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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 June 30, 2014

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)

Nevada	26-2809270
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
Shuinan Industrial Area, Songxi County
Fujian Province, China	353500
(Address of principal executive offices)	(Zip Code)

(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):

Large accelerated filer [   ]	Accelerated filer [   ]	Non-accelerated filer [   ]	Smaller reporting company [X]
		(do not check if a smaller
		reporting company)

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

As of August 13, 2014, the issuer had 36,823,626 shares of common stock outstanding.

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ASIA GREEN AGRICULTURE CORPORATION
Quarterly Report on Form 10-Q
For the Quarterly Period Ended June 30, 2014

TABLE OF CONTENTS

		Page
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS		ii
PART I —FINANCIAL INFORMATION		1
Item 1.	FINANCIAL STATEMENTS	1
Item 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	23
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34
Item 4.	CONTROLS AND PROCEDURES	34
PART II —OTHER INFORMATION		35
Item 1.	LEGAL PROCEEDINGS	35
Item 1A.	RISK FACTORS	35
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	35
Item 3.	DEFAULTS UPON SENIOR SECURITIES	35
Item 4.	MINE SAFETY DISCLOSURES	35
Item 5.	OTHER INFORMATION	35
Item 6.	EXHIBITS	35
SIGNATURES		36
EXHIBIT INDEX		37

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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, 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.

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 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 and that could cause actual results to differ materially from such statements. 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.

Asia Green Agriculture Corporation
Condensed Consolidated Statements of Income and Comprehensive Income
For the three and six months ended June 30, 2014 and 2013
(Stated in US Dollars)

		Three months ended						Six months ended
		June 30,						June 30,
		(unaudited)						(unaudited)
		2014			2013			2014			2013
Sales revenue	$	16,010,875		$	21,742,576		$	51,273,923		$	57,717,905
Cost of sales		(13,993,017	)		(14,618,648	)		(39,341,493	)		(39,782,928	)
Gross profit		2,017,858			7,123,928			11,932,430			17,934,977
Operating expenses
Administrative expenses		641,733			1,300,839			1,898,963			2,429,657
Selling expenses		262,236			431,349			508,376			777,093
		903,969			1,732,188			2,407,339			3,206,750
Income from operations		1,113,889			5,391,740			9,525,091			14,728,227
Government grant income		79,981			39,445			327,058			103,205
Other income, net - Note 9		26,322			16,818			84,448			41,245
Net finance costs - Note 8		(521,715	)		(268,741	)		(904,612	)		(834,790	)
Income before income taxes and noncontrolling interest		698,477			5,179,262			9,031,985			14,037,887
Income taxes - Note 7		(129,064	)		(86,665	)		(314,288	)		(279,247	)
Net income before noncontrolling interest		569,413			5,092,597			8,717,697			13,758,640
Net loss attributable to noncontrolling interest		-			5,122			-			22,007
Net income attributable to Company’s common stockholders	$	569,413		$	5,097,719		$	8,717,697		$	13,780,647
Net income before noncontrolling interest	$	569,413		$	5,092,597		$	8,717,697		$	13,758,640
Other comprehensive income (loss)
Foreign currency translation adjustments		571,732			2,229,363			(1,182,637	)		2,995,202
Total comprehensive income		1,141,145			7,321,960			7,535,060			16,753,842
Comprehensive loss attributable to noncontrolling interest		-			1,795			-			17,609
Total comprehensive income attributable to Company’s common stockholders	$	1,141,145		$	7,323,755		$	7,535,060		$	16,771,451
Earnings per share: basic and diluted attributable to Company’s common stockholders - Note 10	$	0.02		$	0.14		$	0.24		$	0.37
Weighted average number of shares outstanding: basic and diluted		36,823,626			36,823,626			36,823,626			36,823,626

See the accompanying notes to condensed consolidated financial statements

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Asia Green Agriculture Corporation
Condensed Consolidated Balance Sheets
As of June 30, 2014 and December 31, 2013
(Stated in US Dollars)

		June 30,			December 31,
		2014			2013
		(Unaudited)			(Audited)
ASSETS
Current assets
Cash and cash equivalents	$	801,565		$	3,000,376
Restricted cash - Note 3		571,008			2,357,478
Trade receivables, net - Note 4		55,353,833			50,288,766
Other receivables, prepayments and deposits - Note 5		10,800,700			18,051,283
Inventories - Note 6		40,430,902			21,099,678
Deferred tax assets		10,093			10,162
Total current assets		107,968,101			94,807,743
Property, plant and equipment, net - Note 11		37,134,204			37,972,707
Deposits paid - Note 13		40,473,973			40,747,951
Land use rights - Note 12		37,600,682			38,532,504
TOTAL ASSETS	$	223,176,960		$	212,060,905
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Current liabilities
Trade payables - Note 3	$	7,729,792		$	5,777,658
Bills payable - Note 3		243,750			572,600
Receipts in advance		648,413			455,631
Other payables and accrued expenses - Note 14		6,032,634			6,537,218
Amount due to a related party - Note 15		290,828			234,450
Secured short-term borrowings - Note 16		24,163,750			22,409,928
Income tax payable		563,878			348,007
Total current liabilities		39,673,045			36,335,492
Deferred tax liabilities		12,986			13,074
TOTAL LIABILITIES		39,686,031			36,348,566
COMMITMENTS AND CONTINGENCIES - Note 19
STOCKHOLDERS’ EQUITY
Preferred stock: par value $0.001 per share; authorized 10,000,000 shares       in 2014 and 2013; none issued and outstanding    Common stock: par value $0.001 per share; authorized 200,000,000 shares        in 2014 and 2013; 36,823,626 shares issued and outstanding in 2014 and 2013		36,824			36,824
Additional paid-in capital		22,836,231			22,592,701
Statutory reserve - Note 18		10,196,203			10,196,203
Other surplus reserve - Note 18		12,379,891			12,379,891
Accumulated other comprehensive income		9,556,601			10,739,238
Retained earnings		128,485,179			119,767,482
TOTAL STOCKHOLDERS’ EQUITY		183,490,929			175,712,339
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	223,176,960		$	212,060,905

See the accompanying notes to condensed consolidated financial statements

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Asia Green Agriculture Corporation
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
(Stated in US Dollars)

See the accompanying notes to condensed consolidated financial statements

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Asia Green Agriculture Corporation
Condensed Consolidated Statement of Cash Flows
For the six months ended June 30, 2014 and 2013
(Stated in US Dollars)

		Six months ended June 30,
		(Unaudited)
		2014			2013
Cash flows from operating activities
Net income before noncontrolling interest	$	8,717,697		$	13,758,640
Adjustments to reconcile net income before noncontrolling interest to net cash         used in operating activities :-
Depreciation and amortization		1,302,728			961,878
Loss on disposal of property, plant and equipment		644			-
Realized gain on held for trading investments		-			(2,112	)
Provision for obsolete inventories		2,187			8,083
(Reversal of provision) provision for doubtful debts		(30,576	)		777
Share-based compensation		243,530			411,337
Changes in operating assets and liabilities :-
Trade receivables		(5,365,640	)		2,272,270
Bills receivables		-			(7,983	)
Other receivables, prepayments and deposits		7,119,394			(6,106,173	)
Inventories		(19,449,072	)		(16,076,057	)
Trade payables		1,989,900			(1,211,238	)
Receipts in advance		195,664			351,934
Other payables and accrued expenses		(454,306	)		(848,093	)
Income tax payable		217,889			138,117
Net cash flows used in operating activities		(5,509,961	)		(6,348,620	)
Cash flows from investing activities
Payments to acquire and deposits for acquisition of property, plant and equipment		(57,976	)		(4,246,423	)
Proceeds from disposal of property, plant and equipment		-			30,529
Refund of deposits for acquisition of land use rights		-			1,676,468
Proceeds from disposal of held for trading investments		-			84,760
Net cash flows used in investing activities		(57,976	)		(2,454,666	)
Cash flows from financing activities
Proceeds from secured borrowings		16,958,425			17,914,490
Repayments of secured borrowings		(15,058,791	)		(10,651,056	)
Increase in restricted cash held as collateral for bills payable		(20,829	)		(61,358	)
Decrease (increase) in restricted cash held as collateral for bank loans		1,788,543			(2,646,040	)
(Decrease) increase in bills payable		(324,600	)		204,470
Advances from a related party		49,738			92,799
Capital contributions from noncontrolling interests		-			237,750
Net cash flows provided by financing activities		3,392,486			5,091,055
Effect of foreign currency translation on cash and cash equivalents		(23,360	)		159,579
Net decrease in cash and cash equivalents		(2,198,811	)		(3,552,652	)
Cash and cash equivalents - beginning of period		3,000,376			9,756,103
Cash and cash equivalents - end of period	$	801,565		$	6,203,451
Supplemental disclosures for cash flow information
Cash paid for :-
Interest expense	$	767,039		$	694,703
Income taxes	$	96,398		$	132,067

