SHENZHEN, China, Aug. 17 /PRNewswire-Asia-FirstCall/ -- China Organic Agriculture, Inc. (OTC Bulletin Board: CNOA) ("China Organic Agriculture" or the "Company"), a global diversified food products company engaged in the trading and distribution of agricultural products headquartered in the Liaoning province in China, today announced its financial results for the three and six months ended June 30, 2009.



    Financial Highlights of the Second Quarter
    -- Sales revenue was $30.0 million, a year-over-year increase of over 800%.
    -- Gross profit was $6.9 million, a year-over-year increase of 650%.
    -- Net income allocable to CNOA shareholders was $2.5 million, or $0.03
       per diluted share, compared to a net loss of $121,000 recorded in the
       second quarter of 2008.
    -- Cash on hand totaled $9.0 million as of June 30, 2009.
    -- Selling, general and administrative expense decreased 16% compared to a
       year ago.

Revenue for the second quarter 2009 reached $30.0 million, a substantial increase compared to $3.3 million for the same period last year. The increase in sales was attributable to the sales volume of Dalian Huiming, in which the Company acquired a 60% ownership interest in October, 2008 for a purchase price of $10.6 million. Dalian Huiming is mainly involved in trading and distribution of agriculture products, primarily rice and soybeans throughout China.

Net income allocable to CNOA shareholders was $2.5 million for the second quarter of 2009, compared to a net loss of $121,000 for the same period last year. A former operating subsidiary of the Company, Ermapao, was sold in the second half of 2008 and thus its results are now classified as a discontinued operation in the attached schedules. As the Company owns 60% of Dalian Huiming, 40% of the total net income from Dalian Huiming was recorded as income attributed to noncontrolling interest. The Company's net income significantly in the second quarter benefited from the second quarter's gross profit, which was $6.9 million as compared to last year's gross profit of $0.9 million. The selling, general and administrative expenses for the 2nd quarter were lower than the prior year period's level due to reduced professional fees and other cost control measures.

Financial Highlights for the First Half

The Company's revenues for the first six months of 2009 were $66.7 million, up nearly 800% from revenues of $7.5 million recorded during the first six months of 2008. The gross profit for the first six months was $15.3 million, up from $1.8 million recorded in the prior year's comparable period. Net income allocable to CNOA shareholders for the first six months of 2009 was $6.4 million, compared to a net income of $0.9 million for the same period last year. Net income for the first half of 2008 included net income of $0.8 million from discontinued operations.

Financial Conditions

At June 30, 2009, cash and cash equivalents of the Company were $9.0 million, current assets totaled $110.6 million and current liabilities were $58.6 million, resulting in working capital level of $52 million, and a current ratio of 189%.

During the six months ended June 30, 2009, the Company had negative cash flow from operating activities of $9.2 million, primarily attributable to the increase in accounts receivable which was largely due to increased revenue levels. The Company also recorded investments of $37 million in restricted cash and $47.9 million of cash flows from financing activities.

Business Developments

On September 30, 2008, the Company sold all of the shares of its subsidiary, Jilin Songyuan City ErMaPao Green Rice Limited to Bothven Investments Limited for a non-interest bearing note receivable from Bothven at the amount of $8,700,000.

In October 2008, the Company acquired 60% of the outstanding shares of Dalian Huiming Industry Ltd. ("Dalian Huiming") for a payment equivalent to $10,642,609.

About China Organic Agriculture

China Organic Agriculture is based in China and is primarily engaged in the acquisition, trading and distribution of agricultural products.

The Company sells to a limited number of distributors in China, which it will seek to leverage for increased market penetration in agricultural, food and related premium products. For more information, please visit: http://www.chinaorganicagriculture.com .

