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, 2011

OR

[ ] 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 000-53343

ASIA GREEN AGRICULTURE CORPORATION
(Exact name of registrant as specified in its charter)

(86) 0599-2335520
(Issuer's telephone number, including area code)

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

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [   ]

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

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

As of November 1, 2011, the issuer had 36,823,626 shares of common stock outstanding.

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EXPLANATORY NOTE

In this report, unless the context otherwise requires, the terms “AGAC,” “Company,” “we,” “us,” and “our” refer to Asia Green Agriculture Corporation (formerly known as SMSA Palestine Acquisition Corp.), a Nevada corporation and/or its subsidiaries, as the case may be. We are a Nevada holding company and conduct substantially all of our business through our operating subsidiary Fujian Yada Group Co., Ltd. in China.

On August 20, 2010, we entered into an Exchange Agreement (the "Exchange Agreement") with Sino Oriental Agriculture Group Ltd. ("Sino Oriental") and the shareholders of Sino Oriental. In connection the Exchange Agreement we issued 29,214,043 shares of our common stock to the shareholders of Sino Oriental, in exchange for all of the issued and outstanding capital stock of Sino Oriental. Prior to the Exchange Agreement, we were a shell company with nominal operations. Sino Oriental, through its wholly owned subsidiaries operates a green and organic food production and manufacturing business in the People's Republic of China. The acquisition of Sino Oriental has been accounted for as a "reverse merger". Accordingly, the historical financial statements contained in this report reflect the operations of the business of Sino Oriental and its subsidiaries.

On January 18, 2011, we filed amended and restated Articles of Incorporation with the Nevada Secretary of State to give effect to (i) a 2.5 for 1 forward stock split and (ii) an increase in our authorized common stock from 100 million shares to 200 million shares and (iii) a name change from SMSA Palestine Acquisition Corporation to Asia Green Agriculture Corporation. The information in this report reflects the stock split, increase in authorized capital and name change.

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This report contains forward-looking statements, which reflect our views with respect to future events and financial performance. These forward-looking statements are subject to certain uncertainties and other factors that could cause actual results to differ materially from such statements. These forward-looking statements are identified by, among other things, the words "anticipates", "believes", "estimates", "expects", "plans", "projects", "targets" and similar expressions. Any statements that refer to projections of our future financial performance, our anticipated growth and trends in our business, our goals, strategies, focus and plans, and other characterizations of future events or circumstances, including statements expressing general optimism about future operating results and the development of our products, are forward-looking statements.

Forward-looking statements are subject to certain events, risks, and uncertainties that may be outside of our control. When considering forward-looking statements, you should carefully review the risks, uncertainties and other cautionary statements in this report as they identify certain important factors that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. These factors include, among others, the risks described under Item 1A and elsewhere in this report, as well as in the other reports and documents we file with the SEC.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. Except to the extent required by applicable securities laws, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS.

See the accompanying notes to condensed consolidated financial statements

1

See the accompanying notes to condensed consolidated financial statements

2

See the accompanying notes to condensed consolidated financial statements

3

See the accompanying notes to condensed consolidated financial statements

4

5

6

To rationalize the group structure, the Company, Fujian Yada, Yaxin, Shengda and Xinda reorganized their group structure (the “Reorganization”) as follows :-

The aggregate cash consideration of $2,306,858 paid to Mr. Zhan and his spouse, Madam Liufeng Zhou stated in Notes 2 (i), (ii) and (iii) was recorded as deemed distributions of $2,050,133 in 2008 and $256,725 in 2009 in connection of the transactions. Upon the completion of Reorganization on August 20, 2010, Fujian Yada, Yaxin, Shengda and Xinda became the wholly owned subsidiaries of the Company.

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Basis of consolidation and presentation

Before and immediately after the completion of the Reorganization, the Company, Misaky, Sino Oriental, Fujian Yada, Yaxin, Shengda and Xinda were under the common control of Mr. Zhan and his spouse, Madam Liufeng Zhou. Accordingly, accounting for recapitalization is adopted for the preparation of the condensed consolidated financial statements to present the combined results of operations and financial position of the Company, Misaky, Sino Oriental, Fujian Yada, Yaxin, Shengda and Xinda as if the current group structure, which means that Misaky, Sino Oriental, Fujian Yada, Yaxin, Shengda and Xinda are wholly owned subsidiaries of the Company, had been in existence at the beginning of the reporting period. The 29,214,043 shares (as adjusted for the Forward Stock Split) of the Company’s common stock issued for the RTO are deemed the opening common stock since January 1, 2009 to reflect the recapitalization.

The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from these statements pursuant to such rules and regulation and, accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2010.

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.

Concentration of credit risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist principally of cash and cash equivalents, restricted cash, trade receivables and other receivables, prepayment and deposits. As of September 30, 2011 and December 31, 2010, substantially all of the Company’s cash and cash equivalents and restricted cash were held by major financial institutions located in the PRC, which the management believes are of high credit quality. With respect to trade receivables, the Company extends credit based on an evaluation of the customer’s financial condition. The Company generally does not require collateral for trade receivables and maintains an allowance for doubtful accounts of trade receivables.

As of September 30, 2011 and December 31, 2010, the Company did not have any balance of gross trade receivables due from any individual customer that represented 10% or more of the Company’s gross trade receivables.

During the nine months period ended September 30, 2011 and 2010, the Company did not have sales to any individual customer that represented 10% or more of the Company’s consolidated sales.

8

Fair value of financial instruments

The Company follows Topic ASC 820 “Fair Value Measurements and Disclosures”. ASC 820 requires the disclosure of the estimated fair value of financial instruments including those financial instruments for which the fair value option was not elected. The carrying amounts of the financial assets and liabilities approximate to their fair values due to short maturities or the applicable interest rates approximate the current market rates.

The fair values of secured borrowings are estimated using discounted cash flow analyses, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

Derivative financial instruments

The Company accounts for derivative financial instruments in accordance with the Topic ASC 815 “Derivatives and Hedging”. The topic requires the Company to recognize the value of derivative instruments as either assets or liabilities in the condensed consolidated balance sheets at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated as a hedge and qualifies as part of a hedging relationship.

The Company enters into foreign currency forward exchange contracts (“forward exchange contracts”) to manage its exposure to the foreign currency exchange risk related to the trade receivable denominated in Japanese Yen (“JPY”). The Company does not enter into forward exchange contracts for trading or speculative purposes. In accordance with US GAAP, the forward exchange contracts are considered as “derivatives not designated as hedging instruments”. Therefore, the foreign exchange contracts are recorded at fair value, with the gain or loss on these transactions recorded in the condensed consolidated statements of income and comprehensive income within “other (loss) income - net” in the period in which they occur. As of September 30, 2011 and December 31, 2010, the Company had outstanding forward exchange contracts to sell totaling JPY657,126,090 and JPY667,000,000 respectively with maturities of less than one year.

Fair value measurements

When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. The Company uses the following three levels of inputs in determining the fair value of the Company’s assets and liabilities, focusing on the most observable inputs when available :-

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.

