UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC  20549





FORM
10-K





x           ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)


OF
THE SECURITIES EXCHANGE ACT OF 1934




For the
fiscal year ended June 30, 2009




or





 ̈TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934





For
the transition period from _________ to _____________





Commission
file number: 000-18606





CHINA
GREEN AGRICULTURE, INC.


(Exact
name of registrant as specified in its charter)





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





3rdFloor, Borough A, Block A.
No.181, South Taibai Road, Xi’an, Shaanxi Province,


People’s Republic of China
710065


(Address
of Principal Executive Offices, Including Zip Code)





Registrant’s
telephone number:  +86-29-88266368





Securities
registered pursuant to Section 12(b) of the Act:





Title
      of each class
                        
                        Name
      of each exchange on which registeredCommon Stock, $0.001 Par ValuePer Share
                        
                        NYSE_Amex





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   ̈
     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 Exchange Act.  Yes   ̈
     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 report(s)), and (2) has been subject to such filing requirements
for the past 90 days.  Yesx
     No   ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ̈
     No   ̈





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K 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.   ̈





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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filero
                Accelerated
      fileroNon-accelerated
      filero
                  Do
      not check if a smaller reporting company
                Smaller
      reporting companyx




Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ̈Nox





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter: $20,902,260.54 as of December 31, 2008, based on the average bid and
asked price ($2.67) of the Company’s common stock on such date as reported
by the Over-the-Counter Bulletin Board.





The
number of outstanding shares of the registrant’s common stock on September 3,
2009 was 22,681,425.





DOCUMENTS INCORPORATED BY
REFERENCE





Portions
of the registrant’s definitive Proxy Statement for the 2009 Annual Meeting of
Stockholders, which the registrant plans to file with the Securities and
Exchange Commission within 120 days after June 30, 2009 are incorporated by
reference in Part III of this Form 10-K to the extent described
herein.








FORM 10-K
ANNUAL REPORT


FISCAL
YEAR ENDED JUNE 30, 2009





TABLE
OF CONTENTS




PAGEPART I
                    
                    
                    
                    3Item 1.
                    
                    Business
                    
                    3Item 1A.
                    
                    Risk
      Factors
                    
                    18Item 2.
                    
                    Properties
                    
                    28Item 3.
                    
                    Legal
      Proceedings
                    
                    29Item 4.
                    
                    Submission
      of Matters to a Vote of Security Holders
                    
                    29PART II
                    
                    
                    
                    29Item 5.
                    
                    Market
      for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                    
                    29Item 6.
                    
                    Selected
      Financial Data
                    
                    31Item 7.
                    
                    Management’s
      Discussion and Analysis of Financial Condition and Results
      of Operations
                    
                    31Item 7A.
                    
                    Quantitative
      and Qualitative Disclosures about Market Risk
                    
                    38Item 8.
                    
                    Financial
      Statements and Supplementary Data
                    
                    38Item 9.
                    
                    Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                    
                    39Item 9A.(T)
                    
                    Controls
      and Procedures
                    
                    39Item 9B.
                    
                    Other
      Information
                    
                    40PART III
                    
                    
                    
                    40Item 10.
                    
                    Directors,
      Executive Officers and Corporate Governance
                    
                    40Item 11.
                    
                    Executive
      Compensation
                    
                    40Item 12.
                    
                    Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholders Matters
                    
                    40Item 13.
                    
                    Certain
      Relationships and Related Transactions, and Director
      Independence
                    
                    40Item 14.
                    
                    Principal
      Accountant Fees and Services
                    
                    40PART IV
                    
                    
                    
                    40Item 15.
                    
                    Exhibits
      and Financial Statement Schedules
                    
                    40SIGNATURES
                    
                    S-1EXHIBIT
      INDEX
                    
                    E-1FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
                    
                    F-1


2





FORWARD-LOOKING
STATEMENTS





Certain
statements in this Report, and the documents incorporated by reference herein,
constitute "forward-looking statements". Such forward-looking statements include
statements, which involve risks and uncertainties, regarding, among other
things, (a) our projected sales, profitability, and cash flows, (b) our growth
strategies, (c) anticipated trends in our industries, (d) our future financing
plans, and (e) our anticipated needs for, and use of, working capital. They are
generally identifiable by use of the words “may,” “will,” “should,”
“anticipate,” “estimate,” “plan,” “potential,” “project,” “continuing,”
“ongoing,” “expects,” “management believes,” “we believe,” “we intend,” or
the negative of these words or other variations on these words or comparable
terminology. These statements may be found under “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and
“Business,” as well as in this Report generally. Actual events or results
may differ materially from those discussed in forward-looking statements as a
result of various factors including risks described in “Risk Factors” in
Item 1A of this Report and matters described in this report generally. In
light of these risks and uncertainties, there can be no assurance that the
forward-looking statements contained in this filing will in fact occur. You
should not place undue reliance on these forward-looking
statements.





The
forward-looking statements speak only as of the date on which they are made,
and, except to the extent required by federal securities laws, we undertake no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events.




Unless
otherwise noted, all currency figures in this filing are in U.S. dollars.
References to "yuan" or "RMB" are to the Chinese yuan (also known as the
renminbi). According to Xe.com as of September 10, 2009, US $1.00 = 6.83060 yuan
(or 1 yuan = US$ 0.14640).




The
"Company", "we," "us," "our," and the "Registrant" refer to (i) China Green
Agriculture, Inc. (“Green Nevada”, formerly known as Discovery Technologies,
Inc.), a corporation incorporated in the State of Nevada; (ii) Green
Agriculture Holding Corporation (“Green New Jersey”), a wholly-owned subsidiary
of Green Nevada incorporated in the State of New Jersey; (iii) Shaanxi TechTeam
Jinong Humic Acid Product Co., Ltd. (“Techteam”), a wholly-owned subsidiary of
Green New Jersey organized under the laws of the People’s Republic of China (the
“PRC”); and (vi) Xi’an Jintai Agriculture Technology Development Company
(“Jintai”), wholly-owned subsidiary of Techteam in the PRC.





PART I





ITEM 1.
            BUSINESS





Overview





We,
through our indirect wholly owned subsidiaries in China, Techteam and Jintai,
have two business segments: (i) research, development, production and
distribution of humic acid based compound fertilizer (conducted through
Techteam); and (ii) development, production and distribution of agricultural
products (conducted through Jintai), namely, top-grade fruits, vegetables,
flowers and colored seedlings. The fertilizer business has been, and will
continue to be, our main business. The fertilizer business produced
approximately 82.1% and 82.5% of our total revenues in the years ended June 30,
2009 and 2008, respectively.





Humic
acid is an essential natural, organic ingredient for a balanced, fertile soil,
and it is one of the major constituents of organic matter. All of our fertilizer
products are certified as green food production material by China Green Food
Development Center, an agency that reports to the Ministry of Agriculture in
China.





Currently,
we sell our products through a network of 530 regional distributors covering 21
provinces, 4 autonomous regions and 3 municipal cities in China.




3





We
currently sell more than 130 different fertilizer products. We conduct our
research and development activities through Techteam’s wholly-owned subsidiary,
Jintai, which tests new fertilizers and grows high quality flowers, vegetables
and seedlings for commercial sale.





Our
existing production facility was upgraded in December 2008 from a capacity of
10,000 metric tons to a capacity of 15,000 metric tons. We have completed the
construction of a three-story building totaling approximately 13,803 square
meters (i.e., approximately 148,574 square feet) for our new production
facility. With the commencement of production of new facility in August 2009, we
have a total annual capacity of 55,000 metric tons and we anticipate reaching a
full utilization in three years.





Jintai’s
existing greenhouse facility covers approximately 137,000 square meters. It
consists of six intelligent greenhouses, made by ACM-China Greenhouse
Engineering (Shanghai) Co., Ltd., the China branch of the Spanish manufacturer
of greenhouse facilities. The facility is equipped with an advanced drip
irrigation system supplied by Eldar-Shany Technology Co., Ltd. of Israel. We
also have water purification equipment supplied by Beijing Nuobaijing Science
& Technology Development Co., Ltd., a professional supplier of water
purification facilities, which allow us to perform tests with water at different
pH levels. We plan to build new greenhouse facility on a separate parcel of land
of approximately 88 acres to expand our output of high quality agricultural
products for commercial sale while providing an advanced testing field for our
new fertilizer products.





Our
History





The
Company was incorporated under the laws of the state of Kansas on February 6,
1987 under the name Videophone, Inc.  The Company had no operations
from December 1996 to December 2007. In October 2007, the Company was
reincorporated in the state of Nevada, and, on December 26, 2007, acquired all
of the issued and outstanding capital stock of Green New Jersey which owns 100%
of the capital stock of Techteam through a share exchange (the “Share
Exchange”). As a result of the Share Exchange, the Company owns 100% of Green
New Jersey, which is a holding company for Techteam. The Share Exchange occurred
simultaneously with a private placement of $20,519,255 on December 26,
2007.





After the
acquisition of Green New Jersey, the Company changed its name to China Green
Agriculture, Inc., effective February 5, 2008. The trading symbol changed from
DCOV.OB to CGAG.OB on the same day. On March 9, 2009, the Company’s common stock
was listed on NYSE Amex. The trading symbol changed to CGA.




4





Organization
Structure





Our
current corporate structure is set forth in the following diagram:











Recent
Developments





In July
2009, the Company completed a public offering of its common stock for gross
proceeds of $28,778,750.00. As previously reported, the Company intends to use
all of the net proceeds to expand its existing research and development
facilities through the construction of new intelligent green-houses, research
and training centers. The Company estimates that these new facilities will
require an aggregate investment of approximately $38.6 million over the course
of two years.





The
Company plans to build 12 new greenhouses over an 88 acre parcel of land to
expand output of high quality agricultural products for commercial sale while
providing an advanced testing field for new fertilizer products. The new
facility will continue to increase the Company’s capability to produce more
products while shortening the new product development cycle, which allows us to
get products to market quickly, thus increasing revenues and market share. In
addition to developing new humic acid based fertilizer products, the Company is
planning to develop other agricultural derivatives from humic acid, such as
humic-acid based organic pesticides, which can provide additional revenue
sources and increase profitability. The new facility is anticipated to reach
full capacity in 2012.





The
expanded research and development efforts will also support the new 40,000
metric ton production facility, which is the cornerstone of the Company’s growth
strategy. The Company currently manufactures only liquid fertilizer
products.  However, the new production facility is capable of
producing both liquid and highly concentrated fertilizer (i.e. powdered
fertilizer). The Company anticipates that it can reach full utilization of its
55,000 metric ton capacity over the next three years. The Company currently
projects that sales volume can increase 40-45% with a utilization rate of
35%-38% by the end of the 2010 fiscal year.


5





Principal Products and
Services





Fertilizer
Products





We
believe that TechTeam has one of the most advanced automated humic acid
production lines in China. Humic acid is a complex natural, organic ingredient
that is essential for a balanced, fertile soil. It is one of the major
constituents of organic matter in fertile soil, making a vital contribution to
the quality of the soil’s composition. When plant or animal matter decomposes,
it naturally turns into a form of humic acid-rich material, such as peat,
lignite or weathered coal.





Humic
acid exhibits a high capacity for cation exchange (a chemical process in which
cations of like charge are exchanged equally between a solid and a solution),
which serves to chelate plant nutrient elements and release them as the plant
requires. The chelation process holds the nutrients in the soil solution and
prevents them from leaching and prevents runoff. Moreover, humic acids can bind
soil toxins along with plant nutrients, thereby strongly stabilizing soils. The
regular use of humic acid organic liquid compound fertilizer can reduce the use
of fertilizer, insecticide, herbicide and water by 50% or more.  This
mechanism is important to environmental protection, because it can prevent
contamination of water sources caused by runoff.





In
nature, humic acid improves soil structure and aeration, nutrient absorption,
water retention.  It also increases soil’s buffering capacity against
fluctuations in pH levels, and reduces soil crusting and erosion problems from
wind and water as well as radical toxic pollutants.  Humic acid
promotes the development of root systems, seed germination, and overall plant
development.  It also enhances health, resistance to stress and
overall appearance of plants.  We believe that there is no synthetic
material currently known to match humic acid's effectiveness and
versatility.





The pure
humic acid used in our fertilizers is distilled and extracted from weathered
coal by way of alkaline digestion and acid recrystallization. Our products are
dark brown to black in color, and principally used as a foliar fertilizer (a
liquid, water soluble fertilizer applied to a plant’s foliage by a fine spray so
that the plant can absorb the nutrients through its leaves), or sprayed directly
on soil or injected into the irrigation systems.  Benefits of using
our products are to stimulate growth, yield, and protect plants from drought,
disease and temperature damage while improving soil structure and enhancing soil
fertility. We have a multi-tiered product line which offers 134 products,
covering three product categories: Broad Spectrum Fertilizers for general use,
Functional Fertilizers for the enhancement of certain characteristics and
Tailored Fertilizers for very specific crops. In addition to liquid fertilizer
products, our new facility is capable of producing powdered products and we have
already obtained the necessary fertilizer registration certificates to enable us
to produce such products.





During
the fiscal year ended June 30, 2009, we earned $28,889,131 in gross revenues
from our fertilizer products, or 82.1% of our total revenues.





Agricultural
Products





Jintai,
Techteam’s wholly-owned subsidiary, was formed for the research and development
of humic acid fertilizers produced by Techteam. During the process of testing
Techteam’s fertilizers, it produces top-grade fruits, vegetables, flowers and
colored seedlings for commercial sale. Jintai produces the following categories
of products:





Top-grade
flowers:  including principally, faber cymbidium and phalaenopsis.
These two types of flowers are mainly distributed to the middle and high-end
consumers in Shaanxi Province and its adjacent areas. Their seedlings are
distributed across the country, primarily the southern regions of
China.





Green
vegetables and fruits:  including, principally, Holland cucumbers,
sweet and colored pimientos and eggplant and Japanese watermelons which are
distributed to middle and high-end consumers in Shaanxi Province, primarily in
Xi’an city.


6





Multicolored
seedlings: including, principally, photinia serrulata, which are distributed to
customers across China.





During
the year ended June 30, 2009, we earned $6,318,866 in gross revenues from the
sale of our agricultural products, or 17.9% of our total revenues.





Fertilizer Manufacturing
Process





Our
production procedure is scientifically designed and our automated production
line and strict quality control system ensure consistent high quality. Our
fully-automated production line is run by a central control system and only
needs the input of control technicians. The machinery and vats for the line are
supplied by a local medical machinery manufacturer and the automated control
systems were developed by us. Our access rights management system ensures that
our proprietary ingredient mixes are protected at all times from being used by
unauthorized personnel. Also, by linking our computer server with the electronic
scales on each of the material input bins, the exact quantity of each element is
delivered every time, thus maintaining quality and reducing waste. Our new
production line, which can produce liquid fertilizer and powered fertilizer, is
fully-automated and centrally controlled with a wireless panoramic audio and
video monitoring system that allows connectivity with mobile terminals such as
cell phones.





Raw Materials and
Suppliers





Fertilizer
Products





Among the
three materials that can be utilized to produce humic acid (weathered coal,
lignite and peat), we have chosen weathered coal as our principal raw material
because it is abundant and relatively cheap (about $50/metric ton). Although
there are numerous weathered coal suppliers available to us, to date, we have
been using, as our sole supplier Lupoling Coal Mine Industry and Trade Company
of Jinzhong City located in the Shaanxi Province (“Lupoling”) because of the
high-quality weathered coal it provides and its close proximity to our facility.
We utilize spectral analysis technology to select the raw materials with the
best quality, and we have specially-trained buyers to make sure that the quality
and consistency of the raw materials are maintained.





In
addition to weathered coal, we also use approximately 50 different components in
our production process, including microelements such as sodium, calcium, zinc,
iron and potassium, all of which can be readily obtained from numerous sources
in local markets.





Our
products are packaged in bottles, bags and boxes. Each type of packaging
material, along with packaging labels, is purchased from 3 to 4 manufacturers.
These materials are readily available.





Agricultural
Products





The
maternal plants of our top-grade flowers and multi-colored seedlings are mainly
planted and cultivated in our research and development center maintained by
Jintai. We purchase the seeds of green vegetables and fruits from the agents
that import them. We apply fertilizers produced by Techteam to those
products.





Inventory





For our
fertilizer products, our efficient production methods allow us to maintain low
inventory levels, which keeps inventory costs down. Raw materials and packaging
materials are purchased based on production demands. Typically, we carry less
than one month’s supply of such materials. The majority of sales orders are
shipped directly to distributors after production. We normally carry finished
goods up to a week and don’t have any working-in-process.


7





For our
agricultural products, we carry a significant amount of inventory because we
need a significant amount of agricultural products to serve as our research and
development base for our fertilizer research and development.





Return
Policy





The
Company only accepts returns of defective fertilizer products. During the fiscal
year ended June 30, 2009, the Company did not experience any significant
returns.





Industry and Principal
Markets





Market





We
currently market our fertilizer products to private wholesalers and retailers of
agricultural farm products in 21 provinces, 4 autonomous regions and 3 municipal
cities in China. The leading five provinces, which collectively accounted for
36.4% of our fertilizer revenue for the year ended June 30, 2009; are Shandong
(9.5%), Shaanxi (8.3%), Heilongjiang (6.5%), Xinjiang (6.3%) and Anhui (5.9%).
We believe this geographically diverse distribution protects our leading
national market position from regional competitors. We also manufacture our
humic fertilizer products for export to some foreign countries, including India,
Ecuador, Pakistan and Lebanon, through contracted distributors. Total revenues
from exported products currently account for less than 1% of our total sales
revenue.





Our
agricultural products are distributed through various distribution channels in
Shaanxi and its neighboring provinces in China. For example, decorative flowers
are usually sold to flower shops, luxury hotels, government agencies; fruits and
vegetables are sold to high-end supermarkets and upscale restaurants; and
seedlings are normally sold to city planning departments.





We
utilize a multi-tiered product strategy that allows us to tailor our products to
different needs and preferences of the different geographic regions across China
with different climate and soil conditions which grow different crops with
varied needs for fertilizers. For example, in Southern and Eastern China,
farmers are able to grow high margin crops such as fruit and seasonal vegetables
where climate and rainfall condition permits.  Therefore, they can
gain more return on investment from using more expensive and specialized
fertilizers. In the Northwest areas, however, where farmers’ low profit margin
crops prevent them from investing too much in fertilizer, we market a broader
spectrum, low-cost fertilizer.





During
the fiscal year ended June 30, 2009, we produced and sold approximately 15,000
metric tons of organic fertilizer products per year. Our fertilizers are very
concentrated liquids that generally require an application of approximately 120
milliliter (“ml”) per mu (1 mu = .165 acres).





Our
research and development capabilities, which are described more fully below,
allow us to develop products that are tailored to farmers’ specific needs in
different regions, different crops, humidity, weather and soil conditions that
require special fertilizers. For example, our “Red Medlar” product is specially
designed for medlar (a small, brown, apple like fruit, hard and bitter when ripe
and eaten only when partly decayed) in the Ningxia Autonomous
Region.  This product can effectively increase medlar yield and
protect it from foliar disease (the most common culprit for decreased yields of
medlar) and at the same time increase the quality of the fruit.





Marketing





Our sales
staff is trained to closely work with distributors and customers, providing
professional advice on customizing our products to the customers’ needs and
offering extensive customer support.  In addition, our sales staff
educates and informs our customers by organizing training courses about
agricultural techniques that are offered to the public on a regular
basis.


8





We have a
team of 8 marketing personnel in our principal office who collect and analyze
marketing data from across 21 provinces, 4 autonomous regions and 3 municipal
cities in China. By industry norms, we believe that our product development
cycle of 3 to 9 months is relatively short. Because we collect information that
includes the growth records of a variety of plants cultivated in different soil
and climate conditions and feedback from our end-users, we are able to conduct
nationwide market analysis, ascertain new product needs, estimate demand and
customer demographics and develop new products that are tailored to current
market needs.





Although
we utilize television advertisements and mass media, the majority of our
marketing efforts are conducted through joint activities with our distributors.
TechTeam has approximately 120 independent contractors and 110 full-time
employees in marketing and sales. Our staff works with and trains distributors
and retail clients through lectures and interactive meetings. Our staff
emphasizes the technological components of our products to help end-users
understand the differences in products and how to use them. Word-of-mouth
advertising and sample trials of new products in new areas are also an essential
component of our marketing efforts. Also, we have set up nationwide hotlines to
answer customer questions and have constructed an SMS text message platform to
have real-time interaction with our customers.





Our
best-selling fertilizers, which had the highest sales volumes for the fiscal
year ended June 30, 2009, are listed below:





Ranking
                                          in
                                          Techteam
                                        
                                        Product Names
                                        
                                        Volume(Ton)
                                        
                                        Revenues
                                          (US$)
                                        
                                        Percent in total
                                          Revenues of our
                                          Fertilizer Products1
                                        
                                        100ml*40
      Jin Jia
                                        
                                        708.54
                                        
                                        1,317,601.59
                                        
                                        4.56%2
                                        
                                        100ml*40
      Sheng Gen Zhuang Miao
                                        
                                        543.83
                                        
                                        1,059,099.85
                                        
                                        3.67%3
                                        
                                        500ml*20
      High-energy Iron, Zinc & Calcium
                                        
                                        649.27
                                        
                                        1,001,928.73
                                        
                                        3.47%4
                                        
                                        250ml*20
      Ding Hao
                                        
                                        422.65
                                        
                                        879,393.93
                                        
                                        3.04%5
                                        
                                        500ml*20
      Guo Kang Mei
                                        
                                        357.90
                                        
                                        832,491.79
                                        
                                        2.88%





Seasonality





The peak
selling season for our fertilizer products is from March through October. We
experience seasonal variations in our revenues and our operating costs. Periods
of cold weather may delay the application of the fertilizer, or render it
unnecessary thereby reducing demand for our fertilizer products. During the
fiscal year ended June 30, 2009, approximately 57.3% of our annual fertilizer
sales volume occurred in the first fiscal quarter (summer) and the fourth fiscal
quarter (spring), when demand for our fertilizer products typically peaks during
planting season and prior to harvest. We have developed our customer base in
southern China such as Hainan and Guangdong provinces, which have a warm winter,
to mitigate the seasonal variations in our revenues.





