China Green Agriculture, Inc. - Quarter Report: 2008 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2008

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

For the transition period from ____________ to ____________

Commission File Number 000-18606

CHINA GREEN AGRICULTURE, INC.

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

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

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

People’s Republic of China 710065

(Address of principal executive offices)

+86-29-88266368

(Issuer's telephone number)

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o

Non-accelerated filer o Do not check if a smaller reporting company	Smaller reporting company x

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

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 18,381,702 shares of Common Stock, $.001 par value, were outstanding as of November 7, 2008.

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION	Page

Item 1.	Financial Statements.	1

	Consolidated Balance Sheets As of September 30, 2008 and June 30, 2008 (Unaudited)	1

	Consolidated Income Statements For the Three Months Ended September 30, 2008 and 2007 (Unaudited)	2

	Consolidated Statements of Cash Flows For the Three Months Ended September 30, 2008 and 2007 (Unaudited)	3

	Notes to Consolidated Financial Statements As of September 30, 2008 (Unaudited)	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	25

Item 4.	Controls and Procedures.	34


PART II	OTHER INFORMATION

Item 6.	Exhibits	35

Signatures		36

Exhibits/Certifications

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2008 AND JUNE 30, 2008

ASSETS

	September 30, 2008		June 30, 2008
	(Unaudited)
Current Assets
Cash and cash equivalents	$	16,919,102	$	16,612,416
Restricted cash		165,081		193,392
Accounts receivable, net		6,340,147		3,590,552
Inventories		6,572,248		3,988,979
Other assets		104,926		128,091
Advances to suppliers		579,582		512,845
Total Current Assets		30,681,086		25,026,275

Plant, Property and Equipment, Net		17,829,481		18,199,456

Construction In Progress		5,155,894		5,115,492

Intangible Assets, Net		1,153,538		1,180,159

Total Assets	$	54,819,998	$	49,521,382

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
Accounts payable	$	263,332	$	232,417
Unearned revenue		180,924		88,950
Other payables and accrued expenses		439,015		455,228
Registration rights liability		704,494		506,142
Advances from other unrelated companies		336,151		344,628
Amount due to related parties		31,121		31,121
Taxes payable		7,480,835		5,878,275
Short term loans		4,084,550		4,201,925
Total Current Liabilities		13,520,422		11,738,686

Common Stock, $.001 par value, 6,313,617 shares subject to redemption		20,519,255		20,519,255

Commitment		—		—

Stockholders' Equity
Preferred Stock, $.001 par value, 20,000,000 shares authorized, Zero shares issued and outstanding		—		—
Common stock, $.001 par value, 780,000,000 shares authorized, 12,068,085 shares issued and outstanding		12,068		12,068
Additional paid-in capital		1,225,209		1,200,077
Statury reserve		2,280,394		1,882,797
Retained earnings		14,864,409		11,764,079
Accumulated other comprehensive income		2,398,240		2,404,419
Total Stockholders' Equity		20,780,321		17,263,442

Total Liabilities and Stockholders' Equity	$	54,819,998	$	49,521,382

The accompanying notes are an integral part of these consolidated financial statements.

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Unaudited)

	2008			2007
Net sales	$	8,880,002		$	7,191,021
Cost of goods sold		3,930,893			2,773,761
Gross profit		4,949,109			4,417,260
Operating expenses
Selling expenses		216,376			151,705
General and administrative expenses		437,129			150,617
Total operating expenses		653,505			302,322
Income from operations		4,295,604			4,114,938
Other income (expense)
Other income (expense)		4,655			9,301
Interest income		140,395			124
Interest expense		(320,864	)		(92,569	)
Bank charges		(380	)		(22	)
Total other expense		(176,194	)		(83,166	)
Income before income taxes		4,119,410			4,031,772
Provision for income taxes		621,483			—
Net income		3,497,927			4,031,772
Other comprehensive items
Foreign currency translation gain/(loss)		(6,179	)		174,461
Comprehensive income	$	3,491,748		$	4,206,233

Basic and diluted weighted average shares outstanding		18,381,702			10,770,669
Basic and diluted net earnings per share *	$	0.19		$	0.37

* Basic and diluted shares are the same because there are no anti dilutive effect

The accompanying notes are an integral part of these consolidated financial statements.

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Unaudited)

	2008			2007
Cash flows from operating activities
Net income	$	3,497,927		$	4,031,772
Adjustments to reconcile net income to net cash provide by operating activities
Share capital contribution - rental and interest paid by shareholders		—			14,337
Issuance of stock options for compensation		25,133
Depreciation		368,094			208,898
Amortization		26,740			24,253
Decrease / (Increase) in current assets
Accounts receivable		(2,750,170	)		(4,095,432	)
Other receivables		8,258			69,214
Inventories		(2,583,908	)		(150,870	)
Advances to suppliers		(66,825	)		(318,984	)
Other assets		15,756			(2,374	)
(Decrease) / Increase in current liabilities
Accounts payable		30,941			287,180
Unearned revenue		91,989			94,036
Tax payables		1,603,503			757,460
Advances from unrelated parties					(341,719	)
Other payables and accrued expenses		174,431			(16,975	)
Net cash provided by operating activities		441,868			560,796

Cash flows from investing activities
Acquisition of plant, property, and equipment		(897	)		—
Additions to construction in progress		(41,223	)		—
Net cash used in investing activities		(42,120	)		—

Cash flows from financing activities
Repayment of loan		(116,701	)		—
Restricted cash		28,311			—
(Payments)/proceeds to/from related parties		—			(536,621	)
Net cash used in financing activities		(88,391	)		(536,621	)

Effect of exchange rate change on cash and cash equivalents		(4,671	)		1,509
Net increase in cash and cash equivalents		306,686			25,684

Cash and cash equivalents, beginning balance		16,612,416			81,716
Cash and cash equivalents, ending balance	$	16,919,102		$	107,400

Supplement disclosure of cash flow information
Interest expense paid	$	(122,511	)	$	(92,674	)
Income taxes paid	$	—		$	—

The accompanying notes are an integral part of these consolidated financial statements.

