Feature: China Organic Agriculture (CNOA)

Dear Reader,

Chinese organic produce, milk, and even livestock are serving demand thousands of miles away. In 2003 alone, Chinese organics accounted for $142 million in exports to markets around the world; by 2004, that number had increased to $200 million.  According to The New York Sun, imports of Chinese organics tripled globally between 2003 and 2005. In that year, the BBC reports, Chinese organic exports totaled about $350 million.

Sales of organic foods by the country's 800 government-certified producers reached $4 billion last year, of which about $140 million comprised exports, both up 20% from a year earlier. "The term 'organic food' is now part of everyone's vocabulary," says Shi Songkai of the semi-official China Organic Foods Research Centre.

Today's featured company, China Organic Agriculture, Inc. (OTCBB:CNOA) could be in exactly the right place at the right time to take full advantage of the massive growth in the global organics marketplace. “China Organic is truly an international investment opportunity,” said Jinsong Li, CEO. “The challenges inherent in dealing with a Chinese-based company dictate that we find the best partners to delineate our high-growth business model to the global investment community.”

In Asia, it is estimated that organic retail sales now exceed $1 billion and China is the Asian country with the largest area of organic certified land. In China, there’s a big incentive to make that land pay off; organically. 
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Breaking *NEWS* from China Organic Agriculture

China Organic Agriculture Issues Revenue and Earnings Guidance

Tuesday November 25, 4:01 pm ET

LOS ANGELES & LIAONING, China--(BUSINESS WIRE)--China Organic Agriculture, Inc. (OTCBB:CNOA), an international diversified premium food products company capitalizing on China's burgeoning domestic consumer demand, today announced revenue and earnings guidance for fourth quarter 2008 and Fiscal Year 2008, ending December 31, 2008, with estimates exceeding all previous revenue and net income results for the Company.

Projected Guidance for Q4 and FY08:

• Q408 revenue of $54 million (vs. $15.7 million Q407), or an approximate 240% Quarter Over Quarter Revenue Increase
• FY08 revenue $113 million (vs. $44.5 million FY07), or an approximate 150% Year Over Year Revenue Increase
• Q408 net income $11 million (vs. $3.9 million Q407), or an approximate 180% Quarter Over Quarter Net Income Increase
• FY08 net income $20 million (vs. $13.5 million FY07), or an approximate 40% Year Over Year Net Income Increase
• Q408 EPS of $0.15 and FY08 EPS of $0.29

"We remain unequivocal in our commitment to revenue and earnings growth,” said Jinsong Li, Chief Executive Officer of China Organic Agriculture. “Our successful restructuring and the implementation of a number of high growth strategies are validated by our current and forecasted top line and bottom line numbers. We believe our proactive business model will serve to drive revenues, earnings and, ultimately, shareholder value.”

Management noted the Company’s results and forecasts reflect the recent sale of the Company’s ErMaPao subsidiary for $8.7 million and the acquisition of Dalian Huiming in October 2008.

CNOA recently announced aggressive growth strategies for 2009 which include further diversification of product lines, the development of new revenue streams and the completion of a number of strategic acquisitions. The Company is committed to establishing itself as a leading purveyor of premium international consumer products including high-quality foods, organic rice and California wines. It is uniquely positioned to capitalize on rapidly-growing Chinese and Asian domestic consumer demand which is anticipated to continue to increase despite the current economic slowdown worldwide.

About China Organic Agriculture

China Organic Agriculture is a high growth international food products company capitalizing on the China’s burgeoning domestic demand for premium products due to an expanding class of consumers with the ability to acquire premium food products.

The Company has developed an extensive distribution network throughout China including Beijing, Shanghai and Nanjing. The Company is positioned to leverage this network to increase market penetration with broad distribution of agricultural, food and related premium products. The Company has experienced significant growth since its inception in 2002 and continues to implement a number of strategic initiatives to further expand revenues and earnings. For more information, please visit: www.chinaorganicagriculture.com.