The peak
selling season for our agricultural products is from October through March the
next calendar year during our second fiscal quarter (fall) and the third fiscal
quarter (winter). During the period from October 2008 through March 2009, Jintai
generated approximately $4.0 million, or 63.8% of annual sales of agricultural
products. It was mainly due to the strong demand for our high-end fruits and
decorative flowers during the holiday seasons.


9





Distribution, Sales Network
and Customers





Fertilizer
Products





The
fertilizer product market is highly fragmented.  Our strategy is to
operate our own sales network by establishing our distribution through
contractual relationships with distributors, who distribute our products to
wholesalers and retailers, and ultimately, the end-users.





Currently,
we sell our products through a carefully constructed network of about 530
regional distributors covering 21 provinces, 4 autonomous regions and 3
municipal cities in China. We developed approximately 65 new distributors during
the fiscal year ended June 30, 2009 and terminated approximately 15 distributors
based on our evaluation of their performance.





The
distributors sell our products to the smaller, local wholesale and retail
outlets who then sell to the end-users (typically farmers). We do not grant
provincial or regional exclusivity because there is currently no single
distributor sufficiently strong enough to warrant exclusivity. We enter into
non-exclusive written distribution agreements with chosen distributors that
demonstrate their ability in local business experience and sufficient regional
sales networks. The distribution agreements do not dictate distribution quantity
because changes in local market condition and weather changes can dramatically
affect sales quotas.





We have
established representative offices and sales outlets in Beijing, Tianjin,
Shanghai and Chongqing, with each office having three to four representatives.
These regional offices allow us to more effectively coordinate national sales
and marketing teams.  In addition, our sales department works closely
with distributors in various provinces to promote our products, maintain our
profile and to continue to cultivate relationships.





For the
fiscal year ended June 30, 2009, sales through our top 10 distributors accounted
for approximately 6.9% of our fertilizer product revenue, with the top
distributor accounting for approximately 0.8% of fertilizer sales revenue. As we
do not have a significant concentration of customers, we believe that the loss
of any one customer would not have any significant effect on our
business.





As of
June 30, 2009, we had a backlog of orders in the amount of $164,278, while we
had $230,000 in backlog orders as of June 30, 2008.





Agricultural
Products





We
distribute our agricultural products through several networks depending on the
type of product. The top-grade flowers are mainly distributed through our
fertilizer distribution network; the green vegetables and fruits are mainly
distributed to a variety of wholesale markets and supermarkets in Xi’an City,
while our multi-colored seedlings are distributed to the seedling centers and
planting companies in China with which we have had long-term cooperation. The
following is a list of our top five customers in terms of revenues for our
agricultural products in the fiscal 2009. These customers accounted
for  approximately 40.4% revenues of the total revenues of our
agricultural products.





Ranking
                      
                      Customer Name
                      
                      Amount (USD)
                      
                      
                      Percentage as of
                        Jintai's sales1
                      
                      Shaanxi
      Fengshu Yuanli Lvhua Co.
                      
                      $
                      563,510
                      
                      
                      
                      8.91
                      %2
                      
                      Hujiamiao
      Grocery Market
                      
                      $
                      521,038
                      
                      
                      
                      8.24
                      %3
                      
                      Taiyuan
      Yuanlong Lvhua Co.
                      
                      $
                      478,746
                      
                      
                      
                      7.57
                      %4
                      
                      Xinjiamiao
      Grocery Market
                      
                      $
                      401,873
                      
                      
                      
                      6.35
                      %5
                      
                      Shaanxi
      Qintong Agriculture Co.
                      
                      $
                      374,116
                      
                      
                      
                      5.91
                      %


10





Research and
Development





We
conduct our research and development activities through our wholly-owned
subsidiary, Jiantai, through which we also sell high-quality flowers and green
vegetables and fruits which are grown in our research greenhouses to airlines,
hotels and restaurants. We own a 137,000 square meter research and development
facility. Two of the main benefits of the green research and development
facility are as follows: (i) it provides testing and an experimental data
collection base for the function and feature of the new fertilizer products by
imitating the various growing conditions and stages or cycle for a variety of
plants, such as flowers, vegetables and seedlings on which the fertilizer is
applied and (ii) the plants we produce can be sold to our customers to generate
sales. Our research and development capabilities allow us to develop products
that are tailored to farmers’ specific needs in different regions, different
crops, humidity, weather and soil conditions that require special
fertilizers.





In
January 2007, we invested approximately $10 million to purchase and construct an
advanced intelligent greenhouse to serve as our research and development base.
We believe it has quickly become one of the leading green fertilizer research
facilities in China. Flowers, fruits and vegetables that are grown for
experimental testing of TechTeam’s humic acid organic liquid compound
fertilizers in the greenhouses are of high quality and value and are sold to
local supermarkets and airline companies. We sold approximately $6,318,866 of
these products during the fiscal 2009.





In July
2009, we consummated an underwritten public offering of our common stock for
gross proceeds of approximately $28.8 million. We intend to use all of the net
proceeds from the offering to expand our existing research and development
facilities through the construction of new intelligent green-houses, research
and training centers. We plan to build 12 new greenhouses over an 88 acre parcel
of land to expand output of high quality agricultural products for commercial
sale while providing an advanced testing field for new fertilizer products. The
new facility will continue to increase our capability to produce more products
while shortening the new product development cycle, which allows us to get
products to market quickly, thus increasing revenues and market share. In
addition to developing new humic acid based fertilizer products, we are planning
to develop other agricultural derivatives from humic acid, such as humic-acid
based organic pesticides, which can provide additional revenue sources and
increase profitability. The expanded research and development efforts will also
support the new 40,000 metric ton production facility, which is the cornerstone
of the Company’s growth strategy. The Company currently manufactures only liquid
fertilizer products.  However, the new production facility is capable
of producing both liquid and highly concentrated fertilizer (i.e. powdered
fertilizer).





New
Product Development Process





Quickly
developing new products and reducing the product development cycles are the
principal purposes of our research and development facilities. There are eight
distinct phases in our fertilizer products development cycle:





1.           Market
Research: Front line staff continually collects new field data relating to
changes in market demand such as new product market size, price sensitivity and
competition.





2.           Feasibility
Study Report: A team of five staff members correlate the data from across China
and compile a written feasibility study report on the basis of the information
collected detailing the product, expected market size, pricing, segmentation and
competition.





3.           Research
and Development Budget: A budget is prepared to determine the potential revenue
and cost of developing the new product.





4.           Research
and Development Approval: The budget report is presented for the CEO
approval.





5.           Laboratory
Sample and Test: Samples are made and tested in the laboratory using advanced
spectral analysis equipment.


11





6.           Field
Experiments:   Field experiments are carried out, usually in the
greenhouse.





7.           Trial
Sales.





8.           Mass
Production.





New
Products





With our
strong and advanced research and development, we have developed more than 134
products and continue to develop new products.





During
the fiscal year ended June 30, 2009, the following 15 new products were
developed, which contributed $5,900,234 to the increase of our sales revenue for
that period.





1.
Sanbao:  Sanbao is a non-polluting fertilizer that has the ability to
reverse damage previously caused by harsh chemical fertilizers. The product
provides a variety of nutrient supplements, facilitates photosynthesis and
promotes budding.  Sanbao also prevents the yellowing of leaves and
improves the ratio of male to female flowers, resulting in higher pollination
rates.  Fruit grown using Sanbao will be more resistant to cold and
drought, and remain fresh for longer periods of storage or
transportation.





2.
Jinjia: Jinjia fertilizer is highly-concentrated, maximizing the absorbability
rate in plants to 100%.  Jinjia promotes the synthesis of fruit sugars
and acids, improves fruit appearance, and enhances water absorption through sand
follicle cells.  Use of Jinjia will promote fruit growth and
strengthen the connection between fruit and branches, preventing premature
dropping.





3.
Chongshifei: Chongshifei improves fruit color and speeds growth by 10-30%,
allowing it to reach the market five to seven days earlier.  The
product also increases fruit thickness and lengthens shelf life.





4.
Concentrated Chongshifei: Concentrated Chongshifei dramatically improves soil
conditions and inhibits the growth of soil-borne bacteria which lead to root
degradation. Chongshifei products also improve fruit yields, increase vitamin
and nutrient contents and hasten fruit ripening by seven to ten
days.





5. Jinong
Gaibao: Jinong Gaibao is produced by a special process of combining the highly
purified humic acid and calcium-based multi-nutrient with the highly active,
quickly absorbed features, and it can eliminate fruit cracking disease, yellow
leaf disease, lobular disease and other physiological diseases,
and  to prevent the tomato navel rot, cabbage and other dry calcium
deficiency disease.





6. Tu Mo
Bao Dian:  Tu Mo Bao Dian can enhance the activity of root system to
increase the root of nutrient absorption, enhance the anti-freezing, drought,
anti-sandstorm ability to promote early sprouting, early flowering, pollination
rate,  and  promote plant growth robust, fruit enlargement,
fruit flavor and  effectively prevent rot, dry disease, early
defoliation incidence of disease and other diseases





7. Miao
Qing:a new
generation of products specifically developed to strengthen the immune system
for transplanted seedlings. It stimulates root cell division, enhances
photosynthesis and increases the immunity of new seedlings





8. Miao
Wang:works as
a medical treatment as well as a nutrition supplement for crops in general. It
improves the overall development of the root system while increasing transplant
survival rates and relieving the adverse effects from herbicides, pesticides and
fungicides.





9.
Chongshifei II:improves the soil,
increases soil permeability, and inhibits bacterial growth in the soil which
leads to root degradation. It improves the survival rate of transplant and
grafted seedlings and accelerates growth.


12





10. Fu
Guang Jia:promotes growth in
crops by enhancing the absorption of nitrogen, phosphorus, and other nutrients.
It reduces potassium deficiency and extends the shelf life of
plants.





11. Hong
Jia:reduces
harmful effects caused by cold and/or frigid temperatures. It reduces the
falling rate of flowers and fruits, cracking and premature aging due to
potassium deficiency and naturally regulates the supply of nutrients to
strengthen plants and branch stems. It improves resistance to plant disease,
cold, drought, lodging, and over-watering.





12.
Stabilized Growth Control for Cotton:a new generation
of product promoting healthy growth of cotton by promoting pollination and
protecting the flower and buds from falling. It also speeds up recovery after
any damages to the cotton plant due to plant disease, drought, flood and
lodging.





13. Dao
Sheng: is specifically developed to strengthen the immune system for
transplanted rice seedlings. It can effectively prevent rice from diseases, such
as rice blast, rice sheath blight and check blight, while increasing
output.





14. Jin
Wang Ting: can be applied to crops in three different growing stages. It
improves the development of the root system in the early stage, strengthens the
vegetative parts (trunk, stems and leaves) and stimulates more buds in the
flowering stage. It promotes fullness of the fruits and relieves the adverse
effects from drought, flood and diseases in the last growth stage.





15. Xian
Jian: hinders bacterial growth in the soil which leads to root degradation,
improves the survival rate of transplant and grafted seedlings for melon and
increases sugar and vitamin contents in melon.





In
addition to developing new humic acid organic fertilizer products, we are
carrying out some projects to develop derivatives from humic acid; examples are
humic acid liquid film mulch, humic acid sodium fodder additives, highly
concentrated humic acid powder fertilizer, humic acid-based pesticide and humic
acid compound fertilizers. Also, some soil-less seeding and breeding of
colored-leaf plants, rare-flowers and new species of fruits and vegetables are
in the research stages.





Intellectual
Property





Techteam
is the holder of the following trademarks registered with the PRC Trademark
Offices of National Industrial and Commerce Administrative Bureau (the “PRC
Trademark Offices”):





Trademark
                      
                      Registration Number
                      
                      Valid TermJinong
      (“Farmers’ Helper”)
                      
                      No.
      1357523
                      
                      01/28/2000—01/27/2010No.
      3906984
                      
                      05/07/2007—05/06/2017Zhimeizi
      (“Make Plants Grow with Luster”)
                      
                      No.
      3724882
                      
                      07/21/2005—07/20/2015Lepushi
      (“Make Farming Pleasant”)
                      
                      No.
      3724883
                      
                      10/21/2005—10/20/2015


13




Techteam
is in the process of applying for the following trademark:





Trademark
                            
                            Application Type
                            
                            ApplicationNumber
                            
                            Application Receipt Date (as
                              evidence from Trademark
                              Office’s Acknowledgment
                              Receipt)Libangnong
      (“Farmer’s Mighty Helper”)
                            
                            Type
      5 – for the application to pesticide and other chemical
      products
                            
                            6253154
                            
                            10/17/2007Type
      1 – for the application to fertilizer and other chemical
      products
                            
                            6253155
                            
                            10/17/2007





A
registered trademark is protected for a term of ten years, renewable for another
term of ten years under the trademark law of the PRC, so long as an application
for renewal is submitted to the PRC Trademark Offices within six months prior to
the expiration of the initial term.





Techteam
has one patent for a fertilizer formulation and one pending patent application
for our proprietary production line and manufacturing processes as
follows:





Patent/Pending
                                      Patent
                                      Application
                                    
                                    Type of Patent
                                    
                                    Patent No.
                                      /Application No.
                                    
                                    Inventor’s
                                      Name and
                                      Patent Holder
                                    
                                    Date of
                                      Application
                                    
                                    Date of
                                      Publication and
                                      TermPatent:
      Production facility of Humic Acid Products
                                    
                                    Utility
      Model Patent
                                    
                                    Patent
      No.: ZL 2007 2 0031884.2
                                    
                                    Inventor:
      Tao Li
                                      Patent
      Holder: Techteam
                                    
                                    5/29/2007
                                    
                                    5/14/2008;
      term: 10 years fromPending
      Patent Application: Method and recipe of the water soluble humic acid
      fertilizers
                                    
                                    Utility
      Model Patent
                                    
                                    Application
      No.: 200710017334.x
                                    
                                    Applicant:
      Techteam
                                    
                                    2/1/2007
                                    
                                    Pending.





The PRC
Patent Law was adopted by the National People's Congress, the parliament in PRC,
in 1984 and was subsequently amended in 1992 and 2000. A patent is valid for a
term of twenty years in the case of an invention and a term of ten years in the
case of utility models and designs. Our patents are all utility models and
subject to the ten years’ protection. Any use of patent without consent or a
proper license from the patent owner constitutes an infringement of patent
rights.





In
addition to trademark and patent protection law in China, we also rely on
contractual confidentiality provisions to protect our intellectual property
rights and brand. Our research and development personnel and executive officers
are subject to confidentiality agreements to keep our proprietary information
confidential.  In addition, they are subject to a covenant not to
compete following the termination of employment with our Company and they agree
that any work product belongs to our Company.  We also take the
further steps of limiting the number of people involved in production and,
instead of making available lists of ingredients in fertilizers to production
employees, we refer to them by numbers.





Competition





Fertilizer
Products





Currently,
our competitors are numerous small-sized local manufacturers, 3 to 4 larger
national competitors, such as China Agritech, Inc., Qiqihaer Fuer Agriculture
Co., Ltd., a company located at Heilongjiang Province in the PRC, Heze
Exploitation Region Caozhou Chamurgy Co., Ltd. and Guangxi Beihai Penshibao Co.,
Ltd. and 2 to 3 international companies.


14





Small
competitors are generally amino acid compound fertilizer producers, who are very
price competitive. The smaller companies, however, tend to lack sufficient
quality control or process control technologies which leads to inconsistent
quality.





The
Chinese fertilizer market has been fully opened to foreign companies since
December 2006, the time of China’s entry into the World Trade Organization.
Accordingly, the PRC government has increased its fertilizer import quota and
reduced the import tariffs on foreign fertilizer to 1% since January 2007;
however, foreign fertilizers are generally more expensive than domestic
fertilizers and they may lack the advantage in getting their products
localized.





Our
competitive position can be described in the following five aspects for our
fertilizer products:





1.
Nation-wide sales network





In this
highly fragmented market, we were able to set up our own distribution channels
with private distributors and link them together. We have over 530 distributors
nationwide across 21 provinces, 4 autonomous regions and 3 municipalities which
sell our products to retail stores scattered in villages and townships across
China. Our distribution system and sales network is one of the largest in the
humic acid fertilizer manufacturing industry in China. Most of our competitors,
including larger competitors, do not have a sales team as large as ours that
specializes in the sale of humic acid fertilizer products; however, certain of
our larger competitors have better access in certain local markets due to years
of cooperation they have had with particular local distributors.
Despite  our existing wide sales network, we lack of full coverage in
certain cities and counties. We are continuing to expand our sales network
coverage to cover more areas where we have distributors and also expand our
distribution to new areas.





2. Strong
Research and Development





Our
research and development is managed effectively. Typically, it takes only three
to nine months from the decision to develop a new product to mass production,
which ensures product flow and helps to maintain market share. Our strong
research and development department is based at our intelligent greenhouse
facilities. The advanced equipment and soil-free techniques in such facilities
simulate the natural environment in different areas and control selected
factors. As a result, 60%-70% of TechTeam’s experimental
work can be done in the greenhouse, thereby speeding up product development
cycles, and cutting costs without sacrificing accuracy of results. During the
fiscal year ended June 30, 2009, we generated approximately $6,318,866 revenue
from our research and developmentbase (i.e. from the sale
of Jintai’s
agricultural products) and we anticipate that this source of revenue can grow in
the future. We plan to build 12 new greenhouses over a 88-acre parcel of land to
expand output of high quality agricultural products for commercial sale while
providing an advanced testing field for new fertilizer products. The new
facility will continue to increase our capability to produce more products while
shortening the new product development cycle, which allows us to release
products to market quickly, thus increasing revenues and market share. In
addition to developing new humic acid based fertilizer products, we are planning
to develop other agricultural derivatives from humic acid, such as humic-acid
based organic pesticides, which can provide additional revenue sources and
increase profitability. The new facility is expected to reach full capacity in
2012.





We
believe that our greenhouse facility is in the leading position among our
competitors including larger competitors; however, our larger competitors may
have better understanding in certain local markets where they have developed
over the years and have specifically formulated fertilizers for local plant,
soil and climate conditions. We seek to diversify our fertilizers to benefit a
wider range of plants.


15





3.  Well-known
Brand





TechTeam
believes that its customers’ purchasing decisions are often based on strong
brand recognition. We are well recognized by end users in our specialty humic
acid fertilizers; however, certain large international fertilizer producers and
traders who import fertilizers to China, such as Cuikang of Cuikang (Hong Kong)
Co., Ltd., a distributor for a British fertilizer company, Yara Phosyn Ltd., PRC
have strong brand recognition and domestic customers generally perceive the
quality of the imported products as higher or more stable than fertilizers
currently produced in China.





4.  Automated
Production Line and Process





All of
our major production procedures are controlled by a centralized computer system
that can only be accessed by authorized personnel as programmed by such system,
and our 47,000 square meter production facility’s production line is fully
automated. Our automated systems ensure that content in each product is measured
exactly according to its recipe by linking the computer server with the
electronic weights on each of the material input bins. In addition, spectral
analysis is used to accurately check the composition of materials. Management
believes that our automated production line is one of the few advanced lines in
our industry. We have patent protection for our proprietary production line; we
currently have an annual production capacity of 15,000 metric tons. With the
completion of the new production line, our maximum annual production capacity
could reach 55,000 metric tons. However, there can be no assurance that our
competitors will not develop similar production lines with larger production
capacity.





5.  Customer
Support





We have
contracted with more than 120 local sales people through our distributors to do
on-site marketing for our products. The sales personnel speak local dialects and
are familiar with local farmers’ needs. We have district managers, with each
responsible for all the marketing personnel and services in each region. We
believe our strong on-site marketing team with emphasis on after-sale services
separates us from our competitors, including larger competitors.





Agricultural
Products





The
competition position for our agriculture products can be analyzed based on the
following three main products’ types:





Top-grade
flowers: (1) flowers: Our main competitors in Xi'an city and its surrounding
regions are Western Lanhua Company, Ningdong Branch of State Forestry
Administration. Management believes that our flower products have comparative
advantages in terms of the advanced technologies they are based on, the superior
species of the seedlings we select and the efficiency and stability of our
products; (2) Flower seedlings. The main competitors of nationwide market are,
Sanyi Agriculture Techology Co.,Ltd in Gansu Province, Yunnan QianHui Company.
Our management believes that the qualities of our flower seedlings are superior
and the performance of the seedlings is stable. In addition, unlike most of our
competitors that lack comprehensive greenhouse facilities, our flower seedlings
can be supplied all year long and are not limited to the change of
seasons.





Green
Vegetables and Fruits: Our competitors are mainly the vegetable planting centers
and planters in Shaanxi, Shangdong and Gansu provinces that produce vegetables
such as cucumbers and peppers. Our selling point, which distinguishes us from
other competitors, is our Techteam Green Garden for pollution-free green
vegetables and fruits. We apply our green fertilizer to our vegetables and
fruits and the middle and high-end consumers recognize the advantages on
that.





Multi-colored
Seedlings: Our main competitors are Zhejiang Senhe Company and Chang’an Jiahe
Seedling Co., Ltd. Our multi-colored seedlings, mainly red photinia serrulata,
is pure in species. We offer a fair market price with quality plants that have
higher survival rates.


16





Employees





We have a
total of 201 full-time employees, of which 156 are employed by TechTeam and 45
are employed by Jintai.  Of TechTeam’s 156 employees, 29 are in
administration, finance and research and development, 17 in production and
logistics and 110 in marketing and sales. Of Jintai’s 45 full-time employees, 15
are in research and development, 7 in management and administration and 23 in
technology and marketing. Jintai also has approximately an average of 100
temporary employees per year.