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

China Green Agriculture, Inc. (the “Company”, “we”, “us”) was incorporated as Videophone, Inc. in 1987 under the laws of the State of Kansas. It later changed its name to Discovery Systems, Inc. till June 13, 1990 and Discovery Technologies, Inc. (“Discovery Technologies”) from June 14, 1990 to February 4, 2008. The State of Kansas involuntarily dissolved the Company effective December 1996. On December 4, 2006 the State of Kansas reinstated the Company's corporate charter. From December 1996 to December 2007, the Company did not engaged in any operations and was dormant.

On August 27, 2007 the Board of Directors unanimously adopted resolutions announcing a special meeting of shareholders to consider and act upon a proposed Agreement and Plan of Merger, to reincorporate Discovery Technologies, Inc. (“Discovery Technologies”) in the State of Nevada by merger with and into a Nevada corporation with the same name ("Discovery Technologies Nevada") which Discovery Technologies formed for such purpose (the "Migratory Merger"). Effective September 24, 2007, shareholders approved the Agreement and Plan of Merger as described in the definitive proxy materials filed with the Securities and Exchange Commission.

In accordance with the Agreement and Plan of Merger, Discovery Technologies adopted the capital structure of Discovery Technologies Nevada, which includes total authorized capital stock of 800,000,000 shares, of which 780,000,000 are common stock, with a par value of $.001 per share (the "Discovery Technologies Nevada Common Stock") and 20,000,000 shares are blank check preferred stock, with a par value of $.001 per share (the "Preferred Stock"). In addition, on the Effective Date described below, the issued and outstanding shares of our Common Stock automatically converted into shares of Discovery Technologies Nevada Common Stock at a ratio of nine (9) shares of our currently outstanding Common Stock for one (1) share of Discovery Technologies Nevada Common Stock.

As a result of the reverse stock split of registrant's common stock, registrant's outstanding shares of common stock were reduced from 18,746,196 shares to 2,083,339 shares. The Migratory Merger and reverse split became effective on October 16, 2007 (the "Effective Date").

Further on December 18, 2007, the Company had another reverse stock split at a ratio of 6.771:1. As a result, registrant's outstanding shares of common stock were reduced from 2,083,339 shares to 308,084 shares as of December 18, 2007.

All references in the accompanying financial statements to the number of common shares and per share amounts have been retroactively restated to reflect the reverse stock splits.

On December 26, 2007, the Company acquired all of the issued and outstanding capital stock (the “Green Agriculture Shares”) of Green Agriculture Holding Corporation, a New Jersey corporation (“Green Agriculture” or “Green New Jersey”), through a share exchange (the “Share Exchange”) in which the Company issued 10,770,669 number of shares of its common stock, par value $.001 per share (the “Common Stock”) to Green Agriculture’s shareholders in exchange for the Green Agriculture Shares. Immediately prior to the Share Exchange, the Company redeemed 246,148 shares of Common Stock held by Michael Friess and Sanford Schwartz (the “Redemption”) for $550,000 and issued 111,386 new shares of Common Stock to Messrs. Schwartz and Friess, two of our directors at the time, who then appointed Tao Li as the Company’s Director and Chief Executive Officer who proceeded to effect the Share Exchange. In connection to the redemption share issuance, the Company also issued 78,462 shares of common stock to a consultant.

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The Share Exchange has been accounted for as a reverse acquisition under the purchase method of accounting because the stockholders of Green Agriculture obtained control of the Company. Accordingly, the exchange of shares by the two companies has been recorded as a recapitalization of the Company, with the Company (Green Agriculture) being treated as the continuing entity. The historical financial statements presented are those of Green Agriculture. As a result of the reverse acquisition transaction described above the historical financial statements presented are those of Green Agriculture, the operating entity. Pro-forma information is not presented because the public shell’s assets are immaterial. Transaction costs incurred in the reverse acquisition have been charged to expense.

On August 24, 2007, Green Agriculture Holding Corporation acquired 100% outstanding shares of Shaanxi TechTeam Jinong Humic Acid Product Co., Ltd. (“Techteam Jinong”, “Techteam” or “Jinong”) which owns 100% equity of Xi’an Jintai Agriculture Technology Development Company (“Xi’an Jintai” or “Jintai”). Green Agriculture was incorporated on January 27, 2007 under the laws of the State of New Jersey with initially two shareholders owning 89% and 11% of its stock. As of December 25, 2007, immediately prior to the Share Exchange, Yinshing David To (95.1%), Paul Hickey (2.45%) and Greg Freihofner (2.45%), (collectively, the “Green New Jersey Stockholders”) owned 100% of the outstanding capital stock of Green New Jersey. Green New Jersey, through its Chinese subsidiaries Techteam Jinong and Xi’an Jintai is engaged in the research and development, manufacture, distribution and sale of humic acid organic liquid compound fertilizer. The exchange of shares with Techteam has been accounted for as a reverse acquisition under the purchase method of accounting since the stockholders of the Techteam obtained control of the consolidated entity. Accordingly, the merger of the two companies has been recorded as a recapitalization of Techteam, with Techteam being treated as the continuing entity. Inter-company amounts and balances have been eliminated.

Yangling Techteam Jinong Humic Acid Product Co., Ltd. was founded in the People’s Republic of China on June 19, 2000. On February 28, 2006, Yangling Techteam Jinong Humic Acid Product Co., Ltd changed its name to be Shaanxi Techteam Jinong Humic Acid Product Co., Ltd.