See the accompanying notes to condensed consolidated financial statements

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Asia Green Agriculture Corporation
Notes to Condensed Consolidated Financial Statements
(Stated in US Dollars)

1.	Corporate information and general
	Asia Green Agriculture Corporation (the "Company") was organized on May 21, 2008 as a Nevada corporation.
	Following the completion of a reverse takeover transaction on August 20, 2010, the Company commenced to be engaged in the production and marketing of fresh and processed produce, including bamboos, bamboo shoots, cucumber, corn, mushrooms and other agricultural products.
	The Company wholly owns the following subsidiaries and their principal businesses are as follows :-
	(i)	Misaky Industrial Limited ("Misaky") was incorporated in Hong Kong and its principal business is investment holding.
	(ii)	Sino Oriental Agriculture Group Limited ("Sino Oriental") was incorporated in the British Virgin Islands (the "BVI") and its principal business is investment holding.
	(iii)	Fujian Yada Group Co., Ltd. ("Fujian Yada") was established in the People’s Republic of China (the "PRC") and its principal businesses are production and marketing of fresh and processed produce, including bamboos, bamboo shoots, cucumber, corn, mushrooms and other agricultural products.
	(iv)	Fujian Yaxin Food Co., Ltd. ("Yaxin") was established in the PRC and its principal businesses are production and marketing of fresh and processed produce, including bamboos, bamboo shoots, cucumber, corn, mushrooms and other agricultural products.
	(v)	Fujian Shengda Import & Export Trading Co., Ltd. ("Shengda") was established in the PRC and its principal business is trading of the Company’s agricultural products to oversea customers.
	(vi)	Fujian Xinda Food Co., Ltd. ("Xinda") was established in the PRC and its principal businesses are production and marketing of fresh and processed produce, including bamboos, bamboo shoots, cucumber, corn, mushrooms and other agricultural products.
	(vii)	Shixing Yada Forestry Development Co., Ltd. ("Shixing Yada") was established in the PRC and its principal businesses are the production and marketing of bamboo related products.
	(viii)	Yudu Yada Forestry Co., Ltd. ("Yudu Yada") was established in the PRC and its principal businesses are the production and marketing of bamboo related products.
	(ix)	Jianyang Yaxin Agriculture and Forestry Development Co., Ltd. ("Jianyang Yaxin") was established in the PRC and its principal businesses are the production and marketing of fresh produce, including bamboos, bamboo shoots, cucumber, corn, mushrooms and other agricultural products.
	(x)	Fujian Yada E-business Co., Ltd. ("Yada E-business") was established in the PRC and its principal business is retailing packaged foods.

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2.	Summary of significant accounting policies
	Basis of consolidation and presentation
	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, 2013.
	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 June 30, 2014 and December 31, 2013, 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 June 30, 2014 and December 31, 2013, 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 six months ended June 30, 2014 and 2013, the Company did not have sales to any individual customer that represented 10% or more of the Company’s consolidated sales.
	Fair value of financial instruments
	The Company adopted ASC 820 on January 1, 2008. The adoption of ASC 820 did not materially impact the Company’s financial position, results of operations or cash flows.
	ASC 820 requires the disclosure of the estimated fair value of financial instruments including those financial instruments for which 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.
	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 :-

	Level 1 -	Quoted prices in active markets for identical assets or liabilities.
	Level 2 -	Observable inputs other than quoted prices in active markets for identical assets or liabilities.
	Level 3 -	Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

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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2.	Summary of significant accounting policies (Cont'd)
	The Company did not have any financial instruments recorded or measured at fair value on a recurring basis in the accompanying condensed consolidated financial statements that were based on the use of Level 1 inputs as of June 30, 2014 and December 31, 2013.

The Company measures the fair value of held for trading investments by obtaining the quoted price in active markets. There were no changes in valuation techniques during the six months ended June 30, 2014 and 2013.

The Company did not have any financial instruments recorded or measured at fair value on a recurring basis in the accompanying condensed consolidated financial statements that were based on the use of Level 2 inputs as of June 30, 2014 and December 31, 2013.

Noncontrolling interest

Noncontrolling interest resulted from the consolidation of a 70% owned subsidiary, Sanda E-business.

Recently issued accounting pronouncements

The Company evaluated all recently issued accounting pronouncements, namely ASU 2013-03, ASU 2013-04, ASU 2013-05, ASU 2013-07, ASU 2013-09, ASU 2013-11, ASU 2013-12 and ASU 2014-06. The Company does not expect these adoptions to have any material impact on the Company’s condensed consolidated financial statements.

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3.	Restricted cash, bills payable and trade payables

			June 30,			December 31,
			2014			2013
			(Unaudited)			(Audited)
	Bank deposits held as collateral for bank loans - Note 16	$	278,508		$	2,083,994
	Bank deposits held as collateral for bills payable - Note 3(a)		292,500			273,484
		$	571,008		$	2,357,478

Note :-

(a)

When the Company intends or is requested to settle its suppliers by issuance of bills, it is required to place deposits with banks equal to 100% (2013: 50%) of the bills amount at the time of issuance. These deposits will be used to settle the bills at maturity.

	Trade payables represent trade creditors on open account. They are interest-free and unsecured. The normal credit term given by these suppliers to the Company ranges from one to three months.
4.	Trade receivables, net

			June 30,			December 31,
			2014			2013
			(Unaudited)			(Audited)
	Trade receivables	$	55,361,205		$	50,327,033
	Less : Allowance for doubtful accounts		(7,372	)		(38,267	)
		$	55,353,833		$	50,288,766

Trade receivables with carrying value of $2,081,049 and $2,702,543 as of June 30, 2014 and December 31, 2013 respectively were pledged as collateral under certain loan agreements (Note 16).

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

			Six months ended June 30,
			(Unaudited)
			2014			2013
	Balance at beginning of the period	$	38,267		$	-
	Provision for doubtful debts		(30,576	)		777
	Bad debts written off against trade receivables		-			(392	)
	Translation adjustments		(319	)		-
	Balance at end of the period	$	7,372		$	385

(Reversal of provision) provision for doubtful debts of $(30,576) and $777 were charged to operations during the six months ended June 30, 2014 and 2013 respectively. During the three months ended June 30, 2014 and 2013, (reversal of provision) provision for doubtful debts amounted to $(36,880) and $385 respectively.

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5.	Other receivables, prepayments and deposits

			June 30,			December 31,
			2014			2013
			(Unaudited)			(Audited)
	Prepayments - Note 5(a)	$	9,485,496		$	16,216,367
	Deposits		1,197,691			1,202,306
	Other receivables		117,513			632,610
		$	10,800,700		$	18,051,283

Note :-

	(a)	Prepayments are primarily comprised of prepaid materials (including seeds, fresh mushroom cultivation rod, fertilizers and pesticides) and goods, rental and labor charges related to the production of fresh produce which are expected to be recorded as cost of sales upon cultivating and harvesting within one year.
		The Company enters into these arrangements to enhance its control of production and costs. These prepayments can help it to have better planning for the future and enhance its production. In order to secure certain of its bulk purchases, the suppliers require it to prepay certain contract amounts before delivery. In addition, some of its raw materials used in mushroom planting and processing, such as specific wood chips, must be sourced only during dry season or weather to reduce the moisture in the woods chips. This, in turn, requires the Company to make some prepayments to secure the relevant raw materials.
		Initial amounts are recorded as prepayments upon making payments. Prepaid materials and goods are classified as inventories upon the receipt of those goods and transferred to costs of sales upon usage. Prepaid annual rental and labor charges are amortized, over the contract periods, as cost of sales on a straight-line basis.

6.	Inventories

			June 30,			December 31,
			2014			2013
			(Unaudited)			(Audited)
	Raw materials and packaging materials	$	906,909		$	381,909
	Bamboo and other growing crops		30,434,475			17,657,494
	Finished goods		9,099,224			3,067,841
			40,440,608			21,107,244
	Less: Provision for obsolete inventories		(9,706	)		(7,566	)
		$	40,430,902		$	21,099,678

As of June 30, 2014 and December 31, 2013, the inventories with carrying amount of $725,441 and $224,767 were pledged as collateral under certain loan agreements (Note 16).

