have the most significant
impact on our consolidated financial statements and require management to use a
relatively greater degree of judgment and estimates. Actual results may differ
from those estimates.
 
 General
 
 The
Company’s Consolidated Financial Statements are prepared in accordance with U.S.
Generally Accepted Accounting Principles, which require management to make
estimates, judgments and assumptions that affect the reported amounts of assets,
liabilities, net revenue and expenses, and the disclosure of contingent assets
and liabilities. Management bases its estimates on historical experience and on
various other assumptions that it believes to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Management believes that the accounting estimates employed and
the resulting balances are reasonable; however, actual results may differ from
these estimates under different assumptions or conditions.
  26
 
 Revenue
Recognition
 
 For
revenue from product sales, the Company recognizes revenue when: (1) persuasive
evidence of an arrangement exists, (2) delivery has occurred; (3) the selling
price is fixed and determinable; and (4) collectibility is reasonably assured.
Determination of criteria (3) and (4) are based on management’s judgment
regarding the fixed nature of the selling prices of the products delivered and
the collectibility of those amounts. Provisions for discounts and rebates to
customers, estimated returns and allowances, and other adjustments are provided
for in the same period the related sales are recorded.
 
 Allowance
for Doubtful Accounts
 
 The
Company’s receivables primarily consist of accounts receivable from its
customers. Accounts receivable are recorded at invoiced amount and generally do
not bear interest. The Company performs ongoing credit evaluations of its
customers’ financial condition, but generally does not require collateral to
support customer receivables.  The credit risk is controlled through
credit approvals, limits and monitoring procedures.  The Company
establishes an allowance for doubtful accounts based upon historical experience,
management’s evaluation of the outstanding accounts, age of receivables and
other factors. As of December 31, 2009, 20% of the Company’s trade receivables
were current, 0% of the Company’s trade receivables were aged between 31 to 60
days and the remaining 80% of trade receivables were aged between 61 to 360
days. By comparison, as of December 31, 2008, 48% of the Company’s trade
receivables were current and 52% of trade receivables were aged between 31 to 60
days.
 
 Long-Lived
Assets
 
 The
Company has adopted Financial Accounting Standards Board (“FASB) Accounting
Standards Codification (“ASC”) 350. ASC 350 requires that long-lived assets and
certain identifiable intangibles held and used by the Company be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Events relating to
recoverability may include significant unfavorable changes in business
conditions, recurring losses, or a forecasted inability to achieve break-even
operating results over an extended period. The Company evaluates the
recoverability of long-lived assets based upon forecasted discounted cash flows.
Should impairment in value be indicated, the carrying value of long-lived assets
will be adjusted, based on estimates of future discounted cash flows resulting
from the use and ultimate disposition of the asset. ASC 350 also requires assets
to be disposed of to be reported at the lower of the carrying amount or the fair
value less costs to sell.
 
 Recent Accounting
Pronouncements
 
 Effective
for interim and annual periods ending after September 15, 2009, the FASB
ASC is the single source of authoritative literature of U.S. generally accepted
accounting principles (“GAAP”).  The Codification consolidates all
authoritative accounting literature into one internet-based research tool, which
supersedes all pre-existing accounting and reporting standards, excluding
separate rules and other interpretive guidance released by the
SEC.  New accounting guidance is now issued in the form of Accounting
Standards Updates, which update the ASC.    The adoption of
the ASC did not result in any change in the Company’s significant
accounting policies.
 
 In
May 2009, the FASB issued standards that establish general standards of
accounting for and disclosures of events that occur after the balance sheet date
but before financial statements are issued or are available to be issued. These
standards require the disclosure of the date through which an entity has
evaluated subsequent events and the basis for that date, that is, whether the
date represents the date the financial statements were issued or were available
to be issued. This standard is effective in the first interim period ending
after June 15, 2009. This standard did not have any significant impact
on disclosures in the Company’s consolidated financial
statements.
  27
  In
June 2009, the FASB issued authoritative guidance which eliminates the
concept of a qualifying special-purpose entity, creates more stringent
conditions for reporting a transfer of a portion of a financial asset as a sale,
clarifies other sale-accounting criteria, and changes the initial measurement of
a transferor’s interest in transferred financial assets. The guidance is
applicable for annual periods beginning after November 15, 2009 and interim
periods therein and thereafter. The Company does not expect the adoption of this
standard to have a material effect on its consolidated financial position or
results of operations.
 
 In August
2009, the FASB issued guidance on measuring liabilities at fair
value.  This guidance amends the fair value measurements and
disclosures by providing additional guidance clarifying the measurement of
liabilities at fair value.  This new accounting guidance is effective
for reporting periods ending after December 15, 2009.  Adoption of
this standard did not have a material effect on the Company’s consolidated
financial position or results of operations.
 
 Certain
other accounting pronouncements have been issued by the FASB and other standard
setting organizations which are not yet effective and have not yet been adopted
by the Company. The impact on the Company’s consolidated financial position and
results of operations from adoption of these standards is not expected to be
material.
 
 Item
7A.        Quantitative and Qualitative
Disclosures About Market Risk.
  Not
applicable to smaller reporting companies.
  Item
8.           Financial
Statements and Supplementary Data.
  Our
audited consolidated financial statements at and for the fiscal years ended
December 31, 2008 and 2009, together with the related notes thereto, have been
included in this annual report on pages F-1 through F-16.  By this
reference, we have incorporated by reference these financial statements into
this annual report in response to this Item 8.  As a smaller reporting
company, we have omitted supplementary data from our consolidated financial
statements.
  Item
9.           Changes in and
Disagreements With Accountants on Accounting and Financial
Disclosure.
  None.
  Item
9A(T).  Controls and Procedures.
  Evaluation
of Disclosure Controls and Procedures
  Based on
an evaluation under the supervision and with the participation of the Company's
management, the Company's principal executive officer and principal financial
officer have concluded that the Company's disclosure controls and procedures as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (“Exchange Act”) were effective as of December 31, 2009 to
ensure that information required to be disclosed by the Company in reports that
it files or submits under the Exchange Act is (i) recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission rules and forms and (ii) accumulated and communicated to the
Company's management, including its principal executive officer and principal
financial officer, as appropriate to allow timely decisions regarding required
disclosure.
  28
  Changes
in Internal Controls over Financial Reporting
  The
Company’s chief executive officer and the Company’s chief financial
officer  have concluded that there were no changes in the Company’s
internal controls over financial reporting during the quarter ended December 31,
2009 that have materially affected or are reasonably likely to materially affect
the Company’s internal controls over financial reporting.
  Management’s
Report on Internal Control Over Financial Reporting
  Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f). The Company’s internal control system was designed to provide
reasonable assurance to the Company’s management and board of directors
regarding the preparation and fair presentation of published financial
statements. All internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation.
  The
Company’s management, including the Company’s chief executive officer and chief
financial officer, assessed the effectiveness of the Company’s internal control
over financial reporting as of December 31, 2009.  In making this
assessment, the Company’s management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated
Framework. Based on this assessment, management believes that, as of
December 31, 2009, the Company’s internal control over financial reporting was
effective based on those criteria.
  This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
SEC that permit the Company to provide only management’s report in this annual
report.
  Item
9B.        Other Information.
  None.
  29
  PART
III
  Item
10.         Directors, Executive
Officers and Corporate Governance.
  The
following are the officers and directors of China Agri-Business, Inc., Mei Xin
Agri Technology (Shaanxi) Co., Ltd., and Shaanxi Xin Sheng Centennial
Agricultural and Technology Co., Ltd.  Some of our officers and
directors are residents of the PRC and, therefore, it may be difficult for
investors to effect service of process within the U.S. upon them or to enforce
judgments against them obtained from the U.S. courts.
  Directors
and Executive Officers of China Agri:
  NAME
                
                POSITION
                
                AGE*Liping
      Deng
                
                Director,
      Chief Executive Officer and President
                
                38Limin
      Deng
                
                Chairman
      of Board of Directors
                
                47Xiaolong
      Zhou
                
                Chief
      Financial Officer
                
                57Michael
      Segal
                
                Director
                
                67
 
 Directors
and Executive Officers of Meixin:
  NAME
                
                POSITION
                
                AGE*Liping
      Deng
                
                Chairman
      of Board of Directors
                
                38Limin
      Deng
                
                Vice-Chairman
      of Board of Directors
                
                47Zhengfeng
      Guo
                
                Director
                
                39
 
 Directors
and Executive Officers of Xinsheng:
  NAME
                
                POSITION
                
                AGE*Liping
      Deng
                
                Director
      and President
                
                38Limin
      Deng
                
                Chairman
      of Board of Directors
                
                47Hong
      Cai
                
                Director
      and Finance Manager
                
                42Yi
      Fu
                
                Director
      and Vice President
                
                36Mengzhou
      Li
                
                Director
                
                45
 
 
 