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

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The Company, through its subsidiaries is has two business segments: Techteam Jinong’s main business is to produce and sell fertilizers, and Xi’an Jintai’s main business is to sell the products which are the by-products (fruit and vegetables) from the development experiment of the fertilizers.

Effective February 5, 2008, the Company changed its name from Discovery Technologies, Inc. to China Green Agriculture, Inc. to better reflect its business. Related to the name change, the trading symbol changed from DCOV.OB to CGAG.OB on the same day.

The Company’s current structure is set forth in the diagram below:

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

The accompanying unaudited financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods are not necessarily indicative of the results for any future period. These statements should be read in conjunction with the Company's audited financial statements and notes thereto for the fiscal year ended June 30, 2008. The results of the three month period ended September 30, 2008 are not necessarily indicative of the results to be expected for the full fiscal year ending June 30, 2009.

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Principle of consolidation

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

Use of estimates

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

Cash and cash equivalents

For statement of cash flows purposes, the Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. Cash overdraft as of balance sheet date will be reflected as liabilities in the balance sheet. As of September 30, 2008 and June 30, 2008, cash and cash equivalents amounted to $16,919,102 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 September 30, 2008 and June 30, 2008, the Company had accounts receivable of $6,340,147 and $3,590,552, net of allowance for doubtful accounts of $56,451 and $96,065, respectively.

Advances to suppliers

The Company provides advances to certain vendors for purchase of its material. As of September 30, 2008 and June 30, 2008, the advances to suppliers amounted to $579,582 and $512,845, respectively.

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Inventories

Inventories are valued at the lower of cost (determined on a weighted average basis) or net realizable value. The management compares the cost of inventories with the net realizable value and an allowance is made for writing down the inventories to their net realizable value, if lower than the cost.

Property, plant and equipment

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

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

	Estimated Useful Life
Building		10-40 years
Leasehold improvements		3-5 years
Machinery and equipment		5-15 years
Vehicles		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 three months ended September 30, 2008.

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Revenue recognition

The Company's revenue recognition policies are in compliance with Staff Accounting Bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectibility is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. As of September 30, 2008 and June 30, 2008, the Company had unearned revenues of $180,924 and $88,950, respectively.

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

Advertising costs

The Company expenses the cost of advertising as incurred or, as appropriate, the first time the advertising takes place. Advertising costs for the three months ended September 30, 2008 and 2007, were $24,384 and $ 23,125, respectively.

Income taxes

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

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The Company records a valuation allowance for deferred tax assets, if any, based on 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 asset or liabilities in the PRC tax jurisdiction.

Foreign currency translation

The functional currency of the Company is RMB. The Company uses the United States dollar ("U.S. dollars") for financial reporting purposes. The Company's subsidiaries maintain their books and records in their functional currency, being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, the Company translates the subsidiaries' assets and liabilities into U.S. dollars using the applicable exchange rates prevailing at the balance sheet date, and the statement of income is translated at average exchange rates during the reporting period. Gain or loss on foreign currency transactions are reflected on the income statement. Gain or loss on financial statement translation from foreign currency are recorded as a separate component in the equity section of the balance sheet, as component of comprehensive income. The functional currency of the Company is Chinese Renminbi ("RMB"), the PRC's official currency. Until July 21, 2005, RMB had been pegged to US$ at the rate of RMB8.28: US$1.00. On July 21, 2005, the PRC government reformed the exchange rate system into a managed floating exchange rate system based on market supply and demand with reference to a basket of currencies. In addition, the exchange rate of RMB to US$ was adjusted to RMB8.11: US$1.00 as of July 21, 2005. The People's Bank of China announces the closing price of a foreign currency such as US$ traded against RMB in the inter-bank foreign exchange market after the closing of the market on each working day, which will become the unified exchange rate for the trading against RMB on the following working day. The daily trading price of US$ against RMB in the inter-bank foreign exchange market is allowed to float within a band of 0.3% around the unified exchange rate published by the People's Bank of China. This quotation of exchange rates does not imply free convertibility of RMB to other foreign currencies. All foreign exchange transactions continue to take place either through the Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People's Bank of China. Approval of foreign currency payments by the Bank of China or other institutions required submitting a payment application form together with invoices, shipping documents and signed contracts.

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.

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

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

Segment reporting

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

During the three months ended September 30, 2008, the Company was organized into two main business segments: fertilizer production (Jinong) and agricultural products production (Jintai). The following table presents a summary of operating information and quarter-end balance sheet information for the three months ended September 30, 2008 and 2007, respectively.

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

	For the three months ended
	September 30, 2008			September 30, 2007
Revenues from unaffiliated customers:
Fertilizer	$	7,625,501		$	5,588,757
Agricultural products		1,254,501			1,602,264
Consolidated	$	8,880,002		$	7,191,021

Operating income (expenses) :
Fertilizer	$	4,125,086		$	3,131,416
Agricultural products		454,104			983,522
Reconciling item (1)		—			—
Reconciling item (2)		(283,586	)		—
Consolidated	$	4,295,604		$	4,114,938

Identifiable assets:
Fertilizer	$	48,728,908		$	19,373,276
Agricultural products		5,349,876			2,325,120
Reconciling item (1)		576,132			—
Reconciling item (2)		165,081			—
Consolidated	$	54,819,998		$	21,698,396

Net income:
Fertilizer	$	3,521,739		$	3,048,148
Agricultural products		454,229			983,624
Reconciling item (1)		4,043			—
Reconciling item (2)		(482,084	)		—
Consolidated	$	3,497,927		$	4,031,772

Depreciation and amortization:
Fertilizer	$	367,103		$	233,151
Agricultural products		27,731			—
Reconciling item (1)		—			—
Reconciling item (2)		—			—
Consolidated	$	394,834		$	233,151

Capital expenditures:
Fertilizer	$	42,120		$	—
Agricultural products		—			—
Reconciling item (1)		—			—
Reconciling item (2)		—			—
Consolidated	$	42,120		$	—

Interest expense:
Fertilizer	$	122,365		$	92,569
Agricultural products		—			—
Reconciling item (1)		—			—
Reconciling item (2)		198,498			—
Consolidated	$	320,864		$	92,569

(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.