Government
Regulation





Our
products and services are subject to regulation by governmental agencies in the
PRC and Shaanxi Province. Business and company registrations, along with the
products, are certified on a regular basis and must be in compliance with the
laws and regulations of the PRC and provincial and local governments and
industry agencies, which are controlled and monitored through the issuance of
licenses and certificates as following:





“Green”
Certification:
All of our fertilizer products are certified by China Green Food Development
Center (“CGFDC”), an agency that reports to the Ministry of Agriculture in China
as green food production material. Our Green Food Production Material
Certificate was issued on March 30, 2009 and will expire in March
2012.  The certificate is renewable with an application within 90 days
prior to its expiration. Currently, CGFDC provides two different certification
within the Green Food industry: namely, "Green Food Certification" which is
granted to edible foods and "Green Food Production Material Certification" which
is granted to production materials such as our fertilizer products that meet
criteria such as standards that increase human safety and ecological protection
of the environmental, in addition to promoting non-polluting product growth and
the use of non-genetically modified raw materials. Prior to July 2007, the two
categories mentioned above were under one category: the "Green Food
Certificate." In an effort to improve social sustainable development and
optimize the regulation of policy for the green food industry, CGFDC separated
the certification system into categories.





Operating
license:Our operating
license enables us to undertake research and development, production, sales and
services of humic acid liquid fertilizer, sales of pesticides, and export and
import of products, technology and equipment. The registration No. is
6100001020488, and it is valid from March 7, 2006 through March 6,
2010.  Once the term has expired, the license is
renewable.





Fertilizer
Registration:Fertilizer
registration is required for the production of fertilizer and issued by the
Ministry of Agriculture of the PRC. The registration numbers are: Agriculture
Fertilizer No. 0079, No. 1085, No. 1083, No. 1084, No. 467, No. 0865 and No.
0896. There are two kinds of registrations: interim registration and formal
registration. The interim registration is valid for one year and applies to
fertilizers in the stages of in-the-field testing and test selling. Our
certificates with No. 467, No. 0865 and No. 0896 are interim fertilizer
registration certificates. Fertilizers that have completed in-the-field testing
and test selling must obtain formal registration, which is valid for five years,
and thereafter must be renewed each five years. Our other certificates as listed
from No. 0079 through No. 1084 below are formal fertilizer registration
certificates.





Registration
                                        No.
                                      
                                      Trademark
                                      
                                      Product
                                        Name
                                      
                                      Main Technique Index
                                      
                                      Certificate
                                        Issuance Date
                                      
                                      Expiration
                                        Date1
                                      
                                      No.
      0079
                                      
                                      Ji
      Nong
                                      
                                      Formula
      Fertilizer (Special Type)
                                      
                                      N+P2O5+K2O≥150g/l;Humic
      Acid≥20 g/l
                                      
                                      12/31/2004
                                      
                                      12/30/20092
                                      
                                      No.
      1085
                                      
                                      Ji
      Nong
                                      
                                      Humic
      Acid Liquid Fertilizer
                                      
                                      Fe+Mn+Zn+B+Mo≥20
      g/l; Amino acid
                                        ≥100
      g/l
                                      
                                      04/23/2008
                                      
                                      04/22/20133
                                      
                                      No.
      1083
                                      
                                      Ji
      Nong
                                      
                                      Humic
      Acid Liquid Fertilizer
                                      
                                      N+P2O5+K2O≥200g/l;Humic
      Acid≥40 g/l
                                      
                                      04/23/2008
                                      
                                      04/22/20134
                                      
                                      No.
      1084
                                      
                                      Ji
      Nong
                                      
                                      Humic
      Acid Liquid Fertilizer
                                      
                                      N+P2O5+K2O≥350g/l;Humic
      Acid≥30 g/l
                                      
                                      04/23/2008
                                      
                                      04/22/20135
                                      
                                      No.
      467
                                      
                                      Ji
      Nong
                                      
                                      Humic
      Acid Liquid Fertilizer
                                      
                                      N+P2O5+K2O≥23g/l;Humic
      Acid≥80g/l Cu+Fe+Mn+Zn+B+Mo≥60 g/l
                                      
                                      03/19/2009
                                      
                                      10/18/2010*6
                                      
                                      No.0865
                                      
                                      Ji
      Nong
                                      
                                      Refined
      Organic Fertilizer
                                      
                                      N+P2O5+K2O≥10%
                                        ;organic
      matter≥30%
                                      
                                      01/20/2009
                                      
                                      01/19/2010*7
                                      
                                      No.0896
                                      
                                      Ji
      Nong
                                      
                                      Refined
      Organic Fertilizer
                                      
                                      N+P2O5+K2O≥8%
                                        ;organic
      matter≥30%
                                      
                                      04/27/2009
                                      
                                      04/26/2010*





*
Certificates No. 467, No. 0865 and No. 0896 are interim fertilizer
registration certificates with a one-year term. The Company will apply the
formal certificates before the expiration date.


17





ITEM
1A. RISK FACTORS





An
investment in our common stock involves a high degree of risk. You should
carefully consider the following information about these risks, together with
the other information contained in this Report before investing in our common
stock. If any of the events anticipated by the risks described below occur, our
results of operations and financial condition could be adversely affected which
could result in a decline in the market price of our common stock, causing you
to lose all or part of your investment.





Risks
Related to our Business





Our
proprietary fertilizer formula may become obsolete which could materially
adversely affect the competitiveness of our future fertilizer products. In
addition, our proprietary fertilizer formula is in the process of applying for
patent. There is no assurance such patent will be granted.





The
production of our fertilizer products is based on our proprietary fertilizer
formula. Our future success will depend upon our ability to address the
increasingly sophisticated needs of our customers by supporting existing and
emerging humic acid fertilizer products and by developing and introducing
enhancements to our existing products and new products on a timely basis that
keep pace with evolving industry standards and changing customer requirements.
If our proprietary formula becomes obsolete as our competitors develop better
products than ours, our future business and financial results could be adversely
affected. In addition, although we entered into confidentiality agreements with
our key employees, we cannot assure you if there would be any breach of such
agreement in which case our rights over such proprietary fertilizer formula
would be adversely affected.





In
addition, Techteam is in the process of applying for patent for its proprietary
formula under the name of Method and Recipe of the Water Soluble Humic Acid
Fertilizers; however, the process of seeking patent protection can be
lengthy and expensive and we cannot assure you that such patent application will
result in patent being issued, or that existing or future issued patents
will be sufficient to provide us with meaningful protection or commercial
advantage.





We
may be exposed to intellectual property infringement and other claims by third
parties, which, if successful, could cause us to pay significant damage awards
and incur other costs.





Our
success depends, in part, on our ability to protect our
proprietary technologies. Techteam is the patent holder of a patent named
Production Facility of Humic Acid Products in the PRC. Our existing production
facility is protected by such a patent. Our patents and patent applications
may be challenged, invalidated or circumvented in the future. We cannot
assure you that our current or potential competitors do not have, and will
not obtain, patents that will prevent, limit or interfere with our ability
to make, use or sell our products in the PRC.


18





Our
success also depends in large part on our ability to use and develop our
technology and know-how without infringing the intellectual property rights of
third parties. As litigation becomes more common in the PRC in resolving
commercial disputes, we face a higher risk of being the subject of intellectual
property infringement claims. The validity and scope of claims relating to humic
acid fertilizer production technology and related devices and machine patents
involve complex technical, legal and factual questions and analysis and,
therefore, may be highly uncertain. The defense and prosecution of intellectual
property suits, patent opposition proceedings and related legal and
administrative proceedings can be both costly and time consuming and may
significantly divert the efforts and resources of our technical and management
personnel. An adverse determination in any such litigation or proceedings to
which we may become a party could subject us to significant liability, including
damage awards, to third parties, require us to seek licenses from third parties,
to pay ongoing royalties, or to redesign our products or subject us to
injunctions preventing the manufacture and sale of our products. Protracted
litigation could also result in our customers or potential customers deferring
or limiting their purchase or use of our products until resolution of such
litigation.





Our
sales have seasonal variations and adverse weather conditions could reduce
demand for our products.




We will
experience seasonal variations in our revenues and our operating costs due to
seasonality. The peak selling season for our fertilizer products is from March
through October. Periods of cold weather may delay the application of the
fertilizer, or render it unnecessary thereby reducing demand for our fertilizer
products. During the fiscal year ended June 30, 2009, approximately 57.3% of our
annual fertilizer sales volume came from the first fiscal quarter (summer) and
the fourth fiscal quarter (spring), when demand for our fertilizer products
typically peaks during planting season and prior to harvest. The peak selling
season for our agricultural products is from October through March the next
calendar year during our second fiscal quarter (fall) and the third fiscal
quarter (winter). During the period from October 2008 through March 2009, Jintai
generated approximately $4.0 million, or 63.8% of annual sales of agricultural
products. It was mainly due to the strong demand for our high-end fruits and
decorative flowers during the holiday seasons. Although the peak selling seasons
for our two business segments as referenced above can mitigate the seasonality
in their combined revenues, since fertilizer products generated 82.1%
of our total revenues, we may still experience seasonal variations.
Further, if any natural disasters, such as a snowstorm, flood, drought, hail,
tornadoes or earthquakes, occur, demand for our products would likely be
reduced.





The industry in which we do
business is highly
fragmented and competitive and we face competition from numerous fertilizer
manufacturers in China and elsewhere.





We
compete with numerous local Chinese fertilizer manufacturers. Although we may
have greater resources than many of our competitors, most of which are small
local fertilizer companies, it is possible that these competitors have better
access in certain local markets to customers and prospects, an enhanced ability
to customize products to a particular region or locality and more established
local distribution channels within a small region. We also compete with a few
large PRC national competitors. Although we have advanced automated humic acid
based fertilizer production lines and a green house supported research and
development center, we cannot assure you that such large competitors will not
develop their own similar production or research and development facilities.
Further, China’s access into the World Trade Organization could lead to
increased foreign competition for us. International producers and traders import
products into China that generally are of higher quality than those produced in
the local Chinese market. If they are localized and become familiar enough of
the type of fertilizer we produce, we may face additional competition. If we are
not successful in our marketing and advertising efforts to increase awareness of
our brands, our revenues could decline, which could have a material adverse
effect on our business, financial condition, results of operations and share
price.





Our major
competitors may be better able than we to successfully endure downturns in our
industrial sector. In periods of reduced demand for our products, we can either
choose to maintain market share by reducing our selling prices to meet
competition or maintain selling prices, which would likely sacrifice market
share. Sales and overall profitability would be reduced in either case. In
addition, we cannot assure you that additional competitors will not enter our
existing markets, or that we will be able to compete successfully against
existing or new competition.


19





Any
significant fluctuation in our production costs may have a material adverse
effect on our operating results.





The
prices for the raw materials and other inputs to manufacture our fertilizer
products are subject to market forces largely beyond our control, including the
price of weathered coal, our energy costs, mineral and non-mineral elements, and
freight costs. The costs for these inputs may fluctuate significantly based upon
changes in the economy and markets. Although we may pass any increase of such
costs through to our customers, in the event we are unable to do so, we could
incur significant losses and a diminution of our share price.





Disruptions
in the supply of raw materials used in our products could cause us to be unable
to meet customer demand, which could result in the loss of customers and net
sales.





Weathered
coal is the primary raw material that we use to manufacture our products.
Although there are numerous weathered coal suppliers available to us, to date,
we have been using, as our sole supplier Lupoling Coal Mine Industry and Trade
Company of Jinzhong City located in the Shaanxi Province (“Lupoling”) because of
the high quality weathered coal it provides and its closeness in location. If
there are any business interruptions at Lupoling and we are unable to locate an
alternative supply in a timely manner, we may not be able to meet customer
demand, which could result in the loss of customers and net sales.





We
may be subject to more stringent governmental regulation on our
products.





The
manufacture and sale of our agricultural products in the PRC is regulated by the
PRC and the Shaanxi Provincial Government. The legal and regulatory regime
governing our industry is evolving, and we may become subject to different,
including more stringent, requirements than those currently applicable to us.
While we believe a more stringent standard will have a bigger impact on those
manufacturers with poor quality products, we cannot assure you any regulatory
change will not adversely affect our business.





If
we cannot renew our five fertilizer registration certificates, we will be unable
to sell some or all of our products. If we cannot receive the formal fertilizer
registration certificates for our new products, powdered fertilizers, upon the
expiration of the temporary registration certificates, we cannot continue to
produce such new products.





All
fertilizers produced in China must be registered with the PRC Ministry of
Agriculture. No fertilizer can be manufactured without such registration. There
are two kinds of registrations: interim registration and formal registration.
The interim registration is valid for one year and applies to fertilizers in the
stages of in-the-field testing and test selling. Fertilizers that have completed
in-the-field testing and test selling must obtain formal registration, which is
valid for five years, and thereafter must be renewed each five years. We have
obtained formal Fertilizer Registration Certificates covering all of our liquid
compound fertilizer products from the PRC Ministry of Agriculture. Four of our
five liquid compound fertilizer registration certificates will expire in 2013,
and one will expire on December 30, 2009. We have received two interim
fertilizer registration certificates for our new products, powdered fertilizers,
or refined organic fertilizer.





Our
belief is that the PRC Ministry of Agriculture generally will grant an
application for renewal in the absence of illegal activity by the applicant.
However, there is no assurance that the PRC Ministry of Agriculture will grant
renewal of our formal Fertilizer Registration Certificates. If we cannot obtain
the necessary renewal, we will not be able to manufacture and sell our
fertilizer products in China which will cause the termination of part or all of
our commercial operations for fertilizer products. With respect to the
transformation of the interim fertilizer registration certificates to formal
fertilizer registration certificates, we believe that we can receive formal
fertilizer registration certificates for our two interim fertilizer registration
certificates in due course; however, if the government imposes additional burden
on the application procedure or put temporary suspension on its certificate
granting process due to certain unexpected incidents occurred in China,
including but not limited to the polluted baby formula accident originated from
Sanlu Group in 2008, we cannot assure you that our formal fertilizer
registration certificates can be obtained without delay or  can be
obtained at all in which case our production could be adversely
affected.


20





Potential
environmental liability could have a material adverse effect on our operations
and financial condition.





To our
knowledge, neither the production nor the sale of our products constitutes
activities, or generate materials that create any environmental hazards or
requires our business operations to comply with PRC environmental laws. Although
it has not been alleged by PRC government officials that we have
violated any current environmental regulations, we cannot assure you that the
PRC government will not amend the current PRC environmental protection laws and
regulations. Our business and operating results may be materially and adversely
affected if we were to be held liable for violating existing environmental
regulations or if we were to increase expenditures to comply with environmental
regulations affecting our operations.





We
do not presently maintain business disruption insurance. Any disruption of the
operations in our factories would damage our business.




Our
operations could be interrupted by fire, flood, earthquake and other events
beyond our control for which we do not carry adequate insurance. While we have
property damage insurance and automobile insurance, we do not carry business
disruption insurance, which is not readily available in China. Any disruption of
the operations in our factories would have a significant negative impact on our
ability to manufacture and deliver products, which would cause a potential
diminution in sales, the cancellation of orders, damage to our reputation and
potential lawsuits.




We
do not presently maintain product liability insurance, and our property and
equipment insurance does not cover the full value of our property and equipment,
which leaves us with exposure in the event of loss or damage to our properties
or claims filed against us.





We
currently do not carry any product liability or other similar insurance. We
cannot assure you that we will not face liability in the event of the failure of
any of our products. We cannot assure you that, especially as China’s domestic
consumer economy and industrial economy continues to expand, product liability
exposure and litigation will not become more commonplace in the PRC, or that we
will not face product liability exposure or actual liability as we expand our
sales into international markets, such as the United States, where product
liability claims are more prevalent.




Our success depends on our management team and
other key personnel, the loss of any of whom could disrupt our business
operations.





We
depend, to a large extent, on the abilities and participation of our current
management team, but have a particular reliance upon Mr. Tao Li, our CEO,
President and Chairman of the Board. The loss of the services of Mr. Li, for any
reason, may have a material adverse effect on our business and prospects. We
cannot assure you that the services of Mr. Li will continue to be available to
us, or that we will be able to find a suitable replacement for him. We do not
carry key man life insurance for our key personnel. Our future success will also
depend on the continued ability to attract, retain and motivate highly qualified
technical sales and marketing customer support. We cannot guarantee that we will
be able to retain our key personnel or that we will be able to attract,
assimilate or retain qualified personnel in the future. If we are unsuccessful
in our efforts in this regard, it could have an adverse effect on our business,
financial condition, results of operations and share price.





Mr.
Tao Li, our Chairman, President and CEO may not devote all of his time into our
business.





Our
Chairman, President and CEO, Mr. Tao Li, also serves as Chairman of Xi’an
Techteam Science & Technology Industry (Group) Co. Ltd., a company that is
engaged in hi-tech application fields in China. This may give rise to a conflict
of interest for Mr. Li in allocating his time to each business.  While
Mr. Li anticipates having sufficient time to devote to our business, a lack of
adequate time spent by him on our business may adversely affect our business,
financial condition, results of operations and share price.


21




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 June 30,
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.





We
are responsible for the indemnification of our officers and
directors.





Our
Bylaws provide for the indemnification of our directors, officers, employees,
and agents, under certain circumstances, against costs and expenses incurred by
them in any litigation to which they become a party arising from their
association with or activities on our behalf. Consequently, we may be required
to expend substantial funds to satisfy these indemnity obligations.





Risks
Related to Doing Business in the PRC





Changes
in the policies of the PRC government could have a significant impact upon the
business we may be able to conduct in the PRC and the profitability of such
business.





The PRC’s
economy is in a transition from a planned economy to a market oriented economy
subject to five-year and annual plans adopted by the government that set
national economic development goals (Source: President Hu’s Report at 17th Party
Congress). Policies of the PRC government can have significant effects on
economic conditions in China. The PRC government has confirmed that economic
development will follow the model of a market economy, such as the United
States. Under this direction, we believe that the PRC will continue to
strengthen its economic and trading relationships with foreign countries and
business development in the PRC will follow market forces. While we believe that
this trend will continue, we cannot assure you that this will be the case. Our
interests may be adversely affected by changes in policies by the PRC
government, including:





·
            changes
      in laws, regulations or their
interpretation


·
            confiscatory
      taxation


·
            restrictions
      on currency conversion, imports or sources of
  supplies


·
            expropriation
      or nationalization of private
enterprises





Although
the PRC government has been pursuing economic reform policies for more than two
decades, we cannot assure you 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
life.


22


The
PRC laws and regulations governing our current business operations are sometimes
vague and uncertain. Any changes in such PRC laws and regulations may have
a material and adverse effect on our business.




There are
substantial uncertainties regarding the interpretation and application of PRC
laws and regulations, including, but not limited to, the laws and regulations
governing our business, and the enforcement and performance of our arrangements
with customers in the event of the imposition of statutory liens, death,
bankruptcy and criminal proceedings. We and any future subsidiaries are
considered foreign persons or foreign funded enterprises under PRC laws, and as
a result, we are required to comply with PRC laws and regulations. These laws
and regulations are sometimes vague and may be subject to future changes, and
their official interpretation and enforcement may involve substantial
uncertainty. The effectiveness of newly enacted laws, regulations or amendments
may be delayed, resulting in detrimental reliance by foreign investors. New laws
and regulations that affect existing and proposed future businesses may also be
applied retroactively. We cannot predict what effect the interpretation of
existing or new PRC laws or regulations may have on our businesses.





A
slowdown or other adverse developments in the PRC economy may materially and
adversely affect our customers, demand for our services and our
business.




All of
our operations are conducted in the PRC and almost all of our revenues are
generated from sales in the PRC. Although the PRC economy has grown
significantly in recent years (Source: National Bureau of Statistics of China
and Xinhuanet.com), we cannot assure you that such growth will continue. The
humic acid based fertilizer industry in the PRC is growing (Source: Ministry of
Agriculture in the PRC), according to the PRC National Bureau of Statistics, the
PRC’s economy expended 6.8% from a year earlier in the fourth quarter of 2008,
which means that a full-year growth for 2008 was 9.0%. It is the first time
since 2002 that China has expanded by less than 10% annually. We do not know how
sensitive we are to a slowdown in economic growth or other adverse changes in
the PRC economy which may affect demand for our products. A slowdown in overall
economic growth, an economic downturn or recession or other adverse economic
developments in the PRC may materially reduce the demand for our products and
materially and adversely affect our business.





Inflation
in the PRC could negatively affect our profitability and growth.





While the
PRC economy has experienced rapid growth, it has been uneven among various
sectors of the economy and in different geographical areas of the country. Rapid
economic growth can lead to growth in the money supply and rising inflation. If
prices for our products do not rise at a rate that is sufficient to fully
absorb inflation-driven increases in our costs of supplies, our profitability
can be adversely affected.




During
the past ten years, the rate of inflation in China has been as high as 20.7% and
as low as -2.2%. These factors have led to the adoption by the Chinese
government, from time to time, of various corrective measures designed to
restrict the availability of credit or regulate growth and contain inflation. In
order to control inflation in the past, the PRC government has imposed controls
on bank credits, limits on loans for fixed assets and restrictions on state bank
lending. The implementation of these and other similar
policies can impede economic growth and thereby harm the market for
our products.




TechTeam
and Jintai are subject to restrictions on paying dividends and making other
payments to our subsidiary, Green New Jersey; as a result, we might therefore,
be unable to pay dividends to you.




We are a
holding company incorporated in the State of Nevada and do not have any assets
or conduct any business operations other than our investments in our
subsidiaries, Green New Jersey, TechTeam and Jintai. As a result of our holding
company structure, we rely entirely on dividends payments from TechTeam and
Jintai, our subsidiaries in PRC. PRC regulations currently permit payment of
dividends only out of accumulated profits, as determined in accordance with PRC
accounting standards and regulations. Our subsidiaries are also required to set
aside a portion of its after-tax profits according to PRC accounting standards
and regulations to fund certain reserve funds. We may experience difficulties
such as lengthy processing time and administrative delay from the China State
Administration of Foreign Exchange (“SAFE”), the approval of which is necessary
to obtain and remit foreign currency. Furthermore, if Green New Jersey, TechTeam
or Jintai incurs debt on its own in the future, the instruments governing the
debt may restrict its ability to pay dividends or make other payments. If we or
Green New Jersey are unable to receive any profits from TechTeam and Jintai’s
operations, we may be unable to pay dividends on our common
stock.