FORWARD-LOOKING STATEMENTS:

This document includes forward-looking statements. Forward-looking statements include, but are not limited to, statements concerning future acquisitions, estimates of, and increases in, production, cash flows and values, statements relating to the continued advancement of China Organic Agriculture's products and other statements which are not historical facts. When used in this document, the words such as "could," "plan," "estimate," "expect," "intend," "may," and similar expressions denote forward-looking statements. Although China Organic Agriculture Inc. believes that its expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Important factors that could cause actual results to differ from these forward-looking statements include, but are not limited to, those set forth in our reports filed with the Securities and Exchange Commission, together with the risks discussed in our press releases and other communications to shareholders issued by us from time to time, such as our ability to raise capital as and when required, the availability of raw products and other supplies, competition, the costs of goods, government regulations, and political and economic factors in the People's Republic of China in which our subsidiaries operate.





                         China Organic Agriculture, Inc.
                       Consolidated Statement of Operations
        For Three and Six Months Ended June 30, 2009 and 2008 (Unaudited)

                          THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
                                 2009         2008        2009         2008

    Sales                    $30,018,428  $3,268,668  $66,745,736  $7,459,225
    Cost of sales            (23,089,593) (2,341,174) (51,431,107) (5,655,331)
    Gross profit              $6,928,835    $927,494  $15,314,629  $1,803,894

    Selling, general and
     administrative expenses    (477,413)   (569,688)    (842,149) (1,040,029)
    Income from operations    $6,451,422    $357,806  $14,472,480    $763,865

    Other income                  68,514          --      683,067          --
    Interest expense, net       (398,283)   (300,852)    (565,574)   (300,852)

    Income from Continuing
     operations before
     income taxes             $6,121,653     $56,954  $14,589,973    $463,013

    Provision for income
     taxes                    (1,652,726)   (228,797)  (3,724,242)   (448,755)

    Net income (loss) from
     Continuing operations    $4,468,927   $(171,843) $10,865,731     $14,258
    Discontinued operations:
        Income from ErMaPao,
         net of tax                   --      50,651           --     840,156
    Net Income (loss)         $4,468,927   $(121,192) $10,865,731    $854,414
    Less Income attributed
     to noncontrolling
     interest                 (1,987,837)         --   (4,459,450)         --
    Net Income attributable
     to CNOA                  $2,481,090   $(121,192)  $6,406,281    $854,414
    Basic and diluted
     weighted average shares  73,157,232  51,548,776   73,157,232  51,548,776
    Basic and Diluted
     Earnings per Share:
        Income from
         Continuing
         operations
         attributable to
         CNOA shareholders         $0.03       $0.00        $0.09       $0.00
        Income from
         Discontinued
         operations
         attributable to
         CNOA shareholders            --        0.00           --        0.02
    Total Basic and Diluted
     Earnings Per Share            $0.03       $0.00        $0.09       $0.02



                         China Organic Agriculture, Inc.
                            Consolidated Balance Sheet
                       AS OF JUNE 30, 2009 AND DECEMBER 31, 2008

                                                 06/30/2009      12/31/2008
    Assets                                      (Unaudited)(Audited & Restated)
    Current Assets
    Cash and cash equivalents                    $9,000,459        $7,338,817
    Restricted cash                              37,045,331                --
    Accounts receivable, net                     40,705,914        26,448,294
    Inventory                                     2,848,503         4,492,892
    Acquisition deposit                           2,617,952         2,617,952
    Consideration receivable                      6,700,000         8,700,000
    Trade deposits                                7,743,622         2,832,507
    Advances                                      1,860,161         1,846,041
    Other receivables and prepayments             2,104,855           126,296
        Total Current Assets                    110,626,797        54,402,799
    Goodwill                                      1,602,134         1,602,134
    Property, plant & equipment, net             14,418,446        14,521,452
    Mortgage costs - net                            140,038           143,788
    Intangibles, net                                968,000         1,056,000
        Total Assets                           $127,755,415       $71,726,173
    Liabilities and Stockholders' Equity
    Current Liabilities
    Mortgage payable - current                     $206,633          $198,854
    Notes payable - related party                37,324,902                --
    Short term loan                              14,637,217         1,170,515
    Accounts payable and accrued expenses         4,079,801         5,048,054
    Due to related party                            694,894         3,630,842
    Taxes payable                                 1,652,459         3,335,751
        Total Current Liabilities                58,595,906        13,384,016