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

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About China Organic Agriculture

China Organic Agriculture Inc., "China Organic Agriculture""CNOA" is headquartered in the Liaoning province, People’s Republic of China, and is a global diversified food products company engaged in the international distribution and production of premium and natural foods. Serving the marketplace demands of the fast-growing upscale consumer population throughout the Asia-Pacific region, CNOA targets multibillion-dollar expanding markets for premium and natural foods and wines, leveraging its established distribution networks. Historically, the Company has been solely engaged in the manufacturing and distribution of green and organic rice, yet in recent months it has diversified its products.

In October of 2008 the Company’s new CEO, Jinsong Li, announced an expansion of its activities to capitalize on worldwide opportunities in international food markets. As a result, the Company’s expanding portfolio of premium and natural food products will soon include green and organically grown rice, as well as California wine, organic soybeans, kidney beans, mushrooms and other premium products.

As one of the largest distributors of green and organic rice in China, the CNOA has developed extensive networks throughout many of China’s major cities, including Beijing, Shanghai and Nanjing, and is positioned to leverage those networks to establish broad distribution of a number of natural and premium food and related products.

China Organic Agriculture intends to achieve revenue growth both through organic expansion, as well as by acquisition of complementary product lines and companies. China Organic has experienced significant growth since its inception in 2002. China Organic’s new CEO announced his future vision for the company by outlining a number of strategic initiatives to expand sales and revenues throughout Asia
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The Organics Market in China and Globally

Chinese organic produce, milk, and even livestock are serving demand thousands of miles away. In 2003 alone, Chinese organics accounted for $142 million in exports to markets around the world; by 2004, that number had increased to $200 million. 

According to The New York Sun, imports of Chinese organics tripled globally between 2003 and 2005. In that year, the BBC reports, Chinese organic exports totaled about $350 million; the number of acres of organic farmland in China, meanwhile, totaled about 5.7 million, behind only Australia and Argentina.

China currently has 8.6 million acres of organic farmland, almost 90 percent of which was certified in 2004. China may harvest 156 million tons of corn and 16.5 million tons of soybeans this year, the China National Grain and Oils Information Center recently said.

Sales of organic foods by the country's 800 government-certified producers reached $4 billion last year, of which about $140 million comprised exports, both up 20% from a year earlier. "The term 'organic food' is now part of everyone's vocabulary," says Shi Songkai of the semi-official China Organic Foods Research Center.

INDUSTRY DRIVERS Expanding Consumer Class Demographics in China, as well as other emerging economies in Asia, show a rapidly growing affluent population that is becoming increasingly health conscious in a region consisting of a quarter of the world’s population and the largest middle class. Food Safety With news of recent food safety scandals, such as the melamine milk scare, Chinese consumers are increasingly retreating to safe food products that are free of pesticides, chemicals and heavy processing. Pound for pound, even non-organic Chinese farmers are using only a fraction of the insecticides and herbicides used by US farmers. On the other hand, if a consumer’s goal is low environmental impact, they might want to consider the effects of shipping organics across the Pacific. Increasing Disposable Income As their incomes rise, Chinese consumers are changing their diets and demanding greater quality, convenience, and safety in their food, fueling recent growth in sales of premium food and beverage products. Wine Consumption In 2007, the import of wine into China totaled approximately 54 million bottles according to the latest report of the International Wine and Spirit Competition. Total wine consumption in China is expected to increase 65% from 2001 to 2010, a growth rate over six times faster than the global average. Price Support Despite reassuring supply numbers in 2008, several governments’ export restrictions combined with the rapidly-growing emerging market economies will likely keep prices for rice and other agricultural products high for the foreseeable future.

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CNOA Business Segments

Ankang Agriculture

Ankang Agriculture focuses on distribution of green and organic rice. This segment is the engine of growth for China Organic, responsible for a vast majority of its sales by engaging in the resale of rice and grains. 