23




Governmental
control of currency conversion may affect the value of your
investment.





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. 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 dominated obligations. Under existing PRC
foreign exchange regulations, payments 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
PRC to pay capital expenses such as the repayment of bank loans denominated in
foreign currencies.





The PRC
government also may 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 of our expenses as they come
due.





The
fluctuation of RMB may materially and adversely affect your
investment.




The value
of the RMB against the U.S. dollar and other currencies may fluctuate 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 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 for our
operations, appreciation of the RMB against the U.S. dollar could lead the RMB
equivalent of the U.S. dollars be reduced and therefore could have a material
adverse effect on our business, financial condition and results of operations.
Conversely, if we decide to convert our RMB into U.S. dollars for the purpose of
making dividend payments on our common stock or for other business purposes 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.





Our
business and financial performance may be materially adversely affected if the
PRC regulatory authorities determine that our acquisition of Techteam
constitutes a Round-trip Investment without the PRC Ministry of Commerce
(“MOFCOM”) approval.





On August
8, 2006, six PRC regulatory agencies promulgated the Regulation on Merger and
Acquisition of Domestic Companies by Foreign Investors (the “2006 M&A
Rules”), which became effective on September 8, 2006. According to the 2006 M&A Rules, a
“Round-trip Investment” is defined as having taken place when a PRC business
that is owned, directly or indirectly, by PRC individual(s) is sold to a non-PRC
entity that is established or controlled, directly or indirectly, by those same
PRC individual(s) and their PRC affiliates. Under the 2006 M&A Rules, any
Round-trip Investment must be approved by the MOFCOM, and any indirect
arrangement or series of arrangements which achieves the same end result without
the approval of MOFCOM is a violation of PRC law.


24




Prior to
obtaining the approval from the Shaanxi Department on August 3, 2007 and the
approval from the Xi’an Administration for Industry and Commerce on August 24,
2007, pending the full payment of the purchase price, for Green New Jersey
purchasing 100% capital stock of Techteam (the “Techteam Acquisition”), Techteam
was a PRC business whose shareholders were two PRC individuals and
a PRC entity, of which Mr. Tao Li was the controlling shareholder
holding 52% of its shares. The PRC entity owned 66% of the shares of
Techteam prior to the conversion of Techteam from a domestic company to a wholly
foreign owned company. Mr. Tao Li is now our President, Chairman, Chief
Executive Officer and significant shareholder. After the consummation of the
transaction contemplated by the Share Exchange Agreement and a simultaneous
private placement of $20,519,255 on December 26, 2007 (the “Private Placement”),
Techteam received the Techteam Purchase Price on January 2, 2008 paid by Green
New Jersey by using part of the Private Placement proceeds to Techteam’s
shareholders. When Green New Jersey was incorporated on January 27, 2007 and
when the Techteam Acquisition was approved, none of the shareholders of Green
New Jersey was a PRC citizen. Immediately after the consummation of the Share
Exchange Agreement, shareholders of Green New Jersey became our shareholders,
among whom Yinshing David To became our controlling shareholder. To incentivize
Mr. Tao Li in connection with the continuous development of Techteam’s business,
a Call Option Agreement was entered into by and between Mr. Yinshing David To
and Mr. Tao Li on December 24, 2007, pursuant to which Mr. Tao Li has the
opportunity to acquire 6,535,676 shares of Common Stock, or Earn In Shares,
which are majority of Mr. To’s common stock of our company, from Mr. To. All of
the shares subject to the Call Option Agreement have been transferred to Mr. Tao
Li as of February 24, 2009, and upon such transfer Mr. Li became our largest
shareholder.  In addition, in conjunction with the Private Placement,
Mr. To placed additional shares of common stock of our company held by him in an
escrow account pursuant to the Make Good Escrow Agreement providing that such
shares would be conveyed to investors for no additional consideration if certain
2009 performance targets were not met. In the event that we meet the 2009
targets, the escrowed shares will be transferred to Mr. Tao Li. On May 28, 2009,
Mr. To executed a proxy to appoint Mr. Li as his proxy, with full power of
substitution for and in his name, with respect to the escrowed shares, to vote
and act or to give written consent at any shareholders’ meeting or at any time
such escrowed shares are required to be voted or acted upon, further providing
Mr. Li significant voting rights in the Company.





The PRC
regulatory authorities may take the view that the Techteam Acquisition, the
Share Exchange, the Call Option, Make Good Escrow and proxy arrangement are part
of an overall series of arrangements which constitute a Round-trip
Investment, because at the end of these transactions, the same
PRC Individual who controlled Techteam became effective controlling party
of a foreign entity that acquired ownership of Techteam. The PRC regulatory
authorities may also take the view that the registration of the Techteam
Acquisition with Shaanxi Department of Commerce and Administration of Industry
and Commerce (“AIC”) in Xi’an may not be evidence that the Techteam Acquisition
has been properly approved because the relevant parties did not fully
disclose to the MOFCOM or AIC of the overall restructuring arrangements, the
existence of the Share Exchange and its link with the Techteam Acquisition.
The PRC legal counsel of Techteam has opinioned that the Techteam
Acquisition did not violate any PRC law, which would include the 2006 M&A
Rules.  We, however, cannot assure you that the PRC regulatory
authorities, MOFCOM in particular, may take the same view as the PRC legal
counsel. If the PRC regulatory authorities take the view that the
Techteam Acquisition constitutes a Round-trip Investment under the 2006
M&A Rules, we cannot assure you we may be able to obtain the approval
required from MOFCOM.





If the
PRC regulatory authorities take the view that the Techteam Acquisition
constitutes a Round-trip Investment without MOFCOM approval, they
could invalidate our acquisition and ownership of Techteam. Additionally,
the PRC regulatory authorities may take the view that the Techteam Acquisition
constitutes a transaction which requires the prior approval of the China
Securities Regulatory Commission, or CSRC, before MOFCOM approval is obtained.
We believe that if this takes place, we may be able to find a way to
re-establish control of Techteam’s business operations through a series of
contractual arrangements rather than an outright purchase of Techteam. We cannot
assure you that such contractual arrangements will be protected by PRC law or
that we can receive as complete or effective economic benefit and overall
control of Techteam’s business than if the Company had direct ownership of
Techteam. In addition, we cannot assure you that such contractual arrangements
can be successfully effected under PRC law. If we cannot obtain MOFCOM or CSRC
approval if required by the PRC regulatory authorities to do so, and if we
cannot put in place or enforce relevant contractual arrangements as an
alternative and equivalent means of control of Techteam, our business and
financial performance will be materially adversely affected.




25




Recent
PRC regulations relating to the establishment of offshore special purpose
companies by PRC domestic residents and registration requirements for employee
stock ownership plans or share option plans may subject our PRC resident
beneficial owners or the plan participants to personal liability, limit our
ability to inject capital into our PRC subsidiaries, limit our subsidiaries’
ability to increase their registered capital or distribute profits to us,
or may otherwise adversely affect us.




SAFE
issued a public notice in October 2005 requiring PRC domestic residents to
register with the local SAFE branch before establishing or controlling any
company outside of China for the purpose of capital financing with assets or
equities of PRC companies, referred to in the notice as an “offshore special
purpose company.” PRC domestic residents who are shareholders of offshore
special purpose companies and have completed round trip investments but did not
make foreign exchange registrations for overseas investments before November 1,
2005 were retroactively required to register with the local SAFE branch before
March 31, 2006. PRC resident shareholders are also required to amend their
registrations with the local SAFE in certain circumstances. Internal
implementing guidelines issued by SAFE, which became public in June 2007 (known
as Notice 106), expanded the reach of Circular 75. After consultation with China
counsel, we do not believe that any of our PRC domestic resident shareholders
are subject to the SAFE registration requirement, however, we
cannot provide any assurances that all of our shareholders who are PRC
residents will not be required to make or obtain any applicable registrations or
approvals required by these SAFE regulations in the future. The failure or
inability of our PRC resident shareholders to comply with the registration
procedures set forth therein may subject us to fines and legal sanctions,
restrict our cross-border investment activities, or limit our PRC subsidiaries’
ability to distribute dividends or obtain foreign-exchange-dominated loans to
our company.




As it is
uncertain how the SAFE regulations will be interpreted or implemented, we cannot
predict how these regulations will affect our business operations or future
strategy. For example, we may be subject to more stringent review and approval
process with respect to our foreign exchange activities, such as remittance of
dividends and foreign-currency-denominated borrowings, which may adversely
affect our results of operations and financial condition. In addition, if we
decide to acquire a PRC domestic company, we cannot assure you that we or the
owners of such company, as the case may be, will be able to obtain the necessary
approvals or complete the necessary filings and registrations required by the
SAFE regulations. This may restrict our ability to implement our acquisition
strategy and could adversely affect our business and prospects.




Regulations
on Employee Share Options may subject us and/or our PRC employees to regulatory
liability.





Under the
Implementation Rules of the Administrative Measures for Individual Foreign
Exchange, or the Individual Foreign Exchange Rules, issued on January 5,
2007 by the SAFE (“SAFE #78”), PRC citizens who are granted shares or share
options by an overseas listed company (a company that is listed on a stock
exchange) according to its employee share option or share incentive plan are
required, through the PRC subsidiary of such overseas listed company or any
other qualified PRC agent, to register with the SAFE and complete certain other
procedures related to the share option or other share incentive plan. Foreign
exchange income received from the sale of shares or dividends distributed by the
overseas listed company may be remitted into a foreign currency account of such
PRC citizen or be exchanged into RMB. Although our PRC citizen employees have
been granted share options prior to our listing on NYSE Amex on March 9, 2009
and therefore are not subject to SAFE #78, any PRC citizen employees who will
receive options in the future while we are listed on NYSE Amex or any other
qualifying stock exchange shall be subject to SAFE #78. If we or our PRC citizen
employees fail to comply with these regulations, we or our PRC option holders
may be subject to fines and legal sanctions.




Any
recurrence of severe acute respiratory syndrome, or SARS, or another widespread
public health problem, such as H1N1 flu, could adversely affect our
operations.





A renewed
outbreak of SARS or another widespread public health problem in the PRC, where
all of our revenue is derived, could have an adverse effect on our operations.
Our operations may be impacted by a number of health-related factors, including
quarantines or closures of some of our offices that would adversely disrupt our
operations.




26




Any of
the foregoing events or other unforeseen consequences of public health problems
could adversely affect our operations.





Because
our principal assets are located outside of the United States and because almost
all of our directors and all our officers reside outside of the United States,
it may be difficult for you to use the United States Federal securities laws to
enforce your rights against us and our officers and most of our directors or to
enforce judgments of United States courts against us or our officers and most of
our directors in the PRC.





Almost
all of our present officers and directors reside outside of the United States.
In addition, our operating subsidiaries, TechTeam and Jintai, are located in the
PRC and substantially all of their assets are located outside of the United
States. It may therefore be difficult for investors in the United States to
enforce their legal rights based on the civil liability provisions of the United
States Federal securities laws against us and our officers and most of our
directors in the courts of either the United States or the PRC and, even if
civil judgments are obtained in courts of the United States, to enforce such
judgments in PRC courts. Further, it is unclear if extradition treaties now in
effect between the United States and the PRC would permit effective enforcement
against us or our officers and most of our directors of criminal penalties,
under the United States Federal securities laws or otherwise.





Failure
to comply with the U.S. Foreign Corrupt Practices Act could subject us to
penalties and other adverse consequences.




We are
required to comply with the United States Foreign Corrupt Practices Act, which
generally prohibits United States companies from engaging in bribery or other
prohibited payments to foreign officials for the purpose of obtaining or
retaining business. Foreign companies, including some that may compete with us,
are not subject to these prohibitions, and therefore may have a competitive
advantage over us. Corruption, extortion, bribery, pay-offs, theft and other
fraudulent practices may occur in the PRC. If our competitors engage in these
practices they may receive preferential treatment, giving our competitors an
advantage in securing business, which would put us at a disadvantage. We can
make no assurance that our employees or other agents will not engage in such
conduct for which we might be held responsible. If our employees or other agents
are found to have engaged in such practices, we could suffer severe penalties
and other consequences that may have a material adverse effect on our business,
financial condition and results of operations.





Risks Related to an Investment in our
Stock.





Our
officers, directors and affiliates control us through their positions and stock
ownership and their interests may differ from other stockholders.





As of
September 3, 2009, our Chairman, President and CEO, Mr. Tao Li, had the voting
rights on 7,897,710, or 34.82% of our common stock outstanding. As a result, he
is able to influence the outcome of stockholder votes on various matters,
including the election of directors and extraordinary corporate transactions,
including business combinations. The interests of Mr. Li may differ from other
stockholders.




If our common stock were delisted
and determined to be a “penny stock,”a broker-dealer may find it more
difficult to trade our common stock and an investor may find it
more difficult to acquire or dispose of our common stock in the secondary
market.





If our
common stock were removed from listing with the NYSE Amex, it may be subject to
the so-called “penny stock” rules. The SEC has adopted regulations that define a
“penny stock” to be any equity security that has a market price per share of
less than $5.00, subject to certain exceptions, such as any securities
listed on a national securities exchange. For any transaction involving a “penny
stock,” unless exempt, the rules impose additional sales practice requirements
on broker-dealers, subject to certain exceptions. If our common stock were
delisted and determined to be a “penny stock,” a broker-dealer may find it
more difficult to trade our common stock and an investor may find it more
difficult to acquire or dispose of our common stock on the secondary market.
Investors in penny stocks should be prepared for the possibility that they
may lose their whole investment.




27




Our
common stock is subject to price volatility unrelated to our
operations.





The
market price of our common stock could fluctuate substantially due to a variety
of factors, including market perception of our ability to achieve our planned
growth, quarterly operating results of other companies in the same industry,
trading volume in our common stock, changes in general conditions in the economy
and the financial markets or other developments affecting our competitors or
us. In addition, the stock market is subject to extreme price and volume
fluctuations. During the past fifty-two weeks, our stock price has fluctuated
from a low of $1.84 to a high of $33.00. This volatility has had a
significant effect on the market price of securities issued by many companies
for reasons unrelated to their operating performance and could have the same
effect on our common stock.





We
may be required to take a substantial charge with respect to potential
stock-based compensation.





In
connection with our private placement in December 2007, our then largest
shareholder, Mr. Yinshing David To, entered into an escrow agreement with the
Company, the private placement investors and an escrow agent pursuant to which
he agreed to deposit 3,156,808 shares of common stock of the Company, to be
equitably adjusted for stock splits, stock dividends and similar adjustments,
into escrow for satisfaction of certain "make good" provisions in the securities
purchase agreement. In the escrow agreement, we established certain performance
targets for our fiscal year ending June 30, 2009, including obtaining a minimum
after tax net income threshold of at least $12,000,000 and obtaining an earnings
per share of at least $0.60938 per share, in each case as defined,
calculated and adjusted pursuant to the terms of the "make good" provisions of
the securities purchase and escrow agreements.  We expect to achieve these
targets for the fiscal year ended June 30, 2009. The escrow agreement provides
that in the event that the fiscal year 2009 targets are not achieved, then the
private placement investors will be entitled to receive distribution of the
escrowed shares based on a pre-defined formula agreed to among the Company, the
investors and Mr. To. If the 2009 targets are met, the escrowed shares will
instead be released to Mr. Tao Li, our Chief Executive Officer, President and
Chairman of the Board, and our current largest shareholder.  Pursuant to
SFAS No. 123R, Accounting for Stock-Based Compensation, if the net income
threshold is met and the shares are released back to Mr. Li, such release could
be viewed as compensatory and trigger recognition of a non-cash expense equal to
the fair value of the escrowed shares on the date of release. However, we did
not recognize such a non-cash expense for the year ended June 30, 2009, as we
believe it is inapplicable to the aforementioned situation regarding Mr. Li.
Notwithstanding the foregoing, if it is subsequently determined that we should
have in fact recognized the non-cash expense in accordance with SFAS No. 123R
for the fiscal year ended June 30, 2009, our actual financial results for 2009
will be materially adversely affected and we may be required to restate certain
or all of our financial statements for the fiscal year ended June 30, 2009 to
reflect the amortization of the non-cash expense during the year. The
restatement of our financial statements and the existence of a non-cash charge
to earnings may have a material adverse effect on the market price of our common
stock.





ITEM
2. PROPERTIES





Our
principal executive offices are located at 3rd floor, Borough A, Block A. No.
181, South Taibai Road, Xi’an, Shaanxi province, PRC, 710065. The office space
is approximately 800 square meters in area. It is leased from the Group Company,
which is controlled by Mr. Li, our Chairman, President and CEO, for a term of
five years from January 2008 at an annual rent of $19,266, which is the market
rate in that area.





We own a
factory in Yang Ling Agriculture High-tech Demonstration Zone, situated in No. 6
Guhua 5 Road, Yangling, Xi’an, Shaanxi province, PRC, 712100. The factory
occupies an aggregate of approximately 47,081 square meters of land and contains
our production lines, office buildings, warehouses and research laboratories.
The office buildings of 340 square meters are leased from the Group Company,
which is controlled by Mr. Li, our Chairman, President and CEO, for a five-year
term from July 1, 2007 at an annual rent of $4,091, which is the market rate in
that area. The production lines have a capacity of 15,000 tons of fertilizer per
annum. We have completed the construction of a three-story building totaling
approximately 13,803 square meters (i.e., approximately 148,574 square feet) for
our new production facility of up to 40,000 metric tons of our fertilizer
products. The building was located adjacent to the 15,000 ton production
facility.




28





TechTeam’s
wholly owned subsidiary, Jintai, is located in Caotan Modern Agriculture
Development Zone in the northern suburb area of Xi’an. Jintai has nine
intelligent greenhouses and six affiliated buildings, occupying a total area of
approximately 137,000 square meters.





There is
no private ownership of land in China. All land ownership is held by the
government of the PRC, its agencies and collectives. Land use rights can be
transferred upon approval by the land administrative authorities of the PRC
(State Land Administration Bureau) upon payment of the required land transfer
fee. We own the land use rights for the land on which our manufacturing facility
is situated, which has a term of 50 years from 2001. There is a mortgage on the
land use right as of June 30, 2009 for a loan of $2,191,445 from Xi’an City
Commercial Bank in China. We lease the 137,000 square meters of land used for
our research and development facility from Xi’an Jinong Hi-tech Agriculture
Demonstration Zone for 10 years from January 2008 with an annual rent of
approximately $11,333.





ITEM
3  LEGAL PROCEEDINGS





We know
of no material, active, pending or threatened proceeding against us, Green New
Jersey, TechTeam or Jintai, nor are we involved as a plaintiff in any material
proceeding or pending litigation.





ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





There
were no matters that were submitted during the fourth quarter of 2009 to a vote
of security holders.





PART II




ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.





Market
Information





We have
two classes of equity securities: (i) common stock, par value $.001 per share,
22,681,425 shares of which were outstanding as of September 3, 2009, and (ii)
preferred stock, par value $.001 per share, of which no shares were outstanding
as of September 3, 2009. Since March 9, 2009, our common stock has been listed
and traded on the NYSE Amex under the symbol “CGA”. From February August 27,
2007 until March 9, 2009, our common stock was traded on the Over-the-Counter
Bulletin Board.





Table I
below sets forth the high and low bid prices for our common stock for the fiscal
quarters ended September 30, 2008 and December 31, 2008 based on reports of
transactions on the Over-the-Counter Bulletin Board. Such prices reflect
inter-dealer prices, without retail markup, markdowns or commissions and may not
necessarily represent actual transactions.





Table
I





Quarter Ended
                      
                      High Bid
                      
                      
                      Low Bid09/30/2008
                      
                      $
                      25.01
                      
                      
                      $
                      0.0012/31/2008
                      
                      $
                      3.40
                      
                      
                      $
                      1.84




29




Table II
below sets forth the high and low list prices for our common stock for the
fiscal quarters ended March 31, 2009 and June 30, 2009 based on reports of
transactions on the NYSE Amex.





Table
II





Quarter Ended
                      
                      High
                      
                      
                      Low03/31/2009
                      
                      $
                      3.36
                      
                      
                      $
                      3.3506/30/2009
                      
                      $
                      8.59
                      
                      
                      $
                      8.02





On
September 10, 2009, the last sale price for our common stock on the NYSE Amex
was $13.05 per share.





Holders





As of
September 3, 2009, there were approximately 643 shareholders of record of our
common stock. This does not reflect the number of persons or entities who held
stock in nominee or "street" name through various brokerage firms.





Dividends





Our board
of directors has not declared a dividend on our common stock during the last two
fiscal years or the subsequent interim period.





The
payment of dividends, if any, is at the discretion of the Board of Directors and
is contingent on the Company's revenues and earnings, capital requirements,
financial conditions and the ability of our operating subsidiaries, Techteam and
Jintai, to obtain approval to send monies out of the PRC. The PRC's national
currency, the Yuan, is not a freely convertible currency. Pleaser read “TechTeam and Jintai are subject to
restrictions on paying dividends and making other payments to our subsidiary,
Green New Jersey; as a result, we might therefore, be unable to pay dividends to
you.” under Item
1A “Risk Factors” of this Report.





Securities
Authorized for Issuance Under Equity Compensation Plans





We
currently do not have any formal equity compensation plans.





The
following table sets forth the details of  outstanding options to
purchase an aggregate of 75,000 of shares of our common stock that were granted
to the directors and officers as of the date of this Report. The options have a
term of two years from the applicable vesting date.