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The following items recorded or measured at fair value on a recurring basis in the accompanying condensed consolidated financial statements were based on the use of Level 2 inputs as of September 30, 2011 and December 31, 2010 :-

The Company estimates the fair value of forward exchange contracts on a quarterly basis by obtaining market quotes of spot and forward rates for contracts with similar terms, adjusted where necessary for maturity differences. There were no changes in valuation techniques during the nine months period ended September 30, 2011 and 2010.

Recently issued accounting pronouncements

In July 2010, the FASB issued ASU 2010-20 “Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses”. The objective of ASU 2010-20 is to provide financial statement users with greater transparency about an entity’s allowance for credit losses and the credit quality of its financing receivables. Under ASU 2010-20, an entity is required to provide disclosures so that financial statement users can evaluate the nature of the credit risk inherent in the entity’s portfolio of financing receivables, how that risk is analyzed and assessed to arrive at the allowance for credit losses, and the changes and reasons for those changes in the allowance for credit losses. ASU 2010-20 is applicable to all entities, both public and non-public and is effective for interim and annual reporting periods ending on or after December 15, 2010. Comparative disclosure for earlier reporting periods that ended before initial adoption is encouraged but not required. However, comparative disclosures are required to be disclosed for those reporting periods ending after initial adoption. The adoption of this ASU update has no material impact on the Company’s financial statements.

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The FASB issued ASU 2011-02, “Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring”. The amendments to Topic 310 clarify the guidance on a creditor’s evaluation of whether a debtor is experiencing financial difficulties. A creditor should evaluate whether it is probable that the debtor would be in payment default on any of its debts in foreseeable future without the modification. In addition, the amendments to Topic 310 clarify that a creditor is precluded from using the effective interest rate test in the debtor’s guidance on restructuring of payables (paragraph 470-60-55-10) when evaluating whether a restructuring constitutes a troubled debt restructuring. An entity should disclose the total amount of receivables and the allowance for credit losses as of the end of the period of adoption related to those receivables that are newly considered impaired under Section 310-10-35 for which impairment was previously measured under Subtopic 450-20, Contingencies – Loss Contingencies. The adoption of this ASU update has no material impact on the Company’s financial statements.

In April 2011, the FASB issued ASU 2011-03, “Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements”. The amendments in this ASU update remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. The guidance in this ASU update is effective for the first interim or annual period beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. The adoption of this ASU update is not expected to have a material impact on the Company’s financial statements.

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”. The FASB and the International Accounting Standard Board (IASB) works together to ensure that fair value has the same meaning in U.S. GAAP and IFRSs and that their respective fair value measurement and disclosure requirements are the same (except for minor differences in wording and style). The Boards concluded that the amendments in this ASU update will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs. The amendments in this ASU update explain how to measure fair value. They do not require additional fair value measurements and are not intended to establish valuation standards or affect valuation practices outside of financial reporting. The amendments in this ASU update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The adoption of this ASU update is not expected to have a material impact on the Company’s financial statements.

In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”. In this ASU updated, the entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This Update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this ASU update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments in this ASU update are to be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early application by public entities is permitted. The adoption of this ASU update has no material impact on the Company’s financial statements.

11

In September 2011, the FASB issued ASU 2011-08, “Intangibles - Goodwill and Other (Topic 350)”. The amendments in this update will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under these amendments, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative assessment. The adoption of this ASU update is note expected to have a material impact on the Company’s financial statements.

In September 2011, the FASB issued ASU 2011-09, “Compensation - Retirement Benefits - Multiemployer Plans (Subtopic 715 –80)”. The amendments in this update require additional disclosures about an employer's participation in a multiemployer plan. The management is assessing the impact of this ASU update on the Company’s financial statements.

Restricted cash as of September 30, 2011 and December 31, 2010 consist of the following :-

Trade receivables with carrying value of $1,163,806 and $719,318 as of September 30, 2011 and December 31, 2010 was pledged as collateral under certain loan agreements (see Note 15) respectively.

An analysis of the allowance for doubtful accounts is as follows:

Provision for (reversal of) doubtful debts of $351,226 and $(168,266) were charged to operations during the nine months ended September 30, 2011 and 2010 respectively. During the three months ended September 30, 2011 and 2010, provision for (reversal of) doubtful debts amounted to $274,505 and $(4,506) respectively.

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* Represents primarily prepayment for the production of fresh produce which are expected to be recorded as cost of sales upon harvest within one year.

As of September 30, 2011 and December 31, 2010, the inventories with carrying amount of $379,363 and $746,728 were pledged as collateral under certain loan agreements (see Note 15).

Provision for (Reversal of) obsolete inventories of $50 and $(165,178) were charged to operations during the nine months ended September 30, 2011 and 2010 respectively. During the three months ended September 30, 2011 and 2010, provision for (reversal of) obsolete inventories amounted to $(23,505) and $13,588 respectively.

13

14

(i) During the reporting periods, depreciation charge is included in :-

As of September 30, 2011 and December 31, 2010, buildings and plant and machinery with carrying amount of $8,422,315 and $8,521,316 were pledged as collateral under certain loan and bills payable arrangements, respectively (Note 15).

During the nine months ended September 30, 2011, property, plant and equipment with net book value of $2,202 were scrapped, resulting in a loss of $2,202. During the nine months ended September 30, 2010, property, plant and equipment with net book value of $185,961 were disposed of at a consideration of $236,171, resulting in a gain of $50,210.

For the nine months ended September 30, 2010, the Company capitalized interest of $74,191 to the cost of property, plant and equipment. No interest was capitalized for the three months ended September 30, 2011 and 2010 and for the nine months ended September 30, 2011.

(ii) Construction in progress :-

Construction in progress mainly comprises capital expenditure for construction of the Company’s new offices and factories.

15

The Company obtained the land use rights from the relevant PRC land authorities for a period of fifty years to use the lands on which the office premises, production facilities and warehouse of the Company are situated. As of September 30, 2011 and December 2010, land use rights with carrying amounts of $731,548 and $714,963 were pledged as collateral under certain loan arrangements (Note 15).

The Company obtained several land use rights from the relevant PRC local rural village cooperatives for periods ranging from twenty to thirty years to use the lands for growing and plantation purpose for producing the Company’s fresh produce.

During the nine months ended September 30, 2011 and 2010, amortization amounted to $527,079 and $28,749 respectively. During the three months ended September 30, 2011 and 2010, amortization amounted to $209,713 and $20,900 respectively. The estimated amortization for each of the five succeeding years is approximately $883,000 each year.

16

Notes :-

17

The secured borrowings were secured by the following :-

As of September 30, 2011, Fujian Yada’s secured short-term borrowings of $3,756,000 are subject to the fulfillment of certain financial covenants: to maintain the minimum current ratio of 1.0, minimum quick ratio of 0.5 and maximum debt to asset ratio of 60% at any time.

If Fujian Yada were to breach the covenants, the secured short-term borrowings would become payable on demand. Fujian Yada regularly monitors its compliance with these financial covenants.

As of September 30, 2011, none of the above financial covenants relating to secured short-term borrowings had been breached.

18

Rental expense for operating leases amounted to $2,549,273 and $2,058,762 for the nine months ended September 30, 2011 and 2010, respectively, have been recorded in cost of sales and inventories.

Rental expense for operating leases amounted to $889,926 and $889,486 for the three months ended September 30, 2011 and 2010, respectively, have been recorded in cost of sales and inventories.