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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.

Recent accounting pronouncements

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

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations.” This statement replaces FASB Statement No. 141, “Business Combinations.” This statement retains the fundamental requirements in SFAS 141 that the acquisition method of accounting (which SFAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This statement defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. This statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the statement. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company does not expect the adoption of SFAS 160 to have a significant impact on its results of operations or financial position.

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

FASB Statement No. 161 achieves these improvements by requiring disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information about an entity’s liquidity by requiring disclosure of derivative features that are credit risk-related. Finally, it requires cross-referencing within footnotes to enable financial statement users to locate important. Based on current conditions, the Company does not expect the adoption of SFAS 161 to have a significant impact on its results of operations or financial position.

In May 0f 2008, FSAB 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 of 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.

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 3 - INVENTORIES

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

	September 30, 2008		June 30, 2008
Raw materials	$	1,383,121	$	77,000
Supplies and packing materials		1,103,825		207,138
Work in progress		3,941,483		3,570,127
Finished goods		143,820		134,714
Totals	$	6,572,248	$	3,988,979

NOTE 4 - OTHER ASSETS

As of September 30, 2008 and June 30, 2008, other assets comprised of the following:

	September 30, 2008		June 30, 2008
Other receivable	$	71,996	$	93,987
Promotion material		32,930		34,104
Total	$	104,926	$	128,091

Other receivables represent advances made to non-related companies and employees. The amounts were unsecured, interest free, and due on demand.

NOTE 5 - PROPERTY, PLANT AND EQUIPMENT

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

	September 30, 2008			June 30, 2008
Building and improvements	$	8,794,392		$	8,795,804
Vehicles		23,749			23,753
Machinery and equipment		10,262,918			10,263,668
Agriculture assets		887,518			887,518
Total		19,968,577			19,970,743
Less: accumulated depreciation		(2,139,096	)		(1,771,287	)
Total property, plant and equipment	$	17,829,481		$	18,199,456

Depreciation expenses for the three months ended September 30, 2008 and 2007 were $368,094 and $208,898, respectively.

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

Construction in Progress:

As of September 30, 2008 and June 30, 2008, construction in progress, representing construction for a new product line, amounted to $5,155,894 and $5,115,492, respectively.

NOTE 6 - INTAGIBLE ASSETS

The intangible assets comprised of following at September 30, 2008 and June 30, 2008:

	September 30, 2008		June 30, 2008
Land use right, net	$	910,573	$	915,864
Technology know-how, net		242,965		264,295
Total	$	1,153,538	$	1,180,159

LAND USE RIGHT

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

A shareholder contributed the land use rights on August 16, 2001. The land use right was recorded at cost of $1,062,898. The land use right is for fifty years. The land use right consists of the followings as of September 30, 2008 and June 30, 2008:

	September 30, 2008			June 30, 2008
Land use right	$	1,062,898		$	1,062,898
Less: accumulated amortization		(152,324	)		(147,034	)
Total	$	910,573		$	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 $857,174. This technology is the special formula to produce humid acid. The technology know-how is valid for 10 years. The technology know-how consists of the following as of September 30, 2008 and June 30, 2008:

	September 30, 2008			June 30, 2008
Technology Know-how	$	857,174		$	857,174
Less: accumulated amortization		(614,209	)		(592,879	)
Total	$	242,965		$	264,295

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Total amortization expenses of intangible assets for the three months ended September 30, 2008 and 2007 amounted to $26,740 and $24,253, respectively.

Amortization expenses of intangible assets for the next five years after September 30, 2008 are as follows:

September 30, 2009	$	106,975
September 30, 2010		106,975
September 30, 2011		87,498
September 30, 2012		21,258
September 30, 2013		21,258
Total	$	343,964

NOTE 7 - AMOUNT DUE TO RELATED PARTIES

The amount due to related parties were the advances to the Company’s officers and shareholders, and was unsecured, non-interest bearing and due on demand. As of September 30, 2008 and June 30, 2008, the amount due to related parties is $31,121 and $31,121, respectively.

NOTE 8 - ACCRUED EXPENSES AND OTHER PAYABLES

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

	September 30, 2008		June 30, 2008
Payroll payable	$	13,847	$	15,379
Welfare payable		176,216		178,500
Accrued expenses		135,758		148,070
Other levy payable		113,194		113,279
Total	$	439,015	$	455,228

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 9 - LOAN PAYABLES

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

	September 30, 2008		June 30, 2008
Short term loans payable:
Xi’an Commercial Bank Xincheng Branch	$	2,188,152	$	2,188,502
Xi’an Beilin District Rural Credit Union Wenyibeilu Branch		554,332		554,421
Agriculture Bank Yanglingshifangqu Branch		1,342,066		1,459,002
Total	$	4,084,550	$	4,201,925

At September 30, 2008, the Company had a loan payable of $2,188,152 to Xi’an Commercial Bank Xincheng Branch in China, with an annual interest rate of 10.585%, and due on April 1, 2009. The loan is pledge by the land use right and property of the Company.

At September 30, 2008, the Company had a loan payable of $554,332 to Xi’an Beilin District Rural Credit Union Wenyibeilu Branch with an annual interest rate of 11.795%, and due on September 16, 2009. The loan is guaranteed by a former shareholder.

At September 30, 2008, the Company had a loan payable of $1,342,066, to Agriculture Bank in China Yanglingshifangqu Branch, with an annual interest rate of 9.71%, and due on December 28, 2008. The loan is guaranteed by the former shareholder.

The interest expenses from these short-term loans are $122,365 and $92,569 for three months ended September 30, 2008 and 2007.