Provision for obsolete inventories of $2,187 and $8,083 were charged to operations during the six months ended June 30, 2014 and 2013 respectively. During the three months ended June 30, 2014 and 2013, provision for obsolete inventories amounted to $2,187 and $3,169 respectively.

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7.	Income taxes
	United States
	Asia Green Agriculture Corporation is subject to the United States of America Tax law at tax rate of 34%. No provision for the US federal income taxes has been made as the Company had no taxable income in this jurisdiction for the reporting periods.
	BVI
	Sino Oriental is incorporated in the BVI and, under the current laws of the BVI, is not subject to income taxes.
	Hong Kong
	Misaky is incorporated in Hong Kong and subject to profit tax rate of 16.5% on the assessable profits during the periods. No provision for Hong Kong profit tax has been made on Misaky as Misaky had no taxable income in this jurisdiction for the reporting periods.
	PRC
	Pursuant to the new PRC’s enterprise income tax (“EIT”) law, Fujian Yada, Yaxin, Xinda, Shengda, Shixing Yada, Yudu Yada, Jiangyang Yaxin and Yada E-business are generally subject to EIT at the statutory rate of 25%. The Company’s profits generated from its fresh produce and certain processed produce, which have been qualified as agriculture product under the EIT law, are exempted from EIT.
	In July 2006, the FASB issued ASC 740-10-25. This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. The Company adopted this ASC 740-10-25 on January 1, 2007. Under the new EIT Law which became effective on January 1, 2008, the Company may be deemed to be a resident enterprise by the PRC tax authorities. If the Company was deemed to be resident enterprise, the Company may be subject to the EIT at 25% on the worldwide taxable income and dividends paid from PRC subsidiaries to their overseas holding companies may be exempted from 10% PRC withholding tax. Except for certain immaterial interest income from bank deposits placed with financial institutions outside the PRC, all of the Company’s income is generated from the PRC operation. Given the immaterial amount of income generated from outside the PRC and the PRC subsidiaries do not intend to pay dividends for the foreseeable future, the management considers that the impact arising from resident enterprise on the Company’s financial position is not significant. The management evaluated the Company’s overall tax positions and determined that no provision for uncertainty in income taxes is necessary as of June 30, 2014.

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8.	Net finance costs
	Details of net finance costs are summarized as follows:-

			Three months ended						Six months ended
			June 30,						June 30,
			(Unaudited)						(Unaudited)
			2014			2013			2014			2013
	Total interest cost incurred	$	465,776		$	209,622		$	819,572		$	722,938
	Less: Interest income		(764	)		(2,362	)		(5,691	)		(17,396	)
	Net interest cost		465,012			207,260			813,881			705,542
	Other finance costs		56,703			61,481			90,731			129,248
		$	521,715		$	268,741		$	904,612		$	834,790

9.	Other income, net

			Three months ended						Six months ended
			June 30,						June 30,
			(Unaudited)						(Unaudited)
			2014			2013			2014			2013
	Realized gain on held for trading investments	$	-		$	871		$	-		$	2,112
	Other income		26,322			15,947			84,448			39,133
		$	26,322		$	16,818		$	84,448		$	41,245

10.	Earnings per share
	During the reporting periods, potential dilutive shares are excluded from the computation of earnings per share as their effect is anti-dilutive. The anti-dilutive instruments including 1,359,113 warrants and 2,725,013 share options were excluded from the calculation of earnings per share for the three and six months ended June 30, 2014 and 2013. Accordingly, the basic and diluted earnings per share are the same.

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11.	Property, plant and equipment, net

			June 30,			December 31,
			2014			2013
			(Unaudited)			(Audited)
	Costs :
	Buildings	$	16,721,805		$	16,834,999
	Plant and machinery		5,194,045			4,949,955
	Motor vehicles		222,060			225,596
	Electronic equipment		508,595			490,701
			22,646,505			22,501,251
	Accumulated depreciation		(5,182,831	)		(4,582,615	)
	Construction in progress		19,670,530			20,054,071
	Net	$	37,134,204		$	37,972,707

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

			Three months ended						Six months ended
			June 30,						June 30,
			(Unaudited)						(Unaudited)
			2014			2013			2014			2013
	Cost of sales and overheads of inventories	$	246,413		$	255,123		$	492,562		$	449,003
	Selling expenses		944			919			1,888			1,964
	Administrative expenses		70,229			19,470			136,573			48,305
		$	317,586		$	275,512		$	631,023		$	499,272

As of June 30, 2014 and December 31, 2013, buildings and plant and machinery with carrying amount of $14,960,146 and $14,959,927 were pledged as collaterals under certain loans and bills payable arrangements, respectively (Note 16).

During the six months ended June 30, 2014, property, plant and equipment with net book value of $644 were disposed of at a consideration of $Nil, resulting a loss of $644. During the six months ended June 30, 2013, property, plant and equipment with net book value of $30,529 were disposed of at a consideration of $30,529, resulting a gain of $Nil.

Capitalized interest for the six months ended June 30, 2014 and 2013 was immaterial.

(ii) Construction in progress:-

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

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12.	Land use rights

			June 30,			December 31,
			2014			2013
			(Unaudited)			(Audited)
	Land use rights :
	- for office premises, production facilities and warehouse	$	2,333,220		$	2,349,014
	- for growing and plantation		38,904,122			39,167,473
	Accumulated amortization		(3,636,660	)		(2,983,983	)
		$	37,600,682		$	38,532,504

A reconciliation of land use rights and deposits paid for acquisition of land use rights is as follows :-

	Reference made to:		Deposits
			paid for
			acquisition of			Land use
			land use rights			rights
			(Note 13	)		(Note 12	)
	As of December 31, 2013	$	40,739,476		$	38,532,504
	Amortization		-			(671,705	)
	Translation adjustments		(273,921	)		(260,117	)
	As of June 30, 2014	$	40,465,555		$	37,600,682

	(a)	The Company obtained the right from the relevant PRC land authority for a period of 40-50 years to use the land on which the office premises, production facilities and warehouse of the Company are situated.
	(b)	The Company obtained several rights from the relevant PRC local rural village cooperatives for period ranged from 20-37 years (2013 : 20-37 years) to use the land for growing and plantation purpose for producing the Company’s fresh produce.
	(c)	Land use rights are stated at cost, as stipulated in contracts, less accumulated amortization. Amortization is provided using the straight-line method over the terms of lease obtained from the relevant PRC land authorities or relevant PRC local rural village cooperatives.
	(d)	During the six months ended June 30, 2014 and 2013, amortization amounted to $671,705 and $462,606, respectively. During the three months ended June 30, 2014 and 2013, amortization amounted to $335,749 and $232,457, respectively. The estimated amortization expense for each of the five succeeding years is approximately $1,343,000 each year.
	(e)	As of June 30, 2014 and December 31, 2013, land use rights with carrying amounts of $15,931,535 and $8,931,176 respectively were pledged as collateral under certain loan arrangements (Note 16).
	(f)	There were no additional deposits paid for acquisition of land use rights during the six months ended June 30, 2014 and 2013.
	(g)	There was no transfer to land use rights during the six months ended June 30, 2014 and 2013.