 Mr. Liping Deng was appointed
as our Director, President and Chief Executive Officer on June 26, 2006. He has
been a Director and President of Xinsheng since 2002 and Chairman of Board of
Directors of Meixin since March 2006. Prior to joining us, Mr. Deng served as a
senior manager at Xianyang Tong Lida Electronic Communication Co., Ltd. from
1996 to 1998. Prior to that, Mr. Deng served as President of the Worker's Union
in Xianyang Pottery Factory from 1991 to 1995. Mr. Deng obtained a technical
secondary school degree from Xi'an Construction Company Pottery Technology
School. Mr. Liping Deng is the brother of Mr. Limin Deng.  Mr. Deng’s
day to day leadership as our President and Chief Executive Officer brings to our
Board of Directors an intimate knowledge of our operations.  Mr. Deng
also offers extensive business experience in the PRC, excellent business
negotiation skills and extensive professional investment
experience.
  Mr. Limin Deng was appointed
as our Director on June 26, 2006. He founded Xinsheng in 2002 and served as
Chairman of Xinsheng since that time. Mr. Deng is the Vice Chairman of the Board
of Directors of Meixin. Prior to joining us, he served as a security manager in
the Xi'An Electronic Technology University for six years. He founded Shaanxi
Xinsheng Weiye Technology Development Co., Ltd. in 2001, which has been
liquidated. He obtained a junior college degree in Economic Management from the
Continuous Education College of Xi'an Electronic Technology University. Mr.
Limin Deng is the brother of Mr. Liping Deng.  Mr. Deng brings to our
Board of Directors an extensive understanding of the business and operations of
Xinsheng, our operating company in the PRC.  Mr. Deng offers excellent
business negotiation skills, extensive professional management experience, and
also brings extensive knowledge of the legal and regulatory regimes in the
PRC.
  30
  Mr. Xiaolong Zhou was
appointed as our Chief Financial Officer in April 1, 2007. He had been a senior
accountant in Liss Okou Goldstein Okun and Tancer CPA'S P.C. in Great Neck, New
York for the prior nine years. He is a certified public accountant, registered
in the state of New York, a member of American Institute of Certified Public
Accountants, and a member of New York State Society of Certified Public
Accountants. Mr. Zhou obtained an M.B.A. in accountancy degree from Baruch
College of CUNY and an M.A. in economics degree from City College of CUNY. He
obtained a B.A. in economics degree from Fudan University, Shanghai,
China.
  Mr. Michael Segal was
appointed as our Director on June 8, 2006. He is an Officer, General Securities
Principal, Options Compliance Principal and an Investment Banking Representative
of B & B Securities, Inc., a member of the New York Stock Exchange and
Financial Industry Regulatory Authority since January 2010.  From 2006
to 2009 and 2003 to 2005 Mr. Segal was a Principal, Option Compliance Principal
and Branch Manager of Whitaker Securities LLC. Prior to that, Mr. Segal served
in the following capacities: President of Alexander Westcott & Co., Inc., a
licensed broker-dealer, and Secretary of the board of directors of its parent
company, the Financial Commerce Network Inc., a publicly held company; and
President of Lamborn Securities Inc., a licensed broker-dealer. Mr. Segal is
also individually registered as a Commodity Trading Advisor with the Commodity
Futures Trading Commission and is a founding member of the Managed Funds
Association. Mr. Segal received a B.B.A. in marketing and economics from the
University of Miami in Florida.  Mr. Segal sits on the board of
directors of the following privately held companies: SunGame, Inc.,
International American Capital Inc. and Asia Carbon Industries Inc. Mr. Segal
also sits on the board of directors of the following publicly held company:
China Power Equipment Company Inc. From March 2007 until December 2009, Mr.
Segal was a member of the board of directors of Biostar Pharmaceuticals
Inc.  Mr. Segal brings to our Board of Directors his expertise in the
financial and equity markets and his years of experience providing strategic and
financial advisory services to complex organizations.  Mr. Segal also
provides unique perspective as our only U.S. director.
  Mr. Zhengfeng Guo was
appointed as a director of Meixin in November 2007. Prior to that, he was
industry supervisor of Shaanxi Xinsheng Centennial Agriculture & Technology
Co., Ltd. in the PRC from 2001 to 2007. He obtained his bachelor degree in
marketing management from Shaanxi Finance & Economics college in the
PRC.
  Mr. Yi Fu was appointed as a
Director and Vice President of Xinsheng in 2008. Prior that, he served as sales
manager of Xinsheng. Mr. Fu graduated from Shaanxi Mechanical and Electrical
Industry College in 1995.
  Mr. Mengzhou Li was appointed
as a Director of Xinsheng in 2009. Prior that, he was a Vice-Manager of Jiahui
Group. He obtained his dealer certificate of Shanghai Stock Exchanges in
2001.
  According
to our By-laws, the term of our directors is from the date of their appointment
or election until the next annual meeting of shareholders or until his or her
successor shall have been elected and qualified. The terms for our principal
executive officers are one year, and they serve at the discretion of our board
of directors.
  Family
Relationships
  Mr. Limin
Deng and Mr. Liping Deng are brothers.
  Committees
of the Board of Directors
  We do not
currently have separately designated audit, nominating or compensation
committees, or committees performing similar functions. Shares of our common
stock are not listed on any national securities exchange, and thus we are not
subject to the SEC’s or any exchange’s rules requiring standing committees or
independent directors. Since October 17, 2007, our common stock has been quoted
on the OTC Bulletin Board, which does not currently have requirements as to the
maintenance of standing committees or the independence of our board members. We
are not, and in the past have not been, subject to any specific corporate
governance guidelines or rules imposing requirements on the independence of our
directors or committee members. Given the fact that our board of directors
currently consists of three members, our board of directors determined that it
was not appropriate to designate separate committees of the board of directors.
The board of directors as a whole is responsible for fulfilling the duties which
would otherwise be delegated to such committees.
  31


At some
future time, we may seek to have our common stock or other securities quoted on
a tier of a national securities exchange. In so doing, we will reevaluate the
need to have independent directors on our board and on standing committees, in
light of applicable corporate governance rules and corporate best practices. At
the present time, our board of directors is collectively responsible for
analyzing and evaluating our financial statements and our internal controls and
procedures for financial reporting, and for acting as our compensation and
nominating committee.




Code
of Ethics




We are in
the process of adopting, but have not yet adopted, a Code of Business Conduct
and Ethics that applies to our directors and officers.




Involvement
in Certain Legal Proceedings.




To the
best of its knowledge, the Company’s directors and executive officers were not
involved in any legal proceedings during the last 10 years as described in Item
401(f) of Regulation S-K.




Compliance
with Section 16(a) of the Exchange Act




Our
executive officers, directors and shareholders are not subject to the filing
requirements imposed by Section 16(a) of the Securities Exchange Act of 1934, as
amended.




Item
11.         Executive
Compensation.




Summary
Compensation Table




The
following table sets forth all compensation awarded to, or earned by, our
Principal Executive Officer, and our twoother most highly compensated executive officers  for the years
indicated.




Name
      and Principal
                                      Position
                                      (a)
                                    
                                    Year
                                      (b)
                                    
                                    Salary
                                      ($)
                                      (c)
                                    
                                    
                                    Bonus
                                      ($)
                                      (d)
                                    
                                    
                                    Stock
                                      Awards
                                      ($)
                                      (e)
                                    
                                    
                                    Option
                                      Awards
                                      ($)
                                      (f)
                                    
                                    
                                    Non-Equity
                                      Incentive
      Plan
                                      Compensation
                                      ($)
                                      (g)
                                    
                                    
                                    Change
      in
                                      Pension
      Value
                                      And
                                      Nonqualified
                                      Deferred
                                      Compensation
                                      Earnings
                                      ($)
                                      (h)
                                    
                                    
                                    All
      Other
                                      Compensation
                                      ($)
                                      (i)
                                    
                                    
                                    Total
                                      ($)
                                      (j)Liping
      Deng
                                    
                                    2009
                                    
                                    
                                    8,000
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    8,000Chief
      Executive
                                    
                                    2008
                                    
                                    
                                    6,260
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    6,260OfficerXiaolong
      Zhou
                                    
                                    2009
                                    
                                    
                                    45,000
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    45,000Chief
      Financial
                                    
                                    2008
                                    
                                    
                                    45,000
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    45,000Officer




Under a
de facto employment contract as discussed below, we can terminate the de facto
employment contract by informing an executive officer of termination at least
one month prior to the termination date or terminate an executive officer
effective immediately and agree to pay one month’s salary.




We
entered into a preliminary employment agreement with Mr. Zhou on April 1, 2007,
which provides for annual compensation of $45,000. Mr. Zhou continues to be
compensated at this annual rate.


32




We do not
have written employment agreements with our other executive officers. Under PRC
employment laws, if an employer and employee do not enter into a written
employment agreement within one year, they are deemed to have entered into a de
facto employment contract with an open (indefinite) term. In the absence of an
employment contract, an employer remains obligated to participate in the PRC’s
social insurance programs on behalf of the employee, including pension, medical,
unemployment, occupational accident/disability, and maternity
insurance.  Mr. Liping Deng, our executive officer other than Mr.
Zhou, is considered to have a de facto employment contract under PRC
law.




Generally
speaking, employment contracts governed by PRC law are required to include the
following information: identity and domicile of the employer and employee, term
of employment, job description and place of work, work hours, vacation policy,
compensation, social insurance information, safety measures and working
conditions.




China
Agri does not currently have a pension plan, stock option plan, non-equity
incentive plan or deferred compensation arrangement. We plan to implement a more
comprehensive compensation program in the future, which will incorporate
elements of compensation including, but will not be not limited to, non-cash and
other equity-based compensation such as stock options.




Director
Compensation




The
compensation of our directors is determined on a case by case basis. The factors
considered by the Company for the purpose of determining director compensation
include, but are not limited to: the director’s relevant work experience; the
number of years the director has served as a director of the Company, and; the
director’s overall contributions to the Company, including the amount of time
devoted to the Company by the director. The Company has not established a
maximum fee for its directors.




Effective
January 1, 2008, Michael Segal is paid cash compensation at the rate of $1,500
per month, or $18,000 annually, for his services as
director.




Mr.
Limin Deng receives no compensation for his services as
director.




Our Chief
Executive Officer, Liping Deng, does not receive any additional compensation for
his services as director above and beyond his salary as an officer.




The
following table sets forth compensation paid to each named director during the
year end December 31, 2009.




Name
                    (a)
                
                Fees
      Earned
                    or
      Paid in
                    Cash
                    ($)
                    (b)
                
                
                Stock
                    Awards
                    ($)
                    (c)
                
                
                Option
      Awards
                    ($)
                    (d)
                
                
                Non-Equity
                    Incentive
      Plan
                    Compensation
                    ($)
                    (e)
                
                
                Non-
                    Qualified
                    Deferred
                    Compensation
                    Earnings
                    ($)
                    (f)
                
                
                All
      Other
                    Compensation
                    ($)
                    (g)
                
                
                Total
                    ($)
                    (j)Limin
      Deng
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Michael
      Segal
                
                
                18,000
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —




Item
      12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.




The
following table sets forth information regarding the beneficial ownership of our
common stock as of March 31, 2010 by:


33




·
            each
      person known by us to be the beneficial owner of more than 5% of our
      outstanding shares of common stock;




·
            each
      of our officers and directors; and




·
            all
      our officers and directors as a
group.




Based on
information available to us, all persons named in the table have sole voting and
investment power with respect to all shares of common stock beneficially owned
by them, unless otherwise indicated. Beneficial ownership is determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended. In computing the number of shares beneficially owned by a person or a
group and the percentage ownership of that person or group, shares of our common
stock subject to options or warrants currently exercisable or exercisable within
60 days after the date of this prospectus are deemed outstanding, but are not
deemed outstanding for the purpose of computing the percentage of ownership of
any other person. Applicable percentage ownership is based upon 12,958,574
shares of common stock outstanding.