NOTE 10 - TAX PAYABLES

Tax payables consist of the following as of September 30, 2008 and June 30, 2008:

	September 30, 2008		June 30, 2008
VAT payable	$	5,476,791		4,495,140
Income tax payable		1,659,770		1,038,651
Other levies		344,274		344,484
Total	$	7,480,535		5,878,275

NOTE 11 - ADVANCES FROM UNRELATED COMPANIES

Advances from unrelated companies were $336,151 and $344,628 at September 30, 2008 and June 30, 2008, respectively. The advances were due on demand, unsecured and non interest bearing.

NOTE 12 - OTHER INCOME (EXPENSES)

Other incomes (expenses) mainly consist of interest expenses and subsidy income from government.

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 13 - INCOME TAXES

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

The Company is subject to PRC Enterprise Income Tax at a rate of 33% on the net income. For the year 2007, the company can enjoy tax-free benefit because it becomes a foreign invested company according to the PRC tax law.

The provision for income taxes as of September 30, 2008 and September 30, 2007 consisted of the following:

	2008		2007
Current income tax - Provision for China income and local tax	$	621,483	$	—
Deferred taxes		—		—
Total provision for income taxes	$	621,483	$	—

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate as of September 30, 2008 and September 30, 2007:

	2008			2007
Tax at statutory rate		34	%		34	%
Foreign tax rate difference		(19	%)		(19	%)
Net operating loss in other tax jurisdiction for where no benefit is realized		0	%		(15	%)
Total		15	%		0	%

Beginning January 1, 2008, in the People's Republic of China (PRC) the new Enterprise Income Tax (“EIT”) law will replace the existing laws for Domestic Enterprises (“DES”) and Foreign Invested Enterprises (“FIEs”). The new standard EIT rate of 25% will replace the 33% rate currently applicable to both DES and FIEs. The two years tax exemption and three years 50% tax reduction tax holiday for production-oriented FIEs will be eliminated. From January 1, 2008, TechTeam Jinong is subject to income tax at a rate of 15%. Xi’an Jintai is exempt from paying income tax for calendar 2007 as it is a wholly owned subsidiary of TechTeam which was exempt from income tax. Jintai is also exempt from paying income tax for calendar 2008 as it produces the products which fall into the tax exemption list newly issued by the government.

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Due to non-operation in U.S. and tax free status in China, the Company had no deferred tax as of September 30, 2008 and September 30, 2007.

NOTE 14 - CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS

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

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

MAJOR CUSTOMERS AND VENDORS

There were two vendors from which the Company purchased more than 10% of its raw materials for the three months ended September 30, 2008 with each vendor individually accounting for about 14% and 11%. Accounts payable to those venders amounted to $15,806 as of September 30, 2008.

There are one vendor that are over 10% of the total purchase for the three months ended September 30, 2007 with accounting for about 12%. Accounts payable to the vender amounted to $10,211 as of September 30, 2007.

There was no customer that accounted over 10% of the total sales as of three months ended September 30, 2008 and September 30, 2007.

NOTE 15- STOCKHOLDERS’ EQUITY

6,313,617 shares of common stock were issued to 31 accredited investors (the “Investors”) at $3.25 per share in a private placement of the Company’s common stock that was completed on December 26, 2007. 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”.

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

$2,000,000 is held pending the company hiring a qualified CFO. The Company appointed a CFO in April 2008.

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

$250,000 is for the retaining of an Investors Relation firm.

As of September 30, 2008, the balance of restricted cash is $165,081.

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. If PRC governmental actions or policies result in a Material Adverse Effect, as defined in the Securities Purchase Agreement, that cannot be reversed or cured to the Investors’ reasonable satisfaction, we will be obligated to pay to the Investors as liquidated damages the entire principal amount of their investment, with interest at 10% per annum.

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

If the registration statement is not declared effective by the Commission within 150 days after the closing of the Private Placement (the “Effective Date”), the company will be obligated to pay liquidated damages to the Investors equal in amount to one percent (1%) of the principal amount subscribed for by the Investors for each month (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%).

In accordance with this agreement the company has accrued $704,494 as registration right liability and interest expense of 198,353 for the three month ended September 30, 2008.

NOTE 16 - STATUTORY RESERVES

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

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 included in the statutory reserves as of September 30, 2008 and June 30, 2008 amounted to $2,280,394 and $1,882,797, respectively.

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 17- STOCK OPTIONS

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

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

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

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

On April 8, 2008, the Company issued 35,000 stock options to two directors with an exercise price of $6 and term of two years. 10,500 options vested on June 29, 2008, and 24,500 options vested on July 1, 2009. Compensation expense for the three months ended September 30, 2008 recorded was $15,922.

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 year
Expected volatility	540%
Expected dividend yield	0 %

On April 23, 2008, the Company issued 40,000 stock options to the formal CFO with an exercise price of $6 and term of two years. 12,000 options vested on June 29, 2008, and 28,000 options vested on July 1, 2009. Compensation expense for the year ended June 30, 2008 recorded was $38,994.

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

Risk-free interest rate	2.22%
Expected life of the options	2 year
Expected volatility	544%
Expected dividend yield	0 %

On September 10, 2008, the Company issued 28,000 stock options to the CFO with an exercise price of $4 and term of two years. The options will vest on July 1, 2009. Compensation expense for the three months ended September 30, 2008 recorded was $9,211.