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13.       Deposits paid

			June 30,			December 31,
			2014			2013
			(Unaudited)			(Audited)
	Deposits paid for :
	- acquisition of land use rights	$	40,465,555		$	40,739,476
	- acquisition of property, plant and equipment		8,418			8,475
		$	40,473,973		$	40,747,951

Notes :-

	(a)	On December 29, 2011, Fujian Yada entered into an agreement to acquire a land use right with a period of 25 years for growing and plantation purposes from a PRC local rural village cooperative (the “Seller”) at a cost of RMB13,125,000 and Fujian Yada paid deposits of RMB10,500,000 in December 2011 which was included in deposits paid for acquisition of land use right as of December 31, 2012. In addition, the Seller was obligated to facilitate the transfer of Forestry Right Certificate to Fujian Yada.
		Owing to some administrative difficulties in transferring the Forestry Right Certificate to Fujian Yada, on March 30, 2013, Fujian Yada entered into a separate agreement with the Seller to cancel the transfer agreement dated December 29, 2011. Fujian Yada received partial payments of deposits amounting to RMB8,770,000 in March 2013 and the remaining balance of RMB1,730,000 was received in May 2013.
	(b)	In accordance with ASC 360-10, the Company transfers and classifies its “Deposits paid for acquisition of land use rights” as “Land use rights” when the significant benefits and risks of ownership of bamboo forest rights rest with it, which is evidenced on the earlier of (i) the issuance of Forestry Right Certificate to the Company; or (ii) the time when the Company takes control of operations of the bamboo forest pursuant to the relevant transfer agreement, and is entitled to operate the bamboo forest, receives all the relevant agricultural produce harvested from the bamboo forest, bears the cost of operating and maintaining the bamboo forest, and is not expecting any obstacles in transferring or issuing the Forestry Right Certificate to the Company. Under normal circumstances, the transfer or issuance of Forestry Right Certificate is a purely administrative procedure which takes one to two years to complete.
		The Company has signed legally binding transfer agreements with the owners of the bamboo forests or Villagers’ Cooperatives for all acquired land use rights. The Company has obtained at least two-thirds of the Villager’s members and/or the local government’s approval in each and every transaction. Therefore, the Company’s interest and rights of ownership (recoverability for deposits paid) is well protected under PRC laws and regulations. In instances where the Company acquires land use rights for bamboo forests, its transfer agreements require the relevant owners of bamboo forest to take the following actions to ensure the recoverability of its deposits paid: (i) the handover of the physical original Forestry Right Certificates, with respective owners’ names, to the Company as collateral or (ii) the placement of original Forestry Right Certificates at the “Forestry Exchange Bureau” as evidence to the receipt of deposits. This would prevent the owners from disposing their bamboo forests to any other third parties. The Company seeks to have the Forestry Right Certificates legally transferred to the Company’s name before the full settlement of the purchase consideration. In the event of failure to obtain the Forestry Right Certificates (due to certain administrative difficulties), transfer agreements allow the Company to treat a portion of the deposits paid as rental for the use of the bamboo forest and get back the rest of the deposits.

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14.       Other payables and accrued expenses

			June 30,			December 31,
			2014			2013
			(Unaudited)			(Audited)
	Pension payable - Note	$	578,514		$	582,430
	VAT payable		1,894,604			2,549,787
	Salaries payable		394,660			334,247
	Accrued audit fee		132,931			237,220
	Liquidated damage payable - Note 19		443,686			443,686
	Interest payable		112,372			99,022
	Construction cost payable		1,147,913			1,151,795
	Other payables		1,327,954			1,139,031
		$	6,032,634		$	6,537,218

	Note :-
	Pension payable represents accrued staff medical, industry injury claims, labor and unemployment insurances, all of which are third parties insurance and the insurance premiums are based on certain percentage of salaries. The obligations of the Company are limited to those premiums contributed by the Company.
15.	Amount due to a related party
	The amount represents an amount due to Mr. Zhan, and is interest-free, unsecured and repayable on demand. Mr. Zhan is a director and major shareholder of the Company.

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16.       Secured borrowings

			June 30,			December 31,
			2014			2013
			(Unaudited)			(Audited)
	Secured short-term borrowings	$	24,163,750		$	22,409,928

The weighted-average interest rate on short-term borrowings as of June 30, 2014 and December 31, 2013, were 7.94% and 6.47% respectively.

The details of the Company’s banking facilities as of June 30, 2014 were as follows:-

							Amount
	Facilities granted			Granted			utilized			Unused
	Secured bank loans		$	24,193,000		$	24,163,750		$	29,250

The secured borrowings were secured as following:-

(i)

The Company’s assets with following carrying values :-

			June 30,			December 31,
			2014			2013
			(Unaudited)			(Audited)
	Property, plant and equipment (Note 11)	$	14,960,146		$	14,959,927
	Trade receivables (Note 4)		2,081,049			2,702,543
	Land use rights (Note 12)		15,931,535			8,931,176
	Inventories (Note 6)		725,441			224,767
	Restricted cash (Note 3)		278,508			2,083,994
		$	33,976,679		$	28,902,407

	(ii)	Guarantees executed by third parties;
	(iii)	Guarantees executed by Mr. Zhan and Madam Liufeng Zhou, Mr. Zhan’s spouse; and
	(iv)	Guarantees executed by certain management of the Company.

As of June 30, 2014, Fujian Yada’s secured short-term borrowings of $6,337,500 are subject to the fulfillment of certain financial covenants at any time as follows :-

	(i)	To maintain a minimum current ratio of 1.0;
	(ii)	To maintain a maximum debt to asset ratio of 60%;
	(iii)	Total long-term investments cannot exceed 30% of total net assets; and
	(iv)	Ratio of contingent liabilities cannot exceed 60% of total stockholders’ equity.

As of June 30, 2014, Shixing Yada’s secured short-term borrowings of $3,250,000 are subject to the fulfillment of certain financial covenants at any time as follows :-

	(i)	To maintain a maximum debt to asset ratio (excluding inter-group balances) of 50%;
	(ii)	To maintain the sales revenue and gross profit which should not be lower than prior year; and
	(iii)	To maintain a positive cash flow from operating activities.

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

In the opinion of the Board of Directors, none of the above covenants, relating to secured short-term borrowings had been breached as of June 30, 2014.

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17.	Defined contribution plan
	The Company has a defined contribution plan for all qualified employees in the PRC. The employer and its employees are each required to make contributions to the plan at the rates specified in the plan. The only obligation of the Company with respect to the retirement scheme is to make the required contributions under the plan. No forfeited contribution is available to reduce the contribution payable in the future years. The defined contribution plan contributions were charged to the condensed consolidated statements of income and comprehensive income. The Company recorded defined contribution plan expenses of $51,017 and $47,251 for the six months ended June 30, 2014 and 2013 respectively.
18.	Statutory reserve and other surplus reserve
	Statutory reserve
	In accordance with the relevant laws and regulations of PRC, the subsidiaries established in the PRC are required to transfer not less than 10% of their net incomes calculated in accordance with accounting principles generally accepted in the PRC (the percentages are upon approval from the board of directors’ meetings), after offsetting any prior years’ losses, to the statutory reserve.
	When the balance of statutory reserve reaches 50% of the registered capital, any further appropriation is optional. Upon approval from the board of directors of the Company, the statutory reserve can mainly be used to offset accumulated losses or increase capital.
	Other surplus reserve
	Other surplus reserve represented the voluntarily appropriation of 10% of the PRC subsidiaries’ net income calculated in accordance with accounting principles generally accepted in the PRC, and approved from the board of directors’ meetings. The transfer to other surplus reserve is used to retain certain income for future business expansion.

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19.	Commitments and contingencies
	Capital commitment
	As of June 30, 2014 and December 31, 2013, the Company had capital commitments as follows:-

			June 30,			December 31,
			2014			2013
			(Unaudited)			(Audited)
	Construction of new building facilities	$	3,625,255		$	5,966,201
	Acquisition of land use rights		4,406,708			4,436,538
		$	8,031,963		$	10,402,739

Operating lease commitment

The Company leases certain land use rights including the land for all 24 of its vegetables and fruit planting bases and seven of its bamboo forests, under operating leases. As of June 30, 2014 the future minimum lease payments under non-cancelable operating leases were as follows:-

	Within 1 year	$	3,700,119
	In the second year		3,666,867
	In the third year		3,648,721
	In the fourth year		3,641,950
	In the fifth year		3,641,950
	Thereafter		43,917,954
		$	62,217,561

Rental expense for operating leases amounted to $1,830,589 and $1,859,790 for the six months ended June 30, 2014 and 2013, respectively, were recorded in cost of sales and inventories.

Rental expense for operating leases amounted to $908,652 and $935,053 for the three months ended June 30, 2014 and 2013, respectively, were recorded in cost of sales and inventories.

Registration payment arrangement

In connection with a private placement of $15.3 million of common stock and warrants that took place on August 20, 2010, the Company agreed to file a registration statement covering the resale of the common stock and common stock underlying the warrants. The Company agreed to use its best efforts to have the registration statement declared effective prior to January 17, 2011. The registration statement was not declared effective until July 15, 2011. Under the terms of the subscription agreement for the offering, the Company was required to pay liquidated damages to the investors in cash in an amount equal to 0.5% per month of the aggregate amount invested, subject to a cap of 6.0%, for each month that the registration statement was delayed. In accordance with ASC 450 “Contingencies”, the Company recorded a liability in the 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. A provision for the liquidated damages was made in an amount of $443,686 is included in other payables and accrued expenses as of June 30, 2014. No liquidated damages were charged to administrative expenses for the six months ended June 30, 2014 and 2013.