    Mortgage payable - long term                  8,056,406         8,161,705

        Total Liabilities                       $66,652,312       $21,545,721
    Stockholders' Equity
    Preferred stock, par value, $0.001
     per share 20,000,000 shares
     authorized, none outstanding                        --                --
    Common stock, no par value,
     1,000,000,000 shares authorized,
     73,157,232 issued and outstanding at
     June 30, 2009 and December 31, 2008          7,648,410         7,648,410
    Additional paid in capital                      638,831           597,209
    Statutory reserves                            1,423,933         1,423,933
    Other comprehensive income                    2,827,215         2,814,743
    Retained earnings                            39,418,003        33,011,722
    CNOA Stockholders' Equity                   $51,956,392       $45,496,017
    Noncontrolling interest                       9,146,711         4,684,435
    Total Stockholders' Equity                  $61,103,103       $50,180,452
    Total Liabilities and Stockholders'
     Equity                                    $127,755,415       $71,726,173



                         China Organic Agriculture, Inc.
                             Statement of Cash Flows
           FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (UNAUDITED)

                                                  SIX MONTHS ENDED JUNE 30,
                                                    2009              2008
    CASH FLOWS FROM (USED BY) OPERATING
     ACTIVITIES
    Net income from Continued operations        $6,406,281           $14,258
    Adjustments to reconcile net income
     to net cash provided by operating
     activities:
    Net income from Discontinued
     operations                                         --           840,156
        Stock based compensation                    41,622           263,543
        Noncontrolling interest                  4,459,450                --
        Depreciation and amortization              195,432           181,306
    Effect of changes in assets and
     liabilities:
        Accounts receivables                   (14,244,344)       (3,631,323)
        Inventory                                1,645,827         1,839,981
        Trade deposits                          (4,908,990)           42,420
        Acquisition deposit                             --       (13,260,561)
        Consideration receivable                 2,000,000                --
        Advances                                   (13,388)               --
        Other receivable and prepayment         (1,977,933)         (595,569)
        Accounts payable and accrued
         expenses                                 (969,737)        3,050,927
        Due to related party                      (135,948)          867,975
        Taxes payable                           (1,684,597)           85,675

    Net cash used by Operating Activities      $(9,186,325)     $(10,301,212)

    CASH FLOWS USED BY INVESTING
     ACTIVITIES
        Restricted cash                        (37,045,331)               --
        Purchase of property & equipment              (676)      (14,598,802)
    Net cash used by Investing Activities     $(37,046,007)     $(14,598,802)


    CASH FLOWS FROM FINANCING ACTIVITIES
        Proceeds of notes payables              37,324,902                --
        Proceeds of short term loan             14,637,217                --
        Proceeds from mortgage payable,
         net of costs                                   --         8,515,000
        Proceeds from related parties                   --         7,016,000
        Repayment of notes payable              (2,800,000)               --
        Repayment of loan                       (1,170,515)               --
        Repayment of mortgage payable              (97,520)         (210,632)
    Net cash from Financing Activities         $47,894,084       $15,320,368
    Effect of exchange rate changes on
     cash and cash equivalents                        (110)          560,098
    Net change in cash and cash
     equivalents                                $1,661,642       $(9,019,548)

    Cash and cash equivalents, beginning
     balance                                    $7,338,817        $9,697,793

    Cash and cash equivalents, ending
     balance                                    $9,000,459          $678,245

    For further information, please contact:

    China Organic Agriculture, Inc.
     Hans Shen
     Tel:   +1-707-709-2321
     Email: IR@cnoainc.com

SOURCE China Organic Agriculture, Inc.