Unless
otherwise indicated, the address of each individual named below is c/o China
Agri-Business, Inc.  Building 2, Unit 1, 15th Floor, Ling Xian Xin
Cheng, 86 Gaoxin Road, Hi-Tech Industrial Development Zone, Xian, Shannxi, China
710065.






Name
      of Beneficial Owner
              
              Amount
      and Nature
                  of
      Beneficial
                  Ownership
      (1)
              
              
              Percent
      of ClassMichael
      Segal
                11
      East 86th Street
                New
      York, New York 10028
              
              
              63,074
              
              
              
              *
              %Liping
      Deng
              
              
              1,851,148
              
              
              
              14.3Liming
      Deng
              
              
              —
              
              
              
              —Xiaolong
      Zhou
              
              
              —
              
              
              
              —All
      Directors and Executive Officers as a group (4 persons)
              
              
              1,914,222
              
              
              
              14.8Trustees
      for Xinsheng Shareholders (2)
              
              
              9,099,749
              
              
              
              70.2JAG
      Multi Investment (3)
              
              
              750,000
              
              
              
              5.5Keith
      Guenther (3)
              
              
              750,000
              
              
              
              5.5




* Less
than 1%


(1)
Reflects the ownership of our equity securities after a 2.032-for-1 forward
split of our common stock during the fourth quarter of 2006.


(2) The
trustees for the trust holding these shares are: Zhihong Yang, Xiaoying Lin,
Dongdong Ding, Fei Zhao and Junsheng Meng. The trustees are individuals and are
not affiliated with any bank or trust company.  The Xinsheng
shareholders are in the process of terminating the Voting Trust and Escrow
Agreement effective December 2009.


(3)
Includes 500,000 shares of common stock underlying Notes and 250,000 shares of
common stock underlying the Warrants.





Item
13.         Certain Relationships
and Related Transactions, and Director Independence.




Director
Independence




Michael
Segal is an independent director as that term is defined in the Nasdaq Stock
Market, Inc. Marketplace Rules.


34




Our Board
of Directors does not presently have a majority of independent directors. In the
absence of a majority of independent directors, our executive officer, who is
also a principal stockholder and director, could establish policies and enter
into transactions without independent review and approval thereof. This could
present the potential for a conflict of interest between the Company and its
stockholders generally and the controlling officers, stockholders or
directors.




Item
14.         Principal Accounting
Fees and Services.




The
following table sets forth the fees accrued or paid to the Company's independent
registered public accounting firm during fiscal years 2009 and 2008. The
Company’s financial statements for those years were audited by Michael T.
Studer, CPA, P.C.




Audit
      and Non-Audit Fees
                
                2009
                
                
                2008Audit
      Fees (1)
                
                $
                64,400
                
                
                $
                64,400Audit-Related
      Fees (2)
                
                
                —
                
                
                
                —Tax
      Fees (3)
                
                
                —
                
                
                
                —All
      Other Fees
                
                
                —
                
                
                
                —Total
                
                $
                64,400
                
                
                $
                64,400




(1) Audit
fees are fees for services provided in connection with the audits of the
Company's annual financial statements and quarterly reviews of interim quarterly
financial statements, as well as audit provided in connection with other
statutory and regulatory filings.


(2)
Audit-related fees are aggregate fees billed for assurance and related services
that are reasonably related to the performance of the audit or review of the
financial statements and are not otherwise reported as Audit fees.


(3) Tax
fees are aggregate fees billed for professional services rendered for tax
compliance, tax advice, and tax planning.




35




PART IV




Item
15.        Exhibits, Financial Statement
Schedules.




1.     List
of Consolidated Financial Statements. The consolidated financial statements and
the accompanying notes of China Agri-Business, Inc., have been included in this
Report on Form 10-K beginning on page F-1:




Report
      of Independent Registered Public Accounting Firm
                              F-1Consolidated
      Balance Sheets as of December 31, 2009 and December 31,
    2008
                              F-2Consolidated
      Statements of Income and Comprehensive Income for the years ended December
      31, 2009 and 2008.
                              F-3Consolidated
      Statements of Stockholders’ Equity for the years ended December 31, 2009
      and 2008.
                              F-4Consolidated
      Statements of Cash Flows for the years ended December 31, 2009 and
      2008.
                              F-5Notes
      to Consolidated Financial Statements
                              F-6
      -
F-19




2.     All
financial statement schedules are omitted because the required information is
not present or not present in amounts sufficient to require submission of the
schedule or because the information required is included in the respective
financial statements or notes thereto contained herein.




3.     List
of Exhibits filed in accordance with Item 601 of Regulation S-K. The warranties,
representations and covenants contained in the agreements, documents and other
instruments included or incorporated by reference herein or which appear as
exhibits hereto should not be relied upon by buyers, sellers or holders of the
company’s securities and are not intended as warranties, representations or
covenants to any individual or entity except as specifically set forth in such
agreements, documents and other instruments. The following exhibits are
incorporated by reference in, or filed with, this Report on Form
10-K:




Exhibit
                No.
            
            Description3.1
            
            Articles
      of Incorporation (1)3.2
            
            Bylaws
      (1)3.3
            
            Articles
      of Incorporation, as amended (1)4.1
            
            Form
      of 3% Convertible Note (2)4.2
            
            Form
      of Series C Warrant (2)4.3
            
            Form
      of Series D Warrant (2)4.4
            
            Form
      of 2007 Underwriter Warrant (3)4.5
            
            Form
      of 2009 Placement Agent Warrant (3)4.6
            
            Form
      of Warrant issued to Legend Merchant Group dated October 9, 2009.
      (7)9.1
            
            Voting
      Trust and Escrow Agreement with Xinsheng Shareholders and their trustee
      dated April 22, 2006. (1)10.1
            
            Stock
      Purchase Agreement between China Agri-Business, Inc. and Xinsheng
      Shareholders dated April 22, 2006. (1)10.2
            
            Management
      Agreement between Xinsheng and Meixin dated April 18, 2006.
      (1)10.3
            
            Form
      of Subscription Agreement. (2)10.4
            
            Form
      of Registration Rights Agreement. (2)10.5
            
            Placement
      Agent Agreement. (4)10.6
            
            Business
      Advisory Agreement. (6)10.7
            
            Letter
      agreement dated as of August 12, 2009 among China Agri-Business, JAG
      Multi-Investment, LLC and Keith Guenther. (5)10.8
            
            Letter
      agreement dated as of June 12, 2009 among China Agri-Business, JAG
      Multi-Investment, LLC and Keith Guenther.
(7)




36




Exhibit
                No.
              
              Description10.9
              
              Letter
      agreement dated as of October 12, 2009 among China Agri-Business, JAG
      Multi-Investment, LLC and Keith Guenther. (7)10.10
              
              Investor
      and Media Relations Service Agreement, dated as of March 31, 2010, between
      China Agri-Business, Inc. and Christensen International Limited.
      (8)21.1
              
              Subsidiaries
      of the small business issuer (1)31.1
              
              Certification
      by Chief Executive Officer pursuant to Sarbanes Oxley Section
      302.*31.2
              
              Certification
      by Chief Financial Officer pursuant to Sarbanes Oxley Section
      302.*32.1
              
              Certification
      by Chief Executive Officer pursuant to 18 U.S.C. Section
      1350.*32.2
              
              Certification
      by Chief Financial Officer pursuant to 18 U.S.C. Section
      1350.*





(1)
Incorporated by reference to the Form SB-2 (File No. 333-140118) filed on
January 19, 2007.


(2)
Incorporated by reference to the Form 8-K filed on October 3, 2008.


(3)
Incorporated by reference to the Form S-1 (File No. 333-157346) filed on
February 13, 2009.


(4)
Incorporated by reference to the Form S-1/A (File No. 333-157346) filed on June
16, 2009.


(5)
Incorporated by reference to the Form 10-Q filed on August 14,
2009.


(6)
Incorporated by reference to the Form S-1/A (File No. 333-157346) filed on
August 28, 2009.


(7)
Incorporated by reference to the Form S-1/A (File No. 333-157346) filed on
November 12, 2009.


(8)
Incorporated by reference to the Form 8-K filed on April 8, 2010.





* Filed
herewith.


37


SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.





CHINA
      AGRI-BUSINESS, INC.Date:   
      April 15, 2010
                By:
                /s/ Liping DengLiping
      DengPresident
      and Chief Executive
Officer





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.





Name and Signature
            
            Capacity
            
            Date/s/ Liping Deng
            
            President, Chief Executive Officer and Director
            
            April 15, 2010Liping Deng
            
            (Principal Executive Officer)/s/ Xiaolong Zhou
            
            Chief Financial Officer (Principal Financial Officer
            
            April 15, 2010Xiaolong Zhou
            
            and Principal Accounting Officer)/s/ Limin Deng
            
            Director
            
            April 15, 2010Limin Deng/s/ Michael Segal
            
            Director
            
            April 15, 2010Michael Segal


38


CHINA
AGRI-BUSINESS, INC. AND SUBSIDIARIES





INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS


PageReport
      of Independent Registered Public Accounting Firm
                F-1Consolidated
      Balance Sheets
                  as
      of December 31, 2009 and December 31, 2008
                F-2Consolidated
      Statements of Income and Comprehensive Income
                  for
      the years ended December 31, 2009 and 2008
                F-3Consolidated
      Statements of Stockholders’ Equity
                  for
      the years ended December 31, 2009 and 2008
                F-4Consolidated
      Statements of Cash Flows
                  for
      the years ended December 31, 2009 and 2008
                F-5Notes
      to Consolidated Financial Statements
                F-6 - F-19
  
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the
Board of Directors and Stockholders of China Agri-Business, Inc.
  I have
audited the accompanying consolidated balance sheets of China Agri-Business,
Inc. and subsidiaries (the “Company”) as of December 31, 2009 and 2008 and the
related consolidated statements of income and comprehensive income,
stockholders’ equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company’s management. My responsibility
is to express an opinion on these financial statements based on my
audits.
  I
conducted my audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audits provide a reasonable
basis for my opinion.
  In my
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of China Agri-Business, Inc.
and subsidiaries as of December 31, 2009 and 2008 and the results of their
operations and cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States.
  /S/ Michael T. Studer CPA
      P.C.Michael
      T. Studer CPA P.C.
 Freeport,
New York
  April 15,
2010
  F -
1
 
