Origin Agritech Limited Reports Financial Results for the Twelve Months Ended September 30, 2009

Revenues for FY2009 were US $86.8 million from US $75.6 million, an increase of 14.7%

Operating Cash Flow in FY2009 was US $30.59 million from US $8.42 million in FY2008

BEIJING--(BUSINESS WIRE)--January 14, 2010--Origin Agritech Limited (NASDAQ: SEED) (“Origin” or the “Company”), a vertically–integrated supplier of hybrid and genetically-modified crop seeds in China, today announced audited financial results for the year ended September 30, 2009. These audited twelve month results reflect the Company’s financial statements during the period from October 1, 2008 to September 30, 2009. Origin prepares its financial statements in accordance with generally accepted accounting principles (GAAP) of the United States.

With the rapid growth in China prompting greater demands on domestic food production, and China rapidly becoming a net corn importer, as a result of the rising consumer desire for higher quality food products, the Chinese central government has taken several measures to deal with these core issues. Crop seed is the fundamental input in the corn industry, and this input which possesses the greatest upside in gains from technological improvements. According to research, corn seed plays the most active factor in the increase of yield gains, accounting for over 35.5% of the total contribution.

During the past years, the Chinese central government initiated a comprehensive USD 6 billion plan for the implementation of genetically modified food products throughout China. In 2009, they furthered this plan through further implementation, including the approval of the first genetically modified main crop seed in rice and corn. Compared with conventional varieties, the obvious advantages of transgenic varieties are high yield, high quality, disease-resistance, and herbicide resistance. Farmers plant transgenic varieties to both save time and cost, while also reducing the amount of fieldwork. Given Origin’s unique position with our late stage product pipeline, we believe we are the beneficiary of such emerging trends affecting our industry for the next decade.

We have pursued genetically modified research, and in November 2009, we received the Bio-Safety Certificate from the Ministry of Agriculture as a final approval for commercial use of the world’s first genetically modified phytase corn. This is the first genetically modified corn seed product in China. We are also actively pursuing the approval of other GM seed products including glyphosate resistant corn and Bt Corn. Origin’s focus remains in the production of higher quality seed products, whether proprietary or licensed.

Consequently, we established several plant genetic engineering technology platforms to meet the demands we foresee in the future. These include transforming genetically modified traits such as herbicide tolerance, insect resistance, nitrogen efficiency, and drought stress tolerance genes into corn inbred lines. As a domestic company, we are afforded the ability to proceed through all five phases of GMO approval, while international entities are restricted to phases one currently, and forbidden to proceed to phase 2 through 5. We have already had several products in the phase 2 to phase 4, and we will be the first company ready to sell and produce GM corn seed in China.

As an example, we have been successful in marketing genetically modified BT cotton varieties in China and plan to continue to develop other new seed varieties. Upon introduction, the Bt cotton gene was able to increase yield and production value. As a result, the farmers were willing to pay more for genetically modified seeds and prices increased roughly four-fold for genetically modified cotton seed as compared to standard hybrid seed. Today, almost all the planted acreage in China utilizes genetically modified cotton seed, exclusive of the Xinjiang region. We believe that other crop seeds can follow similar product adoption patterns.

Glyphosate resistance and Bt corn, as highly successful products elsewhere in the world, remain “industry changers” in China. Origin Agritech retains the exclusive license rights to these specific traits, and expects to be the first company to commercialize these crops in China.

Worldwide, the largest segment of the transgenic crop market has been herbicide resistant crops. Specifically, glyphosate resistant crops have been widely accepted in cotton, corn, and canola in North America. Introduced in the US in 1998, the use of glyphosate resistant corn grew at a compounded annual growth rate of 51.9%, according to the US Department of Agriculture. The rapid historical adoption rate indicates farmers find this trait to extremely valuable. Additionally, Bt crops produce a protein toxic to specific insects used in areas with high levels of infestations of targeted pests. Introduced in 1996 in the US, acreage of Bt corn has grown at a compounded annual growth rate of 36.7%, according to the US Department of Agriculture.

We have roughly 100 total hybrid products in the market, and began to develop Origin’s own proprietary hybrid seed varieties in 1998. As of December 2009, we have 23 proprietary corn seed products, 18 proprietary rice seed products, 3 proprietary cotton seed products and 3 proprietary canola seed products that are in commercial production and distribution. Currently, we have 9 breeding stations and employ 136 full time research personnel. Origin’s longstanding, education-based distribution platform enables us to introduce higher quality products into the marketplace, as Origin’s associated infrastructure affords us the ability to successfully launch genetically modified products.