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20.	Share based compensation
	The Company has granted share options and warrants to employees, directors and consultants to reward them for services rendered.
	Stock option plan
	Under the stock option plan adopted by the Company in 2010, 3,093,258 share options with an exercisable period of up to 10 years were granted to management and employees of the Company on February 14, 2011, of which 184,123 share options vested on March 18, 2011 with an exercise price of $3.94, 184,122 share options vested on March 18, 2012 with an exercise price equal to 125% of the market price of the Company’s common stock on that vesting date (market price as of March 19, 2012 was $1.59), 908,335 share options vested on February 14, 2012 and 1,816,678 share options are vesting in equal amounts on the first day of each quarter during a four year period commencing from February 15, 2012 with an exercise price of $4.00 per share. All the share options granted are subject to the option holders continuing to be management or employees of the Company before the respective vesting dates.
	On September 21, 2012, Mr. Tsang Yin Chiu, Stanley, resigned from the Company as Chief Financial Officer and Corporate Secretary. The stock options previously granted to Mr. Tsang pursuant to the stock option agreement expired on December 21, 2012, three months after the termination date.
	A summary of share option plan activity for the six months ended June 30, 2014 is presented below:

						Weighted average			Remaining			Aggregate
			Number			exercise price			contractual			intrinsic
			of shares			per share			term			value (1)
	Outstanding as of January 1, 2014		2,725,013		$	4.00
	Granted		-			-
	Exercised		-			-
	Forfeited		-			-
	Cancelled		-			-
	Outstanding as of June 30, 2014		2,725,013		$	4.00			6.7 years		$	-
	Exercisable as of June 30, 2014		1,930,216		$	4.00			6.7 years		$	-

(1)

There was no aggregate intrinsic value as the weighted average exercise price of options of $4.00 is in excess of the estimated value of the Company’s common stock as of June 30, 2014.

The weighted average grant-date fair value of options granted during 2011 was $1.78 per share. The Company recognized compensation expense arising from abovementioned share options granted in the amount of $243,530 and $411,337 for the six months ended June 30, 2014 and 2013 respectively. The compensation expense was allocated to administrative expenses in the amount of $184,293 and $311,282 and selling expense in the amount of $59,237 and $100,055 for the six months ended June 30, 2014 and 2013 respectively.

As of June 30, 2014, there were no other share options granted to employees and directors.

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.

	Estimated stock price	$4.00
	Expected volatility	56.80%
	Expected dividends	Nil
	Expected life	5.0-7.5 years
	Risk-free interest rate	3.69%

As of June 30, 2014, there was unrecognized compensation cost of $348,311 related to the above non-vested share options which are expected to be recognized over approximately 1.7 years.

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20.	Share based compensation (Cont'd)
	Warrants
	On February 10, 2011, the Company issued warrants to a service provider in exchange for investor relation services provided to the Company. 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. 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. No compensation expense arising from the abovementioned warrants was recognized or allocated to administrative expenses for the six months ended June 30, 2014 and 2013.
	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:-

	Stock price and exercise price	$4.00
	Expected volatility	57.28%
	Expected dividends	Nil
	Expected life	2.5 years
	Risk-free interest rate	2.41%

	As of June 30, 2014, there was no unrecognized compensation cost related to the above warrants.
21.	Segment information
	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 six months ended June 30, 2014 and 2013. Management does not track segment assets and, therefore, segment assets information is not presented.

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21.	Segment information (Cont’d)
	A reconciliation is provided for unallocated amounts relating to corporate operations which is not included in the segment information.

			Three months ended						Six months ended
			June 30,						June 30,
			(Unaudited)						(Unaudited)
			2014			2013			2014			2013
	Total consolidated revenue	$	16,010,875		$	21,742,576		$	51,273,923		$	57,717,905
	Total profit for reportable segments	$	2,017,858		$	7,123,928		$	11,932,430		$	17,934,977
	Unallocated amounts relating to operations :-
	Administrative expenses		(641,733	)		(1,300,839	)		(1,898,963	)		(2,429,657	)
	Selling expenses		(262,236	)		(431,349	)		(508,376	)		(777,093	)
	Government grant income		79,981			39,445			327,058			103,205
	Other income, net		26,322			16,818			84,448			41,245
	Net finance costs		(521,715	)		(268,741	)		(904,612	)		(834,790	)
	Income before income taxes and noncontrolling interest	$	698,477		$	5,179,262		$	9,031,985		$	14,037,887

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

			Three months ended						Six months ended
			June 30,						June 30,
			(Unaudited)						(Unaudited)
			2014			2013			2014			2013
	PRC	$	15,003,997		$	20,692,033		$	49,462,617		$	55,400,992
	Japan		1,006,878			1,050,543			1,811,306			2,316,913
	Total	$	16,010,875		$	21,742,576		$	51,273,923		$	57,717,905

	During the reporting periods, no individual customer represented 10% or more of the Company’s consolidated revenue.
22.	Related party transactions
	Apart from the transactions as disclosed in notes 15 and 16 to the condensed consolidated financial statements, the Company had no other material transactions with its related parties during the six months ended June 30, 2014 and 2013.

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23.	Subsequent events
	As previously reported on Form 8-K filed on November 21, 2013, the Company received a preliminary non-binding proposal from Mr. Youdai Zhan, Chairman and Chief Executive Officer of the Company, to acquire all of the outstanding shares of common stock of the Company not currently owned, legally or beneficially, by Mr. Zhan, for $0.55 per share in cash. If implemented, the proposal would result in the Company becoming a privately-held company.
	In response to the proposal, as also reported in the Prior Form 8-K, the Company’s Board of Directors formed a special committee of independent directors consisting of Messrs. Cheng Sing Wai, Lum Pak Sum and Mak Ka Wing Patrick (the “Special Committee”) to evaluate and negotiate the proposed transaction with Mr. Zhan. The Special Committee retained Duff & Phelps Securities LLC and Duff & Phelps, LLC as its financial advisor and Sheppard, Mullin, Richter & Hampton LLP as legal counsel to assist it with the review and negotiations.
	The Special Committee reviewed possible transaction structures, including long-form merger, involving a front-end tender offer and a top-up option, and analyzed key deal terms and provisions to protect the minority stockholders and assure fairness in the transaction.
	During the negotiations with the Special Committee, Mr. Zhan received a number of unsolicited inquiries from certain unaffiliated stockholders of the Company who indicated an interest in potentially rolling over their shares into a newly formed corporation Asia Green Food Enterprise Limited (the “ Parent ”) and continuing their investment in the Company. These unaffiliated stockholders were comprised of (i) certain stockholders that participated in the private placement of $15.3 million of common stock and warrants that took place on August 20, 2010, and (ii) certain stockholders affiliated with the Company’s major stockholder when the Company operated under its former name SMSA Palestine Acquisition Corp. Subsequently, Mr. Zhan notified (the “ Notification ”) the Board of Directors, including the members of the Special Committee, that certain stockholders holding approximately 93.6% of the Company’s common stock (the “ Buyer Group ”) intended to contribute their shares to the Parent . Mr. Zhan also advised the Board of Directors that the Parent intended to create a subsidiary entity, AGF Industrial Limited (the “ MergerSub ”), and effect a short form merger of the MergerSub with and into the Company under Chapter 92A.180 of the Nevada Revised Statutes. Upon consummation of this merger, the Company would be the surviving entity and all shares of the Company’s common stock (other than shares held by MergerSub and any treasury shares or shares for which dissenter’s rights have been properly exercised and not withdrawn or lost) would be cancelled and exchanged for the right to receive the merger price of $0.60 per share of common stock.
	Under Chapter 92A.180 of the Nevada Revised Statutes, the short form merger can take place without the vote or approval of the Company’s Board of Directors or stockholders. Accordingly, shortly after the Notification, the Special Committee determined to dissolve and the Board of Directors took action to ratify the dissolution of the Special Committee on June 25, 2014.
	Additional information concerning the proposed short form merger and going private transaction, including information concerning the background of the transaction, the purposes of the transaction and alternatives considered, can be found in the Buyer Group’s Schedule 13E-3/A filed with the SEC on July 29, 2014. Information concerning the Buyer Group can be found in the Buyer Group’s Schedule 13D filed with the SEC on June 25, 2014.
	The Company evaluated all events or transactions that occurred after June 30, 2014 through the date the financial statements were issued and has determined that, except for the transaction disclosed above, there are no other material recognizable nor subsequent events or transactions which would require recognition or disclosure in the condensed consolidated financial statements.