 China
Agri-Business, Inc.
 Consolidated
Balance Sheets
 As of
December 31, 2009 and 2008
 
 2009
                
                
                2008AssetsCurrent
      AssetsCash
      and cash equivalents
                
                $
                9,625,657
                
                
                $
                8,312,636Accounts
      receivable, net of allowance for doubtful accounts of $8,300
      and  $6,524, respectively
                
                
                28,310
                
                
                
                45,165Inventory
                
                
                138,253
                
                
                
                47,113Other
      receivables
                
                
                7,911
                
                
                
                7,329Prepaid
      expenses
                
                
                25,396
                
                
                
                22,345Total
      Current Assets
                
                
                9,825,527
                
                
                
                8,434,588Property,
      plant and equipment, net of accumulated depreciation of $202,921 and
      $161,055, respectively
                
                
                337,995
                
                
                
                231,278Investment
      in Tienwe Technology
                
                
                879,000
                
                
                
                879,420Deferred
      financing costs, net of accumulated amortization of $134,550 and $28,403,
      respectively
                
                
                72,732
                
                
                
                178,879Intangible
      assets, net of accumulated amortization of $13,115 and $47,493,
      respectively
                
                
                3,724
                
                
                
                59,495Total
      Assets
                
                $
                11,118,978
                
                
                $
                9,783,660Liabilities
      and Stockholders' EquityCurrent
      LiabilitiesCurrent
      portion of long-term debt
                
                $
                8,779
                
                
                $
                -Current
      portion of convertible notes, net of unamortized debt discounts of $72,499
      and $0, respectively
                
                
                427,501
                
                
                
                -Accounts
      payable and accrued liabilities
                
                
                286,128
                
                
                
                234,007Total
      Current Liabilities
                
                
                722,408
                
                
                
                234,007Long
      Term LiabilitiesLong-term
      debt
                
                
                105,618
                
                
                
                -Convertible
      notes, net of unamortized debt discounts $0 and $172,980, respectively
                
                
                -
                
                
                
                327,020Total
      Long Term Liabilities
                
                
                105,618
                
                
                
                327,020Total
      Liabilities
                
                
                828,026
                
                
                
                561,027Stockholders'
      EquityUndesignated
      preferred stock, par value $.001 per share; authorized 4,900,000 shares;
      none issued
                
                
                -
                
                
                
                -Common
      stock, par value $.001 per share; authorized 100,000,000 shares, issued
      and outstanding 12,958,574 and 12,958,574, respectively
                
                
                12,959
                
                
                
                12,959Additional
      paid-in capital
                
                
                4,370,212
                
                
                
                4,369,786Retained
      earnings
                
                
                4,708,473
                
                
                
                3,654,212Accumulated
      other comprehensive income
                
                
                1,199,308
                
                
                
                1,185,676Total
      stockholders' equity
                
                
                10,290,952
                
                
                
                9,222,633Total
      Liabilities and Stockholders' Equity
                
                $
                11,118,978
                
                
                $
                9,783,660
 
 The
accompanying notes are an integral part of these financial
statements.
  F -
2
 
 China
Agri -Business, Inc.
 Consolidated
Statements of Income and Comprehensive Income
 For The
Years Ended December 31, 2009 and 2008
 
 2009
                    
                    
                    2008Sales
      of products
                    
                    $
                    3,038,560
                    
                    
                    $
                    2,922,385Cost
      of goods sold
                    
                    
                    1,065,599
                    
                    
                    
                    817,472Gross
      profit
                    
                    
                    1,972,961
                    
                    
                    
                    2,104,913Selling,
      general and administrative expenses
                    
                    
                    708,042
                    
                    
                    
                    729,278Income
      from operations
                    
                    
                    1,264,919
                    
                    
                    
                    1,375,635Interest
      and other income
                    
                    
                    23,315
                    
                    
                    
                    28,107Interest
      expense
                    
                    
                    (225,288
                    )
                    
                    
                    (58,403
                    )Loss
      on impairment of products rights
                    
                    
                    (8,685
                    )
                    
                    
                    -Income
      before income taxes
                    
                    
                    1,054,261
                    
                    
                    
                    1,345,339Income
      taxes
                    
                    
                    -
                    
                    
                    
                    -Net
      income
                    
                    $
                    1,054,261
                    
                    
                    $
                    1,345,339Earnings
      per common share:Basic
                    
                    $
                    0.08
                    
                    
                    $
                    0.10Diluted
                    
                    $
                    0.08
                    
                    
                    $
                    0.10Weighted
      average number of common shares used to compute earnings per common
      share:Basic
                    
                    
                    12,958,574
                    
                    
                    
                    12,958,574Diluted
                    
                    
                    13,958,574
                    
                    
                    
                    13,216,108Comprehensive
      Income:Net
      income
                    
                    $
                    1,054,261
                    
                    
                    $
                    1,345,339Other
      comprehensive income - foreign currency translation
    adjustment
                    
                    
                    13,632
                    
                    
                    
                    529,512Comprehensive
      Income
                    
                    $
                    1,067,893
                    
                    
                    $
                    1,874,851
 
 The
accompanying notes are an integral part of these financial
statements.
  F -
3
 
 China
Agri -Business, Inc.
 Consolidated
Statements of Stockholders' Equity
 For the
Years Ended December 31, 2009 and 2008
 
 Common Stock
                        Shares
                      
                      
                      CommonStock
                        Amount
                      
                      
                      AdditionalPaid-
                        in Capital
                      
                      
                      Retained
                        Earnings
                      
                      
                      Accumulated
                        Other
                        Comprehensive
                        Income
                      
                      
                      TotalBalance,
      December 31, 2007
                      
                      
                      12,958,574
                      
                      
                      $
                      12,959
                      
                      
                      $
                      4,150,636
                      
                      
                      $
                      2,308,873
                      
                      
                      $
                      656,164
                      
                      
                      $
                      7,128,632Relative
      fair value of warrants and beneficial conversionfeature included
      in sale of convertible notes
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      199,230
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      199,230Fair
      value of Placement Agent warrants
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      19,920
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      19,920Net
      income for the year ended December 31, 2008
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,345,339
                      
                      
                      
                      -
                      
                      
                      
                      1,345,339Foreign
      currency translation adjustment
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      529,512
                      
                      
                      
                      529,512Balance,
      December 31, 2008
                      
                      
                      12,958,574
                      
                      
                      
                      12,959
                      
                      
                      
                      4,369,786
                      
                      
                      
                      3,654,212
                      
                      
                      
                      1,185,676
                      
                      
                      
                      9,222,633Fair
      value of additional warrants issued to Placement Agent
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      426
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      426Net
      income for the year ended December 31, 2009
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,054,261
                      
                      
                      
                      -
                      
                      
                      
                      1,054,261Foreign
      currency translation adjustment
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      13,632
                      
                      
                      
                      13,632Balance,
      December 31, 2009
                      
                      
                      12,958,574
                      
                      
                      $
                      12,959
                      
                      
                      $
                      4,370,212
                      
                      
                      $
                      4,708,473
                      
                      
                      $
                      1,199,308
                      
                      
                      $
                      10,290,952
 
 The
accompanying notes are an integral part of these financial
statements.
  F -
4
  China
Agri -Business, Inc.
 Consolidated
Statements of Cash Flows
 For the
Years Ended December 31, 2009 and 2008
 
 2009
                                
                                
                                2008Operating
      activitiesNet
      income
                                
                                $
                                1,054,261
                                
                                
                                $
                                1,345,339Adjustments
      to reconcile net income to net cash provided by operating
      activities:Provision
      for (reduction in) allowance for doubtful accounts
                                
                                
                                1,758
                                
                                
                                
                                (18,785
                                )Depreciation
      of property, plant and equipment
                                
                                
                                42,673
                                
                                
                                
                                47,374Amortization
      of intangible assets and deferred financing costs
                                
                                
                                115,627
                                
                                
                                
                                47,726Amortization
      of debt discount and fair value of warrants
                                
                                
                                100,907
                                
                                
                                
                                26,250Loss
      on impairment of products rights
                                
                                
                                8,685
                                
                                
                                
                                -Changes
      in operating assets and liabilities:Decrease
      in accounts receivable
                                
                                
                                15,079
                                
                                
                                
                                37,420Increase
      in other receivable
                                
                                
                                (582
                                )
                                
                                
                                (474
                                )Increase
      / (decrease) in inventory
                                
                                
                                (91,140
                                )
                                
                                
                                13,469(Increase)
      in prepaid expenses
                                
                                
                                (3,051
                                )
                                
                                
                                (16,610
                                )Increase
      in accounts payable and accrued liabilities
                                
                                
                                52,121
                                
                                
                                
                                67,807Net
      cash provided by operating activities
                                
                                
                                1,296,338
                                
                                
                                
                                1,549,516Investing
      activitiesProceeds
      from return of unused manufacturing equipment and production rights to
      respective vendors for cash equal to the asset's current Company book
      value
                                
                                
                                131,760
                                
                                
                                
                                -Property,
      plant and equipment additions
                                
                                
                                (126,837
                                )
                                
                                
                                (5,300
                                )Net
      cash used in investing activities
                                
                                
                                4,923
                                
                                
                                
                                (5,300
                                )Financing
      activitiesRepayment
      of long-term debt
                                
                                
                                (2,803
                                )
                                
                                
                                -Proceeds
      from convertible notes
                                
                                
                                -
                                
                                
                                
                                500,000Financing
      costs
                                
                                
                                -
                                
                                
                                
                                (187,362
                                )Net
      cash provided by (used in) financing activities
                                
                                
                                (2,803
                                )
                                
                                
                                312,638Effect
      of exchange rate changes on cash and cash equivalents
                                
                                
                                14,563
                                
                                
                                
                                471,334Increase
      in cash and cash equivalents
                                
                                
                                1,313,021
                                
                                
                                
                                2,328,188Cash
      and cash equivalents, beginning of period
                                
                                
                                8,312,636
                                
                                
                                
                                5,984,448Cash
      and cash equivalents, end of period
                                
                                $
                                9,625,657
                                
                                
                                $
                                8,312,636Supplemental Disclosures of Cash Flow
      Information:Interest
      paid
                                
                                $
                                17,500
                                
                                
                                $
                                -Income
      taxes paid
                                
                                $
                                -
                                
                                
                                $
                                -Supplemental
      Schedule of Non-Cash Investing and Financing Activities:Cost
      of building acquired
                                