Name of Grantee
                            
                            Exercise Price
                            
                            
                            Number of
                              Common Stock
                              Underlying the
                              Options
                            
                            Grant Date
                            
                            Vest DateYizhao
      Zhang
                            
                            $
                            6.00
                            
                            
                            
                            3,000
                            
                            4/8/2008
                            
                            6/29/20087,000
                            
                            4/8/2008
                            
                            7/1/2009
                            (1)10,000
                            (2)Barry
      Raeburn
                            
                            $
                            6.00
                            
                            
                            
                            7,500
                            
                            4/8/2008
                            
                            6/29/200817,500
                            
                            4/8/2008
                            
                            7/1/2009
                            (1)25,000Huan
      Chen (3)
                            
                            $
                            6.00
                            
                            
                            
                            12,000
                            
                            4/23/2008
                            
                            6/29/2008Ying
      Yang
                            
                            $
                            4.00
                            
                            
                            
                            28,000
                            (4)
                            9/10/2008
                            
                            7/1/2009Total:
                            
                            
                            
                            
                            
                            
                            75,000




30




(1)
            If
      the director or officer is terminated prior to the vesting date, such
      unvested options will terminate immediately on the date of such
      termination.


(2)
            On
      August 17, 2009, Yizhao Zhang exercised 10,000 shares of options in a
      cashless manner from which he received 5,681 shares of common
      stock.


(3)
            Effective
      September 10, 2008, our former CFO, Mr. Huan Chen’s employment was
      terminated. Consequently, 28,000 unvested options were terminated
      effective September 10, 2008.


(4)
            On
      August 17, 2009, Ying Yang exercised 28,000 shares of options in a
      cashless manner from which he received 19,938 shares of common
      stock.




Recent
Sales of Unregistered Securities; Use of Proceeds from Unregistered
Securities.





On
December 29, 2008, the Company reached an agreement with the holders of a
majority shares issued in the private placement in 2007 to issue an aggregate of
213,484 shares of common stock to the thirty-one investors on a pro rata basis
in lieu of the cash payment of the liquidated damages. On January 16, 2009, the
Company issued an aggregate of 213,484 shares of restricted common stock on
a pro rata basis to the investors.





ITEM
6.      SELECTED FINANCIAL
DATA





Not
required.





ITEM
7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION





Management’s
Discussion and Analysis of Financial Condition and Results of
Operations




The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our audited consolidated financial
statements and the notes to those financial statements appearing elsewhere in
this Form 10-K. This discussion and analysis contains forward-looking statements
that involve significant risks and uncertainties. As a result of many factors,
such as the competition in the fertilizer industry and the impact of such
competition on pricing, revenues and margins, the weather conditions in the
areas where our customers are based, the cost of attracting and retaining highly
skilled personnel, the prospects for future acquisitions, and the factors set
forth elsewhere in this Form 10-K, our actual results may differ materially from
those anticipated in these forward-looking statements.  Unless the
context indicates otherwise, as used in the following discussion, "Company”,
"we,” "us,” and "our,” refer to (i) China Green Agriculture, Inc. (“Green
Nevada”, formerly known as Discovery Technologies, Inc.), a corporation
incorporated in the State of Nevada; (ii) Green Agriculture Holding Corporation
(“Green New Jersey”), a wholly-owned subsidiary of Green Nevada incorporated in
the State of New Jersey; (iii) Shaanxi TechTeam Jinong Humic Acid Product Co.,
Ltd. (“Techteam”), a wholly-owned subsidiary of Green New Jersey organized under
the laws of the People’s Republic of China (the “PRC”); and (vi) Xi’an Jintai
Agriculture Technology Development Company (“Jintai”), wholly-owned subsidiary
of Techteam in the PRC.




31




Overview





We,
through our direct and indirect wholly owned subsidiaries, Techteam and Jintai,
have two business segments: (i) research, development, production and
distribution of humic acid based compound fertilizer; and (ii) development,
production and distribution of agricultural products, namely, top-grade fruits,
vegetables, flowers and colored seedlings. The fertilizer business has been our
main business which generated 82.1% and 82.5% of our total revenues in the years
ended June 30, 2009 and 2008, respectively.





We employ
a multi-tiered product strategy in which we tailor our products to different
needs and preferences of the different geographic regions across China. Each
region has varying climate and soil conditions and grows different crops which
require different fertilizers to address local unique conditions. As of June 30,
2009, we developed and produced 134 different fertilizer products and sold
approximately 15,042 and 10,677 metric tons for the years ended June 30, 2009
and 2008, respectively. The five provinces in which we had the most sales
accounted for 36.4% of our fertilizer revenue for the year ended June 30,
2009.  Those provinces were Shandong (9.5%), Shaanxi (8.3%),
Heilongjiang (6.5%), Xinjiang (6.3%) and Anhui (5.9%).





Our
fertilizers are sold through a large number of distributors and we are not
dependent on any one or group of distributors. As of June 30, 2009, we had
approximately 530 distributors in China. The top five distributors accounted for
3.7% of fertilizer revenues for the year ended June 30, 2009.





We also
export our humic acid based compound fertilizer to some foreign countries,
including India, Ecuador, Pakistan and Lebanon through contracted distributors.
Total revenues from exported products currently account for less than 1% of our
sales revenue.





Through
our wholly-owned subsidiary Jintai, we sell high quality flowers, green
vegetables and fruits to airlines, hotels and restaurants, among other
customers. We also currently use Jintai to conduct our fertilizer research and
development activities. Jintai has a 137,000 square meter greenhouse facility.
The leading five provinces, which accounted for 100% of our agriculture product
revenue for the year ended June 30, 2009, were Shaanxi (79.0%), Shanxi (7.6%),
Sichuan (5.7%), Gansu (4.2%) and Jilin (3.5%). Jintai’s top five distributors
accounted for 37.0% of Jintai’s sales for the year ended June 30,
2009.





The peak
selling season for our fertilizer products is from March through October. During
the fiscal year ended June 30, 2009, approximately 57.3% of our annual
fertilizer sales volume occurred in the first fiscal quarter (summer) and the
fourth fiscal quarter (spring), when demand for our fertilizer products
typically peaks during planting season and prior to harvest. We have developed
our customer base in southern China such as Hainan and Guangdong provinces,
which have a warm winter, to mitigate the seasonal variations in our
revenues.





The peak
selling season for our agricultural products is from October through March the
next calendar year during our second fiscal quarter (fall) and the third fiscal
quarter (winter). During the period from October 2008 through March 2009, Jintai
generated approximately $4.0 million, or 63.8% of annual sales of agricultural
products. It was mainly due to the strong demand for our high-end fruits and
decorative flowers during the holiday seasons.





Recent
Development





We have
completed the construction of a new 40,000 metric ton production line facility
adjacent to our existing 15,000 metric ton facility. Our new facility includes
27 vats for mixing ingredients and pharmaceutical grade, electronically
calibrated measuring equipment spread over approximately 148,000 square feet.
The new facility commenced production in August 2009 to meet the growing demand
for our green fertilizer products. We are the first company in China to build an
entirely automated manufacturing system which precisely measures and mixes key
ingredients to formulate our humic acid compound fertilizer products. While our
current facility incorporates a high degree of automation, new equipment has
been added in the new facility to further increase efficiency and reduce
reliance on manual labor. The advanced production techniques in the new facility
reduce waste which in turn reduces costs. In addition, the new facility is
capable of producing both liquid-based and powdered fertilizer products. We have
received manufacturing permit  for powdered fertilizer
products.




32




We plan
to build new greenhouse facility over an 88-acre parcel of land to expand our
output of high quality agricultural products for commercial sale while providing
an advanced testing field for our new fertilizer products (“New Greenhouse”).
While we anticipate that our fertilizer business will continue to generate most
of our total revenue over the next four years, once our New Greenhouse reaches
full output capacity, we anticipate a greater percentage of revenues from the
sale of agricultural products.





The New
Greenhouse requires an aggregate investment of approximately a total of $38.6
million over the course of two years. We received a total of approximately $28.8
million from a public offering of our common stock on July 24, 2009 and we
anticipate the balance of the funds necessary will be provided by operating
income.





Results of
Operations





The
following table shows the operating results of the Company on a consolidated
basis for the fiscal years ended June 30, 2009 and 2008.





Fiscal Year Ended
                        June 30, 2009
                      
                      
                      Fiscal Year Ended
                        June 30, 2008Net
      Sales
                      
                      $
                      35,207,997
                      
                      
                      $
                      22,604,719Cost
      of Goods Sold
                      
                      
                      14,712,066
                      
                      
                      
                      9,792,856Gross
      Profit
                      
                      
                      20,495,931
                      
                      
                      
                      12,811,862Selling
      Expenses
                      
                      
                      1,412,101
                      
                      
                      
                      927,285Operating
      and Administrative Expenses
                      
                      
                      1,993,817
                      
                      
                      
                      2,567,661Operating
      Income
                      
                      
                      17,090,013
                      
                      
                      
                      9,316,917Total
      Other Income (expense)
                      
                      
                      (294,043
                      )
                      
                      
                      (845,916
                      )Income
      Before Income Taxes
                      
                      
                      16,795,970
                      
                      
                      
                      8,471,001Provision
      for Income Taxes
                      
                      
                      2,331,548
                      
                      
                      
                      692,474Net
      Income
                      
                      
                      14,464,422
                      
                      
                      
                      7,778,527





Net
Sales





Total net
sales for the year ended June 30, 2009 were $35,207,997, an increase of
$12,603,277, or 55.8%, from $22,604,719 for the year ended June 30,
2008.





Techteam’s
net sales, which accounted for 82.1% of our total net sales, were driven by the
sales of humic acid based compound fertilizers. For the year ended June 30,
2009, Techteam’s net sales increased $10,246,167, or 55.0%, to $28,889,131 from
$18,642,964 for the year ended June 30, 2008. Sales volume increased 40.9% to
15,042 tons for the year ended June 30, 2009 from 10,677 tons for the year ended
June 30, 2008. This increase was attributable to production capacity upgrades,
the introduction of 15 new products and the net addition of 50 new
distributors.





Jintai’s
net sales, which include sales of agricultural products, namely top-grade
fruits, vegetables, flowers and colored seedlings by using our existing and new
fertilizers, increased $2,357,111, or 59.5%, to $6,318,866 for the year ended
June 30, 2009 from $3,961,755 for the same period in 2008. This increase was
largely due to the strong sales of our various decorative flowers, mainly
butterfly orchids, big orchids and red leaf flowers during this year’s holiday
seasons. The sales for these three products accounted for 71.0% of Jintai’s
sales for the year ended June 30, 2009.




33




Cost
of Goods Sold





Total
cost of goods sold for the year ended June 30, 2009 were $14,712,066, an
increase of $4,919,211, or 50.2%, from $9,792,856 for the year ended June 30,
2008.





Cost of
goods sold by Techteam for the year ended June 30, 2009 were $11,173,236, an
increase of $3,180,615, or 39.8%, from $7,992,621 for the same period in 2008.
As a percentage of total net sales, cost of goods sold by Techteam approximated
31.7% and 35.4% for the years ended June 30, 2009 and 2008, respectively. The
decrease in cost of goods sold is primarily attributable to the upgrade of our
production lines, which resulted in increased efficiency and cost savings, and
economies of scale achieved through increased production.





Cost of
goods sold by Jintai for the year ended June 30, 2009 were $3,538,830, an
increase of $1,738,595, or 96.6%, from $1,800,235 for the same period in 2008.
As a percentage of total net sales, cost of goods sold by Jintai approximated
10.1% and 8.0% for the years ended June 30, 2009 and 2008, respectively. The
direct material used by Jintai for the year ended June 30, 2009, which accounted
for 86.7% of total cost of goods sold by Jintai, has increased 90.8% compared to
the same period a year ago due to increasing demand for agricultural
products.





Gross
Profit





Total
gross profit for the year ended June 30, 2009 increased $7,684,068, or 60.0%, to
$20,495,931 compared to $12,811,863 for the year ended June 30, 2008. Gross
profit margin approximated 58.2% and 56.7% for the years ended June 30, 2009 and
2008, respectively.





Gross
profit from Techteam increased $7,065,552, or 66.3%, to $17,715,895 for the year
ended June 30, 2009 from $10,650,343 for the year ended June 30, 2008. Gross
profit margin from Techteam sales approximated 61.3% and 57.1% for the years
ended June 30, 2009 and 2008, respectively. The increase in gross profit margin
was mainly due to the relatively low purchase costs in packaging materials and
the increasing focus on high-end and higher margin products comparing to a year
ago.





Gross
profit from Jintai increased $618,516, or 28.6% for the year ended June 30,
2009, to $2,780,036 compared to $2,161,520 for the year ended June 30, 2008.
Gross profit margin from Jintai sales approximated 44.0% and 54.6% for the years
ended June 30, 2009 and 2008, respectively. The decrease in gross profit margin
was primarily due to additional amortization expenses relating
to  greenhouse upgrades completed in March 2008.





Selling
Expenses





Our
selling expenses consist primarily of salaries of sales personnel, advertising
and promotion expenses, freight charges and related compensation. Selling
expenses were $1,412,101, or 4.0% of net sales for the year ended June 30, 2009
as compared to $927,285, or 4.1% of net sales for the year ended June 30, 2008,
an increase of $484,816 or 52.3%. The increase was primarily attributable to the
increase in the number of sales, additional marketing promotions and a higher
number of sales representatives.





General
and Administrative Expenses





General
and administrative expenses consisted primarily of related salaries, rental
expenses, business development, depreciation and travel expenses incurred by our
general and administrative departments and legal and professional expenses.
General and administrative expenses were $1,993,817, or 5.7% of net sales for
the year ended June 30, 2009, as compared to $2,567,661, or 11.4% for the year
ended June 30, 2008, a decrease of $573,844. The decrease was mainly
attributable to cost savings in professional service fees.




34




Total
Other Income (Expenses)





Total
other income (expenses) consisted of subsidy income from the PRC government,
interest income, interest expenses and bank charges. Total other expenses for
the year ended June 30, 2009 were $294,043, as compared to $845,916 for the year
ended June 30, 2008, a decrease of $551,873. The decrease was mainly
attributable to a one time charge of $506,142 that we incurred in the year ended
June 30, 2008 in connection with the liquidated damages we paid to certain
investors resulting from the late effectiveness of our registration statement on
Form S-1.





Income
Taxes





Techteam
is subject to a preferred tax rate of 15% as a result of Techteam’s operation
being classified as a High-Tech project under the new PRC Enterprise Income Tax
Law (“EIT”) effective on January 1, 2008. Techteam incurred income tax expenses
of $2,331,548 for the year ended June 30, 2009, compared to $692,474 a year ago,
an increase of $1,639,074, primarily attributable to our increased operating
income and an income tax holiday Techteam enjoyed from August 24, 2007, the date
on which it was acquired by Green Holding until December 31, 2007 due to its
status as a wholly foreign owned enterprise (“WFOE”). The PRC tax incentive
expired on December 31, 2007.





Jintai
has been exempt from paying income tax since its formation as it produces
products which fall into the tax exemption list set out in the EIT. This
exemption is expected to last as long as the related EIT does not
change.





Net
Income





Net
income for the year ended June 30, 2009 was $14,464,422, an increase of
$6,685,895 from $7,778,527, or 86.0% compared with that of the year ended June
30, 2008. The increase was attributable to the increase in net sales. Net income
as a percentage of total net sales approximated 41.1% and 34.4% for the years
ended June 30, 2009 and 2008, respectively.





Discussion
of Segment Profitability Measures





Our
business consists of two segments – the sales of fertilizer products through
Techteam and the sales of agricultural products through Jintai. Each of the
segments prepares its own quarterly and annual projections with regard to
marketing, research and development, production and sales along with financial
budgets.





Liquidity
and Capital Resources





Our
principal sources of liquidity include cash from operations, borrowings from
local commercial banks and proceeds of offerings of our securities consummated
in December 2007 (the “Private Placement”) and July 2009 (the “Public
Offering”).  We received $28,778,750.00 in gross proceeds from a
public offering consummated on July 24, 2009.





As of June 30, 2009, cash and cash
equivalents were $17,795,447, an increase of $1,183,031 from $16,612,416 as of
June 30, 2008. This does not include restricted cash from our escrow account.
Pursuant to the Securities Purchase Agreement and Holdback Escrow Agreement by
and among the Company and the investors in the Private Placement, a total of
$250,000 cash from the Private Placement proceeds was escrowed for investor
relations-related expenditures. The funds are being released to the Company on a
monthly basis to pay invoices issued by the Company’s investor relations firm.
As of June 30, 2009, there was $83,579 left in the escrow
account.





We intend
to use all of the net proceeds we received in the Public Offering to expand our
production of agricultural products through the construction of the New
Greenhouse, as set forth above. We anticipate using existing cash reserves,
operating profits and bank loans to provide the difference between the total
required investment of the new green-house facilities and the net proceeds from
the Public Offering. The management believes that the Company has sufficient
cash, along with projected cash to be generated by the business of the Company
to support its operations for the next twelve months.




35




The
following table sets forth a summary of our cash flows for the periods
indicated:





Fiscal Year Ended June 30;2009
                        
                        
                        2008Net
      cash provided by / (used in) operating activities
                        
                        
                        7,184,086
                        
                        
                        
                        9,117,611Net
      cash used in investing activities
                        
                        
                        (5,097,721
                        )
                        
                        
                        (10,623,021
                        )Net
      cash provided by / (used in) financing activities
                        
                        
                        (926,957
                        )
                        
                        
                        17,258,183Effect
      of exchange rate change on cash and cash equivalents
                        
                        
                        23,623
                        
                        
                        
                        777,927Net
      increase in cash and cash equivalents
                        
                        
                        1,183,031
                        
                        
                        
                        16,530,700Cash
      and cash equivalents, beginning balance
                        
                        
                        16,612,416
                        
                        
                        
                        81,716Cash
      and cash equivalents, ending balance
                        
                        
                        17,795,447
                        
                        
                        
                        16,612,416





Operating
Activities





Net cash
provided by operating activities was $7,184,086 for the year ended June 30,
2009, a decrease of $1,933,525 from $9,117,611 of net cash provided by
operating activities for the year ended June 30, 2008. The decrease was mainly
due to an increase in accounts receivable as a result of the increased sales and
a decrease in tax payables as a result of payment of accrued income tax and VAT
obligation.





Investing
Activities





Net cash
used in investing activities in the year ended June 30, 2009 was
$5,097,721, mainly for  upgrades to our existing production line and
additions made to our new production line. The net cash used in investing
activities for the same period in 2008 was $10,623,021, most of which was used
in connection with the acquisition of Techteam shares in our going-public
transaction in 2007 and upgrading of our greenhouse facilities.





Financing
Activities





Net cash
used by financing activities in the year ended June 30, 2009 totaled $926,957.
The net cash provided from financing activities for the same period in 2008 was
$17,258,183, primarily due to the Private Placement.





As of
June 30, 2009, our loans payable were as follows:





Short term loans
                          payable:
                        
                        Amount
                          Outstanding
                        
                        Repayment Terms
                        
                        Expiration DateXi’an
      Commercial Bank Xincheng Branch
                        
                        $2,191,445
                        
                        Annual
      Interest Rate: 7.965%, repaid on a monthly basis
                        
                        Initial
      Due Date: 04/01/2009
                          Renewed
      Due Date:
                          04/01/2010Xi’an
      Beilin District Rural Credit Union Wenyibeilu Branch
                        
                        $555,166
                        
                        Annual
      Interest Rate: 11.794%, repaid on a monthly basis
                        
                        Initial
      Due Date:
                          09/16/2008
                          Renewed
      Due Date:
                          09/16/2009Agriculture
      Bank Yanglingshifangqu Branch
                        
                        $423,679
                        
                        Annual
      Interest Rate: 7.02%, repaid on a monthly basis
                        
                        Initial
      Due Date:
                          12/29/2008
                          Renewed
      Due Date:
                          06/29/2009*Total
                        
                        $3,170,290




36




*In July
2009, we paid in full the remaining outstanding balance of $423,679 with
Agriculture Bank Yangling Shifangqu Branch.





None of
our officers or shareholders has made commitments to the Company for financing
in the form of advances, loans or credit lines.





Accounts
Receivable





We had
$8,167,715 accounts receivable as of June 30, 2009, compared to 3,590,552 as of
June 30, 2008, an increase of 127.5% or $4,577,162. The increase was primarily
due to the increase in our sales.





Our
allowance for doubtful accounts was $119,178 as of June 30, 2009 compared with
$96,065 as of June 30, 2008, an increase of 24.1% or $23,113.





Inventories





We had an
inventory of $7,162,249 as of June 30, 2009 as compared to $3,988,979 as of June
30, 2008, an increase of 79.6% or $3,173,270. Inventory in Techteam decreased to
$252,537 as of June 30, 2009 from $414,793 in the prior period and inventory in
Jintai increased to $6,909,712 as of June 30, 2009 from $3,574,186 in the prior
period mainly due to the increased work in progress at Jintai’s
greenhouses.





Off-Balance Sheet
Arrangements





We do not
have any off-balance sheet arrangements.





Critical Accounting Policies
and Estimates





Management's
discussion and analysis of its financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with United States generally accepted accounting principles. Our
financial statements reflect the selection and application of accounting
policies which require management to make significant estimates and judgments.
See Note 2 to our consolidated financial statements, “Basis of Presentation and
Summary of Significant Accounting Policies.” We believe that the following
paragraphs reflect the more critical accounting policies that currently affect
our financial condition and results of operations:





Use of
estimates





The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the amount of revenues and
expenses during the reporting periods. Management makes these estimates using
the best information available at the time the estimates are made. However,
actual results could differ materially from those estimates.




37




Revenue
recognition





Sales
revenue is recognized at the date of shipment to customers when a formal
arrangement exists, the price is fixed or determinable, the delivery is
completed, no other significant obligations of the Company exist and
collectibility is reasonably assured. Payments received before all of the
relevant criteria for revenue recognition are satisfied are recorded as unearned
revenue.