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Registration payment arrangement

On August 20, 2010, the Company completed a private placement of 4,848,525 shares (as adjusted for the Forward Stock Split) of common stock and warrants in order to purchase up to 969,717 shares (as adjusted for the Forward Stock Split) of common stock at an exercise price of $3.78 per share (as adjusted for the Forward Stock Split). In connection with the private placement, warrants to purchase up to 339,396 shares (as adjusted for the Forward Stock Split) of common stock at an exercise price of $3.78 per share (as adjusted for the Forward Stock Split) were issued to the Placement Agent.

Pursuant to the subscription agreement, the Company was required to file a registration statement (the “Registration Statement”) under the Securities Act of 1933, as amended, (i) registering for resale by the investors 4,848,525 shares (as adjustment for the Forward Stock Split) of common stock and warrants in order to purchase up to 969,717 shares (as adjustment for the Forward Stock Split) of common stock issued to the investors; and (ii) registering for resale for the Placement Agents for the warrants to purchase up to 339,396 shares (as adjustment for the Forward Stock Split) of common stock (all of the foregoing securities being collectively referred herein as the “Registrable Securities”). The Company agreed to use its best efforts to file the Registration Statement within 30 days from the closing date, dated August 20, 2010 (the “Closing Date”), (the “Registration Filing Date”) and to have the Registration Statement declared effective prior to the 150th day following the Closing Date (the “Registration Effective Date”).

In the event that (i) the Registration Statement has not been filed on or prior to the Registration Filing Date or declared effective by the SEC on or before the Registration Effective Date; and (ii) the Registrable Securities included in such Registration Statement are not saleable under Rule 144, the Company shall pay to each investor as liquidated damages, a cash payment equal to 0.5% per month of the aggregated amount invested by such investors in the private placement until the registration statement has been filed and/or declared effective, but the maximum amount of liquidated damages is capped at 6% on aggregated amount invested by such investors. In accordance with ASC 450 “Contingencies”, the Company records a liability in the condensed consolidated financial statements for these contingencies when a loss is known or considered probable and the amount can be reasonably estimated. In accordance with FASB ASC 825-20, if the Company determines a registration payment arrangement is probable and can be reasonably estimated, a liability should be recorded. The Registration Statement was declared effective on July 15, 2011 and the provision of liquidated damages was made in an amount of $443,686 as of September 30, 2011 with reference to the effective date of Registration Statement. Liquidated damage of $Nil and $443,686 was recognized and allocated to administrative expenses for the three and nine months ended September 30, 2011, respectively.

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A summary of share option plan activity for the nine months ended September 30, 2011 is presented below:

The weighted average grant-date fair value of options granted during 2011 was $1.78 per share. Compensation expense of $2,050,922 arising from abovementioned share options granted was recognized and allocated $1,637,146 to administrative expenses and $413,776 to selling expenses for the nine months ended September 30, 2011.

The fair value of the above option awards was estimated on the date of grant using the Binomial Option Valuation Model together with the following assumptions.

As of September 30, 2011, there was unrecognized compensation cost of $3,445,898 related to the above non-vested share options which are expected to be recognized over approximately 4.4 years.

Warrant

On February 10, 2011, the Company issued warrants to a service provider the warrant holder is entitled to purchase up to 50,000 shares of the Company’s common stock at a price of $4.00 per share in exchange for investor relation services provided to the Company. These warrants have exercisable period of 5 years commencing from February 10, 2011.

At the grant date, the fair value of warrants issued was approximately $2.04 each. Compensation expense of $101,907 arising from abovementioned warrants issued was recognized and allocated to administrative expenses for the nine months ended September 30, 2011.

The fair value of the above warrants issued was estimated on the date of grant using the Binomial Option Valuation Model together with the following assumptions.

As of September 30, 2011, there was no unrecognized compensation cost related to the above warrants.

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The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operating results solely by monthly fresh produce and processed produce and operating results of the Company and, as such, the Company has determined that the Company has two operating segments as defined by ASC 280, “Segments Reporting” : Fresh produce and processed produce.

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on reportable operating segments’ gross profit. There were no inter-segment sales or transfers during the three and nine months ended September 30, 2011 and 2010. Management does not track segment assets and, therefore, segment assets information is not presented.

A reconciliation is provided for unallocated amounts relating to corporate operations which is not included in the segment information.

22

All of the Company’s long-live assets are located in the PRC. Geographic information about the revenues, which are classified based on the customers, is set out as follows :-

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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

FORWARD-LOOKING STATEMENTS

Statements in the following discussion and throughout this report that are not historical in nature are “forward-looking statements”. You can identify forward-looking statements by the use of words such as “expect,” “anticipate,” “estimate,” “may,” “should,” “intend,” “believe,” and similar expressions. Although we believe the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to risk and we can give no assurances that our expectations will prove to be correct. Actual results could differ from those described in this report because of numerous factors, many of which are beyond our control. These factors include, without limitation, those described under Item 1A “Risk Factors.” We undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes. Please see “Special Note Regarding Forward Looking Statements” at the beginning of this report.

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes and other financial information appearing elsewhere in this report.

OVERVIEW

We are a green and organic food company with headquarters in Fujian Province, China. We currently provide over 100 kinds of fresh and processed products in three principal categories, bamboo shoot products, fresh vegetables and fruit, and processed vegetables. Bamboo shoot products accounted for approximately 52% of our revenue in 2010 and 54% of our revenue in the first nine months of 2011, while fresh vegetables and fruit accounted for approximately 28% and 29% of revenue, processed vegetables for 7% and 7% of revenue, and bamboo wood for 13% and 10% of revenue, respectively.

We have a vertically integrated operation consisting of planting, manufacturing and sales of final products. We can supply most of the fresh raw material for our products from our own land. We view our integrated operations as key to the quality of our products, as we monitor substantially all of our products from seed to ultimate sale. Accordingly, our ability to grow is dependent in part on the size of lands we control under lease, and our processing and storage capacity. We are currently experiencing rapid growth in our business and continually seek to procure additional lands for planting. We anticipate making capital expenditures over the next nine to twenty-one months to increase our cold storage capacity, increase planting bases and processing capacity.

We conduct our operations in China and sell products in 10 provinces and administrative regions in China as well as the Japanese market. We derived approximately 94% of our revenue in 2010 and in the first nine months of 2011 in China and approximately 6% in Japan.

Agricultural products are naturally subject to seasonality tied to their local growing season. For example, our fresh bamboo shoots, an important revenue driver, are only available for sale from approximately December through April. As a result, our fourth and first quarter revenues tend to be significantly higher than our second and third quarter revenues. We seek to offset the impact of seasonality on our revenues by managing a diversified portfolio of products. In addition to product diversification, we use cold storage facilities to preserve some of our fresh products to extend their season and time market sales to improve gross margin. We also maintain research and development facilities that focus on the development of unique products which either have unique size or flavor characteristics or which have the potential to expand the market for products, such as our high PH bamboo shoots.

We believe that investments we made in physical facilities and planting bases in 2010 establish a strong foundation for growth during the remainder of 2011 and beyond. Our growth strategy is currently centered on the following five initiatives:

• Expand our planting bases.

• Improve our profitability by continuously introducing new high value added products.