                                $
                                244,073
                                
                                
                                
                                -Less,
      purchase price paid in cash
                                
                                
                                126,873
                                
                                
                                
                                -$
                                117,200
                                
                                
                                
                                -Relative
      fair value of warrants and beneficial conversion feature
                                
                                $
                                -
                                
                                
                                $
                                199,230Fair
      value of Placement Agent warrants recorded as financial cost, deferred
      financing costs and additional paid in capital
                                
                                $
                                426
                                
                                
                                $
                                19,920
 
 The
accompanying notes are an integral part of these financial
statements.
  F -
5
  CHINA AGRI-BUSINESS, INC AND
SUBSIDIARIES
 NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
 (AT AND FOR THE YEARS ENDED
DECEMBER 31, 2009 AND 2008)
 
 NOTE 1 –
ORGANIZATION AND
NATURE OF BUSINESS
 
 China
Agri-Business, Inc. (“China Agri”) was incorporated in the State of Maryland on
December 7, 2005. On October 31, 2006, China Agri effectuated a 2.032 to 1
forward stock split. All share and per share amounts have been retroactively
adjusted to reflect the stock split.
  China
Agri is a holding company with no operations other than acting as a holding
company for its wholly owned subsidiary, Mei Xin Agri Technology (Shaanxi) Co.,
Ltd. (“Meixin”), a limited liability company and a wholly-owned foreign
enterprise (“WOFE”) organized under the laws of the PRC on March 24, 2006.
Meixin acts as a management company for our operating business in the PRC,
Shaanxi Xin Sheng Centennial Agricultural and Technology Co., Ltd. (“Xinsheng”),
a corporation formed under the laws of the PRC on April 22, 2002, in accordance
with the terms of a management entrustment agreement between Meixin and
Xinsheng. Meixin controls Xinsheng's business and management, and is entitled to
the proceeds of Xinsheng's business and is obligated to fund Xinsheng’s
operations, including any losses. China Agri and Meixin do not own any equity
rights in Xinsheng.
  Pursuant
to a Management Entrustment Agreement dated April 18, 2006 between Meixin and
Xinsheng, and a Stock Purchase Agreement dated April 22, 2006 between China Agri
and Xinsheng (collectively, the “Transaction”), China Agri issued 10,950,897
shares of China Agri common stock, representing approximately 89% of the
12,278,774 shares of China Agri common stock outstanding immediately after the
Transaction, to a trustee of a trust for the benefit of the Xinsheng
stockholders. The Transaction was accounted for as a “reverse merger”, since the
stockholders of Xinsheng owned a majority of China Agri’s common stock
immediately following the Transaction. Xinsheng was deemed to be the acquirer in
the reverse merger. Consequently, the assets and liabilities and the historical
operations that are reflected in the financial statements prior to the
Transaction are those of Xinsheng and are recorded at the historical cost basis
of Xinsheng, and the consolidated financial statements after completion of the
Transaction include the assets and liabilities of China Agri, Meixin, and
Xinsheng (collectively, the “Company”), historical operations of Xinsheng, and
operations of China Agri and Meixin from the date of the
Transaction.
 
 China
Agri-Business, Inc., through its operating company in China, manufactures and
sells non-toxic fertilizer, bactericide and fungicide products used for farming
in the People’s Republic of China (the “PRC”). Crops grown with our products are
eligible to qualify for the “AA Green Food” rating administered by the China
Green Food Development Center, an agency under the jurisdiction of the Ministry
of Agriculture of the PRC.
 
 NOTE 2 -
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
 
 Basis of
presentation
 
 The
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States (“US
GAAP”).
 Principles of
Consolidation
  The
consolidated financial statements include the accounts of China Agri, Meixin and
Xinsheng. All significant intercompany accounts and transactions have been
eliminated in consolidation.
  F -
6
 
 Fair Value of Financial
Instruments
 
 The
Company’s financial instruments consist of cash and cash equivalents, accounts
receivable, net, other receivables, accounts payable and accrued liabilities,
and convertible notes, net. The fair value of these financial instruments
approximate their carrying amounts reported in the consolidated balance sheets
due to the short term maturity of these instruments or by comparison to other
instruments with similar terms.
 
 Foreign Currency
Transactions and Comprehensive Income (Loss)
 
 The
functional currency of China Agri is the United States dollar. The functional
currency of Xinsheng and Meixin is the RMB. The reporting currency of the
Company is the United States dollar.
 
 The
assets and liabilities of Xinsheng and Meixin are translated into United States
dollars at period-end exchange rates ($0.14650 and $0.0.14657 at December 31,
2009 and 2008, respectively). The revenues and expenses are translated into
United States dollars at average exchange rates for the period ($0.14475 and
$0.14396 for the years ended December 31, 2009 and 2008, respectively).
Resulting translation adjustments are recorded as a component of accumulated
other comprehensive income within stockholders’ equity.
  Transaction
gains or losses arising from exchange rate fluctuation on transactions
denominated in a currency other than the functional currency are included in the
consolidated results of operations. There are no material foreign currency
transaction gains or losses for the years ended December 31, 2009 and
2008.
 
 Use of
Estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States ("GAAP") requires management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates,
and such differences may be material to the financial statements.
 
 Reclassifications
 
 Certain
prior year amounts have been reclassified to conform to the current year
presentation.
 
 Cash and Cash
Equivalents
 
 Cash and
cash equivalents consist of cash on hand, cash on deposit with banks, and highly
liquid debt investments with a maturity of three months or less when
purchased.
  Inventory
 
 Inventory
is stated at the lower of cost (first-in, first-out method) or
market.
 
 Property, Plant and
Equipment, Net
 
 Property,
plant and equipment is stated at cost less accumulated depreciation.
Depreciation is calculated on a straight-line basis over the estimated useful
lives of the respective assets.
  F -
7
 
 Intangible and Other
Long-Lived Assets, Net
 
 Intangible
and other long-lived assets are stated at cost, less accumulated amortization
and impairments. The intangible assets are being amortized over their expected
useful economic lives ranging from 5 to 10 years.
 
 The
Company reviews its 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, the Company measures 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 assets and
their eventual disposition. If the sum of the expected undiscounted cash flow is
less than the carrying amount of the assets, the Company would recognize an
impairment loss based on the fair value of the assets. During 2009, the Company
recognized an impairment loss of $8,685 for the six useless production rights of
fertilizers (see Note 7).
 
 Revenue
Recognition
 
 Sales of
products are recorded when title passes to the customer, which is generally at
time of shipment. The Company performs ongoing credit evaluations of its
customers’ financial condition, but generally does not require collateral to
support customer receivables. The credit risk is controlled through credit
approvals, limits and monitoring procedures. The Company establishes an
allowance for doubtful accounts based upon factors surrounding the credit risk
of specific customers, historical trends and other factors. Accounts receivable
are charged against the allowance for doubtful accounts once all collection
efforts have been exhausted. The Company does not routinely permit customers to
return product.
 
 Freight
and other transportation costs are included in cost of goods sold.
 
 Stock-Based
Compensation
 
 Stock-based
compensation is accounted for at fair value in accordance with Accounting
Standards Codification (“ASC”) topic 718-10, Stock Compensation (formerly, SFAS
123(R), “Accounting for Stock-Based Compensation”).
  In
addition to requiring supplemental disclosures, FASB ASC 718, Compensation–Stock Compensation,
addresses the accounting for share-based payment transactions in which a company
receives goods or services in exchange for (a) equity instruments of the company
or (b) liabilities that are based on the fair value of the company’s equity
instruments or that may be settled by the issuance of such equity
instruments. FASB ASC 718 focuses primarily on accounting for transactions in
which a company obtains employee services in share-based payment
transactions.
 
 References
to the issuances of restricted stock refer to stock of a public company issued
in private placement transactions to individuals who are eligible to sell all or
some of their shares of restricted Common Stock pursuant to Rule 144,
promulgated under the Securities Act of 1933 (“Rule 144”), subject to certain
limitations. In general, pursuant to Rule 144, a stockholder who is not an
affiliate and has satisfied a six-month holding period may sell all of his
restricted stock without restriction, provided that the Company has current
information publicly available. Rule 144 also permits, under certain
circumstances, the sale of restricted stock, without any limitations, by a
non-affiliate of the Company that has satisfied a one-year holding
period.
  F -
8
 
 Advertising
 
 Advertising
costs include advance payment to our Super Chain Sales Partner stores (to be
used for signage and store display). The Company expenses advertising costs as
incurred in accordance with ASC 720-35, “Advertising Costs.” For the years ended
December 31, 2009 and 2008, advertising expenses were $113,044 and $205,566,
respectively.
 
 Research and
Development
 
 In
accordance with the Accounting Standards Codification subtopic 730-10, Research
and Development (“ASC 730-10”) (formerly, SFAS No. 2, “Accounting For Research
and Development Costs”), the Company expenses all research and development costs
as incurred. Research and development expenses for the year ended December 31,
2009 and 2008 were $25,418 and $72, respectively.
 
 Segment
Information
 
 ASC
280-10 (formerly, SFAS No. 131, “Disclosure About Segments of and Enterprise and
Related Information”), requires entity-wide disclosures about the products and
services an entity provides, the material countries in which it holds assets and
reports revenues, and its major customers. The Company operates as a single
segment and will evaluate additional segment disclosure requirements as it
expands its operations.
 
 Income
Taxes
 
 The
Company accounts for income taxes using the asset and liability method described
in ASC 740-10 (formerly, SFAS No. 109, “Accounting For Income Taxes”), the
objective of which is to establish deferred tax assets and liabilities for the
temporary differences between the financial reporting and the tax bases of the
Company’s assets and liabilities at enacted tax rates expected to be in effect
when such amounts are realized or settled. A valuation allowance related to
deferred tax assets is recorded when it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
 
 Xinsheng
is governed by the Income Tax Laws of the PRC. Pursuant to the PRC relevant laws
and regulations and tax law, Xinsheng is exempt from income tax.
 
 Earnings (Loss) Per Common
Share
 
 The
Company has adopted ASC 260-10 (formerly, SFAS No. 128, “Earnings per Share”
(“EPS”)), which requires presentation of basic and diluted EPS on the face of
the income statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation.
 
 Basic
earnings (loss) per common share are computed on the basis of the weighted
average number of common shares outstanding during the period.
 