• Flagship products
• Organic and green rice
• New product lines
• Soybeans, kidney beans and mushrooms. 
• Some of these new products will be distributed under the newly acquired “Xiaoxinganling” brand name, popular in the northeast provinces of China

Dalian Huiming

Major agricultural trading company with broad distribution and product lines.  60% stake recently acquired by CNOA on October 30, 2008. Expands the diversity of the products CNOA offers Focuses on soybeans, corn, and cereal crops.

Based on net earnings, Dalian Huiming is one of the top-tier agricultural trading companies in the Northeast provinces of China. 

• For fiscal year 2007...
• Revenue was $40.2 million
• Net income was $2.7 million
• Fourfold increase from the comparable period in 2006.

Bellisimo Vineyard

• Located in the premium wine country of Sonoma, CA 
• Produces Chardonnay, Merlot, and Cabernet Sauvignon wine grapes
• Export Napa and Sonoma wine to China
• Chinese and Asian consumers hold area’s wine in high regard
• Label bottles specifically for Chinese and Asian consumers
• Partnering with local wineries in order to bottle harvestable grapes
• Marketed toward a variety of different consumer groups

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Recent News from China Organic Agriculture, Inc.

Press Release Source: China Organic Agriculture, Inc. 
Friday November 21, 6:38 pm ET 

LOS ANGELES & LIAONING, China--(BUSINESS WIRE)--China Organic Agriculture, Inc. (OTCBB: CNOA - News), a diversified food products company capitalizing on China's consumer revolution, today announced that it has engaged China America Financial Communications Group (CAF), a leading financial communications and marketing firm uniquely focused on high quality Chinese-based companies with exceptional growth potential.

CAF’s role will be to provide financial communications services, drive global investor visibility and support CNOA’s mandate of delivering significant shareholder value.

“China Organic is truly an international investment opportunity,” said Jinsong Li, Chief Executive Officer. “The challenges inherent in dealing with a Chinese-based company dictate that we find the best partners to delineate our high-growth business model to the global investment community. We are confident that the depth of market experience and communications knowledge of the CAF team on all of these fronts make this relationship an extremely powerful combination.”

CAF's responsibilities under the agreement include ongoing contact with prospective investors and the brokerage community, dissemination of news, research and information to China Organic’s current shareholders and potential investors. CAF will also manage ongoing outreach and special presentations to institutional investors and others in the financial community through industry meetings as well as national and international financial conferences.

“Given the volatility of today’s markets, it is especially important that all companies, particularly Chinese operating companies, align themselves with firms that understand global markets as well as their unique character,” said A. J. Cervantes, Chairman and CEO of China America. “China Organic represents a compelling investment opportunity that has already displayed exceptional growth to date. We are very much looking forward to working with Mr. Li and his team to bring this impressive story to the attention of the global investment community.” MORE

Press Release Source: China Organic Agriculture, Inc. 
Tuesday November 4, 11:35 am ET 

LOS ANGELES & LIAONING, China--(BUSINESS WIRE)--China Organic Agriculture, Inc. (OTCBB: CNOA - News), a diversified food products company capitalizing on China's consumer revolution, today announced that its new CEO, Jinsong Li, purchased 500,000 shares of CNOA stock in a private transaction from an existing shareholder of CNOA. 

Mr. Li made the purchase at a price equivalent to the 10-day trading average ending November 3, 2008. The purchase represents Mr. Li’s initial equity stake in the Company.

“Establishing an equity position in CNOA has been a goal of mine since I first joined the Company,” said Mr. Li. “I made this investment because China Organic is a promising agricultural company in the fast-growing Asian market and I strongly believe in the core strengths of our organization.”MORE

Press Release Source: China Organic Agriculture, Inc. 
Friday October 31, 8:51 am ET 

LOS ANGELES & LIAONING, China--(BUSINESS WIRE)--China Organic Agriculture, Inc. (OTCBB: CNOA - News), a diversified food products company capitalizing on China's consumer revolution, today announced that it has completed the previously announced acquisition of Dalian Huiming Industry, Ltd. (“Dalian Huiming”).