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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 condensed 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. We also sell mature bamboo wood from our forests for use in manufacturing a variety of bamboo products. Bamboo shoot products accounted for approximately 46% of our revenue in 2013, while fresh vegetables and fruit accounted for approximately 34% of revenue, processed vegetables for 5% of revenue, and bamboo wood for 15% of revenue, respectively. In the six months ended June 30, 2014, bamboo shoot products accounted for approximately 75% of our revenue, while fresh vegetables and fruits accounted for approximately 20%, processed vegetables for 5%. We did not sell any bamboo wood during the first half of 2014. The significant drought season in 2013 resulted in a reduction in bamboo shoots volume for the first half of 2014. We determined to preserve more bamboo trees to encourage the growth of bamboo shoots in the future.

We have a vertically integrated operation consisting of planting, manufacturing and distribution of final products. We can supply most of our requirements for fresh raw materials 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. However, during the peak season, we purchase raw materials from surrounding bamboo shoot manufacturers for our further processing. Accordingly, our ability to grow is partially dependent on the area of lands we control under lease or acquisition, and our processing and storage capacity. We do not anticipate making significant capital expenditures over the next 6 to 18 months to increase our bamboo forest capacity, increase and improve our production resources and facilities. Rather, we intend to complete our acquisition of land use right in respect of bamboo forests where we have currently paid deposits.

We conduct our operations in China and sell products in 10 provinces and administrative regions in China as well as in the Japanese market. We derived approximately 97% and 3% of our revenue in China and in Japan, respectively, in 2013 and approximately 96% and 4% in China and in Japan, respectively, in the first six months of 2014.

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 revenues in the fourth and first quarter tend to be significantly higher than our revenue in the second and third quarter. 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.

Because of the volatility in market demand for different varieties of vegetables and fruits, and the corresponding complexity that creates on planning and operations, we intend to downsize our vegetable and fruit planting bases by half in 2014 and may discontinue those product lines entirely in 2015. This change is intended to allow us to streamline our operations and concentrate on our core bamboo business, especially the fast moving consumption products (FMCP) such as healthy snacks that require further processing. This would also allow us to use the off-peak season from May to November for these further processing activities.

We embarked on the industrial production of French-Horn Mushrooms at the end of 2012, and have constructed special processing plant for French Horn Mushrooms. This product segment demonstrated relatively strong results during the first six months of 2014. We intend to continue this production and anticipate that growth in this segment could offset some of the downsizing in our fresh vegetables and fruit planting activity.

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RECENT DEVELOPMENTS

Net sales for the first six months of 2014 were $51.3 million, a decrease of approximately 11.1% over net sales in the first six months of 2013. Net income attributable to Company’s common stockholders for the first six months of 2014 was $8.7 million, a decrease of approximately 36.9%, compared to $13.8 million for the six months ended June 30, 2013.

We did not acquire any additional bamboo forest or planting bases during the six months period ended June 30, 2014 and we do not anticipate making significant capital expenditures over the next 6 to 18 months to increase our bamboo forest capacity. We intend to downsize our vegetable and fruit planting bases by half in 2014 and may discontinue those product lines in 2015. The reduction in vegetable and fruit planting bases will correspondingly result in lower revenues from our fresh vegetable and fruit segments.

The table below summarizes our planting bases as of December 31, 2013 and June 30, 2014.

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 our internal sales team members, and outside sales agents as of December 31, 2013 and June 30, 2014.

During the remainder of 2014, we may reduce internal sales team members consistent with the planned reduction in our fresh vegetables and fruit business, while we focus on our core bamboo business. We have no immediate plans to expand our international sales presence beyond Japan.

As of June 30, 2014, some of the construction work in progress related to new logistic, trading and testing center and staff quarters, were partially completed. The remaining portion is expected to be completed by the end of 2014. The French Horn Mushroom processing plant (Phase 1) was in normal production during the first quarter of 2014.

We have been gaining brand recognition in China, especially in Fujian Province. Our brand “ ” was awarded as a “Well Known Trademark of China” in May 2011. As of June 30, 2014, our product distribution included over 800 supermarket stores. We plan to further enhance our name recognition through establishing branded counters at supermarkets.

CRITICAL ACCOUNTING POLICIES

Our financial statements have been prepared in accordance with the accounting policies which are consistent with policies used in our audited consolidated financial statements for the year ended December 31, 2013. Please refer to the audited consolidated financial statements for the year ended December 31, 2013 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 consolidated financial statements for the year ended December 31, 2013 for a more complete discussion of the accounting policies we have identified as the most important to understand our current financial condition and results of operations.

The preparation of financial statements, in conformity with US 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 outcome of the uncertainties increase, these judgments become even more subjective and complex. While such judgments and estimates are made in good faith by management, they may not always prove to be correct.

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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 condensed consolidated balance sheets consist primarily of land rental cost and service costs.

In assessing the ultimate realization of inventories, we make 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% and 100% provision for raw materials, packing materials and finished goods aged between one and two years and over two years respectively.

Revenue recognition

Revenue from sales of our 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 a 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 obligations on our part, or 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, including fresh produce and processed produce. When there is any significant post-delivery performance obligation exists, revenue is recognized only after such obligation is fulfilled. We evaluate the terms of sales agreement with such customer for fresh produce and processed produce in order to determine whether any significant post-delivery performance obligations exists. 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 products 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". 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 subsidiaries will remain unchanged for the remainder of 2014.

In 2007, China passed the EIT Law and its implementing rules, both of which became effective on January 1, 2008. The EIT Law significantly curtails tax incentives granted to foreign-invested enterprises under the previous law. The 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.

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Substantially all of our income may be derived from dividends we receive from our PRC operating subsidiaries. The 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 EIT Law, we may be classified as a 'resident enterprise' of China" in our annual report on Form 10-K for the year ended December 31, 2013. Such classification will likely result in unfavorable tax consequences to us and our non-PRC stockholders.

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 stockholders’ 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 June 30, 2014 Compared to Three Months Ended June 30, 2013

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)

		For the three months						For the three months
Item		ended						ended
		June 30, 2014						June 30, 2013
(Unaudited)		(As reported)						(As reported)
		In			As a			In			As a
		Thousands			Percentage			Thousands			Percentage
					of						of
					Net Sales						Net Sales
Net sales	$	16,011			100%		$	21,743			100%
Cost of sales		(13,993	)		(87)%			(14,619	)		(67)%
Gross profit		2,018			13%			7,124			33%
Selling and administrative expenses		(904	)		(6)%			(1,732	)		(8)%
Operating income		1,114			7%			5,392			25%
Government grant income		80			0%			39			0%
Other income - net		26			0%			17			0%
Net finance costs		(522	)		(3)%			(269	)		(1)%
Income before income taxes and noncontrolling interest		698			4%			5,179			24%
Income taxes		(129	)		0%			(86	)		0%
Net income before noncontrolling interest		569			4%			5,093			24%
Net loss attributable to noncontrolling interest		-			0%			5			0%
Net income attributable to Company’s common stockholders		569			4%			5,098			24%

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 are based on the exchange rate of RMB 6.1652 to $1.00 for the three months ended June 30, 2014 and the rate of RMB 6.2112 to $1.00 for the three months ended June 30, 2013.

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Net Sales. Our net sales consist of revenue derived from the sales of our products, less discounts and returns. For the three months ended June 30, 2014, our net sales were $16.0 million compared to $21.7 million for the same period of last year, a decrease of $5.7 million or approximately 26%. The decrease was primarily due to decreased sales volume in the second quarter of 2014. Of the decrease in net sales, approximately $7.0 million was attributable to decreased sales volume of our products, while approximately $0.7 million due to higher average selling prices of our products and approximately $0.6 million was due to the appreciation of the RMB against the US dollars.

The following table summarizes some of the major fluctuations in net sales for the period and the basis for the change from the prior period :-

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 June 30, 2014, our cost of sales were $14.0 million compared to $14.6 million for the same period of last year, a decrease of $0.6 million or approximately 4%. The comparable cost of sales, despite a 26% decrease in sales, was the result of an increase in production costs and direct labor. As a percentage of net sales, our cost of sales increased to approximately 87% for the three months ended June 30, 2014 from approximately 67% for the three months ended June 30, 2013.