 Diluted
earnings (loss) per share are computed similarly to basic earnings per share
except that it includes the dilutive securities (convertible notes and warrants)
outstanding and potential dilution that could occur if dilutive securities were
converted. Diluted loss per share is the same as basic loss per share, as the
effect of potentially dilutive securities (convertible notes payable) are
anti-dilutive.
  F -
9
 
 A
reconciliation of the weighted average number of common shares used to compute
basic and diluted earnings per share for the years ended December 31, 2009 and
2008 follows:
 
 2009
                        
                        
                        2008Weighted
      average number of common shares  outstanding (used to compute
      basic EPS)
                        
                        
                        12,958,574
                        
                        
                        
                        12,958,574Assumed
      conversion of convertible notes - see Note 8
                        
                        
                        1,000,000
                        
                        
                        
                        257,534Weighted
      average number of common shares outstanding  and dilutive common
      stock equivalents outstanding  (used to compute diluted
      EPS)
                        
                        
                        13,958,574
                        
                        
                        
                        13,216,108
 
 Recent Accounting
Pronouncements
 
 Effective
for interim and annual periods ending after September 15, 2009, the FASB
ASC is the single source of authoritative literature of U.S. generally accepted
accounting principles (“GAAP”).  The Codification consolidates all
authoritative accounting literature into one internet-based research tool, which
supersedes all pre-existing accounting and reporting standards, excluding
separate rules and other interpretive guidance released by the
SEC.  New accounting guidance is now issued in the form of Accounting
Standards Updates, which update the ASC.    The adoption of
ASC did not result in any change in the Company’s significant
accounting policies.
 
 In
May 2009, the FASB issued standards that establish general standards of
accounting for and disclosures of events that occur after the balance sheet date
but before financial statements are issued or are available to be issued. These
standards require the disclosure of the date through which an entity has
evaluated subsequent events and the basis for that date, that is, whether the
date represents the date the financial statements were issued or were available
to be issued. This standard is effective in the first interim period ending
after June 15, 2009. This standard did not have any significant impact
on disclosures in the Company’s consolidated financial statements.
 
 In
June 2009, the FASB issued authoritative guidance which eliminates the
exemption for qualifying special-purpose entities from consolidation
requirements, contains new criteria for determining the primary beneficiary of a
variable interest entity, and increases the frequency of required reassessments
to determine whether a company is the primary beneficiary of a variable interest
entity. The guidance is applicable for annual periods beginning after
November 15, 2009 and interim periods therein and thereafter. The Company
does not expect the adoption of this standard to have a material effect on its
consolidated financial position or results of operations.
 
 In
June 2009, the FASB issued authoritative guidance which eliminates the
concept of a qualifying special-purpose entity, creates more stringent
conditions for reporting a transfer of a portion of a financial asset as a sale,
clarifies other sale-accounting criteria, and changes the initial measurement of
a transferor’s interest in transferred financial assets. The guidance is
applicable for annual periods beginning after November 15, 2009 and interim
periods therein and thereafter. The Company does not expect the adoption of this
standard to have a material effect on its consolidated financial position or
results of operations.
 
 In August
2009, the FASB issued guidance on measuring liabilities at fair
value.  This guidance amends the fair value measurements and
disclosures by providing additional guidance clarifying the measurement of
liabilities at fair value.  This new accounting guidance is effective
for reporting periods ending after December 15, 2009.  Adoption of
this standard did not have a material effect on the Company’s consolidated
financial position or results of operations.
  F -
10
 
 Certain
other accounting pronouncements have been issued by the FASB and other standard
setting organizations which are not yet effective and have not yet been adopted
by the Company. The impact on the Company’s consolidated financial position and
results of operations from adoption of these standards is not expected to be
material.
 
 NOTE 3 –
INVENTORY
 
 Inventory
      consists of:
                    
                    December
      31,
                    
                    
                    December
      31,2009
                    
                    
                    2008Raw
      materials
                    
                    $
                    85,989
                    
                    
                    $
                    39,125Finished
      goods
                    
                    
                    13,419
                    
                    
                    
                    4,536Purchased
      fertilizers for resale in direct sale storesand branded stores
                    
                    
                    40,852
                    
                    
                    
                    -Other
                    
                    
                    2,444
                    
                    
                    
                    3,452Allowance
      for slow moving and obsolete items
                    
                    
                    (4,451
                    )
                    
                    
                    -Total
      inventory
                    
                    $
                    138,253
                    
                    
                    $
                    47,113
 
 NOTE 4 –
PROPERTY, PLANT AND
EQUIPMENT, NET
 
 Property,
plant and equipment, net, consist of:
 December
      31,
                              
                              
                              December
      31,2009
                              
                              
                              2008Building
                              
                              $
                              263,727
                              
                              
                              $
                              19,699Transportation
      equipment
                              
                              
                              222,986
                              
                              
                              
                              223,092Machinery
      and electronic equipment
                              
                              
                              50,697
                              
                              
                              
                              146,034Office
      equipment
                              
                              
                              3,506
                              
                              
                              
                              3,508540,916
                              
                              
                              
                              392,333Less
      accumulated depreciation
                              
                              
                              (202,921
                              )
                              
                              
                              (161,055
                              )Property,
      plant and equipment, net
                              
                              $
                              337,995
                              
                              
                              $
                              231,278
 
 In August
2009, Xinsheng acquired a building in Shannxi, China containing approximately
3,800 square feet of space for $244,073 (1,665,783 RMB). $126,873 (865,783 RMB)
of the purchase price was paid in cash and the remaining $117,200 (800,000 RMB)
was financed through a 10 year mortgage (see Note 9). For legal expediency
reasons, the property and mortgage were acquired in the name of the Company’s
Chairman of the board of directors
 
 Depreciation
expense was $42,673 and $47,374 for the years ended December 31, 2009 and 2008,
respectively. Depreciation expense included in the cost of goods sold were
$5,551 and $5,752 for 2009 and 2008, respectively. In the first quarter of 2009,
the Company returned certain unused manufacturing equipment to the original
vendor for $94,428, an amount equal to the net book value of the
equipment.
  F -
11
  NOTE 5 –
INVESTMENT IN TIENWE
TECHNOLOGY INC
 
 On July
29, 2005, Xinsheng acquired a 13.95% equity interest in Tienwe Technology Inc.
(“Tienwe”), a PRC company, for 6,000,000 RMB ($879,000 and $879,420 translated
at the December 31, 2009 and 2008 exchange rate, respectively). The investment
is carried at cost. Tienwe shares are not quoted or traded on any securities
exchange or in any recognized over-the-counter market; accordingly, it is not
practicable to estimate the fair value of the investment. Tienwe sells aerospace
products to military industry customers.
 
 NOTE 6 –
DEFERRED FINANCING
COSTS
 
 Deferred
financing costs, which are being amortized as interest expense over the two year
term of the convertible notes payable due September 29, 2010, consist
of:
 
 December
      31,
                              2009
                            
                            
                            December
      31,
                              2008Placement
      Agent commissions
                            
                            $
                            40,000
                            
                            
                            $
                            40,000Placement
      Agent expense allowance
                            
                            
                            25,000
                            
                            
                            
                            25,000Fair
      value of Placement Agent warrants
                            
                            
                            19,920
                            
                            
                            
                            19,920Legal
      and other fees
                            
                            
                            122,362
                            
                            
                            
                            122,362Total
                            
                            
                            207,282
                            
                            
                            
                            207,282Less:
      accumulated amortization
                            
                            
                            (134,550
                            )
                            
                            
                            (28,403
                            )Deferred
      Financing Costs, end of period
                            
                            $
                            72,732
                            
                            
                            $
                            178,879
 
 NOTE 7 –
INTANGIBLE ASSETS,
NET
 
 Intangible
assets, net, consist of:
 December
      31,
                    
                    
                    December
      31,2009
                    
                    
                    2008Product
      rights
                    
                    $
                    -
                    
                    
                    $
                    90,141Patent
                    
                    
                    14,650
                    
                    
                    
                    14,657Trademark
                    
                    
                    2,189
                    
                    
                    
                    2,190Total
                    
                    
                    16,839
                    
                    
                    
                    106,988Less
      accumulated amortization
                    
                    
                    (13,115
                    )
                    
                    
                    (47,493
                    )Intangible
      assets, net
                    
                    $
                    3,724
                    
                    
                    $
                    59,495
 
 The
product rights were acquired by Xinsheng in December 2006 from an unrelated
third party and relate to nine registered fertilizer products. In the first
quarter of 2009, the Company returned three of these products rights to the
original vendor for $37,332, an amount equal to the net book value of the
respective assets. During the fourth quarter of 2009, the Company determined
that the remaining rights of six products were worthless. Accordingly, the
Company wrote off products rights of $52,740 and related accumulated
amortization of $43,950. The Company recognized loss on impairment of product
rights of $8,685 and foreign exchange effect of $105.
 
 The
patent was acquired by Xinsheng in 2002 from three related parties (one of the
parties was an officer, director and significant stockholder of the Company at
the time of the exchange) in exchange for a total of 16.67% of the issued and
outstanding shares of Xinsheng common stock. The patent (and contributed
capital) at the date of the exchange on April 22, 2002 has been reflected at the
transferors’ cost. The patent is for Zero-tillage Fertilizing Equipment (PRC
Patent Number 330398), which is a type of seeding machine, the use of which
reduces soil erosion.
 
 F -
12
  Estimated
amortization expense for each of the Company’s succeeding years ending December
31, 2010, 2011, 2012, 2013 and 2014 is $1,684, $1,684, $53, $53 and $53,
respectively.
 
 NOTE 8 –
CONVERTIBLE NOTES
PAYABLE, NET
 
 Convertible
notes payable, net, consist of:
 December
      31,
                      
                      
                      December
      31,2009
                      
                      
                      2008Convertible
      notes - face amount
                      
                      $
                      500,000
                      
                      
                      $
                      500,000Less:Debt
      discount attributable to the relative fair value of
    warrants
                      
                      
                      (149,615
                      )
                      
                      
                      (149,615
                      )Debt
      discount attributable to the intrinsic value of the beneficial conversion
      feature
                      
                      
                      (49,615
                      )
                      
                      
                      (49,615
                      )Add
      accumulated amortization of debt discounts
                      
                      
                      126,731
                      
                      
                      
                      26,250Convertible
      notes payable, net
                      
                      $
                      427,501
                      
                      
                      $
                      327,020
 
 On
September 29, 2008, the Company completed the sale of 3% unsecured convertible
notes in an aggregate principal amount of $500,000, and Series C warrants to
purchase 500,000 shares of common stock, to two accredited investors. The
Company received net proceeds of $431,500 after the deduction of Placement Agent
commissions of $40,000, Placement Agent expense allowance of $25,000, and an
escrow agent fee of $3,500.
 