• Further expand our domestic sales and distribution network and enter new markets.

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• Increase our cold storage capacity.

• Further enhance our brand recognition.

RECENT DEVELOPMENTS

Net sales for the first nine months of 2011 were $76.1 million, an increase of approximately 50% over net sales in the first nine months of 2010. Net income for the first nine months of 2011 was $23.6 million, an increase of approximately 42%, compared to the nine months ended September 30, 2010.

Our continued growth has been the result of focus on our five core initiatives. The table below summarizes our planting bases as of December 31, 2010 and September 30, 2011.

Our research and development team is continuously evaluating new product opportunities with the potential to address unmet market needs or provide additional value characteristics to our products. In 2010 we launched our proprietary high PH bamboo shoots, which maintain freshness and are generally sold in the "off season," when fresh bamboo shoots are not available. Sales of our high PH bamboo shoots, as well as increased sales of bamboo wood products helped to improve margins for the nine months ended September 30, 2011. Overall, our gross margins for the nine months ended September 30, 2011 were 40%, as compared to our gross margins of 38% for the nine months ended September 30, 2010.

We currently sell through distributors and members of our own sales force to farmers' markets, supermarkets, food manufacturers, restaurants and retailers in China. The following table shows the number of internal sales team members, outside sales agents and markets served at December 31, 2010 and September 30, 2011.

During the remainder of 2011, we plan to continue expansion of our sales network domestically, with our focus on the cities of Jinan, Nanjing, Beijing, Tianjin and Harbin. We have no immediate plans to expand our international sales presence beyond Japan.

We had a 6,000 metric ton cold storage facility as at September 30, 2011 for storing fresh and semi-finished products. We are adding an additional 5,500 metric ton cold storage facility in order to meet the requirements of our existing products and the anticipated need for storage as a result of our recent new product launches. As of September 30, 2011, the construction work for this additional facility was underway.

We have been gaining brand recognition in China, especially in Fujian Province. At September 30, 2011 we had expanded our sales to approximately 1,200 supermarket stores. We plan to further enhance our name recognition through establishing branded counters at supermarkets. We also have opened five Yada-branded distribution locations in Fujian Province and Shanghai.

CRITICAL ACCOUNTING POLICIES

Our financial statements have been prepared in accordance with the accounting policies which are consistent with the audited consolidated financial statements for the year ended December 31, 2010. Please refer to the audited consolidated financial statements for the year ended December 31, 2010 for the description of all of the accounting policies.

Management believes that the most critical accounting policies important to understanding our financial statements and financial condition are our policies concerning inventories, revenue recognition, and income taxes and foreign currency translation, discussed in more detail below. Please see “Note 3 – Significant Accounting Policies” in our financial statements for a more complete discussion of the accounting policies we have identified as the most important to an understanding of our current financial condition and results of operations.

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     The preparation of financial statements in conformity with United States generally accepted accounting principles, or “GAAP,” requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. As the number of variables and assumptions affecting the probable future resolution of the uncertainties increase, these judgments become even more subjective and complex.

Inventories

Inventories are stated at the lower of cost or market. Cost is computed using the weighted average cost method for finished goods, raw materials and packaging materials. Finished goods include fresh and processed produce while raw materials and packaging materials consist primarily of purchased fresh and processed produce and containers.

Expenditures on bamboo and other growing crops are valued at the lower of cost or market and are deferred and charged to cost of sales when the related produce is harvested and sold. The deferred growing costs included in inventories in the consolidated balance sheets consist primarily of land rental cost and service costs.

In assessing the ultimate realization of inventories, management makes judgments as to future demand requirements compared to current or committed inventory levels. Our reserve requirements generally increase or decrease with our projected demand requirements and market conditions. We estimate the demand requirements based on market conditions, forecasts prepared by our customers, sales contracts and orders in hand.

In addition, we estimate net realizable value based on intended use, current market value and inventory ageing analyses. We write down the inventories for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventories and the estimated market value based upon assumptions about future demand and market conditions.

Based on the above assessment, we established a general provision to make a 20% provision for inventories aged between one and two years and 100% provision for inventories aged over 2 years.

Revenue recognition

Revenue from sales of the Company’s products, including fresh produce and processed produce, is recognized upon customer acceptance, which occurs at the time of delivery to the customer, provided persuasive evidence of an arrangement exists, such as signed sales contract, the significant risks and rewards of ownership have been transferred to the customer at the time when the products are delivered to our customer with no significant post-delivery obligation on our part, the sales price is fixed or determinable and collection is reasonably assured. We do not provide our customers with contractual rights of return and post-delivery discount for any of our products. When any significant post-delivery performance obligation exists, revenue is recognized only after such obligation is fulfilled. We evaluate the terms of sales agreement with our customer in order to determine whether any significant

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post-delivery performance obligations exist. Currently, the sales under fresh produce and processed produce segments do not include any terms which may impose any significant post-delivery performance obligations.

Revenue from sales of our product represents the invoiced value of goods, net of the value-added tax (“VAT”). Our processed produce products that are sold in the PRC are subject to VAT at a rate of 17 percent of the gross sales price. This VAT may be offset by VAT paid on raw materials, other materials or costs included in the cost of producing our processed produce products.

Income taxes

We use the asset and liability method of accounting for income taxes pursuant to ASC 740 "Income Taxes" (previously SFAS No. 109). Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carry forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

We file separate tax returns in the United States and China. Income taxes of our PRC operating subsidiaries are calculated in accordance with taxation principles currently effective in the PRC. For Asia Green Agriculture Corporation, applicable U.S. tax laws are followed. We expect that the tax rate of 25% currently applicable to our Fujian Yada operating subsidiary will remain unchanged in the remainder of 2011.

In 2007, China passed the New EIT Law and its implementing rules, both of which became effective on January 1, 2008. The New EIT Law significantly curtails tax incentives granted to foreign-invested enterprises under the previous law. The New EIT Law, however, (i) reduces the statutory rate of enterprise income tax from 33% to 25%, (ii) permits companies to continue to enjoy their existing tax incentives, adjusted by certain transitional phase-out rules, and (iii) introduces new tax incentives, subject to various qualification criteria.

Substantially all of our income may be derived from dividends we receive from our PRC operating subsidiaries. The New EIT Law and its implementing rules generally provide that a 10% withholding tax applies to China-sourced income derived by non-resident enterprises for PRC enterprise income tax purposes. We expect that such 10% withholding tax will apply to dividends paid to us by our PRC subsidiaries but this treatment will depend on our status as a non-resident enterprise. For detailed discussion of PRC tax issues related to resident enterprise status, see "Risk Factors — Risks Associated with Doing Business in China — Under the New EIT Law, we may be classified as a 'resident enterprise' of China." Such classification will likely result in unfavorable tax consequences to us and our non-PRC stockholders.

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Foreign currency translation

Our functional currency is the RMB and RMB is not freely convertible into foreign currencies. We maintain our financial statements in our functional currency. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet date. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchanges rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.

For financial reporting purposes, our financial statements that are prepared using the functional currency have been translated into United States dollars. Assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and stockholder's equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders' equity.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2011 Compared to Three Months Ended September 30, 2010

The following table sets forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of our net sales.