China Organic acquired 60% of Dalian Huiming for $10.6 million in an all cash transaction dated October 31, 2008. The transaction was completed within the timeframe set forth by the company’s new Chief Executive Officer, Jinsong Li, and will be reflected in China Organic’s fourth quarter financial results.

“The completion of this acquisition marks an important milestone in the history of China Organic Agriculture,” said Mr. Li. “We’re now able to focus on the successful integration of Dalian Huiming into CNOA’s operations, allowing us to expand distribution channels and diversify our product offerings.”MORE
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Management at China Organic Agriculture, Inc.

Jinsong Li
Chief Executive Officer and Chairman of the Board Mr. Li, a Chinese business leader with over 18 years of agricultural and financial industry background, was formerly vice president of Beijing Jingwei Capital Investment Co., Ltd, an investment firm focusing on agricultural companies, where he managed investment projects valued at more than $100 million. Mr. Li previously worked for more than 15 years in various executive roles at a commercial trade company in Shantou and an agricultural products company in Beijing.

Xuefeng Guo
CFO & Secretary of the Board
Mr. Guo graduated from the University of Shandong and holds an MBA degree. From January 2003 to present, he was deputy Manager of Beijing Mingtian Capital. Until December 2002, Mr. Guo was Deputy Manager of Tianlishou Medicine Factory, in Shandong. 

Zhouzhe Jin

Mr. Jin graduated from Yanbian Agriculture College and is an accredited senior agronomist in the Songyuan Agricultural Specialist Group of Jilin Province and has been an independent director and consultant of China Organic Agriculture since 2005. Mr. Jin has been a pioneer in the field of rice breeding with several acclaimed publications and awards for his work in developing and popularizing new, high quality breeds. 

Jingyong Ma
Mr. Ma is an agricultural specialist and researcher. Since 1970, Mr. Ma has lectured graduate students at Jilin Agricultural Academy, while also conducting research on the quality of rice grain, new varieties of rice grain, and rice grain breeding genetics. Since January 2005, Mr. Ma has been retained by the Company as a rice grain specialist and consultant. Mr. Ma has developed a variety of new species of grains which are resistance to disease and blight. 
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Financial Highlights for CNOA

Net sales for the third quarter of 2008 were $47.2 million, increasing 111% compared to $22.4 million for the comparable quarter of 2007. For the nine months ended September 30, 2008 net sales were $58.4 million, increasing 103% compared to $28.8 million for the nine months ended September 30, 2007. China Organic had net income of $8.3 for the third quarter of 2008, compared to net income of $7.2 million for the third quarter of 2007. Earnings per share maintained its level of $0.14 per diluted share compared with the third quarter of 2007 as a result of a proportionate increase in the weighted average number of shares between the two periods.

Organic and Green Rice | China Organic Agriculture’s flagship product is organic and green rice, which is being sold through the Company’s fast growing Ankang subsidiary. Sales from this unit, which was new at the beginning of the year, are expected to represent a majority of China Organics revenue for the third quarter of 2008.

Wine Distribution | The purchase of the Bellisimo Vineyard and the formation of the Far East Wine Holding Group enables CNOA to import Sonoma and Napa Valley wine directly to Chinese and Asian consumers who hold these products in high regard.

Soybeans, Kidney Beans and Mushrooms | China Organic acquired the “Xiaoxinganling” trademark, which for the past seven years has been associated with select premium organic products in China. Along with the trademark, China Organic gained access to the distribution channels for several premium food products, including soybeans, kidney beans and mushrooms.

Future Acquisitions | China Organic Agriculture is actively seeking accretive acquisition targets that are involved in the production of premium and natural foods and expand its base of Chinese and Asian customers.

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Company Contact

Steve Wan
China Organic Agriculture Inc.
Tel. 310.441.1888
stevewan@chinaorganicagriculture.com
 www.chinaorganicagriculture.com

Financial Communications Contact 
Darren Minton
China America Financial Communications Group
Tel. 212.823.0524
chinaorganic@cafcg.com
http://www.cafcg.com

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