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 year
Expected volatility	538%
Expected dividend yield	0 %

Options outstanding as of September 30, 2008 and related weighted average price and intrinsic value are as follows:

Exercise Prices	Total Options Outstanding	Weighted Average Remaining Life (Years)	Total Weighted Average Exercise Price	Options Exercisable	Weighted Average Exercise Price	Aggregate Intrinsic Value

$3.25-$6	121,500	2.05	$4.49	69,000	$4.15	1,860

The following table summarizes the options outstanding as of September 30, 2008:

	Options Outstanding
Outstanding, June 30, 2008		121,500
Granted		28,000
Forfeited/Canceled		(28,000	)
Exercised		—
Outstanding, September 30, 2008		121,500

CHINA GREEN AGRICULTURE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 18 - COMMITMENTS AND LEASES

The Company has recorded the free lease as rent expenses and contributed capital based on Xian house rental market. From July 2007, the company signed an office lease with the shareholder and started to pay the rent for $1,702 per month. The Company recorded rent expenses of $5,104 and $2,589 as rent expenses for the three months ended September 30, 2008 and 2007, respectively. Rent expenses for the 5 years after September 30, 2008 is as follows:

September 30, 2009	$	20,418
September 30, 2010		20,418
September 30, 2011		20,418
September 30, 2012		20,418
September 30, 2013		20,418
Total	$	102,090

Item 2. 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 consolidated financial statements and the notes to those financial statements appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as the slow-down of the global financial market and its impact on economic growth in general, the competition in the fertilizer industry and the impact of such competition on pricing, revenues and margins, the weather conditions in the areas where our customers are based, the cost of attracting and retaining highly skilled personnel, the prospects for future acquisitions, and the factors set forth elsewhere in this report, our actual results may differ materially from those anticipated in these forward-looking statements. Unless the context indicates otherwise, as used in the following discussion, "Company”, "we,” "us,” and "our,” refer to (i) China Green Agriculture, Inc. (“Green Nevada”, formerly known as Discovery Technologies, Inc.), a corporation incorporated in the State of Nevada; (ii) Green Agriculture Holding Corporation (“Green New Jersey”), a wholly-owned subsidiary of Green Nevada incorporated in the State of New Jersey; (iii) Shaanxi TechTeam Jinong Humic Acid Product Co., Ltd. (“Techteam”), a wholly-owned subsidiary of Green New Jersey organized under the laws of the People’s Republic of China (the “PRC”); and (vi) Xi’an Jintai Agriculture Technology Development Company (“Jintai”), wholly-owned subsidiary of Techteam in the PRC.

Overview

We, through our indirect wholly owned subsidiaries, Techteam and Jintai, have two business segments: (i) research, development, production and distribution of humic acid organic liquid compound fertilizer; 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 85.9% and 77.7% of our total revenues in the three months ended September 30, 2008 and September 30, 2007, respectively.

Fertilizers can be organic (composed of organic matter), or inorganic (made of simple, inorganic chemicals or minerals). Inorganic fertilizers or chemical fertilizers generally may lead to ecosystem degradation. Organic compound fertilizer, the fertilizer we produce, comprises a balance of both organic and inorganic substances, thereby combining the speedy effectiveness of chemical fertilizers with the environmental benefits of the organic fertilizers.

We employ a multi-tiered product strategy in which we tailor our products to different needs and preferences of the different geographic regions across China. Each region has varying climate and soil conditions and grows different crops which require fertilizer which addresses local conditions. For example, in Southern and Eastern China, farmers are able to grow high margin crops such as fruits and seasonal vegetables where climate and rainfall permits, hence they can gain more return on investment from more expensive, specialized fertilizers, whereas in Northwest areas, farmers’ low profit margin crops disincentivize investment in fertilizer requiring that we market a more broad spectrum, low cost fertilizer.

Currently, we sell our products through a network of about 486 regional distributors covering 27 provinces in China. Roughly 20 million farmers are using our fertilizer products. We produced and sold approximately 4,114 and 3,234 metric tons of our fertilizer products for the three months ended September 30, 2008 and September 30, 2007, respectively.

We have developed more than 123 different fertilizer products, including four new products introduced to the market in the quarter ended September 30, 2008. The leading five provinces by revenue for the three months ended September 30, 2008 are Heilongjiang (12.2%), Shandong (8.8%), Xinjiang (8.3%), Guangdong (8.2%) and Hebei (6.9%), in which we generated a total of $3,386,121 revenues, or approximately 44% of our total fertilizer sales from the sale of our fertilizer products for the quarter ended September 30, 2008. Our top five fertilizer products by revenue for the quarter ended September 30, 2008 generated a total of approximately $2,391,228 or 31.4% of the total fertilizer sales during that period.

We also export our humic acid organic liquid compound fertilizer to some foreign countries, including India, Ecuador, Pakistan and Lebanon through contracted distributors. Total revenues from exported products currently account for approximately 1% of our sales for the three months ended September 30, 2008.

We conduct our research and development activities through our wholly owned subsidiary, Jintai, which tests new fertilizers and grows high quality flowers, vegetables and seedlings for commercial sales.

Recent Development

During the three months ended September 30, 2008, we launched four new fertilizer products under the Company’s high-end brand, Jinong. They generated approximately $122,796, or 1.6% of our total revenues from our fertilizer products sold for the quarter ended September 30, 2008.

We are constructing new production facilities in order to increase our annual fertilizer production capacity from the current 10,000 metric tons to 50,000 metric tons by using approximately $13 million of the net proceeds we received in the private placement consummated in December 2007. We anticipate our new production lines will commence trial production in March 2009, and we seek to commence actual production in August 2009.

Results of Operations

The following table shows the operating results of the Company on a consolidated basis for the three months ended September 30, 2008 and September 30, 2007.

	Three months ended			Three months ended
	September 30, 2008			September 30, 2007
Net Sales	$	8,880,002		$	7,191,021
Cost of Goods Sold		3,930,893			2,773,761
Gross Profit		4,949,109			4,417,260
Selling Expenses		216,376			151,705
General and Administrative Expenses		437,129			150,617
Income from Operations		4,295,604			4,114,938
Total Other Income (expense)		(176,194	)		(83,166	)
Income Before Income Taxes		4,119,410			4,031,772
Provision for Income Taxes		621,483			—
Net Income		3,497,927			4,031,772

Net Sales

Total net sales for the three months ended September 30, 2008 increased $1,688,981, or 24%, from $7,191,021 for the three months ended September 30, 2007. The increase was attributable to an increase of $2,036,744 in sales by Techteam, offset by a decrease of $347,763 in sales by Jintai.