 The Notes
mature two years from the date of issuance and bear interest at the rate of 3%
per annum, payable annually in cash or in shares of common stock, subject to
approval of the holder. Overdue interest shall bear interest at the rate of 15%
per annum. Overdue principal shall bear interest at the rate of 8% per annum.
The Notes are convertible at the option of the holder into the common stock of
the Company at an initial conversion price of $0.50 per share. The conversion
price is subject to adjustment upon the occurrence of stock splits,
combinations, dividends and subsequent offerings.
 
 The
Series C warrants have a term of three years and are exercisable into shares of
common stock at an exercise price of $1.50 per share. Upon exercise of a Series
C warrant, in addition to receiving shares of common stock, each Series C
warrant holder shall be issued a Series D warrant to purchase additional shares
of common stock in an amount equal to the number of Series C warrants exercised.
The Series D warrants, if issued shall have a term of three years and an
exercise price of $2.00 per share. The exercise price of the warrants is subject
to adjustment upon the occurrence of stock splits, combinations, dividends and
subsequent offerings, as set forth in the warrants. No Series D warrants have
been issued as of the date of this filing.
  The
Company shall have the right to prepay the Notes at 110% of the outstanding
principal amount any time prior to the maturity date and upon 30 days prior
written notice to the holders. The Company may call for the termination of any
unexercised portion of the Series C warrants upon consummation of a subsequent
offering by the Company of not less than $7,500,000 in gross proceeds and upon
30 days written notice to the holders. Upon termination of any unexercised
Series C warrants, the warrant holders would not receive any Series D warrants,
any shares underlying the Series C or Series D warrants, or any other
securities.
  F -
13
 
 In
connection with the transaction, the Company agreed to prepare and file a
registration statement with the Securities and Exchange Commission (the “SEC”)
within 60 days following the final closing date. In addition, if the
registration statement was not declared effective within 120 days from the
filing date, the Company was subject to monthly cash liquidated damages payments
equal to 2% of the purchase price paid by each investor, subject to a maximum of
24%. On February 13, 2009, the Company filed a registration statement on Form
S-1 to register the shares underlying the convertible notes and warrants. In
response to SEC comment letters, the Company filed amendments to the
registration statement on Form S-1. The Company and the investors entered into
agreements extending the date of the Form S-1 was required to become effective
to October 30, 2009. The registration statement on Form S-1 was declared
effective on November 16, 2009. The Company accrued $734 liquidated damages
under the registration rights agreement payable to the investors as of December
31, 2009.
 
 The
Company recorded the $149,615 relative fair value of the warrants ($78,136 for
the Series C warrants; $71,479 for the Series D warrants) and the $49,615
intrinsic value of the beneficial conversion feature as additional paid in
capital. No Series D warrants have been issued as of the date of this
filing.
  The
$149,615 fair value of the Series C and Series D warrants was calculated using a
Black-Scholes option pricing model and the following assumptions: risk-free
interest rate of 2.26%; expected stock price volatility of 130.69%; stock price
of $0.40 per share; exercise price of $1.50 per share for the Series C warrants
and $2.00 per share for the Series D warrants; and term of 3 years.
  In
connection with the private placement, the placement agent received warrants to
purchase 80,000 shares of the Company’s common stock at an exercise price of
$1.00 per share for a term of three years. The $19,920 fair value of these
warrants (calculated using the same assumptions described above except for the
exercise price) was charged to deferred financing costs and added to additional
paid in capital. On October 9, 2009, the Company issued warrants to purchase
1,000 shares of the Company’s common stock at an exercise price of $1.00 per
share for a term of three years for services rendered and waiving registration
rights. The $426 fair value of these warrants (calculated using the same
assumptions described above except for the exercise price) was charged to
current financing cost and added to additional paid in capital.
  Interest
expense incurred on the convertible Notes Payable during the year ended December
31, 2009 and 2008 was $15,000 and $3,750, respectively.
 
 NOTE 9 –
LONG-TERM
DEBT
 
 Long-term
debt represents a mortgage payable to Xian Commerce Bank in connection with
Xinsheng’s acquisition of a building in August 2009 (see Note 4). The mortgage,
which had an initial balance of $117,200 (800,000 RMB) and is secured by the
building, bears interest at an annual rate of 6.53% and is due in monthly
installments of interest and principal of approximately $1,330 to August 6,
2019.
  F -
14
  At
December 31, 2009, maturities of the Long-term Debt for the next five years and
in total are as follows:
 
 Year
      endingDecember 31,2010
                    
                    $
                    8,7792011
                    
                    
                    9,3702012
                    
                    
                    10,0012013
                    
                    
                    10,6742014
                    
                    
                    11,393Thereafter
                    
                    
                    64,180Total
                    
                    $
                    114,397
 
 Interest
expense incurred on the Long-term Debt during the years ended December 31, 2009
and 2008 was $2,500 and $0, respectively.
 
 NOTE 10 –
COMMON
STOCK
 
 On
October 11, 2008, upon the completion of the public offering, China Agri sold
379,800 units at a price of $1.00 per unit to the public investors. Each Unit
consisted of one share of Common Stock, one warrant to purchase one share of
Common Stock at $1.50 per share exercisable for three years from the date of
issuance, and one warrant to purchase one share of Common Stock at $2.00 per
share exercisable for three years from the date of issuance only if the $1.50
Unit Warrant was exercised.
 
 NOTE 11 -
WARRANTS
 
 The
Company has issued warrants (exercisable into shares of common stock) to
investors, the Underwriter, and the Placement Agent as part of its sale of
Series A preferred stock, its public offering, and its private placement of
convertible notes. Changes in the warrants outstanding are as
follows:
 
 December
      31,
                      
                      
                      December
      31,2009
                      
                      
                      2008Outstanding
      at beginning of period
                      
                      
                      1,387,580
                      
                      
                      
                      807,580Warrants
      issued - see Note 8
                      
                      
                      1,000
                      
                      
                      
                      580,000Warrants
      exercised
                      
                      
                      -
                      
                      
                      
                      -Warrants
      expired
                      
                      
                      (10,000
                      )
                      
                      
                      -Outstanding
      at end of period
                      
                      
                      1,378,580
                      
                      
                      
                      1,387,580Exercisable
      at end of period
                      
                      
                      1,378,580
                      
                      
                      
                      1,387,580
  F -
15
 
 Warrants
outstanding at December 31, 2009 consist of:
 Date
      Issued
                        
                        Expiration
      Date
                        
                        Number
      of
                          Warrants
                        
                        
                        Weighted
      Average
                          Exercise
      PriceOctober
      11, 2007
                        
                        October
      10, 2010
                        
                        
                        379,800
                        
                        
                        $
                        1.50October
      11, 2007
                        
                        October
      10, 2010
                        
                        
                        379,800
                        
                        
                        
                        2.00October
      11, 2007
                        
                        October
      10, 2012
                        
                        
                        37,980
                        
                        
                        
                        1.00September
      29, 2008
                        
                        September
      29, 2011
                        
                        
                        80,000
                        
                        
                        
                        1.00September
      29, 2008 (1)
                        
                        September
      29, 2011
                        
                        
                        500,000
                        
                        
                        
                        1.50October
      9, 2009
                        
                        October
      9, 2012
                        
                        
                        1,000
                        
                        
                        
                        1.00Total
                        
                        
                        
                        
                        1,378,580
                        
                        
                        $
                        1.59(1)
      Represents Series C warrants.
 
 NOTE 12 –
RESTRICTED NET
ASSETS
 
 Relevant
PRC statutory laws and regulations permit payments of dividends by Meixin and
Xinsheng only out of its retained earnings, if any, as determined in accordance
with PRC accounting standards and regulations. In addition, PRC laws and
regulations require that annual appropriations of 10% of after-tax income should
be set aside prior to payments of dividends as a reserve fund. As a result of
these PRC laws and regulations, the Company is restricted in its ability to
transfer a portion of its net assets in the form of dividends, loans or
advances. The restricted portion amounted to approximately $5,127,000 and
$5,104,000 at December 31, 2009 and 2008, respectively.
 
 NOTE 13 –
INCOME
TAXES
 
 Xinsheng
is subject to a PRC 25% standard enterprise income tax. However, due to its
agricultural industry status, the National Tax Bureau in Xi’an High-Tech
Development Zone has granted Xinsheng exemptions from this tax since 2006. The
Company has to apply for exemption status on an annual basis.
  At
December 31, 2009 and 2008, the Company had an unrecognized deferred United
States income tax liability relating to undistributed earnings of Xinsheng.
These earnings are considered to be permanently invested in operations outside
the United States. Generally, such earnings become subject to United States
income tax upon the remittance of dividends and under certain other
circumstances. Determination of the amount of the unrecognized deferred United
States income tax liability with respect to such earnings is not
practicable.
 
 The
Company did not have any significant temporary differences relating to deferred
tax liabilities as of December 31, 2009 and 2008.
  F -
16
 
 The
provisions for income taxes differ from the amounts computed by applying the
statutory United States federal income tax rate to income (loss) before income
taxes. Reconciliations follow:
 
 December
      31,
                          
                          
                          December
      31,2009
                          
                          
                          2008Expected
      tax at 35%
                          
                          $
                          368,991
                          
                          
                          $
                          470,869Tax
      effect of unutilized losses of China Agri and Meixin
                          
                          
                          170,338
                          
                          
                          
                          71,807Effect
      of PRC income tax exemption granted to Xinsheng
                          
                          
                          (385,235
                          )
                          
                          
                          (387,626
                          )Permanent
      difference relating to Xinsheng's earnings to be permanently invested in
      operations outside the United States
                          
                          
                          (154,094
                          )
                          
                          
                          (155,050
                          )Actual
      provision for income taxes
                          
                          $
                          -
                          
                          
                          $
                          -
 
 NOTE 14 –
SEGMENT
INFORMATION
 
 The
Company operates in one industry segment – the manufacturing and sale of
agricultural enhancement products. Substantially all of the Company’s
identifiable assets at December 31, 2009 and 2008 were located in the PRC. Net
sales for the periods presented were all derived from PRC
customers.
 