The
Company's revenue consists of invoiced value of goods, net of a value-added tax
(VAT). No product return or sales discount allowance is made as products
delivered and accepted by customers are normally not returnable and sales
discounts are normally not granted after products are delivered.





Cash and cash
equivalents





For
statement of cash flows purposes, the Company considers all cash on hand and in
banks, certificates of deposit and other highly-liquid investments with
maturities of three months or less, when purchased, to be cash and cash
equivalents.





Accounts
receivable





The
Company's policy is to maintain reserves for potential credit losses on accounts
receivable. Any accounts receivable that is outstanding for more than three
months will be accounted as allowance for bad debts.





Segment
reporting





Statement
of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure About
Segments of an Enterprise and Related Information" requires use of the
"management approach" model for segment reporting. The management approach model
is based on the way a company's management organizes segments within the company
for making operating decisions and assessing performance. Reportable segments
are based on products and services, geography, legal structure, management
structure, or any other manner in which management disaggregates a
company.





During
the year ended June 30, 2009, the Company was organized into two main business
segments: produce fertilizer (Techteam) and agricultural products
(Jintai).





ITEM 7A.
            QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET
RISKS





This item
is not required for smaller reporting companies like us.





ITEM 8.
            FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA





Balance
sheets, as of June 30, 2009 and 2008, and statements of operations,
stockholders’ equity and cash flows for each of the two years in the period
ended June 30, 2009 and 2008, together with the related notes and the reports of
independent registered public accounting firms, are set forth on the “F” pages
of this report.




38




ITEM 9.
            CHANGES IN AND DISAGREEMENTS WITH
      ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
  DISCLOSURE





None.





ITEM 9A (T).
            CONTROLS AND
      PROCEDURES





Disclosure
Controls and Procedures





The
Company's Chief Executive Officer and Chief Financial Officer have reviewed and
evaluated the effectiveness of our disclosure controls and procedures, which
included inquiries made to certain other of the Company's employees. Based on
their evaluation, the Company's Chief Executive Officer and Chief Financial
Officer have each concluded that, as of June 30, 2009, the Company's disclosure
controls and procedures were effective and sufficient to ensure that we record,
process, summarize and report information required to be disclosed by the
Company in its periodic reports filed under the Securities and Exchange
Commission's rules and forms.





Management
Report on Internal Control Over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting to provide reasonable assurance regarding the
reliability of our financial reporting and the preparation of financial
statement for external purposes in accordance with U.S. generally accepted
accounting principles. Internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the Company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with U.S. generally accepted accounting principles, and
that receipts and expenditures of the Company are being made only in accordance
with authorizations of management and directors of the Company; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the Company’s assets that
could have a material effect on the financial statements.





Any
system of internal control, no matter how well designed, has inherent
limitations, including the possibility that a control can be circumvented or
overridden and misstatements due to error or fraud may occur and not be detected
in a timely manner. Also, because of changes in conditions, internal control
effectiveness may vary over time. Accordingly, even an effective system of
internal control will provide only reasonable assurance with respect to
financial statement preparation. In addition, the design of any system of
controls is based in part on certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions. Over time, controls may
become inadequate because of changes in conditions or deterioration in the
degree of compliance with policies or procedures. Therefore, any current
evaluation of controls can not and should not be projected to future
periods.





Management
assessed our internal control over financial reporting as of June 30, 2009, the
end of our fiscal year of 2009. In making this assessment, management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in "Internal Control-Integrated Framework." The COSO framework
summarizes each of the components of a company’s internal control system,
including (i) the control environment, (ii) risk assessment, (iii) control
activities, (iv) information and communication, and (v) monitoring.





Based on
management's assessment using the COSO criteria, management has concluded that
the Company's internal control over financial reporting was effective as of June
30, 2009 to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external reporting
purposes in accordance with U.S. generally accepted accounting
principles.




39




This
Report does not include an attestation report of 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 Securities and Exchange Commission that
permit the Company to provide only management’s report in
this  Report.





Changes
in Internal Control





There
were no changes in the Company’s internal control over financial reporting that
occurred during our fourth fiscal quarter of 2009 that has materially affected
or is reasonably likely to materially affect our internal control over financial
reporting.





ITEM
9B.      OTHER INFORMATION





None.





PART
III





ITEM
10.       DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE





The
information required by this Item is incorporated herein by reference to the
section entitled “Directors and Executive Officers and Corporate Governance” of
our 2009 Proxy Statement.





ITEM
11   EXECUTIVE COMPENSATION





The
information required by this Item is incorporated herein by reference to the
section entitled “Executive Compensation” of our 2009 Proxy
Statement.





ITEM 12.
            SECURITY OWNERSHIP OF CERTAIN
      BENEFICIAL OWNERS AND MANAGEMENT AND RELATED  STOCKHOLDERS
      MATTERS





The
information required by this Item is incorporated herein by reference to the
section entitled “Security Ownership of Certain Beneficial Owners and Management
and Related Matters” of our 2009 Proxy Statement.





ITEM
13.       CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE





The
information required by this Item is incorporated herein by reference to the
section entitled “Certain Relationship of Certain Beneficial Owners and
Management and Related Matters” of our 2009 Proxy Statement.





ITEM
14.       PRINCIPAL ACCOUNTANT FEES AND
SERVICES





The
information required by this Item is incorporated herein by reference to the
section entitled "Principal Accounting Fees and Services" of our 2009 Proxy
Statement.





PART IV





Item
15.         Exhibits and Financial Statement
Schedules





(a)The following documents
are filed as part of this report:




40




Financial
Statements





The
following financial statements of China Green Agriculture, Inc. and Reports of
Independent Registered Public Accounting Firms are presented in the “F” pages of
this report:





Reports
      of Independent Registered Public Accounting Firms
                F-1Consolidated
      Balance Sheets - as of June 30, 2009 and 2008
                F-2Consolidated
      Statements of Income and Other Comprehensive Income - for the
      Years ended June 30, 2009 and 2008
                F-3Consolidated
      Statements of Shareholders’ Equity - for the Years ended June 30, 2009 and
      2008
                F-4Consolidated
      Statements of Cash Flows - for the Years ended June 30, 2009 and
      2008
                F-5Notes
      to Consolidated Financial Statements
                F-6
      - F-22





(b)Exhibits





See the
Exhibit Index following the signature page of this report, which Index is
incorporated herein by reference.


41


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
      Green Agriculture, Inc.Date: September
      17, 2009
                      By:
                      /s/
      Tao LiTao
      Li, President and CEO(principal
      executive officer)/s/
      Ying YangYing
      Yang, Chief Financial Officer(principal
      financial officer and principal
                        accounting
      officer)





Pursuant
to the requirements of Section 13 or 15(d) 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.





September
      17, 2009
                                  
                                  /s/
      Tao LiTao
      Li, Chairman of the Board of DirectorsSeptember
      17, 2009
                                  
                                  /s/
      Yu HaoYu
      Hao, DirectorSeptember
      17, 2009
                                  
                                  /s/
      Lianfu LiuLianfu
      Liu, DirectorSeptember
      17, 2009
                                  
                                  /s/
      Yizhao ZhangYizhao
      Zhang, DirectorSeptember
      17, 2009
                                  
                                  /s/
      Barry RaeburnBarry
      Raeburn,
Director




S-1


China
Green Agriculture, Inc.


Exhibit
Index to Annual Report on Form 10-K


For
the Year Ended June 30, 2009





1.1
              Underwriting
      Agreement dated July 20, 2009 between the Company and Roth Capital
      Partners, LLC (incorporated herein by reference to the Company’s Current
      Report on Form 8-K filed with the SEC on July 21,
2009).3.1
              Articles
      of Incorporation (incorporated herein by reference to the Company’s
      Quarterly Report on Form 10-QSB, for the quarter ended September 30, 2007,
      filed with the SEC on November 9, 2007, Exhibit 3.1).3.2
              Certificate
      of Change filed with the Secretary of State of the State of Nevada on
      December 18, 2007 (incorporated herein by reference to the Company’s
      Current Report on Form 8-K filed with the SEC on January 2, 2008, Exhibit
      4.2).3.3
              Certificate
      of Correction (incorporated herein by reference to the Company’s
      Registration Statement on Form S-1 filed with the SEC on February 8, 2008,
      Exhibit 4.1).3.4
              Articles
      of Merger (incorporated herein by reference to the Company’s Current
      Report on Form 8-K, filed February 5, 2008, Exhibit
  3.1).3.5
              Bylaws
      (incorporated herein by reference to the Company’s Quarterly Report on
      Form 10-QSB, for the quarter ended September 30, 2007, filed with the SEC
      on November 9, 2007, Exhibit 3.2).4.1
              Specimen
      Common Stock Certificate (incorporated herein by reference to the
      Company’s Registration Statement on Form S-3 filed with the SEC on June 8,
      2009, Exhibit 4.1).4.2
              Waiver
      and Consent dated June 30, 2009 by and among the Company and shareholders
      holding a majority of the shares issued in the 2007 private
      placement.10.1
              Employment
      Agreement, dated September 10, 2008, by and between the Company and Ms.
      Ying Yang  (Incorporated herein by reference to our Current
      Report on Form 8-K filed with the SEC on September 11,
    2008).10.2
              Option
      Agreement, dated September 10, 2008, by and between the Company and Ms.
      Ying Yang (Incorporated herein by reference to the Current Report on Form
      8-K filed with the SEC on September 11, 2008).10.3
              Lock-up
      Agreement dated July 20, 2009 by and between Roth Capital Partners, LLC
      and Mr. Tao Li.14.1
              Code
      of Ethics (incorporated herein by reference to the Annual Report on Form
      10-K filed with the SEC on September 26, 2008).21
              Description
      of Subsidiaries of the Company (Incorporated by reference to our Current
      Report on Form 8-K filed with the Commission on January 2,
      2008).23
              Consent
      of Kabani & Company, Inc., Independent Registered Public Accounting
      Firm.





E-1




31.1
              Certification
      of Tao Li pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.31.2
              Certification
      of Ying Yang pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.32.1
              Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of
2002.


E-2





REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and Stockholders


China
Green Agriculture Inc. and its subsidiaries





We have
audited the accompanying balance sheets of China Green Agriculture Inc. and its
subsidiaries as of June 30, 2009 and 2008, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the two
years in the period ended June 30, 2009. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.





We
conducted our audits of these statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. 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. We believe that our
audits provide a reasonable basis for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of China Green Agriculture Inc. and
its subsidiaries as of June 30, 2009 and 2008, and the results of its operations
and its cash flows for each of the two years ended June 30, 2009, in conformity
with accounting principles generally accepted in the United States of
America.





KABANI
& COMPANY, INC.


CERTIFIED
PUBLIC ACCOUNTANTS





Los
Angeles, California


September
8, 2009


F-1




CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 AS
OF JUNE 30, 2009 AND 2008
 
 June 30, 2009
                  
                  
                  June 30, 2008ASSETSCurrent
      AssetsCash
      and cash equivalents
                  
                  $
                  17,795,447
                  
                  
                  $
                  16,612,416Restricted
      cash
                  
                  
                  83,579
                  
                  
                  
                  193,392Accounts
      receivable, net
                  
                  
                  8,167,715
                  
                  
                  
                  3,590,552Inventories
                  
                  
                  7,162,249
                  
                  
                  
                  3,988,979Other
      assets
                  
                  
                  129,213
                  
                  
                  
                  128,091Deferred
      offering cost
                  
                  
                  160,500
                  
                  
                  
                  -Advances
      to suppliers
                  
                  
                  95,255
                  
                  
                  
                  512,845Total
      Current Assets
                  
                  
                  33,593,958
                  
                  
                  
                  25,026,275Plant,
      Property and Equipment, Net
                  
                  
                  17,341,654
                  
                  
                  
                  18,199,456Construction
      In Progress
                  
                  
                  9,609,649
                  
                  
                  
                  5,115,492Intangible
      Assets, Net
                  
                  
                  1,073,165
                  
                  
                  
                  1,180,159Total
      Assets
                  
                  $
                  61,618,426
                  
                  
                  $
                  49,521,382LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable
                  
                  $
                  926,883
                  
                  
                  $
                  232,417Advances
      from customers
                  
                  
                  24,000
                  
                  
                  
                  88,950Other
      payables and accrued expenses
                  
                  
                  1,091,168
                  
                  
                  
                  455,228Registration
      rights liability
                  
                  
                  -
                  
                  
                  
                  506,142Advances
      from other unrelated companies
                  
                  
                  326,970
                  
                  
                  
                  344,628Amount
      due to related parties
                  
                  
                  31,160
                  
                  
                  
                  31,121Taxes
      payable
                  
                  
                  2,887,828
                  
                  
                  
                  5,878,275Short
      term loans
                  
                  
                  3,170,290
                  
                  
                  
                  4,201,925Total
      Current Liabilities
                  
                  
                  8,458,299
                  
                  
                  
                  11,738,686Common
      Stock, $.001 par value, 6,313,617 shares subject to
    redemption
                  
                  
                  20,519,255
                  
                  
                  
                  20,519,255Commitment
                  
                  
                  -
                  
                  
                  
                  -Stockholders'
      EquityPreferred
      Stock, $.001 par value,  20,000,000 shares authorized, None
      issued and outstanding
                  
                  
                  -
                  
                  
                  
                  -Common
      stock, $.001 par value,   780,000,000 shares
      authorized,  12,281,569 and 12,068,086 shares issued and
      outstanding as of June 30, 2009 and 2008
                  
                  
                  12,282
                  
                  
                  
                  12,068Additional
      paid-in capital
                  
                  
                  2,060,162
                  
                  
                  
                  1,200,077Statuary
      reserve
                  
                  
                  3,468,530
                  
                  
                  
                  1,882,797Retained
      earnings
                  
                  
                  24,642,768
                  
                  
                  
                  11,764,079Accumulated
      other comprehensive income
                  
                  
                  2,457,130
                  
                  
                  
                  2,404,419Total
      Stockholders' Equity
                  
                  
                  32,640,872
                  
                  
                  
                  17,263,441Total
      Liabilities and Stockholders' Equity
                  
                  $
                  61,618,426
                  
                  
                  $
                  49,521,382
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-2
 
 CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF  INCOME AND COMPREHENSIVE INCOME
 FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008
 
 Year
      Ended June 302009
                  
                  
                  2008Net
      sales
                  
                  $
                  35,207,997
                  
                  
                  $
                  22,604,719Cost
      of goods sold
                  
                  
                  14,712,066
                  
                  
                  
                  9,792,856Gross
      profit
                  
                  
                  20,495,931
                  
                  
                  
                  12,811,863Operating
      expensesSelling
      expenses
                  
                  
                  1,412,101
                  
                  
                  
                  927,285General
      and administrative expenses
                  
                  
                  1,993,817
                  
                  
                  
                  2,567,661Total
      operating expenses
                  
                  
                  3,405,918
                  
                  
                  
                  3,494,945Income
      from operations
                  
                  
                  17,090,013
                  
                  
                  
                  9,316,917Other
      income (expense)Other
      income(expense)
                  
                  
                  5,202
                  
                  
                  
                  43,694Interest
      income
                  
                  
                  334,948
                  
                  
                  
                  50,106Interest
      expense
                  
                  
                  (632,446
                  )
                  
                  
                  (933,053
                  )Bank
      charges
                  
                  
                  (1,747
                  )
                  
                  
                  (6,663
                  )Total
      other income (expense)
                  
                  
                  (294,043
                  )
                  
                  
                  (845,916
                  )Income
      before income taxes
                  
                  
                  16,795,970
                  
                  
                  
                  8,471,001Provision
      for income taxes
                  
                  
                  2,331,548
                  
                  
                  
                  692,474Net
      income
                  
                  
                  14,464,422
                  
                  
                  
                  7,778,527Other
      comprehensive itemsForeign
      currency translation gain
                  
                  
                  52,711
                  
                  
                  
                  2,160,701Comprehensive
      income
                  
                  $
                  14,517,133
                  
                  
                  $
                  9,939,228Basic
      weighted average shares outstanding
                  
                  
                  18,478,474
                  
                  
                  
                  14,688,250Basic
      net earnings per share
                  
                  $
                  0.78
                  
                  
                  $
                  0.53Diluted
      weighted average shares outstanding
                  
                  
                  18,532,591
                  
                  
                  
                  14,695,626Diluted
      net earnings per share
                  
                  $
                  0.78
                  
                  
                  $
                  0.53
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-3
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 STATEMENTS
OF STOCKHOLDERS' EQUITY
 FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008
 
 Additional
                      
                      
                      
                      
                      
                      
                      
                      
                      Accumulated
      Other
                      
                      
                      TotalNumber
                      
                      
                      Common
                      
                      
                      Paid
      In
                      
                      
                      Statutory
                      
                      
                      Retained
                      
                      
                      Comprehensive
                      
                      
                      Stockholders'Of
      Shares
                      
                      
                      Stock
                      
                      
                      Capital
                      
                      
                      Reserve
                      
                      
                      Earnings
                      
                      
                      Income
      (loss)
                      
                      
                      EquityBALANCE,
      JUNE 30, 2007
                      
                      
                      10,770,669
                      
                      
                      
                      10,771
                      
                      
                      
                      2,642,517
                      
                      
                      
                      880,252
                      
                      
                      
                      4,988,097
                      
                      
                      
                      243,718
                      
                      
                      
                      8,765,355Recapitalization
      for reverse merger
                      
                      
                      251,784
                      
                      
                      
                      252
                      
                      
                      
                      (12,565
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (12,313
                      )Stock
      issued in relation to fund raising
                      
                      
                      977,948
                      
                      
                      
                      978
                      
                      
                      
                      (978
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Shares
      issuance cost
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (1,916,532
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (1,916,532
                      )Contribution
      by related parties
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      10,216
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      10,216Issuance
      of stock options for compensation
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      477,487
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      477,487Exercised
      of stock options-cashless
                      
                      
                      67,685
                      
                      
                      
                      68
                      
                      
                      
                      (68
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Net
      income for the year ended June. 30, 2008
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      7,778,527
                      
                      
                      
                      -
                      
                      
                      
                      7,778,527Transfer
      to statutory reserve
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,002,545
                      
                      
                      
                      (1,002,545
                      )
                      
                      
                      -
                      
                      
                      
                      -Accumulative
      other comprehensive loss
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,160,701
                      
                      
                      
                      2,160,701BALANCE,
      JUNE 30, 2008
                      
                      
                      12,068,086
                      
                      
                      
                      12,068
                      
                      
                      
                      1,200,077
                      
                      
                      
                      1,882,797
                      
                      
                      
                      11,764,079
                      
                      
                      
                      2,404,419
                      
                      
                      
                      17,263,441Net
      income for the year ended June 30, 2009
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      14,464,422
                      
                      
                      
                      -
                      
                      
                      
                      14,464,422Stock
      options compensation
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      155,804
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      155,804Issuance
      of stock for liquidated damages
                      
                      
                      213,483
                      
                      
                      
                      213
                      
                      
                      
                      704,281
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      704,494Transfer
      to statutory reserve
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,585,733
                      
                      
                      
                      (1,585,733
                      )
                      
                      
                      -
                      
                      
                      
                      -Accumulative
      other comprehensive loss
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      52,711
                      
                      
                      
                      52,711BALANCE,
      JUNE 30, 2009
                      
                      
                      12,281,569
                      
                      
                      $
                      12,282
                      
                      
                      $
                      2,060,162
                      
                      
                      $
                      3,468,530
                      
                      
                      $
                      24,642,768
                      
                      
                      $
                      2,457,130
                      
                      
                      $
                      32,640,872
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-4
  CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 STATEMENTS
OF CASH FLOWS
 FOR
THE YEARS ENDED JUNE 30, 2009 AND 2008
 
 2009
                    
                    
                    2008Cash
      flows from operating activitiesNet
      income
                    
                    $
                    14,464,422
                    
                    
                    
                    7,778,527Adjustments
      to reconcile net income to net cashprovided
      by operating activitiesShare
      capital contribution - rental and interest paid by
      shareholders
                    
                    
                    -
                    
                    
                    
                    10,216Issuance
      of stock options for compensation
                    
                    
                    155,804
                    
                    
                    
                    477,487Depreciation
                    
                    
                    1,494,489
                    
                    
                    
                    988,240Amortization
                    
                    
                    108,525
                    
                    
                    
                    105,266Decrease
      / (Increase) in current assetsAccounts
      receivable
                    
                    
                    (4,570,071
                    )
                    
                    
                    (1,412,479
                    )Other
      receivables
                    
                    
                    (13,234
                    )
                    
                    
                    89,759Inventories
                    
                    
                    (3,166,338
                    )
                    
                    
                    (1,905,399
                    )Advances
      to suppliers
                    
                    
                    418,072
                    
                    
                    
                    (265,955
                    )Other
      assets
                    
                    
                    10,875
                    
                    
                    
                    (14,477
                    )(Decrease)
      / Increase in current liabilitiesAccounts
      payable
                    
                    
                    693,896
                    
                    
                    
                    (73,799
                    )Unearned
      revenue
                    
                    
                    (65,037
                    )
                    
                    
                    (1,309
                    )Tax
      payables
                    
                    
                    (2,996,862
                    )
                    
                    
                    3,161,272Other
      payables and accrued expenses
                    
                    
                    649,544
                    
                    
                    
                    180,261Net
      cash provided by operating activities
                    
                    
                    7,184,086
                    
                    
                    
                    9,117,611Cash
      flows from investing activitiesAcquisation
      of plant, property, and equipment
                    
                    
                    (612,662
                    )
                    
                    
                    (5,840,159
                    )Additions
      to construction in progress
                    
                    
                    (4,485,059
                    )
                    
                    
                    (4,782,862
                    )Net
      cash used in investing activities
                    
                    
                    (5,097,721
                    )
                    
                    
                    (10,623,021
                    )Cash
      flows from financing activitiesRepayment
      of loan
                    
                    
                    (1,036,770
                    )
                    
                    
                    (481,914
                    )Shares
      issuane cost
                    
                    
                    -
                    
                    
                    
                    (1,916,532
                    )Proceeds
      issuance of shares subject to redemption
                    
                    
                    -
                    
                    
                    
                    20,519,255Restricted
      cash
                    
                    
                    109,813
                    
                    
                    
                    (193,392
                    )(Payments)/proceeds
      to/from related parties
                    
                    
                    -
                    
                    
                    
                    (669,233
                    )Net
      cash provided by (used in) financing activities
                    
                    
                    (926,957
                    )
                    
                    
                    17,258,183Effect
      of exchange rate change on cash and cash equivalents
                    
                    
                    23,623
                    
                    
                    
                    777,927Net
      increase in cash and cash equivalents
                    
                    
                    1,183,031
                    
                    
                    
                    16,530,700Cash
      and cash equivalents, beginning balance
                    
                    
                    16,612,416
                    
                    
                    
                    81,716Cash
      and cash equivalents, ending balance
                    
                    $
                    17,795,447
                    
                    
                    $
                    16,612,416Supplement
      disclosure of cash flow informationInterest
      expense paid
                    
                    $
                    (433,821
                    )
                    
                    $
                    (222,260
                    )Income
      taxes paid
                    
                    $
                    (2,112,985
                    )
                    
                    $
                    -Non
      Cash Transaction:Stock
      issued for settlement of registration rights liability
                    
                    $
                    704,494
                    
                    
                    $
                    -
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-5




NOTE
1 – ORGANIZATION AND DESCRIPTION OF BUSINESS





China
Green Agriculture, Inc. (the “Company”, “we”, “us”) was incorporated in 1987. On
December 26, 2007, the Company acquired all of the issued and outstanding
capital stock (the “Green Agriculture Shares”) of Green Agriculture Holding
Corporation, a New Jersey corporation (“Green Agriculture” or “Green New
Jersey”), through a share exchange (the “Share Exchange”).