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The functional currency of the Company is RMB; however, our financial information is expressed in US Dollars. The results of operations reported in the table above is based on the exchange rate of RMB 6.4029 to $1 for the three months ended September 30, 2011 and the rate of RMB 6.7613 to $1 for the three months ended September 30, 2010.

Net Sales. Our net sales consist of revenue derived from the sale of our food products, less discounts and returns. For the three months ended September 30, 2011, our net sales were $29.6 million compared to $18.0 million for the same period last year, an increase of $11.6 million or approximately 65%. The increase was primarily due to increased demand of products. Of such increase, approximately $10.9 million was attributable to increased sales volume of our products and approximately $0.7 million due to higher average selling prices of our products.

Cost of Sales. Our cost of sales is primarily comprised of the costs of our raw materials, labor, overhead and sales tax. For the three months ended September 30, 2011 our cost of sales were $14.7 million compared to $8.5 million for the same period last year, an increase of $6.2 million or approximately 74%. This increase was primarily due to higher sales volume. As a percentage of net sales, our cost of sales increased to approximately 50% for the three months ended September 30, 2011 from approximately 47% for the three months ended September 30, 2010.

Gross Profit and Gross Margin. Our gross profit is equal to our net revenues less our cost of sales. Our gross profit was $14.9 million for the three months ended September 30, 2011 compared to $9.5 million for the same period last year, an increase of $5.4 million or approximately 57%. Gross profit as a percentage of net sales was approximately 50% and 53% for the three months ended September 30, 2011 and 2010, respectively. Our gross margin decreased primarily due to a decrease in sales of higher margin bamboo wood as a proportion of total net sales revenue as well as a decrease in the gross margin of our bamboo wood, in each case comparing the third quarter of 2011 with the year ago quarter. The gross margin of our bamboo wood was approximately 74% and 82% in the third quarters of 2011 and 2010, respectively.

Selling and Administrative Expenses. Our selling and administrative expenses increased $0.8 million, or approximately 108%, to $1.5 million for the three months ended September 30, 2011 from $0.7 million for the three months ended September 30, 2010.

Our selling expenses include sales commissions, the cost of promotional materials, salaries and fringe benefits of sales personnel, transportation costs and other sales related costs. Our selling expenses amounted to $0.4 million for the three months ended September 30, 2011, similar to $0.4 million for the three months ended September 30, 2010. As a percentage of net sales, selling expenses for the three months ended September 30, 2011 were approximately 2% of net sales, as compared to 3% for the three months ended September 30, 2010.

Our administrative expenses primarily include the costs associated with staff and support personnel who manage our business activities, office expense, professional fees paid to third parties, foreign exchange expense, and depreciation of non-production facilities. Our administrative expenses increased $0.8 million, or approximately 276%, to $1.1 million for the three months ended September 30, 2011 from $0.3 million for the three months ended September 30, 2011. The increase is mainly attributed to a non-cash compensation expense of approximately $0.6 million arising from the grant of employee stock options and an increase in salaries of approximately $0.1 million. As a percentage of net sales, administrative expenses increased to approximately 4% for the three months ended September 30, 2011 from 2% for the three months ended September 30, 2010.

Net Finance Costs. Our net finance costs decreased to approximately $0.2 million for the three months ended September 30, 2011 from approximately $0.3 million for the three months ended September 30, 2010. The decrease is mainly due to a decrease in exchange loss.

Income Taxes. We had income tax credit of approximately $0 million for the three months ended September 30, 2011, as compared to approximately $0.1 million for the three months ended September 30, 2010. This slight decrease was primarily attributable to our decreased taxable loss for the three months ended September 30, 2011 as compared to the three months ended September 30, 2010.

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Net Income. Our net income increased by $4.4 million or approximately 52%, to $12.8 million for the three months ended September 30, 2011. The main reasons for the growth of our net income were due to the changes in our other key components of our results of operations discussed above.

Nine months Ended September 30, 2011 Compared to Nine months Ended September 30, 2010

The following table sets forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of our net sales.

(All amounts, other than percentage, in thousands of US dollars)

The functional currency of the Company is RMB; however, our financial information is expressed in US Dollars. The results of operations reported in the table above is based on the exchange rate of RMB 6.4876 to $1 for the nine months ended September 30, 2011 and the rate of RMB 6.7981 to $1 for the nine months ended September 30, 2010.

Net Sales. Our net sales consist of revenue derived from the sale of our food products, less discounts and returns. For the nine months ended September 30, 2011, our net sales were $76.1 million compared to $50.7 million for the same period last year, an increase of $25.4 million or approximately 50%. The increase was primarily due to increased sales volume resulting from increased demand for our products. Of such increase, approximately $21.9 million was attributable to increased sales volume of our products, while approximately $3.5 million was due to higher average selling prices of our products.

Cost of Sales. Our cost of sales is primarily comprised of the costs of our raw materials, labor, overhead and sales tax. For the nine months ended September 30, 2011 our cost of sales were $46.0 million compared to $31.4 million for the same period last year, an increase of $14.6 million or approximately 46%. This increase was primarily due to higher sales volume. As a percentage of net sales, our cost of sales decreased to approximately 60% for the nine months ended September 30, 2011 from approximately 62% for the nine months ended September 30, 2010.

Gross Profit and Gross Margin. Our gross profit is equal to our net revenues less our cost of sales. Our gross profit was $30.2 million for the nine months ended September 30, 2011 compared to $19.3 million for the same period last year, an increase of $10.9 million or approximately 56%. Gross profit as a percentage of net sales was approximately 40% and 38% for the nine months ended September 30, 2011 and 2010, respectively. Our gross margin increased primarily due to product mix as we had an increase in sales of higher margin products such as bamboo wood and high PH bamboo shoots for the nine months ended September 30, 2011 as compared to 2010. The gross margin of our high PH bamboo shoots was approximately 83% and 76% for the nine months ended September 30, 2011 and 2010, respectively. The gross margin of our bamboo wood was approximately 75% and 82% for the nine months ended September 30, 2011 and 2010, respectively.

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Selling and Administrative Expenses. Our selling and administrative expenses increased $3.8 million, or approximately 193%, to $5.7 million for the nine months ended September 30, 2011 from $1.9 million for the nine months ended September 30, 2010.

Our selling expenses include sales commissions, the cost of promotional materials, salaries and fringe benefits of sales personnel, transportation costs and other sales related costs. Our selling expenses increased to $1.5 million for the nine months ended September 30, 2011, from $1.0 million for the nine months ended September 30, 2010. As a percentage of net sales, selling expenses for the nine months ended September 30, 2011 were approximately 2% of net sales, as compared to 2% for the nine months ended September 30, 2010. The dollar increase of our selling expenses is primarily attributable to non-cash compensation expense related to the grant of employee stock option, and to a lesser extent to an increase in transportation costs.