 From
2008, the Company launched a new sales and marketing initiative to establish a
closer relationship with farmers through agricultural cooperatives located
throughout the rural areas of China. One component of this initiative is called
the “Super Chain Sales Partner Program”. Super Chain Store under the name of
“Xinsheng Shiji” are owned and managed by the third party. The other is called
“Direct Sales Stores”. The direct sales stores are controlled and managed
directly by the Company.  As of December 31, 2009, the Company had
established 103 branded super chain stores, a majority of those stores are
located at Shannxi Province (local province) and Hunan Province. In addition,
the Company established 49 direct sales stores, which are located in the Shannxi
Province. For the year ended by December 31, 2009, about one third of our
revenues were generated from those super chain stores and direct sales
stores.
 Sales
      by Sales Network
                          
                          For
      the Year EndedDecember 31, 2009Direct
      sales stores
                          
                          $
                          414,356
                          
                          
                          
                          13.64
                          %Super
      chain branded stores
                          
                          
                          619,637
                          
                          
                          
                          20.39
                          %Traditional
      sales network
                          
                          
                          1,944,974
                          
                          
                          
                          64.01
                          %Others
                          
                          
                          59,593
                          
                          
                          
                          1.96
                          %Total
      Sales
                          
                          $
                          3,038,560
                          
                          
                          
                          100.00
                          %
  F -
17
  In
addition to sale products manufactured by the Company, the Company also sells
certain products manufactured by the third party in the direct sale stores and
super chain branded stores. Total sales of third party products was $386,007, or
12.7% of total sales.
 
 Sales
      of Products by Manufactures
                      
                      For
      the Year EndedDecember 31, 2009Home
      Made
                      
                      
                      Third
      Party
                      
                      
                      %
      of ThirdTotal
                      
                      
                      Products
                      
                      
                      Products
                      
                      
                      Party
      ProductsDirect
      sales stores
                      
                      $
                      414,356
                      
                      
                      $
                      41,078
                      
                      
                      $
                      373,278
                      
                      
                      
                      90.09
                      %Super
      chain branded stores
                      
                      
                      619,637
                      
                      
                      
                      606,908
                      
                      
                      
                      12,729
                      
                      
                      
                      2.05
                      %Traditional
      sales network
                      
                      
                      1,944,974
                      
                      
                      
                      1,944,974
                      
                      
                      
                      -Others
                      
                      
                      59,593
                      
                      
                      
                      59,593
                      
                      
                      
                      -Total
      Sales
                      
                      $
                      3,038,560
                      
                      
                      $
                      2,652,553
                      
                      
                      $
                      386,007
                      
                      
                      
                      12.70
                      %
 
 NOTE 15 –
COMMITMENTS AND
CONTINGENCIES
 
 Lease
Agreements
 
 Xinsheng
leases its office space (approximately 7300 square feet) at an annual rent of
366,390 RMB ($53,640 translated at the September 30, 2009 exchange rate) under a
lease with a three year term expiring March 31, 2011. The Company terminated
this lease on October 1, 2009 after relocating to its new purchased office
buildings; (see Note 4). On October 1, 2009, the Company signed a new lease with
the same landlord for an office space of 344 square feet at an annual rent of
12,000 RMB ($1,758). This one year term lease is expires on September 30,
2010.
 
 Xinsheng
leases its operating and testing space (approximately 2600 square feet) at an
annual rent of 38,500 RMB ($5,640 translated at the December 31, 2009 exchange
rate) under a lease expiring March 31, 2010. As of the date of filing of this
Form 10-K, the Company is still in negotiations with the landlords to extend the
lease.
 
 Xinsheng
leases its manufacturing space (approximately 22,600 square feet at an annual
rent of 90,000 RMB ($13,176 translated at the December 31, 2009 exchange rate)
under a lease expiring December 21, 2011, with payment made for the each year to
be made in advance.
 
 China
Agri utilizes office space provided by one of its directors at no
cost.
 
 For the
year ended December 31, 2009 and 2008, rental and related expenses for all
operating leases amounted to $69,757 and $68,091, respectively.
 
 At
December 31, 2009, future minimum rental commitments under all non-cancellable
operating leases were:
 
 Year
                    
                    Minimum
                      Rent2010
                    
                    $
                    15,9142011
                    
                    
                    -Total
                    
                    $
                    15,914
  F -
18
 
 PRC
Risks
 
 Substantially
all of the Company’s business operations are conducted in the PRC and governed
by PRC laws and regulations. Meixin and Xinsheng are generally subject to laws
and regulations applicable to foreign investments and foreign-owned enterprises.
Because these laws and regulations are relatively new, the interpretation and
enforcement of these laws and regulations involve uncertainties.
 
 The PRC
government imposes controls on the convertibility of RMB into foreign currencies
and, in certain cases, the remittance of currency out of the PRC. The Company
receives substantially all of its revenues in RMB, which is currently not a
freely convertible currency. Under existing PRC foreign exchange regulations,
payment of current account items, including profit distributions, interest
payments and expenditures from the transaction, can be made in foreign
currencies without prior approval from the PRC State Administration of Foreign
Exchange by complying with certain procedural requirements. However, approval
from appropriate governmental authorities is required where RMB is to be
converted into foreign currency and remitted out of the PRC to pay capital
expenses, such as the repayment of bank loans denominated in foreign currencies.
The PRC government may also at its discretion restrict access in the future to
foreign currencies for current account transactions.
 
 NOTE 16 –
CONCENTRATION OF
CREDIT RISK
 
 The
Company maintains cash balances that are held in seven banks in China.
Currently, no deposit insurance system has been set up in China. Therefore, the
Company will bear a risk if any of these banks become insolvent. As of December
31, 2009 and 2008, the Company’s uninsured cash balances were approximately
$9,597,000 and $8,300,000, respectively.
  NOTE 17 –
SUBSEQUENT
EVENTS
 
 On
October 21, 2009, Xinsheng received an approval letter from the Bureau of
Foreign Trade and Economic Cooperation of Lantian County of Xinsheng’s
application to purchase land use rights in Lantian County to establish “Xinsheng
Centennial Industrial Zone”.  Xinsheng intends to purchase the land
use rights for 66 acres for a term of 30 years.  The land use right
purchase cost is expected to be approximately $4.1 million (28,000,000
RMB).  In addition, the estimated cost for relocation of local
dwellers is estimated will be approximately $299,000 (2,040,000 RMB). As the
date of this Form 10K filing, the transaction is not finalized due to the delay
in processing by the local government.
  On March
31, 2010, the Company entered into an Investor and Media Relations Service
Agreement (“the Agreement”) with Christensen International Limited
(“Christensen”). Pursuant to the Agreement, Christensen will provide investor
relations services to the Company in a term of one year. The Company will pay
$100,000 as service fee plus expenses to Christensen. The fees will be paid
quarterly at the beginning of each quarter.
  The
Company has evaluated subsequent events through the filing date of this Form
10-K and has determined that there were no further subsequent events to
recognize or disclose in these financial statements.
  F -
19


EXHIBIT
INDEX




Exhibit
                  No.
              
              Description3.1
              
              Articles
      of Incorporation (1)3.2
              
              Bylaws
      (1)3.3
              
              Articles
      of Incorporation, as amended (1)4.1
              
              Form
      of 3% Convertible Note (2)4.2
              
              Form
      of Series C Warrant (2)4.3
              
              Form
      of Series D Warrant (2)4.4
              
              Form
      of 2007 Underwriter Warrant (3)4.5
              
              Form
      of 2009 Placement Agent Warrant (3)4.6
              
              Form
      of Warrant issued to Legend Merchant Group dated October 9, 2009.
      (7)9.1
              
              Voting
      Trust and Escrow Agreement with Xinsheng Shareholders and their trustee
      dated April 22, 2006. (1)10.1
              
              Stock
      Purchase Agreement between China Agri-Business, Inc. and Xinsheng
      Shareholders dated April 22, 2006. (1)10.2
              
              Management
      Agreement between Xinsheng and Meixin dated April 18, 2006.
      (1)10.3
              
              Form
      of Subscription Agreement. (2)10.4
              
              Form
      of Registration Rights Agreement. (2)10.5
              
              Placement
      Agent Agreement. (4)10.6
              
              Business
      Advisory Agreement. (6)10.7
              
              Letter
      agreement dated as of August 12, 2009 among China Agri-Business, JAG
      Multi-Investment, LLC and Keith Guenther. (5)10.8
              
              Letter
      agreement dated as of June 12, 2009 among China Agri-Business, JAG
      Multi-Investment, LLC and Keith Guenther. (7)10.9
              
              Letter
      agreement dated as of October 12, 2009 among China Agri-Business, JAG
      Multi-Investment, LLC and Keith Guenther. (7)10.10
              
              Investor
      and Media Relations Service Agreement, dated as of March 31, 2010, between
      China Agri-Business, Inc. and Christensen International Limited.
      (8)21.1
              
              Subsidiaries
      of the small business issuer (1)31.1
              
              Certification
      by Chief Executive Officer pursuant to Sarbanes Oxley Section
      302.*31.2
              
              Certification
      by Chief Financial Officer pursuant to Sarbanes Oxley Section
      302.*32.1
              
              Certification
      by Chief Executive Officer pursuant to 18 U.S.C. Section
      1350.*32.2
              
              Certification
      by Chief Financial Officer pursuant to 18 U.S.C. Section
      1350.*





(1)
Incorporated by reference to the Form SB-2 (File No. 333-140118) filed on
January 19, 2007.


(2)
Incorporated by reference to the Form 8-K filed on October 3, 2008.


(3)
Incorporated by reference to the Form S-1 (File No. 333-157346) filed on
February 13, 2009.


(4)
Incorporated by reference to the Form S-1/A (File No. 333-157346) filed on June
16, 2009.


(5)
Incorporated by reference to the Form 10-Q filed on August 14,
2009.


(6)
Incorporated by reference to the Form S-1/A (File No. 333-157346) filed on
August 28, 2009.


(7)
Incorporated by reference to the Form S-1/A (File No. 333-157346) filed on
November 12, 2009.


(8)
Incorporated by reference to the Form 8-K filed on April 8, 2010.





* Filed
herewith.