Techteam’s net sales, which accounted for 86% of total net sales, were driven by the sales of humic acid organic liquid compound fertilizers. For the three months ended September 30, 2008, Techteam’s net sales increased $2,036,744, or 36%, to $7,625,501 from $5,588,757 for the three months ended September 30, 2007. Sales volume increased 27% to 4,114 tons for the three months ended September 30, 2008 from 3,234 tons for the three months ended September 30, 2007. We launched four new products that accounted for $122,796 of net sales for the three months ended September 30, 2008.

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, decreased $347,763, or 22%, to $1,254,501 for the three months ended September 30, 2008 from $1,602,264 for the same period in 2007. The earthquake and flooding that occurred in China earlier this year had a negative impact on our business in the beginning of the quarter ended September 30 2008. In addition, during the comparable quarter in 2007, Jintai’s sales were significantly higher than normal due to a one time project.

Cost of Goods Sold

Total cost of goods sold for the three months ended September 30, 2008 increased $1,157,132, or 42%, to $3,930,893 compared to that for the three months ended September 30, 2007.

Cost of goods sold by Techteam for the three months ended September 30, 2008 increased $1,087,777, or 51%, to $3,225,946 compared to that for the same period in 2007. This increase was primarily due to higher costs of packaging materials which accounted for over two thirds of the cost of our fertilizer products, the increase in our sales volume and the weakening US dollar against the Renminbi, the official currency in China. As a percentage of total net sales, cost of goods sold by Techteam approximated 36% and 30% for the three months ended September 30, 2008 and 2007, respectively.

Cost of goods sold by Jintai increased $69,354, or 11%, to $704,947 for the three months ended September 30, 2008 compared to that for the three months ended September 30, 2007. Jintai reduced costs by cultivating its own plants as opposed to purchasing them from the outside vendors; however, increases in electricity consumption arising from the addition of new machinery and equipment to our greenhouse and depreciation expenses for our new greenhouse facilities which commenced during the second quarter of fiscal 2008 outweighed the cost saving. As a percentage of total net sales, cost of goods sold by Jintai approximated 8% and 9% for the three months ended September 30, 2008 and 2007, respectively.

Gross Profit

Total gross profit for the three months ended September 30, 2008 increased $531,849, or 12%, to $4,949,109 compared to $4,417,260 for the three months ended September 30, 2007. Gross profit margin approximated 56% and 61% for the three months ended September 30, 2008 and 2007, respectively.

Gross profit from Techteam sales increased $948,967, or 28%, to $4,399,555 for the three months ended September 2008 from $3,450,588 for the three months ended September 2007. Gross profit margin from Techteam sales approximated 58% and 62% for the three months ended September 30, 2008 and 2007, respectively.

Gross profit from Jintai sales decreased $417,117, or 43% for the three months ended September 30, 2008, to $549,554 compared to $966,671 for the three months ended September 30, 2007. Gross profit margin from Jintai sales approximated 44% and 60% for the three months ended September 30, 2008 and 2007, respectively.

Selling Expenses

Selling expenses consist primarily of salaries of sales personnel, advertising and promotion expenses, freight charges and related compensation. Selling expenses were $216,376, or 2% of net sales for the three months ended September 30, 2008 as compared to $151,705, or 2% of net sales for the three months ended September 30, 2007, an increase of $64,671, or approximately 43%. Most of this increase was due to higher travel and lodging expenses for our sales representatives, increases in freight charges due to higher fuel prices and higher salaries from our expanded sales force. We increased our full-time sales representatives to 107 as of September 30, 2008 from 85 as of September 30, 2007.

General and Administrative Expenses

General and administrative expenses consisted primarily of rental expenses, related salaries, business development, depreciation and travel expenses incurred by our general and administrative departments and legal and professional expenses. General and administrative expenses were $437,129, or 5% of net sales for the three months ended September 30, 2008, as compared to $150,617, or 2% for the three months ended September 30, 2007, an increase of $286,512. The increase was primarily attributable to the expenses incurred for operating as a US public company and expanding our board of directors and management team.

Total Other Income (Expenses)

Total other income (expenses) consisted of subsidy income from the PRC government, interest income, interest expenses and bank charges. Total other expenses for the three months ended September 30, 2008 and 2007 were $176,194 and $83,166, respectively. The increase in total other expenses was due to the carry over from the quarter ended June 30, 2008 of part of the liquidated damages incurred to investors in connection with our registration statement, offset by an increase in interest income.

Income Taxes

Techteam is subject to a preferred tax rate of 15% as a result of Techteam’s operation being classified as a High-Tech project under the new PRC Enterprise Income Tax Law (“EIT”) effective on January 1, 2008. Prior to that, Techteam enjoyed an income tax holiday until December 31, 2007, due to its status as a wholly foreign owned enterprise (“WFOE”) and the PRC regulations provided such a tax incentive through December 31, 2007. Therefore, Techteam incurred income tax expenses of $621,483 for the three months ended September 30, 2008, compared to $0 for the same period in the prior year.

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

Net Income

Our net income was $3,497,927 for the three months ended September 30, 2008, a decrease of $533,845 or 13% from $4,031,772 for the three months ended September 30, 2007. The increase in gross profit was offset by income taxes which were previously exempted, higher operating expenses associated with our obligation in compliance with a public company’s reporting and corporate governance requirements and one-time liquidated damages as mentioned above. Net income as a percentage of total net sales approximated 39% and 56% for the three months ended September 30, 2008 and 2007, respectively.