Our administrative expenses primarily include the costs associated with staff and support personnel who manage our business activities, office expense, professional fees paid to third parties, foreign exchange expense, and depreciation of non-production facilities. Our administrative expenses increased $3.3 million, or approximately 367%, to $4.2 million for the nine months ended September 30, 2011 from $0.9 million for the nine months ended September 30, 2011. The increase is mainly attributed to non-cash compensation expense of approximately $1.6 million arising from the grant of employee stock options; an increase in salaries of approximately $0.6 million; bad debts expense of approximately $0.3 million; provision for liquidated damages of approximately $0.3 million to certain investors as discussed in Note 20 to our condensed consolidated financial statements filed herewith; and compensation expense of approximately $0.1 million arising from the grant of warrants to an investor relations firm that we did not incur during the nine months ended September 30, 2010. As a percentage of net sales, administrative expenses increased to approximately 6% for the nine months ended September 30, 2011 from approximately 2% for the nine months ended September 30, 2010.

Net Finance Costs. Our net finance costs decreased to approximately $0.4 million for the nine months ended September 30, 2011 from approximately $0.7 million for the nine months ended September 30, 2010. The decrease is mainly due to the decrease of exchange loss, and to a lesser extent, to government subsidies for agricultural producers for interest expenses set off in the amount of approximately $0.1 million. If such government subsidies decrease in the future, interest expense set off will also decrease and the results of our operations and cash flow may be adversely affected; however, we do not expect any such adverse effect to be significant.

Income Taxes. We had income taxes of $0.2 million for the nine months ended September 30, 2011, as compared to $0.1 million for the nine months ended September 30, 2010. This increase was primarily attributable to the increase of taxable profit for the nine months ended September 30, 2011 as compared to the nine months ended September 30, 2010.

Net Income. Our net income increased by $7.0 million or approximately 42%, to $23.6 million for the nine months ended September 30, 2011. The main reasons for the growth of our net income were due to the changes in our other key components of our results of operations discussed above.

Liquidity and Capital Resources

As of September 30, 2011, we had cash and cash equivalents of approximately $7.7 million, compared to approximately $10.0 million for December 31, 2010. Our accounts receivable at September 30, 2011 were $30.7 million, compared to $20.9 million at December 31, 2010. Our days’ sales outstanding increased slightly to 110 days as at September 30, 2011, similar to 106 days as at December 31, 2010. We finished the third quarter with working capital of $50.7 million, compared to $30.0 million at December 31, 2010.

The following table provides detailed information about our net cash flow for all financial statements periods presented in this report.

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Cash Flows from Operating Activities.

Net cash provided by operating activities was $6.0 million for nine months ended September 30, 2011, compared to $9.6 million provided by operating activities for nine months ended September 30, 2010. The change was primarily attributable to an increase in inventories.

Our days' sales outstanding was 110 days as at September 30, 2011 similar to 106 days as at December 31, 2010.

Cash Flows from Investing Activities.

Net cash used in investing activities for the nine months ended September 30, 2011 was $10.8 million compared to $8.0 million for the nine months ended September 30, 2010. The increase of net cash used in investing activities was primarily attributable to capital expenses for the expansion of planting bases and production facilities. During the nine months ended September 30, 2011 we invested $0.9 million to acquire property, plant and equipment and made an additional $9.9 million in payments on the outstanding balance due in relation to previously acquired land use rights.

Cash Flows from Financing Activities.

Net cash provided by financing activities was $2.4 million in the nine months ended September 30, 2011 compared to $9.2 million used in financing activities for the nine months ended September 30, 2010. Net cash provided by financing activities for the nine months ended September 30, 2011 was primarily attributable to borrowings under bank credit facilities. Net cash provided by financing activities for the nine months ended September 30, 2010, included the proceeds from a $13.7 million sale of common stock and warrants in a private placement transaction. There was no similar equity financing transaction in 2011.

As of September 30, 2011 and December 31, 2010, the Company's banking facilities were composed of the following: (All amounts, other than percentages, in thousands of U.S. dollars)

We had the following financing arrangements as of September 30, 2011, including those with third parties:

• Fujian Yada Group Co., Ltd. (formerly known as Fujian Shengda Food Co., Ltd.) entered into a Maximum Amount Mortgage Contract on March 19, 2009 with China Construction Bank Corporation Ltd Songxi Branch to provide a RMB4,130,000, or $618,615 mortgage to secure certain debts owed to China Construction Bank Corporation Ltd Songxi Branch by Fujian Shengda Food Development Co., Ltd.

• Fujian Yada Group Co., Ltd. (formerly known as Fujian Shengda Food Co., Ltd.)  entered into a Maximum Amount Mortgage Contract on February 27, 2009 with China Construction Bank Corporation Ltd Songxi Branch to provide a RMB15,160,000, or $2,270,753 mortgage to secure certain debts owed to China Construction Bank Corporation Ltd Songxi Branch by Fujian Shengda Food Development Co., Ltd.

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• Fujian Yada Group Co., Ltd. (formerly known as Fujian Shengda Food Co., Ltd.) entered into a Maximum Amount Mortgage Contract on March, 2009 with China Construction Bank Corporation Ltd Songxi Branch to provide a RMB7,840,000, or $1,174,321 mortgage to secure certain debts owed to China Construction Bank Corporation Ltd Songxi Branch by Fujian Shengda Food Development Co., Ltd.

• Fujian Shengda Import & Export Trading Co., Ltd., an indirectly owned subsidiary of the Company, entered into a Maximum Mortgage Contract on February 27, 2009 with China Construction Bank Corporation Ltd Songxi Branch to provide a RMB29,000,000, or $4,343,788 mortgage guarantee for certain debts owed to China Construction Bank Corporation Ltd Songxi Branch by Fujian Shengda Food Development Co., Ltd.

• Fujian Yada Group Co., Ltd. entered into a RMB Fund Loan Contract on November 26, 2010 to borrow from China Construction Bank Corporation Ltd Songxi Branch the amount of RMB8,000,000, or $1,209,921 for the purpose of capital turnover, and the annual interest rate of the loan shall be 10% higher than the benchmark interest rate announced by the People’s Bank of China as of the value date. The term of such RMB Fund Loan Contract shall be from November 26, 2010 to November 26, 2011. Proceeds of the loan may be used for permitted purposes only, otherwise a 100% penalty applies.

• Mr. Zhan Youdai and Ms. Zhou Liufeng entered into a Natural Person Guarantee Contract on November 26, 2010 with Songxi Sub-branch of Construction Bank of China Co., Ltd. to assume the several and joint guarantee liability for the loan under a RMB Fund Loan Contract between Fujian Yada Group Co., Ltd., an indirectly owned subsidiary of the Company, and Songxi Sub-branch of Construction Bank of China Co., Ltd. valued at RMB8,000,000, or $1,209,921.

• Fujian Yada Group Co., Ltd. entered into a RMB Fund Loan Contract on February 16, 2011 to borrow from Songxi Sub-branch of Construction Bank of Co., Ltd the amount of RMB2,900,000, or $441,380 for purpose of capital turnover, and the annual interest rate of the loan shall be benchmark interest rate announced by the People’s Bank of China as of the value date. The term of such RMB Fund Loan Contract shall be from February 16, 2011 to February 16, 2012.

• Mr. Zhan Youdai and Ms. Zhou Liufeng entered into a Natural Person Guarantee Contract on February 15, 2011 with Songxi Sub-branch of Construction Bank of China Co., Ltd to assume the several and joint guarantee liability for the loan under a RMB Fund Loan Contract between Fujian Yada Group Co., Ltd, an indirectly owned subsidiary of the Company, and Songxi Sub-branch of Construction Bank of China Co., Ltd. valued at RMB2,900,000, or $441,380.