Gross Profit and Gross Margin. Our gross profit is equal to our net sales less our cost of sales. Our gross profit was $2.0 million for the three months ended June 30, 2014 compared to $7.1 million for the same period of last year, a decrease of $5.1 million or approximately 72%. Gross profit as a percentage of net sales was approximately 13% and 33% for the three months ended June 30, 2014 and 2013, respectively. The decrease in gross profit margin was mainly due to the decrease in sales of High PH bamboo shoots (with skin) that commanded a high gross profit margin of approximately 60% to 70% previously. With the change in consumers’ preferences, additional operational procedures were required to further process the High PH bamboo shoots. This resulted in additional cost of sales and lower margins for those products. In addition, that fact that we did not sell any bamboo woods (which also command relatively higher gross profit margin) in the first half of 2014 was another contributing factor to the decrease in the overall gross profit and gross margin.

Selling and Administrative Expenses. Our selling and administrative expenses decreased by $0.8 million, or approximately 47%, to $0.9 million for the three months ended June 30, 2014 from $1.7 million for the three months ended June 30, 2013.

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 decreased from $0.4 million for the three months ended June 30, 2013 to $0.3 million for the three months ended June 30, 2014. As a percentage of net sales, selling expenses for the three months ended June 30, 2014 were approximately 2% of net sales, comparable to 2% for the three months ended June 30, 2013.

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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 fluctuation, and depreciation of non-production facilities. Our administrative expenses decreased by $0.7 million, or approximately 54%, to $0.6 million for the three months ended June 30, 2014 from $1.3 million for the three months ended June 30, 2013. The decrease was mainly attributed to the decrease in insurance premium paid of approximately $0.3 million, and exchange losses of approximately $0.1 million as well as a reduction in share-based compensation of approximately $0.1 million. As a percentage of net sales, administrative expenses decreased to approximately 4% for the three months ended June 30, 2014 from 6% for the three months ended June 30, 2013.

Net Finance Costs. Our net finance costs increased to approximately $0.5 million for the three months ended June 30, 2014 from approximately $0.3 million for the three months ended June 30, 2013. This was mainly due to the increase in secured short-term borrowings to meet the increased working capital requirement demand. As a percentage of net sales, net finance costs increased to 3% for the three months ended June 30, 2014 from 1% for the three months ended June 30, 2013.

Income Taxes. We had income taxes of approximately $0.1 million for the three months ended June 30, 2014, compared to approximately $0.09 million for the three months ended June 30, 2013. Even though income was lower for the three months ended June 30, 2014, a greater portion of our income in the second quarter of 2013 was derived from the sale of fresh produce, which is exempt from income tax.

Net Income. Our net income attributable to Company’s common stockholders decreased by $4.5 million or approximately 88%, to $0.6 million for the three months ended June 30, 2014 from $5.1 million for the three months ended June 30, 2013. The main reasons for the decrease of our net income were due to change in our key components of our results of operations discussed above.

Six months Ended June 30, 2014 Compared to Six months Ended June 30, 2013

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)

		For the six months						For the six months
Item		ended						ended
		June 30, 2014						June 30, 2013
(Unaudited)		(As reported)						(As reported)
		In			As a			In			As a
		Thousands			Percentage			Thousands			Percentage
					of						of
					Net Sales						Net Sales
Net sales	$	51,274			100%		$	57,718			100%
Cost of sales		(39,341	)		(77)%			(39,783	)		(69)%
Gross profit		11,933			23%			17,935			31%
Selling and administrative expenses		(2,407	)		(4)%			(3,207	)		(6)%
Operating income		9,526			19%			14,728			25%
Government grant income		327			1%			103			0%
Other income - net		84			0%			41			0%
Net finance costs		(905	)		(2)%			(835	)		(1)%
Income before income taxes and noncontrolling interest		9,032			18%			14,037			24%
Income taxes		(314	)		(1)%			(279	)		0%
Net income before noncontrolling interest		8,718			17%			13,758			24%
Net loss attributable to noncontrolling interest		-			0%			22			0%
Net income attributable to Company’s common stockholders		8,718			17%			13,780			24%

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 6.1626 to $1.00 for the six months ended June 30, 2014 and the rate of RMB 6.2461 to $1.00 for the six months ended June 30, 2013.

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Net Sales. Our net sales consist of revenue derived from the sales of our products, less discounts and returns. For the six months ended June 30, 2014, our net sales were $51.3 million compared to $57.7 million for the same period of last year, a decrease of $6.4 million or approximately 11%. The decrease was primarily due to decreased sales volume resulting from a reduction in our vegetable and fruit planting bases and the drought season that occurred in 2013. Of such decrease, approximately $14.5 million was attributable to decreased sales volume of our products, offset by approximately $6.6 million due to higher average selling prices of our products and increased by approximately $1.5 million was due to the appreciation of the RMB against the US dollars.

The following table summarizes some of the major fluctuations in net sales for the period and the basis for the change from the prior period:-

Cost of Sales. Our cost of sales is primarily comprised of the costs of our raw materials, labor, overhead and sales tax. For the six months ended June 30, 2014, our cost of sales were $39.3 million compared to $39.8 million for the same period of last year, a decrease of $0.5 million or approximately 1%. This comparable cost of sales, despite the 11% decrease in sales, was primarily due to an increase in the price of raw materials of approximately 15% to 25% over the periods. We also experienced an increase in direct costs of processed bamboo shoot products, including direct labor costs. As a percentage of net sales, our cost of sales increased to approximately 77% for the six months ended June 30, 2014 from approximately 69% for the six months ended June 30, 2013.

Gross Profit and Gross Margin. Our gross profit is equal to our net revenues less our cost of sales. Our gross profit was $11.9 million for the six months ended June 30, 2014 compared to $17.9 million for the same period of last year, a decrease of $6.0 million or approximately 34%. Gross profit as a percentage of net sales was approximately 23% and 31% for the six months ended June 30, 2014 and 2013, respectively. The decrease in gross profit margin was mainly due to the decrease in sales of High PH bamboo shoots (with skin) that commanded a high gross profit margin of approximately 60% to 70% previously. With the change in consumers’ preferences, additional operational procedures were required to further process the High PH bamboo shoots. This resulted in additional cost of sales and lower margins for those products. In addition, the fact that we did not sell any bamboo woods (which also command relatively higher gross profit margin) in the first half of 2014 was another contributing factor to the decrease in the overall gross profit margin.

Selling and Administrative Expenses. Our selling and administrative expenses decreased by $0.8 million, or approximately 25%, to $2.4 million for the six months ended June 30, 2014 from $3.2 million for the six months ended June 30, 2013.

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 decreased to $0.5 million for the six months ended June 30, 2014, from $0.8 million for the six months ended June 30, 2013.

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This was primarily due to the decrease in the following items :-

	i)	share-based compensation expense of $0.04 million,
	ii)	transportation charges of $0.09 million,
	iii)	selling and promotional expenses of $ 0.04 million
	iv)	travelling and related expenses of $0.03 million

As a percentage of net sales, selling expenses for the six months ended June 30, 2014 were approximately 1% of net sales, comparable to 1% for the six months ended June 30, 2013.

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 fluctuation, and depreciation of non-production facilities. Our administrative expenses decreased by $0.5 million, or approximately 21%, to $1.9 million for the six months ended June 30, 2014 from $2.4 million for the six months ended June 30, 2013. The decrease was mainly attributed to the decrease in insurance premium paid of approximately $0.2 million and foreign exchange losses of approximately $0.3 million during the current period of 2014, compared to the same period 2013. As a percentage of net sales, administrative expenses remained at comparable level of 4% for both the six months ended June 30, 2014 and 2013.

Net Finance Costs. Our net finance costs increased to approximately $0.9 million for the six months ended June 30, 2014 from approximately $0.8 million for the six months ended June 30, 2013. The increase is mainly due to increase in bank borrowings to meet our increased working capital requirement. As a percentage of net sales, net finance costs was 2% and 1% for the six months ended June 30, 2014 and 2013 respectively.

Income Taxes. We had income taxes of approximately $0.3 million for the six months ended June 30, 2014, similar to approximately $0.3 million for the six months ended June 30, 2013 primarily because we had comparable taxable profits for the two periods, after application of the tax exemption on profits from sales of fresh produce.