Green
Agriculture was incorporated on January 27, 2007 under the laws of the State of
New Jersey. On August 24, 2007, Green Agriculture acquired 100% outstanding
shares of Shaanxi TechTeam Jinong Humic Acid Product Co., Ltd. (“Techteam
Jinong”, “Techteam” or “Jinong”) which owns 100% equity of Xi’an Jintai
Agriculture Technology Development Company (“Xi’an Jintai” or “Jintai”).
Techteam is engaged in the research and development, manufacture, distribution
and sale of humic acid based liquid compound fertilizer. It was incorporated in
the People’s Republic of China on June 19, 2000 under the name of Yangling
Techteam Jinong Humic Acid Product Co., Ltd.. On February 28, 2006, Yangling
Techteam Jinong Humic Acid Product Co., Ltd changed its name to Shaanxi Techteam
Jinong Humic Acid Product Co., Ltd.





On
January 19, 2007, Techteam Jinong incorporated Xi’an Jintai which provides
testing and experimental data collection base for the function and feature of
the new fertilizer products produced by Techteam Jinong by imitating the various
growing conditions and stages or cycles for a variety of plants, such as
flowers, vegetables and seedlings which the fertilizers apply on. Xi’an Jintai
also sells such plants themselves to its customers and generates
sales.





As a
result of the Share Exchange on December 26, 2007, the Company’s corporate
structure is as follows:








The
Company, through its subsidiaries has two business segments: Techteam Jinong’s
main business is to produce and sell fertilizers, and Xi’an Jintai’s main
business is to conduct research and development on new fertilizer products and
sell high quality agricultural products.


F-6


CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE
2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES





Principles of
consolidation





The
accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries—Green Agriculture, Techteam Jinong and
Xi’an Jintai. All significant inter-company accounts and transactions have been
eliminated in consolidation.





Use of
estimates





The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the amount of revenues and
expenses during the reporting periods. Management makes these estimates using
the best information available at the time the estimates are made. However,
actual results could differ materially from those estimates.





Cash and cash
equivalents





For
statement of cash flows purposes, the Company considers all cash on hand and in
banks, certificates of deposit and other highly-liquid investments with
maturities of three months or less, when purchased, to be cash and cash
equivalents. Cash overdraft as of balance sheet date will be reflected as
liabilities in the balance sheet. As of June 30, 2009 and 2008, cash and cash
equivalents amounted to $17,795,447 and $16,612,416 respectively.





Accounts
receivable





The
Company's policy is to maintain reserves for potential credit losses on accounts
receivable. Management reviews the composition of accounts receivable and
analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves. As of June 30, 2009 and 2008, the
Company had accounts receivable of $8,167,715 and $3,590,552, net of allowance
for doubtful accounts of $119,178 and $96,065 respectively.





Advances to
suppliers





The
Company makes advances to certain vendors for purchase of its materials. As of
June 30, 2009 and 2008, the advances to suppliers amounted to $95,255 and
$512,845 respectively.





Inventories





Inventory
is valued at the lower of cost (determined on a weighted average basis) or net
realizable value. Management compares the cost of inventory with the net
realizable value and an allowance is made for writing down the inventory to its
net realizable value, if lower than the cost.





Property, plant and
equipment





Property,
plant and equipment are recorded at cost. Gains or losses on disposals are
reflected as gain or loss in the year of disposal. The cost of improvements that
extend the life of property, plant, and equipment are capitalized. These
capitalized costs may include structural improvements, equipment, and fixtures.
All ordinary repair and maintenance costs are expensed as
incurred.


F-7


CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





Depreciation
for financial reporting purposes is provided using the straight-line method over
the estimated useful lives of the assets:





Estimated Useful LifeBuilding
                10-40
      yearsLeasehold
      improvements
                3-5
      yearsMachinery
      and equipment
                5-15
      yearsVehicles
                3-5
      years





Leasehold
improvements are amortized over the lease term or the estimated useful life,
whichever is shorter.





Impairment





The
Company applies the provisions of Statement of Financial Accounting Standard No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS No.
144"), issued by the Financial Accounting Standards Board ("FASB"). FAS No. 144
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable through the estimated undiscounted cash flows expected to result
from the use and eventual disposition of the assets. Whenever any such
impairment exists, an impairment loss will be recognized for the amount by which
the carrying value exceeds the fair value.





The
Company tests long-lived assets, including property, plant and equipment and
intangible assets subject to periodic amortization, for recoverability at least
annually or more frequently upon the occurrence of an event or when
circumstances indicate that the net carrying amount is greater than its fair
value. Assets are grouped and evaluated at the lowest level for their
identifiable cash flows that are largely independent of the cash flows of other
groups of assets. The Company considers historical performance and future
estimated results in its evaluation of potential impairment and then compares
the carrying amount of the asset to the future estimated cash flows expected to
result from the use of the asset. If the carrying amount of the asset exceeds
estimated expected undiscounted future cash flows, the Company measures the
amount of impairment by comparing the carrying amount of the asset to its fair
value. The estimation of fair value is generally measured by discounting
expected future cash flows as the rate the Company utilizes to evaluate
potential investments. The Company estimates fair value based on the information
available in making whatever estimates, judgments and projections are considered
necessary. There was no impairment of long-lived assets for the fiscal year
ended June 30, 2009.





Revenue
recognition





The
Company's revenue recognition policies are in compliance with Staff Accounting
Bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to
customers when a formal arrangement exists, the price is fixed or determinable,
the delivery is completed, no other significant obligations of the Company exist
and collectibility is reasonably assured. Payments received before all of the
relevant criteria for revenue recognition are satisfied are recorded as advances
from customers.  As of June 30, 2009 and 2008, the Company had
advances from customers of $24,000 and $88,950, respectively.





The
Company's revenue consists of invoiced value of goods, net of a value-added tax
(VAT). No product return or sales discount allowance is made as products
delivered and accepted by customers are normally not returnable and sales
discounts are normally not granted after products are delivered.





Advertising
costs





The
Company expenses the cost of advertising as incurred or, as appropriate, the
first time the advertising takes place. Advertising costs for the fiscal year
ended June 30, 2009 and 2008 were $62,717 and $260,764,
respectively.


F-8


CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





Income
taxes





The
Company accounts for income taxes using an asset and liability approach which
allows for the recognition and measurement of deferred tax assets based upon the
likelihood of realization of tax benefits in future years. Under the asset and
liability approach, deferred taxes are provided for the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. A
valuation allowance is provided for deferred tax assets if it is more likely
than not these items will either expire before the Company is able to realize
their benefits, or that future deductibility is uncertain.





The
Company records a valuation allowance for deferred tax assets, if any, based on
its estimates of its future taxable income as well as its tax planning
strategies when it is more likely than not that a portion or all of its deferred
tax assets will not be realized. If the Company is able to utilize more of its
deferred tax assets than the net amount previously recorded when unanticipated
events occur, an adjustment to deferred tax assets would increase the Company
net income when those events occur. The Company does not have any significant
deferred tax assets or liabilities in the PRC tax jurisdiction.





Foreign currency
translation





The
reporting currency of the Company is the US dollar. The functional currency of
China Green Agriculture and Green Holding is the US dollar. The functional
currency of Techteam Jinong and its subsidiary Xi’an Jintai is the Chinese Yuan
or Renminbi (“RMB”). For the subsidiaries whose functional currencies are other
than the US dollar, all asset and liability accounts were translated at the
exchange rate on the balance sheet date; stockholder's equity is translated at
the historical rates and items in the cash flow statements are translated at the
average rate in each applicable period. Translation adjustments resulting from
this process are included in accumulated other comprehensive income in the
statement of shareholders’ equity. The resulting translation gains and losses
that arise from exchange rate fluctuations on transactions denominated in a
currency other than the functional currency are included in the results of
operations as incurred.





Accumulated
other comprehensive income amounted to $2,457,130 and $2,404,419 as of June 30,
2009 and 2008, respectively.





Fair values of financial
instruments





Statement
of Financial Accounting Standard No. 107, "Disclosures about Fair Value of
Financial Instruments", requires that the Company disclose estimated fair values
of financial instruments.


The
Company's financial instruments primarily consist of cash and cash equivalents,
accounts receivable, other receivables, advances to suppliers, accounts payable,
other payable, tax payable, and related party advances and
borrowings.





As of the
balance sheet dates, the estimated fair values of the financial instruments were
not materially different from their carrying values as presented on the balance
sheet. This is attributed to the short maturities of the instruments and that
interest rates on the borrowings approximate those that would have been
available for loans of similar remaining maturity and risk profile at respective
balance sheet dates.





Segment
reporting





Statement
of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure About
Segments of an Enterprise and Related Information" requires use of the
"management approach" model for segment reporting. The management approach model
is based on the way a company's management organizes segments within the company
for making operating decisions and assessing performance. Reportable segments
are based on products and services, geography, legal structure, management
structure, or any other manner in which management disaggregates a
company.


F-9


CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




During
the fiscal year ended June 30, 2009, the Company was organized into two main
business segments: produce fertilizer (Jinong) and agricultural products
(Jintai). The following table presents a summary of operating information and
year-end balance sheet information for the fiscal years ended June 30, 2009 and
2008.




For the year ended June 30,2009
                          
                          
                          2008Revenues
      from unaffiliated customers:Fertilizer
                          
                          $
                          28,889,131
                          
                          
                          $
                          18,658,426Agricultural
      products
                          
                          
                          6,318,866
                          
                          
                          
                          3,946,293Consolidated
                          
                          $
                          35,207,997
                          
                          
                          $
                          22,604,719Operating
      income:Fertilizer
                          
                          $
                          15,846,248
                          
                          
                          $
                          9,126,583Agricultural
      products
                          
                          
                          2,445,913
                          
                          
                          
                          1,974,488Reconciling
      item (1)
                          
                          
                          -
                          
                          
                          
                          (588,888
                          )Reconciling
      item (2)
                          
                          
                          (1,060,976
                          )
                          
                          
                          (1,195,266
                          )Reconciling
      item (2)—stock compensation
                          
                          
                          (155,804
                          )
                          
                          
                          -Consolidated
                          
                          $
                          17,075,381
                          
                          
                          $
                          9,316,917Net
      income:Fertilizer
                          
                          $
                          13,411,090
                          
                          
                          $
                          8,050,577Agricultural
      products
                          
                          
                          2,446,238
                          
                          
                          
                          1,974,869Reconciling
      item (1)
                          
                          
                          7,867
                          
                          
                          
                          (574,499
                          )Reconciling
      item (2)
                          
                          
                          (1,400,733
                          )
                          
                          
                          (1,672,420
                          )Consolidated
                          
                          $
                          14,464,422
                          
                          
                          $
                          7,778,527Depreciation
      and Amortization:Fertilizer
                          
                          $
                          1,512,212
                          
                          
                          $
                          1,093,505Agricultural
      products
                          
                          
                          90,803
                          
                          
                          
                          -Consolidated
                          
                          $
                          1,603,015
                          
                          
                          $
                          1,093,505Interest
      expense:Fertilizer
                          
                          $
                          433,822
                          
                          
                          $
                          426,478Agricultural
      products
                          
                          
                          -
                          
                          
                          
                          -Reconciling
      item (1)
                          
                          
                          
                          
                          
                          
                          433Reconciling
      item (2)
                          
                          
                          198,624
                          
                          
                          
                          506,142Consolidated
                          
                          $
                          632,446
                          
                          
                          $
                          933,053Capital
      Expenditure:Fertilizer
                          
                          $
                          5,097,721
                          
                          
                          $
                          10,623,021Agricultural
      products
                          
                          
                          -
                          
                          
                          
                          -Consolidated
                          
                          $
                          5,097,721
                          
                          
                          $
                          10,623,021
  F-10
 CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 Identifiable
      assets:
                          
                          As
      of 06/30/09
                          
                          
                          As
      of 06/30/08Fertilizer
                          
                          $
                          53,096,423
                          
                          
                          $
                          43,930,733Agricultural
      products
                          
                          
                          8,250,834
                          
                          
                          
                          4,601,269Reconciling
      item (1)
                          
                          
                          30,995
                          
                          
                          
                          795,988Reconciling
      item (2)
                          
                          
                          240,174
                          
                          
                          
                          193,392Consolidated
                          
                          $
                          61,618,426
                          
                          
                          $
                          49,521,382




(1)
Reconciling amounts refer to the unallocated assets or expenses of Green
Agriculture.




(2)
Reconciling amounts refer to the unallocated assets or expenses of the parent
Company.





Statement of cash
flows





In
accordance with Statement of Financial Accounting Standards No. 95, "Statement
of Cash Flows," cash flows from the Company's operations is calculated based
upon the local currencies. As a result, amounts related to assets and
liabilities reported on the statement of cash flows may not necessarily agree
with changes in the corresponding balances on the balance sheet.





Earnings Per
Share





Statement
of Financial Accounting Standards No. 128, “Earnings per share” requires
the presentation of basic earnings per share and diluted earnings per share.
Basic and diluted earnings per share computations are presented by the Company
conform to the standard and are based on the weighted average number of shares
of Common Stock outstanding during the year.





Basic
earnings per share is computed by dividing net income or loss by the weighted
average number of shares outstanding for the year. “Diluted” earnings per share
is computed by dividing net income or loss by the total of the weighted average
number of shares outstanding, and the dilutive effect of outstanding stock
options (applying the treasury stock method).


F-11


CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





The
Company had 69,000 of granted stock options that were exercisable as of June 30,
2009 and 69,000 of granted stock options exercisable at June 30,
2008.





The
following is a reconciliation of the numerators and denominators of the basic
and diluted earnings per share computations:





The
following is a reconciliation of the numerators and denominators of the basic
and diluted earnings per share computations:




Year  ended June 30, 2009
                    
                    Net Income
                    
                    
                    Shares
                    
                    
                    Per ShareBasic
      earnings per shares:Net
      income available to common stockholders
                    
                    $
                    14,464,422
                    
                    
                    
                    18,478,474
                    
                    
                    $
                    0.78Effect
      of dilutive securities:Stock
      options
                    
                    
                    
                    
                    
                    
                    54,117Diluted
      earnings per share:
                    
                    $
                    14,464,422
                    
                    
                    
                    18,532,591
                    
                    
                    $
                    0.78





Year  ended June 30, 2008
                    
                    Net Income
                    
                    
                    Shares
                    
                    
                    Per ShareBasic
      earnings per shares:Net
      income available to common stockholders
                    
                    $
                    7,778,527
                    
                    
                    
                    14,688,250
                    
                    
                    $
                    0.53Effect
      of dilutive securities:Stock
      options
                    
                    
                    
                    
                    
                    
                    7,376Diluted
      earnings per share:
                    
                    $
                    7,778,527
                    
                    
                    
                    14,695,626
                    
                    
                    $
                    0.53





Recent accounting
pronouncements





In
December 2007, FAS 141(R), “Business Combinations," was issued. FAS 141R
replaces FAS 141.FAS
141R retains the fundamental requirements in FAS 141 that the acquisition method
of accounting, which FAS 141 called the purchase method, be used for all
business combinations and for an acquirer to be identified for each business
combination. FAS 141R requires an acquirer to recognize the assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree at the
acquisition date, measured at their fair values as of that date, with limited
exceptions. This replaces FAS 141’s cost-allocation process, which required the
cost of an acquisition to be allocated to the individual assets acquired and
liabilities assumed based on their estimated fair values. FAS 141R also requires
the acquirer in a business combination achieved in stages, sometimes referred to
as a step acquisition, to recognize the identifiable assets and liabilities, as
well as the noncontrolling interest in the acquiree, at the full amounts of
their fair values, or other amounts determined in accordance with FAS 141R. FAS
141R applies prospectively to business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period beginning
on or after December 15, 2008. An entity may not apply it before that date. The
Company has not adopted FAS 141R for the year ended June 30, 2009; however, the
Company adopted FAS 141R as of July 1, 2009 and believes that if the Company
consummated a business combination transaction, the Company’s adoption of FAS
141R would have a material impact on the consolidated financial
statements.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51.  This statement clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements.  This statement changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to both parent and the
noncontrolling interest.  This statement is effective for the fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008.  Based on current conditions, the Company does not
expect the adoption of SFAS 160 to have a significant impact on its results of
operations or financial position.


F-12


CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





In March
2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The new standard also improves transparency about the location and
amounts of derivative instruments in an entity’s financial statements; how
derivative instruments and related hedged items are accounted for under
Statement 133; and how derivative instruments and related hedged items affect
its financial position, financial performance, and cash flows. Management is
currently evaluating the effect of this pronouncement on financial
statements.





In May
2008, FASB issued SFASB No.162, “The Hierarchy of Generally Accepted Accounting
Principles”. The pronouncement mandates the GAAP hierarchy reside in the
accounting literature as opposed to the audit literature. This has the practical
impact of elevating FASB Statements of Financial Accounting Concepts in the GAAP
hierarchy. This pronouncement will become effective 60 days following SEC
approval. The Company does not believe this pronouncement will impact its
financial statements.





In May
2008, FASB issued SFASB No. 163, “Accounting for Financial Guarantee Insurance
Contracts-an interpretation of FASB Statement No. 60”. The scope of the
statement is limited to financial guarantee insurance (and reinsurance)
contracts. The pronouncement is effective for fiscal years beginning after
December 31, 2008. The Company does not believe this pronouncement will impact
its financial statements.





On
January 12, 2009 FASB issued FSP EITF 99-20-01, “Amendment to the Impairment
Guidance of EITF Issue No. 99-20”. This FSP amends the impairment guidance in
EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on
Purchased Beneficial Interests and Beneficial Interests That Continue to be Held
by a Transferor in Securitized Financial Assets,” to achieve more consistent
determination of whether an other-than-temporary impairment has occurred. The
FSP also retains and emphasizes the objective of an other-than-temporary
impairment assessment and the related disclosure requirements in FASB Statement
No. 115, Accounting for Certain Investments in Debt and Equity Securities, and
other related guidance. The FSP is shall be effective for interim and annual
reporting periods ending after December 15, 2008, and shall be applied
prospectively. Retrospective application to a prior interim or annual
reporting period is not permitted. The Company does not believe this
pronouncement will impact its financial statements.





NOTE
3 – INVENTORIES





Inventories
consist of the following as of June 30, 2009 and 2008:





2008
                  
                  
                  2008Raw
      materials
                  
                  $
                  67,046
                  
                  
                  $
                  77,000Supplies
      and packing materials
                  
                  
                  87,081
                  
                  
                  
                  207,138Work
      in progress
                  
                  
                  6,901,124
                  
                  
                  
                  3,570,127Finished
      goods
                  
                  
                  106,279
                  
                  
                  
                  134,714Totals
                  
                  $
                  7,162,249
                  
                  
                  $
                  3,988,979


F-13


CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE
4 – OTHER ASSETS





Other
assets consist of the following as of June 30, 2009 and 2008


2008
                  
                  
                  2008Advances
      to employees and others
                  
                  $
                  91,334
                  
                  
                  $
                  93,987Promotion
      material
                  
                  
                  37,879
                  
                  
                  
                  34,104Total
                  
                  $
                  129,213
                  
                  
                  $
                  128,091





NOTE
5 – DEFERRED OFFERING COST





Deferred
offering cost, related to the public offering in July 2009, consists of the
following as of June 30, 2009 and 2008


2008
                    
                    
                    2008Legal
      costs
                    
                    $
                    130,000
                    
                    
                    $
                    -Accounting
      costs
                    
                    
                    30,500
                    
                    
                    
                    -Total
                    
                    $
                    160,500
                    
                    
                    $
                    -





NOTE
6 - PROPERTY, PLANT AND EQUIPMENT, AND CONSTRUCTION IN PROGRESS





Property,
plant and equipment consist of the following as of June 30, 2009 and
2008:





2009
                  
                  
                  2008Building
      and improvements
                  
                  $
                  10,632,055
                  
                  
                  $
                  8,795,804Vehicles
                  
                  
                  23,784
                  
                  
                  
                  23,753Machinery
      and equipment
                  
                  
                  8,620,173
                  
                  
                  
                  10,263,668Agriculture
      assets
                  
                  
                  1,334,538
                  
                  
                  
                  887,518Total
                  
                  
                  20,610,551
                  
                  
                  
                  19,970,743Less:
      accumulated depreciation
                  
                  
                  (3,268,897
                  )
                  
                  
                  (1,771,287
                  )Total
      property, plant and equipment
                  
                  $
                  17,341,654
                  
                  
                  $
                  18,199,456





Depreciation
expenses for the fiscal years ended June 30, 2009 and 2008 were $1,494,489 and
$988,240, respectively.