• Fujian Yada Group Co., Ltd. entered into a RMB Fund Loan Contract on February 16, 2011 to borrow from Songxi Sub-branch of Construction Bank of Co., Ltd the amount of RMB3,100,000, or $471,820 for purpose of capital turnover, and the annual interest rate of the loan shall be benchmark interest rate announced by the People’s Bank of China as of the value date. The term of such RMB Fund Loan Contract shall be from February 16, 2011 to February 16, 2012.

• Mr. Zhan Youdai and Ms. Zhou Liufeng entered into a Natural Person Guarantee Contract on February 15, 2011 with Songxi Sub-branch of Construction Bank of China Co., Ltd to assume the several and joint guarantee liability for the loan under a RMB Fund Loan Contract between Fujian Yada Group Co., Ltd, an indirectly owned subsidiary of the Company, and Songxi Sub-branch of Construction Bank of China Co., Ltd. valued at RMB3,100,000, or $471,820.

• Fujian Yada Group Co., Ltd. entered into a RMB Fund Loan Contract on March 2, 2011 to borrow from Songxi Sub-branch of Construction Bank of Co., Ltd the amount of RMB5,000,000, or $761,000 for purpose of capital turnover, and the annual interest rate of the loan shall be benchmark interest rate announced by the People’s Bank of China as of the value date. The term of such RMB Fund Loan Contract shall be from March 2, 2011 to February 2, 2012.

• Mr. Zhan Youdai and Ms. Zhou Liufeng entered into a Natural Person Guarantee Contract on March 2, 2011 with Songxi Sub-branch of Construction Bank of China Co., Ltd to assume the several and joint guarantee liability for the loan under a RMB Fund Loan Contract between Fujian Yada Group Co., Ltd, an indirectly owned subsidiary of the Company, and Songxi Sub-branch of Construction Bank of China Co., Ltd. valued at RMB5,000,000, or $761,000.

• Fujian Yada Group Co., Ltd and Industrial and Commercial Bank of China Limited Jianyang Sub-branch entered into a Maximum Amount Guarantee Contract on June 28, 2010 to guarantee a maximum of RMB20,000,000, or $3,044,001 for debts within the period from June 28, 2010 to June 27, 2011 owed to

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the Industrial and Commercial Bank of China Limited Jianyang Sub-branch by Fujian Yaxin Food Group Co., Ltd.

• Fujian Yaxin Food Co., Ltd. entered into a Small Business Loan Agreement on April 6, 2011 to borrow from Industrial and Commercial Bank of China Limited Jianyang Sub-branch the amount of RMB5,000,000, or $773,503 for purpose of purchasing financial resources and materials, and the annual interest rate of the loan shall be 6.941%. The term of the Agreement shall be from April 6, 2011 to April 5, 2012.

• Fujian Yaxin Food Co., Ltd. entered into a Maximum Amount Liquid Fund Loan Contract on May 5, 2011 to borrow from Jianyang City Rural Credit Cooperative Union Business Department the amount of RMB2,000,000, or $309,401 for purpose of purchasing financial resources and materials, and the monthly interest rate of the loan shall be 10.908 ‰. The term of the Agreement shall be from May 5, 2011 to May 4, 2012.

• Fujian Yaxin Food Co., Ltd. entered into a Domestic Factoring Contract on July 26, 2011 to borrow from Industrial and Commercial Bank of China Limited Jianyang Sub-branch the amount of RMB3,000,000, or $469,498 for purpose of purchasing materials, and the annual interest rate of the loan shall be the benchmark interest rate announced by the People’s Bank of China plus a floating rate of 5% on each loan issuing date. The term of such Contract shall be from July 26, 2011 to January 12, 2012.

• Fujian Yada Group Co., Ltd. entered into a RMB Fund Loan Contract on August 4, 2011 to borrow from Songxi Sub-branch of Construction Bank of Co., Ltd the amount of RMB3,600,000, or $563,398 for purpose of capital turnover, and the annual interest rate of the loan shall be the benchmark interest rate announced by the People’s Bank of China as of the value date. The term of such RMB Fund Loan Contract shall be from August 4, 2011 to February 4, 2012.

• Mr. Zhan Youdai and Ms. Zhou Liufeng entered into a Natural Person Guarantee Contract on August 4, 2011 with Songxi Sub-branch of Construction Bank of China Co., Ltd to assume the several and joint guarantee liability for the loan under a RMB Fund Loan Contract between Fujian Yada Group Co., Ltd, an indirectly owned subsidiary of the Company, and Songxi Sub-branch of Construction Bank of China Co., Ltd. valued at RMB3,600,000, or $563,398.

• Fujian Yada Group Co., Ltd. entered into a RMB Fund Loan Contract on August 4, 2011 to borrow from Songxi Sub-branch of Construction Bank of Co., Ltd the amount of RMB1,400,000, or $219,099 for purpose of capital turnover, and the annual interest rate of the loan shall be the benchmark interest rate announced by the People’s Bank of China as of the value date. The term of such RMB Fund Loan Contract shall be from August 4, 2011 to February 4, 2012.

• Mr. Zhan Youdai and Ms. Zhou Liufeng entered into a Natural Person Guarantee Contract on August 4, 2011 with Songxi Sub-branch of Construction Bank of China Co., Ltd to assume the several and joint guarantee liability for the loan under a RMB Fund Loan Contract between Fujian Yada Group Co., Ltd, an indirectly owned subsidiary of the Company, and Songxi Sub-branch of Construction Bank of China Co., Ltd. valued at RMB1,400,000, or $219,099.

• Fujian Yada Group Co., Ltd. entered into a Domestic Commercial Invoice Discount Financing Application Letter to borrow from Bank of China Songxi Branch an approximate amount of RMB3,278,635, or $513,104 for purpose of financing, and the annual interest rate of the loan shall be 5.85%. The term of such RMB Fund Loan Contract shall be from August 15, 2011 to January 2, 2012.

• Fujian Yada Group Co., Ltd entered into a Mortgage Loan Agreement on August 17, 2011 to borrow from Songxi County rural Credit Cooperative Business Department the amount of RMB6,000,000, or $938,997 for purpose of purchasing fresh agricultural products, and the monthly interest of the loan shall be 0.8641667%. The term of such Mortgage Loan Agreement shall be from August 17, 2011 to February 14, 2012. The loan shall be only used for purposes in accordance with the Mortgage Loan Agreement.

• Fujian Yada Group Co., Ltd. entered into a Domestic Letter of Credit Opening Contract to borrow from Songxi Sub-branch of Construction Bank of China Co., Ltd. an approximate amount of RMB10,000,000, or $1,564,994 for capital turnover, and the deposit for issuing the L/C shall be 30% of the total amount of the L/C plus the floating amount (if applicable), which is RMB3,000,000, or $469,498. The term of such Domestic Letter of Credit Opening Contract shall be from September 27, 2011 to March 23, 2012.

• Fujian Yada Group Co., Ltd. entered into a Guarantee Deposit Pledge Contract of Domestic Letter of Credit Opening Contract on September 27, 2011 with Songxi Sub-branch of Construction Bank of China Co., Ltd to provide a pledge for the guarantee deposit of RMB3,000,000, or $469,498, under a Domestic

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Letter of Credit Opening Contract between Fujian Yada Group Co., Ltd. and Songxi Sub-branch of Construction Bank of China Co., Ltd.