Net Income. Our net income attributable to Company’s common stockholders decreased by $5.1 million or approximately 37%, to $8.7 million for the six months ended June 30, 2014 from $13.8 million for the six months ended June 30, 2013. The main reasons for the decrease 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

The following table provides detailed information regarding key balance sheet items and other items affecting our liquidity for the financial statement periods presented in this report.

		As of
		June 30,			December 31,
		2014			2013
		(Unaudited)			(Audited)
Cash and cash equivalents	$	0.8 million		$	3.0 million
Trade receivables		55.4 million			50.3 million
Working capital		68.3 million			58.5 million
Days sales outstanding		190			143

The overall increase in working capital during the period ended June 30, 2014 resulted primarily from increases in trade receivables and inventories, with cash and cash equivalents declining by $2.2 million. Our trade receivables have been impacted, in part, by an increase in days sales outstanding. Our inventory levels were impacted by an increase in bamboo inventory as a result of the low harvest during the period and an accumulation of our fresh fruit and vegetable products which are typically sold in the third quarter. We expect to be able to convert these inventories into trade receivables and ultimately cash and cash equivalents over the next few quarters in order to improve our liquidity.

Our days sales outstanding increased to 190 days as of June 30, 2014 from 143 days as of December 31, 2013. This was mainly due to the tightening of monetary policy by the Chinese Government that indirectly resulted in the demand for longer credit terms to settle the outstanding debts from 120 days to 180 days. Approximately 29% of our trade receivables were within 90 days and 55% of our trade receivables were within 91 to 180 days as of June 30, 2014.

Given our standard credit terms of 120 days as of June 30, 2014, we have taken relevant measures such as rebate to encourage prompt settlement. As of August 2014, we have collected approximately 40% of our total outstanding trade receivables that were due since December 2013. More stringent credit control measure will be implemented in the third quarter of 2014 to improve and strengthen our overall financial position. However, continued tightening of monetary policy may cause additional delays in payment from our customers. If that persists, we may be required to increase borrowings, or restrict the credit terms that we extend customers, in order to manage our cash position. Any restriction in credit terms to our customers could adversely impact our net sales.

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

Cash Flow
(All amounts in thousands of U.S. dollars)

		Six months Ended
		June 30,
		(Unaudited)
		2014			2013
Net cash used in operating activities	$	(5,510	)	$	(6,349	)
Net cash used in investing activities		(58	)		(2,455	)
Net cash provided by financing activities		3,392			5,091
Effect of exchange rate on cash and cash equivalents		(23	)		160
Cash and cash equivalents at the beginning of the period		3,000			9,756
Cash and cash equivalents at the end of the period		801			6,203

Cash Flows from Operating Activities.

Net cash used in operating activities was $5.5 million for the six months ended June 30, 2014, compared to net cash used in operating activities of $6.3 million for the six months ended June 30, 2013. The decrease in cash from operations was primarily attributable to a decrease in net income generated during the period, an increase in trade receivables and inventories, which was partly offset by decrease in other receivables, prepayments and deposits and increase in trade payables.

Cash Flows from Investing Activities.

Net cash used in investing activities for the six months ended June 30, 2014 was $0.06 million compared to $2.5 million for the six months ended June 30, 2013. The overall decrease in cash used in investment was primarily related to decreased deposits for acquisition of property, plant and equipment and there was no refund of deposits for acquisition of land use rights during the period. We did not acquire any new land use rights during the six months ended June 30, 2014.

Cash Flows from Financing Activities.

Net cash provided by financing activities was $3.4 million for the six months ended June 30, 2014 compared to $5.1 million provided by financing activities for the six months ended June 30, 2013. Net cash provided by financing activities for the six months ended June 30, 2014 was primarily attributable to borrowings under bank credit facilities.

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Contractual Obligations and Commitments

Our short term borrowings consist of secured bank loans under a number of credit facilities with commercial banks in China. The weighted-average interest rate on short-term borrowings as of June 30, 2014 and December 31, 2013, were 7.94% and 6.47% respectively. The details of our banking facilities as of June 30, 2014 were as follows: -

						Amount
Facilities granted			Granted			utilized			Unused
Secured bank loans		$	24,193,000		$	24,163,750		$	29,250

For additional details, please refer to Note 16 to our condensed consolidated financial statements for the three and six months ended June 30, 2014 and 2013 on page 16.

Our operating leases relate to payments for land use rights for our facilities, planting bases and bamboo forests. Our rights to our corporate facilities extend until 2053 to 2055. The rights to our planting basis range from 7 to 30 years and the rights to our bamboo forests generally range from 20 to 37 years. As of June 30, 2014 the future minimum lease payments under non-cancelable operating leases were as follows:

Within 1 year	$	3,700,119
In the second year		3,666,867
In the third year		3,648,721
In the fourth year		3,641,950
In the fifth year		3,641,950
Thereafter		43,917,954
	$	62,217,561

For additional details, please refer to Note 19 to our condensed consolidated financial statements for the three and six months ended June 30, 2014 and 2013 on page 18.

Contingent Liabilities

In accordance with PRC labor laws and regulations, we are required to contribute the social insurance for our staff. Before December 31, 2010, we made a provision of approximately $579,000 to cover potential liability with respect to certain unpaid social insurances for staff. On February 29, 2012, we obtained written confirmation from the local authority that, because we primarily employ migrant workers from rural areas and temporary workers, which normally have high mobility and with different levels of implementation of the social insurance systems by the local authority, we are allowed to contribute the social insurance in amounts accepted by the local authority which are generally lower than the requirements under PRC labor laws and regulations. Since January 1, 2011, we have been making payments for the social insurance based on the instructions by local authority. If we were required to fully contribute the social insurance for our staff under the PRC labor laws and regulations, the total cost may be as much as $4,821,000. However, we have not been involved in any investigation or administrative penalty by the local authority in connection with our social insurance payments. Based on our past experience and the written confirmation from the local authority, we believe the likelihood that we will have to pay any additional amount is remote. 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.” 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 $0.06 million for the six months ended June 30, 2014. Our capital expenditures were used to acquire property, plant and equipment. We currently estimate that our capital expenditures in fiscal year 2014 will be approximately $2.5 million, which we intend to use primarily for the completion of our acquisition of land use right in respect of bamboo forest that we have paid deposits for and the construction of our new logistic, trading and testing center and staff quarters.

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Capital Resources

As of June 30, 2014, we had only a minimal amount of 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. Our cash and cash equivalents decreased by $2.2 million during the six months ended June 30, 2014. Our overall working capital position increased by $9.8 million for the six months ended June 30, 2014, primarily as a result of increases in trade receivables and inventories. We will need to convert more of our trade receivables and inventories into cash to improve our liquidity and capital resources. Based on our recent operating experience, we anticipate that cash generated from operations together with commercial borrowings will be sufficient to fund our operations over the next 12 months.

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 our annual report on Form 10-K for the year ended December 31, 2013. In addition, we may, in the future, require additional cash resources due to changed business conditions, expansion of 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. No arrangements or commitments for any such financings are in place at this time, and we cannot give any assurance about the availability or terms of any future financings.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Item 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures.

We maintain disclosure controls and procedures that are designed to provide reasonable assurances that material information related to our company is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer have determined that as of June 30, 2014, our disclosure controls were effective at that “reasonable assurance” level.

Changes in Internal Controls over Financial Reporting.

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 and in the course of business, we may become involved in various legal proceedings seeking monetary damages and other relief. The amount of the ultimate liability, if any, from such claims cannot be determined. However, in the opinion of our management, there are no legal claims currently pending or threatened against us that would be likely to have a material adverse effect on our financial position, results of operations or cash flows.

Item 1A. RISK FACTORS.

You should carefully consider the risk factors discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on March 31, 2014, 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.

None.

Item 3. DEFAULTS UPON SENIOR SECURITIES.

None.

Item 4. MINE SAFETY DISCLOSURES.

Not applicable.

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.

	ASIA GREEN AGRICULTURE CORPORATION
Date: August 22, 2014	/s/ CHIN HON SIANG ALEX
	Chin Hon Siang Alex, Chief Financial Officer
	(Principal Accounting Officer)

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Exhibit
No.		Document Description		Incorporation by
				Reference
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.		Filed herewith.
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.		Filed herewith.
32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C, Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.		Filed herewith.
101.INS		XBRL Instance Document		Filed herewith.
101.SCH		XBRL Taxonomy Extension Schema Document		Filed herewith.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document		Filed herewith.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document		Filed herewith.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document		Filed herewith.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document		Filed herewith.

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