Agriculture
assets consist of reproductive trees that are expected to be commercially
productive for a period of eight years.





Construction
in Progress:





As of
June 30, 2009 and 2008, construction in progress, representing construction for
a new product line, amounted to $9,609,649 and $5,115,492,
respectively.





NOTE
7 - INTAGIBLE ASSETS





The
intangible assets comprised of following as of June 30, 2009 and
2008:





2009
                  
                  
                  2008Land
      use right, net
                  
                  $
                  895,808
                  
                  
                  $
                  915,864Technology
      know-how, net
                  
                  
                  177,358
                  
                  
                  
                  264,295Total
                  
                  $
                  1,073,165
                  
                  
                  $
                  1,180,159


F-14


CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





LAND USE
RIGHTS





Under the
People's Republic of China's governmental regulations, the government owns all
land. However, the government grants the user a “land use right” (the Right) to
use land. The Company has recognized the amounts paid for the acquisition of
rights to use land as an intangible asset and amortizing over a period of fifty
years which was approved by the government.




A
shareholder contributed the land use rights on August 16, 2001. The land use
right was recorded at cost of $1,064,326. The land use right is for fifty years.
The land use right consists of the following as of June 30, 2009 and
2008:





2009
                  
                  
                  2008Land
      use right
                  
                  $
                  1,064,326
                  
                  
                  $
                  1,062,898Less:
      accumulated amortization
                  
                  
                  (168,518
                  )
                  
                  
                  (147,034
                  )Total
                  
                  $
                  895,808
                  
                  
                  $
                  915,864





TECHNOLOGY
KNOW-HOW





A
shareholder contributed the technology know-how on August 16, 2001. The
technology know-how is recorded at cost of $858,326. This technology is the
special formula to produce humid acid. The technology know-how is valid for 10
years. The technology know-how consists of the following as of June 30, 2009 and
2008:





2009
                  
                  
                  2008Technology
      Know-how
                  
                  $
                  858,326
                  
                  
                  $
                  857,174Less:
      accumulated amortization
                  
                  
                  (680,968
                  )
                  
                  
                  (592,879
                  )Total
                  
                  $
                  177,358
                  
                  
                  $
                  264,295





Total
amortization expenses of intangible assets for the fiscal years ended June 30,
2009 and 2008 amounted to $108,525 and $105,266, respectively.





Amortization
expenses of intangible assets for the next five years after June 30, 2009 are as
follows:





June
      30, 2010
                  
                  $
                  107,119June
      30, 2011
                  
                  
                  107,119June
      30, 2012
                  
                  
                  26,979June
      30, 2013
                  
                  
                  21,287June
      30, 2014
                  
                  
                  21,287Total
                  
                  $
                  283,790





NOTE
8 - RELATED PARTIES TRANSACTIONS





The
“Amount due to related parties” represents the advances from one of the
Company’s shareholder. The amounts were unsecured, non-interest bearing and due
on demand. As of June 30, 2009 and 2008, amount due to related parties amounted
to $31,160 and $31,121, respectively.


F-15


CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE
9 - ACCRUED EXPENSES AND OTHER PAYABLES





Accrued
expenses and other payables of the following as of June 30, 2009 and
2008:





2009
                  
                  
                  2008Payroll
      payable
                  
                  $
                  8,766
                  
                  
                  $
                  15,379Welfare
      payable
                  
                  
                  177,865
                  
                  
                  
                  178,500Accrued
      expenses
                  
                  
                  791,172
                  
                  
                  
                  148,070Other
      levy payable
                  
                  
                  113,365
                  
                  
                  
                  113,279Total
                  
                  $
                  1,091,168
                  
                  
                  $
                  455,228





NOTE 10 - LOANS
PAYABLES





As of
June 30, 2009 and 2008, the loan payables were as follows:





2009
                  
                  
                  2008Short
      term loans payable:Xi’an
      Commercial Bank Xincheng Branch
                  
                  $
                  2,191,445
                  
                  
                  $
                  2,188,502Xi’an
      Beilin District Rural Credit Union Wenyibeilu Branch
                  
                  
                  555,166
                  
                  
                  
                  554,421Agriculture
      Bank Yanglingshifangqu Branch
                  
                  
                  423,679
                  
                  
                  
                  1,459,002Total
                  
                  $
                  3,170,290
                  
                  
                  $
                  4,201,925





At June
30, 2009, the Company had a loan payable of $2,191,445 to Xi’an Commercial Bank
Xincheng Branch in China, with an annual interest rate of 7.965%, and due on
March 30, 2010.  The loan is secured by the land use right and
property of the Company.





At June
30, 2009, the Company had a loan payable of $555,166 to Xi’an Beilin District
Rural Credit Union Wenyibeilu Branch with an annual interest rate of 11.7936%,
and due on September 16, 2009. The loan is guaranteed by a former
shareholder.





At June
30, 2009, the Company had a loan payable of $423,679 to Agriculture Bank in
China Yanglingshifangqu Branch, with an annual interest rate of 7.02%, and due
on June 29, 2009. The loan is guaranteed by the former shareholder.





The
interest expense was $424,510 and $426,911 for the fiscal years ended June 30,
2009 and 2008, respectively.





NOTE
11 - TAXES PAYABLES





Taxes
payables consist of the following as of June 30, 2009 and 2008:





2009
                  
                  
                  2008VAT
      payable
                  
                  $
                  1,216,191
                  
                  
                  
                  4,495,140Income
      tax payable
                  
                  
                  1,290,777
                  
                  
                  
                  1,038,651Other
      levies
                  
                  
                  380,860
                  
                  
                  
                  344,484$
                  2,887,828
                  
                  
                  
                  5,878,275


F-16


CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE
12 – ADVANCES FROM UNRELATED COMPANIES





Advances
from unrelated companies were $326,970 and $344,628 at June 30, 2009 and 2008,
respectively. The advances were due on demand, unsecured and non- interest
bearing.





NOTE
13 - OTHER INCOME (EXPENSES)





Other
income (expenses) mainly consists of interest expense and subsidy income from
the government.





NOTE
14 - INCOME TAXES





The
Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each period end based on
enacted tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.




The
provision for income taxes as of June 30, 2009 and 2008 consisted of the
following:




2009
                                
                                
                                2008Current
      income tax - Provision for China income and local tax
                                
                                $
                                2,331,548
                                
                                
                                $
                                692,474Deferred
      taxes
                                
                                
                                -
                                
                                
                                
                                -Total
      provision for income taxes
                                
                                $
                                2,331,548
                                
                                
                                $
                                692,474





The
following table reconciles the U.S. statutory rates to the Company’s effective
tax rate as of June 30, 2009 and 2008:





2009
                      
                      
                      2008Tax
      at statutory rate
                      
                      
                      34
                      %
                      
                      
                      34
                      %Foreign
      tax rate difference
                      
                      
                      (19
                      )%
                      
                      
                      (19
                      )%Net
      operating loss in other tax jurisdiction for where no benefit is
      realized
                      
                      
                      (8
                      )%
                      
                      
                      (8
                      )%Total
                      
                      
                      7
                      %
                      
                      
                      7
                      %





Beginning
January 1, 2008, in the People's Republic of China (PRC) the new Enterprise
Income Tax (“EIT”) law replaced the existing laws for Domestic Enterprises
(“DES”) and Foreign Invested Enterprises (“FIEs”). The new standard EIT rate of
25% replaced the 33% rate currently applicable to both DES and FIEs. The two
year tax exemption and three year 50% tax reduction tax holiday for
production-oriented FIEs was eliminated. Since January 1, 2008, Techteam Jinong
has been subject to income tax at a rate of 15%. Xi’an Jintai was exempt from
paying income tax for calendar 2008 as it produces the products which fall into
the tax exemption list issued by the government.





Due to
non-operation in U.S. and tax free status in China, the Company had no deferred
tax for the fiscal year ended June 30, 2009 and 2008.


F-17


CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE
15 - CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS





The
Company's operations are all carried out in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal environments in the PRC, and by the general state
of the PRC's economy.





The
Company's operations in the PRC are subject to specific considerations and
significant risks not typically associated with companies in the North America
and Western Europe. These include risks associated with, among others, the
political, economic and legal environments and foreign currency exchange. The
Company's results may be adversely affected by changes in governmental policies
with respect to laws and regulations, anti-inflationary measures, currency
conversion and remittance abroad, and rates and methods of taxation, among other
things.





MAJOR CUSTOMERS AND
VENDORS





There was
one vendor from which the Company purchased more than 10% of its raw materials
for the fiscal year ended June 30, 2009 which accounted for about 11.4%.
Accounts payable to the venders amounted to $0 as of June 30, 2009.





There
were three venders from which the Company purchased more than 10% of its raw
material for the fiscal year ended Jun 30, 2008 with each vendor individually
accounting for about 12%, 10%, 10%. Account payable to the venders amounted to
$0, $26,907, and $0 as of June 30, 2008.





There was
no customer that accounted for over 10% of the total sales for the fiscal years
ended June 30, 2009 or 2008.





CONCENTRATION
OF CASH





For
purposes of the statements of cash flows, cash equivalents include cash on hand
and deposits with financial institutions. The cash deposit with one bank
amounted to $17,535,579 and 13,731,284 as of June 30, 2009 and 2008,
respectively.  The Company believes there is no significant risk with
respect to these deposits.





NOTE
16– STOCKHOLDERS’ EQUITY




COMMON
STOCK




On
December 26, 2007 the Company issued 6,313,617 shares of common stock to 31
accredited investors (the “Investors”) at $3.25 per share in a private placement
(the “Private Placement”). If any governmental agency in the PRC challenges or
otherwise takes any action that adversely affects the transactions contemplated
by the Exchange Agreement, and the Company cannot undo such governmental action
or otherwise address the material adverse effect to the reasonable satisfaction
of the Investors within sixty (60) days of the occurrence of such governmental
action, then, upon written demand from an Investor, the Company shall promptly,
and in any event within thirty (30) days from the date of such written demand,
pay to that Investor, as liquidated damages, an amount equal to that Investor’s
entire Investment Amount with interest thereon from the Closing date until the
date paid at the rate of 10% per annum. As a condition to the receipt of such
payment, the Investor shall return to the Company for cancellation of the
certificates evidencing the Shares acquired by the Investor under the Agreement.
In accordance with EITF D-98: “Classification and Measurement of Redeemable
Securities”, the Company has classified the equity as temporary equity, as
“Common Stock, $.001 par value, 6,313,617 shares subject to
redemption”.




The
Company issued 977,948 shares of common stock to consultants relating to the
Private Placement. Net proceeds from the Private Placement were $18,602,723, of
which $188,388 was received in January 2008. The direct costs related to this
placement, including legal and professional fees, were deducted from the related
proceeds and the net amount in excess of par value was recorded as additional
paid-in capital. The total of $4,250,000 was placed in escrow and booked as
restricted cash as of December 31, 2007. The total of $4,250,000 in escrow is
pursuant to a Securities Purchase Agreement and the Holdback Make Good Agreement
entered into in connection with the placement for the
following:


F-18


CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





1.
            $2,000,000
      was held pending the company hiring a qualified CFO. The Company appointed
      a CFO in April 2008 and $2,000,000 was released to the Company
      accordingly.


2.
            $2,000,000
      was held pending the company hiring two independent directors, therefore
      constituting a majority independent directors in the board. The Company
      appointed a majority of independent directors in April 2008 and $2,000,000
      was released to the Company
accordingly.


3.
            $250,000
      was held for the retention of an Investor Relations firm. The Company
      retained an Investor Relations firm in January 2008 and the money was
      released to the Company on a monthly
basis.





As of
June 30, 2009, the balance of restricted cash is $83,579.





In
connection with the Securities Purchase Agreement and the Private Placement, the
Company also entered into a registration rights agreement (the “Registration
Rights Agreement”) and a lockup agreement (the “Lockup Agreement”). Among other
things, the Securities Purchase Agreement: (i) establishes targets for after tax
net income and earnings per share for our fiscal year ending June 30, 2009 at
not less than $12,000,000 and $0.609, respectively (the “2009 Targets”); (ii)
provides for liquidated damages in the event that PRC governmental policies or
actions have a material adverse effect on the transactions contemplated by the
Share Exchange Agreement (a “Material Adverse Effect”); and (iii) requires us to
hire a new, fully qualified chief financial officer (“CFO”) satisfactory to the
Investors. In order to secure our obligations to meet the 2009 profit target and
earnings per share target, Mr. To has placed 3,156,808 shares of Common Stock
(“2009 Make Good Shares”) into an escrow account pursuant to the terms of the
Make Good Escrow Agreement by and among us, Mr. To, the Investors and the escrow
agent named therein. In the event we do not achieve either of the 2009 Targets,
the 3,156,808 shares of Common Stock will be conveyed to the Investors pro-rata
in accordance with their respective investment amount for no additional
consideration. In the event that we meet the 2009 Targets, the 3,156,808 shares
will be transferred to Mr. Tao Li.





Within 45
days of the closing of the Private Placement (the “Filing Date”), the Company
was obligated to file a registration statement with the Commission covering and
registering for re-sale all of the common stock offered and sold in the Private
Placement. If a registration statement was not filed by the Filing Date, the
company would have been obligated to pay the Investors liquidated damages equal
in amount to one percent (1%) of the principal amount subscribed for by the
Investors for each month (or part thereof) after the Filing Date until the
registration statement is filed (“Filing Damages”).





If the
registration statement is not declared effective by the Commission within 150
days after the closing of the Private Placement (the “Effective Date”), the
Company will be obligated to pay liquidated damages to the Investors in amount
equal to one percent (1%) of the principal amount subscribed for by the
Investors starting from the first day following the Effective Date for each
30-day period (or part thereof) after the Effective Date until the registration
statement is effective (“Effectiveness Damages”). The aggregate of Filing
Damages and Effectiveness Damages is subject to a cap of ten percent (10%). The
Company incurred Effectiveness Damages of $704,494.





As of
December 29, 2008, the Company reached an agreement with the holders of a
majority shares issued in the Private Placement to issue an aggregate of 213,484
shares of common stock to the Investors on a pro rata basis in lieu of the cash
payment of the Effectiveness Damages. On January 16, 2009, the Company issued an
aggregate of 213,483 shares of restricted common stock on a pro rata basis to
the Investors in the Private Placement.


F-19


CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





PREFERRED
STOCK





Under the
Company’s articles of incorporation, the  board of directors has the
authority, without further action by stockholders, to designate up to 20,000,000
shares of preferred stock in one or more series and to fix the rights,
preferences, privileges, qualifications and restrictions granted to or imposed
upon the preferred stock, including dividend rights, conversion rights, voting
rights, rights and terms of redemption, liquidation preference and sinking fund
terms, any or all of which may be greater than the rights of the common
stock.  If the Company sells shares of preferred stock under a
registration statement on Form S-3, we will fix the rights, preferences,
privileges, qualifications and restrictions of the preferred stock of each
series in the certificate of designation relating to that series and will file
the certificate of designation that describes the terms of the series of
preferred stock the Company offers  before the issuance of the related
series of preferred stock.





As of
June 30, 2009, the Company had 20,000,000 shares of preferred stock authorized,
with a par value of $.001 per share, of which no shares are
outstanding.





NOTE
17– STATUTORY
RESERVE





As
stipulated by the Company Law of the People's Republic of China (PRC), net
income after taxation can only be distributed as dividends after appropriation
has been made for the following:




i) Making
up cumulative prior years' losses, if any;




ii)
Allocations to the "Statutory surplus reserve" of at least 10% of income after
tax, as determined under PRC accounting rules and regulations, until the fund
amounts to 50% of the Company's registered capital;




iii)
Allocations of 5-10% of income after tax, as determined under PRC accounting
rules and regulations, to the Company's "Statutory common welfare fund", which
is established for the purpose of providing employee facilities and other
collective benefits to the Company's employees; and Statutory common welfare
fund is no longer required per the new cooperation law executed in
2006.




iv)
Allocations to the discretionary surplus reserve, if approved in the
shareholders' general meeting.





In
accordance with the Chinese Company Law, the Company has allocated 10% of its
net income to surplus. The amount allocated to the surplus reserve amounted to
$1,585,733 and $1,002,545 for the fiscal years ended June 30, 2009 and 2008,
respectively.





NOTE
18– STOCK OPTIONS





Effective
January 1, 2006, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 123-R, “Share-Based Payment” (“SFAS No. 123-R”),
which requires the measurement and recognition of compensation expense for all
share-based payment awards made to employees and directors, including stock
options based on their fair values. SFAS No. 123-R supersedes Accounting
Principles Board Opinion No. 25, “Accounting for Stock Issued to
Employees”(“APB
25”), which the Company previously followed in accounting for stock-based
awards. In March 2005, the SEC issued Staff Accounting Bulletin
No. 107(SAB
107) to provide guidance on SFAS No. 123-R. The Company has applied SAB 107 in
its adoption of SFAS No. 123-R.





On
January 31, 2008, the Company issued 123,000 stock options to its employees with
an exercise price of $3.25 and term of three years.  Compensation
expense as of June 30, 2008 recorded was $388,452.  On June 24, 2008,
the employees requested a cashless exercise of 76,500 options at an exercise
price of $3.25 per share. Based on the formula provided in the options
agreement, the employees received 67,685 shares.


The
assumptions used in calculating the fair value of options granted using the
Black-Scholes option pricing model are as follows:





Risk-free
      interest rate
                  
                  
                  2.27
                  %Expected
      life of the options
                  
                  3
      yearExpected
      volatility
                  
                  
                  252
                  %Expected
      dividend yield
                  
                  
                  0
                  %




F-20


CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





On April
8, 2008, the Company issued 35,000 stock options to two directors with an
exercise price of $6 and term of two years.  10,500 options vested on
June 29, 2008, and 24,500 options vested on July 1,
2009.  Compensation expense recorded for the year ended June 30, 2009
was $63,689.





The
assumptions used in calculating the fair value of options granted using the
Black-Scholes option pricing model are as follows:





Risk-free
      interest rate
                  
                  
                  1.87
                  %Expected
      life of the options
                  
                  2
      yearExpected
      volatility
                  
                  
                  540
                  %Expected
      dividend yield
                  
                  
                  0
                  %





On April
23, 2008, the Company issued 40,000 stock options to the CFO with an exercise
price of $6 and term of two years.  12,000 options vested on June 29,
2008, and 28,000 options were forfeited due to the former CFO’s
resignation..  Compensation expense recorded for the year ended June
30, 2009 was $0.





On
September 10, 2008, the Company issued 28,000 stock options to the CFO with an
exercise price of $4 and term of two years.  The options will vest on
July 1, 2009.  Compensation expense recorded for the year ended June
30, 2009 was $92,116.





The
assumptions used in calculating the fair value of options granted using the
Black-Scholes option pricing model are as follows:





Risk-free
      interest rate
                  
                  
                  2.22
                  %Expected
      life of the options
                  
                  2
      yearExpected
      volatility
                  
                  
                  584
                  %Expected
      dividend yield
                  
                  
                  0
                  %




Options
outstanding as of June 30, 2009 and related weighted average price and intrinsic
value are as follows:





Exercise
                    Prices
                  
                  Total
                    Options
                    Outstanding
                  
                  
                  Weighted
                    Average
                    Remaining
                    Life
                    (Years)
                  
                  
                  Total
                    Weighted
                    Average
                    Exercise
                    Price
                  
                  
                  Options
                    Exercisable
                  
                  
                  Weighted
                    Average
                    Exercise
                    Price
                  
                  
                  Aggregate Intrinsic
                    Value$3.25-$6
                  
                  
                  121,500
                  
                  
                  
                  1.30
                  
                  
                  $
                  4.49
                  
                  
                  
                  69,000
                  
                  
                  $
                  4.15
                  
                  
                  
                  437,810




The
following table summarizes the options outstanding as of June 30,
2009:




Options
                          OutstandingOutstanding,
      July 1, 2007
                        
                        
                        -Granted
                        
                        
                        198,000Forfeited/Canceled
                        
                        
                        -Exercised
                        
                        
                        (76,500)Outstanding,
      July 1, 2008
                        
                        
                        121,500Granted
                        
                        
                        28,000Forfeited/Canceled
                        
                        
                        (28,000)Exercised
                        
                        
                        -Outstanding, June 30, 2009
                        
                        
                        121,500


F-21


CHINA
GREEN AGRICULTURE INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE
19 - COMMITMENT




In July
2007, the Company signed an office lease with a shareholder and started to pay
the rent for $1,705 per month. The Company recorded rent expenses of $20,456 and
$19,266 for the fiscal years ended June 30, 2009 and 2008,
respectively.  Rent expenses for the 5 years after June 30, 2009 are
as follows:





June
      30, 2010
                      
                      $
                      20,456June
      30, 2011
                      
                      
                      20,456June
      30, 2012
                      
                      
                      20,456June
      30, 2013
                      
                      
                      20,456June
      30, 2014
                      
                      
                      20,456Total
                      
                      $
                      102,282




NOTE
20 - SUBSEQUENT EVENTS





The Company issued 4,025,000 shares of
common stock at a public offering price of $7.15 per share and received a total
of approximately $28.8 million on July 24, 2009. The shares were sold under the
Company's previously filed shelf registration statement, which was declared
effective by the Securities and Exchange Commission on June 12,
2009.The
Companyintends to use all of the
net proceeds to expand its production of agricultural products through the
construction of a new greenhouse.


F-22