• Fujian Shengda Import and Export Trading Co., Ltd. entered into a Guarantee Contract on September 27, 2011 with Songxi Sub-branch of Construction Bank of China Co., Ltd to assume the several and joint guarantee liability for a L/C under a Domestic Letter of Credit Opening Contract between Fujian Yada Group Co., Ltd, an indirectly owned subsidiary of the Company, and Songxi Sub-branch of Construction Bank of China Co., Ltd. valued at RMB10,000,000, or $1,564,994.

• Songxi Yasheng Food Co., Ltd. entered into a Guarantee Contract on September 27, 2011 with Songxi Sub-branch of Construction Bank of China Co., Ltd to assume the several and joint guarantee liability for a L/C under a Domestic Letter of Credit Opening Contract between Fujian Yada Group Co., Ltd, an indirectly owned subsidiary of the Company, and Songxi Sub-branch of Construction Bank of China Co., Ltd. valued at RMB10,000,000, or $1,564,994.

• Mr. Zhan Youdai and Ms. Zhou Liufeng entered into a Natural Person Guarantee Contract on September 27, 2011 with Songxi Sub-branch of Construction Bank of China Co., Ltd to assume the several and joint guarantee liability for a L/C under a Domestic Letter of Credit Opening Contract between Fujian Yada Group Co., Ltd, an indirectly owned subsidiary of the Company, and Songxi Sub-branch of Construction Bank of China Co., Ltd. valued at RMB10,000,000, or $1,564,994.

The following table summarizes key elements of the aforementioned twenty-seven financing arrangements:

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Solely for the convenience of the reader, the above amounts were converted from RMB to U.S. dollars at specified rates, as follows: for any contract entered into in the third quarter of 2011, the conversion rate was 6.3898 RMB to $1; for any contract entered into in the second quarter of 2011, the conversion rate was 6.4641 RMB to $1; for any contract entered into in the first quarter of 2011, the conversion rate was 6.5703 RMB to $1; for any contract entered into in 2010, the conversion rate was 6.6120 RMB to $1; and for any contract entered into 2009, the conversion rate was 6.6762 RMB to $1.

Many of the financing agreements contain covenants prohibiting us from borrowing “substantial” amounts of money, or leasing or subsequently pledging already pledged assets, without the prior consent of each relevant lender. In addition, we are prohibited from selling a “significant” amount of its assets without prior consent from each relevant lender. The terms “significant” and “substantial” are not defined in the relevant contracts. In assessing our compliance with the financing agreements we have determined that a value exceeding approximately 10% of our total assets, or about $10.9 million as of September 30, 2011, would be significant or substantial and would trigger a requirement to obtain the prior consent of various lenders. However, the lenders may have a different interpretation of the limitation on our ability to borrow money or sell assets, and it may be lower than our understanding of the provisions of the loan agreements. If we were to inadvertently sell assets or borrow money with a value in excess of what our lenders believe is permissible without their consent, they could pursue breach of contract and other claims against us, which could harm our business and reputation.

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Contingent Liabilities

We have made a provision of approximately $731,000 to cover potential liability with respect to certain unpaid social insurance obligations for full-time employees. We believe that the total potential liabilities include cost of rectifying non-compliance of the social insurance obligations for full-time employees and temporary workers, and the cost of rectifying non-compliance of the housing fund obligations for full-time employees and temporary workers, and may be as much as $1,847,000. See “Risk Factors—We may face claims or administrative penalties for non-execution of labor contracts or non-payment and/or underpayment of the social insurance and housing fund obligations in respect of our temporary workers and full-time employees.” in our annual report on Form 10-K for the year ended December 31, 2010. The provision reflects our good faith estimate of the costs of rectifying our non-compliance with these obligations; actual costs could be lower or higher. If we are required to rectify our non-compliance and the costs of doing so approach or exceed our good faith estimate, it would have a material adverse effect on our liquidity and capital resources.

Capital Expenditures

Our capital expenditures were approximately $7.5 million for the quarter ended September 30, 2011, $10.8 million for the nine months ended September 30, 2011 and $15.3 million for the year ended December 31, 2010. Our capital expenditures were mainly used to acquire property, plant and equipment and land use rights to expand our production capacity. We currently estimate that our aggregate capital expenditures in fiscal year 2011 will be approximately $12 million, which we intend to use primarily for expansion of bamboo forests, constructing additional cold storage and preliminary processing facilities.

Capital Resources

At September 30, 2011, we did not have any unused credit facility that was available to us.

We believe that our cash on hand and cash flow from operations will meet our expected capital expenditures and working capital requirements for at least the next 12 months. However, our cash from operations could be affected by various risks and uncertainties, including, but not limited to the risks detailed in Part I, Item 1A titled “Risk Factors.” In addition, we may, in the future, require additional cash resources due to changed business conditions, implementation of our strategy to expand our production capacity or other investments or acquisitions we may decide to pursue.

If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.

Recent Accounting Pronouncements

See Note 3 to our unaudited consolidated financial statements for the nine months ended September 30, 2011 and 2010 beginning on page 8.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide disclosure under this item.

Item 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures.

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that material information is: (1) gathered and communicated to our management, including our principal executive and financial officers, on a timely basis; and (2) recorded, processed, summarized, reported and filed with the SEC as required under the Securities Exchange Act of 1934, as amended.

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We conducted 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. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of September 30, 2011 except for the points discussed below related to material weaknesses in our internal control over financial reporting.

In our annual report on Form 10-K for the period ended December 31, 2010, we identified certain material weaknesses in our internal controls over financial reporting. These weaknesses included:

The existence of these material weaknesses could impair our ability to provide timely and accurate financial information.

Changes in Internal Controls over Financial Reporting.

We are in the process of implementation of additional internal control procedures to remediate the identified material weaknesses. During the period ended September 30, 2011 we completed our procedures for establishing and management of our credit terms with customers. We have also completed implementation of control procedures for our sight and verification of documentation and sales acknowledgements for delivery of product and revenue recognition. We are continuing to work with external professional consultants to evaluate and improve our internal control system.

Except for the improvements in internal controls set forth above, no material changes were made in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Internal Controls over Financial Reporting.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or internal controls will prevent all errors or all instances of fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and any design may not 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. Because of the inherent limitation of a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II—OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS.

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business, including claims of alleged infringement, misuse or misappropriation of intellectual property rights of third parties. As of the date of this report, we are not a party to any litigation which we believe would have a material adverse effect on our business operations or financial condition.

Item 1A. RISK FACTORS.

You should carefully consider the risk factors discussed in our Report on Form 10-K filed March 31, 2011, as amended, the occurrence of which could materially affect harm our business, financial position and results of operations, before making an investment decision. Such risk factors are incorporated herein by reference.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Unregistered Sales of Equity Securities

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. (REMOVED AND RESERVED).

Item 5. OTHER INFORMATION.

None.

Item 6. EXHIBITS.

See the Exhibit Index immediately following the signature page of this report.

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SIGNATURES

Pursuant to the requirements 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.

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