Discussion of Segment Profitability Measures

Our business consists of two segments - the sales of fertilizer products through Techteam and the sales of agricultural products through Jintai. Each of the segments prepares its own quarterly and annual projections with regard to marketing, research and development, production and sales along with financial budgets. We also have a monthly forecasting process and provide variation analysis to the budget.

Liquidity and Capital Resources

Our principal sources of liquidity include cash from operations, borrowings from local commercial banks and proceeds from our December 2007 private placement.

As of September 30, 2008, cash and cash equivalents were $16,919,102, an increase of $306,686 from $16,612,416 as of June 30, 2008, primarily due to cash from operations. This does not include the restricted cash from our escrow account. Pursuant to the Securities Purchase Agreement and Holdback Escrow Agreement by and among the Company and the investors in the private placement, a total of $250,000 cash from the private placement proceeds was escrowed for investor relations purposes. The funds are released to the Company on a monthly basis to pay invoices issued by the Company’s investor relations firm. As of September 30, 2008, there was $165,081 left in the escrow account.

Based on our current operating plan, we believe that existing cash and cash equivalents balances, cash forecasted by management to be generated by operations and borrowings from existing credit facilities will be sufficient to meet our working capital and capital requirements for at least the next 12 months. However, if events or circumstances occur such that we do not meet our operating plan as expected, we may be required to seek additional capital and/or reduce certain discretionary spending, which could have a material adverse effect on our ability to achieve our business objectives. We may seek additional financing, which may include debt and/or equity financing. There can be no assurance that any additional financing will be available on acceptable terms, if at all. Any equity financing may result in dilution to existing stockholders and any debt financing may include restrictive covenants.

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

	Three months ended September 30
	2008			2007
Net cash provided by / (used in) operating activities		411,868			560,796
Net cash used in investing activities		(42,120	)		—
Net cash provided by financing activities		(88,391	)		(536,621	)
Effect of exchange rate change on cash and cash equivalents		(4,671	)		1,509
Net increase in cash and cash equivalents		306,686			25,684
Cash and cash equivalents, beginning balance		16,612,416			81,716
Cash and cash equivalents, ending balance		16,919,102			107,400

Operating Activities

Net cash provided by operating activities was $411,868 for the three months ended September 30, 2008, a decrease of $118,928 from $560,796 for the same period in 2007. The decrease was mainly due to an increase in inventory which was partly offset by a decrease in outstanding accounts receivable.

Investing Activities

Net cash used in investing activities in the three months ended September 30, 2008 was $42,120, mainly due to additions made for our new production line. We did not have any investment activities for the same period in 2007.

Financing Activities

Net cash used by financing activities in the three months ended September 30, 2008 totaled $88,391. The proceeds of $28,311 from the restricted escrow account were offset by the repayment of $116,701 of our loans.

As of September 30, 2008, our loans payable were as follows:

Short term loans payable:	Amount Outstanding	Repayment Terms	Expiration Date
Xi’an Commercial Bank Xincheng Branch	$2,188,152	Annual Interest Rate: 10.585%, repaid on a monthly basis	04/01/2009
Xi’an Beilin District Rural Credit Union Wenyibeilu Branch	$554,332	Annual Interest Rate: 11.795%, repaid on a monthly basis	09/16/2009
Agriculture Bank Yanglingshifangqu Branch	$1,342,066	Annual Interest Rate: 9.71%, repaid on a monthly basis	12/28/2008
Total	$4,084,550

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

Accounts Receivable

Our accounts receivable, net of allowance for doubtful accounts, was $6,340,147 as of September 30, 2008, compared to $3,590,552 as of June 30, 2008, an increase of $2,749,595. The increase resulted from the following factors: (i) our sales increased by approximately 24% from the quarter ended June 30, 2008, many of which occurred in the latter half of the quarter ended September 30, 2008; and (ii) the earthquake and seasonal flooding that occurred in China earlier this year resulted in slight delays for payments of our products. However, we do not believe that the increase in accounts receivable during the quarter will result in any significant change in our ability to collect these receivables based on our historical practices. Additionally, in the comparable period in 2007, our accounts receivable had reached $6,046,270, or approximately 84% of the net sales for that period, compared to the approximately 71% of our net sales for the three months ended September 30, 2008.

Our allowance for doubtful accounts was $56,451 as of September 30, 2008 compared with $96,065 as of June 30, 2008, a decrease of $39,614 due to improvements we made to collect accounts receivable amounts that were greater than 90 days past due.

Inventories

We had inventory of $6,572,248 as of September 30, 2008 as compared to $3,988,979 as of June 30, 2008, an increase of $2,583,268. This increase was mainly due to the increased purchase of raw materials and packaging materials for higher production demands for the next quarter.

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

Revenue recognition

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

Cash and cash equivalents

Accounts receivable

The Company's policy is to maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Any accounts receivable that is outstanding for more than three months will be accounted as allowance for bad debts.

Segment reporting

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

During the three months ended September 30, 2008, the Company was organized into two main business segments: produce fertilizer (Techteam) and agricultural products (Jintai).

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. At the conclusion of the period ended September 30, 2008 we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Rules 13a-15e and 15d-15e). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective and adequately designed to ensure that the information required to be disclosed by us in the reports we submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms and that such information was accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, in a manner that allowed for timely decisions regarding required disclosure.

(b) Changes in internal controls. During the period covered by this report, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

PART II OTHER INFORMATION

Item 6. Exhibits

(a) Exhibits

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

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

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

SIGNATURES

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

	CHINA GREEN AGRICULTURE, INC.


Date: November 10, 2008	BY:	/s/ Tao Li
		Tao Li
		President and Chief Executive Officer
		(principal executive officer)


Date: November 10, 2008	BY:	/s/ Ying Yang
		Ying Yang
		Chief Financial Officer
		(principal financial officer and accounting officer)