Liang Yuan, President and Chief Executive Officer of Origin Agritech, commented, “We remain excited of the positive growth trends illustrated by results for the fiscal 2009 year period ended September 30, 2009. While most other industries remain uncertain, we show positive signs of significant improvement in both Origin’s top-line and bottom-line numbers. As expected, Origin’s financials for the fiscal 2009 period ended September 30, 2009 showed revenue growth, margin improvement, and bottom line increases from the fiscal year ended September 30, 2008. We expect these trends to continue into FY 2010. As the market trends more towards technology based products, we have managed Origin’s R&D and operations in anticipation of bringing higher quality products to the market.”

Our revenues for the year ended September 30, 2009 were RMB592.49 million (US $86.76 million), an increase of 15.39% from RMB513.49 million (US $75.63 million) in the fiscal year ended September 30, 2008. Inclusive of any currency changes, based on US $, the year over year increase in revenues to US $86.76 million from US $75.63 was 14.73%. For the year ended 2009, our scrap sales only amounted to 0.54% of our total revenues with limited impact on our overall gross margin. Excluding these scrap sales and the impairment of inventory; our gross margins for the period were 35.60% (unaudited) as compared to our 31.56% (unaudited) gross margins for the twelve months ended September 30, 2008.

The revenues resulting from non-scrap seed sales for the twelve months ended September 30, 2009 as compared to that of the twelve months ended September 30, 2008 were as follows:

Our cost of revenue for the year ended September 30, 2009 was RMB392.84 million (US$57.53 million), including the RMB7.40 million (US$1.08 million) inventory write-down. This was a decrease of 2.95% from RMB404.80 million (US$59.62 million) from FY2008, including the inventory write-down of RMB18.01 million (US$2.65 million).

Our gross profit for the year ended September 30, 2009 increased to RMB199.70 million (US$29.24 million) from RMB108.70 million (US$15.94 million) for the year ended September 30, 2008. This represented an increase of 83.72% from the fiscal year ended September 30, 2008.

Operating expenses for the year ended September 30, 2009 were RMB153.95 million (US$22.55 million), representing an increase of 1.91% from RMB151.07 million (US$22.25 million) for the fiscal year ended September 30, 2008. For all intents and purposes, our operating expenses were relatively flat as compared to the year ended September 30, 2008. Selling and marketing expenses for the year ended September 30, 2009 were RMB55.65 million (US$8.15 million), representing an increase of 4.61% from RMB53.20 million (US$7.84 million) for the year ended September 30, 2008. General and administrative expenses for the year ended September 30, 2009 were RMB64.83 million (US$9.50 million), representing a decrease of 11.63 % from RMB73.36 million (US$10.80 million) for the twelve months ended September 30, 2008. This decrease in the operating expense during the year in part due to a generally decreased in other operating expenses due to enhancement of control over expenditures during daily operations. Research and development expenses for the year ended September 30, 2009 were RMB33.47 million (US$4.90 million), representing an increase of 36.56 % from RMB24.51million (US$3.61 million) for the twelve months ended September 30, 2008. These R& D expenses represent 5.65% of our total revenues inline with our 5.0% of total revenue targets.

As a result of the impact of the components described above, we had gain from operations for the year ended September 30, 2009 of RMB45.70 million (US$6.69 million), compared with the loss from operations of RMB42.38 million (US$6.24 million) for the twelve months ended September 30, 2008.

Our net loss was RMB40.82 million (US$5.98 million) in the year ended September 30, 2009, as compared to the net loss of RMB43.29 million (US$6.37 million) for the fiscal year ended September 30, 2008. In Q209, the company repurchased their outstanding convertible notes from Citadel Investment Group (CIG). While this event had no material impact on our Q409 financial results, the repurchase event does affect our fiscal year financial figures. As a result, a similar GAAP vs. Non GAAP calculation has been calculated for reference. Excluding non-recurring charges related to the convertible notes charged mainly in the second quarter of 2009, net income for the fiscal year ended 2009 was RMB 1.91 million (unaudited), or US$0.08 per diluted share, as compared to a loss of US$0.27 per share a year ago.

GAAP and non-GAAP FY 2009

Origin Agritech Limited
Consolidated Statements of Income Data (USD in thousands, except per share amounts)
(unaudited)

	Year Ended September 30

			2008						2009
	GAAP (1)		Difference		Non-GAAP (2)		GAAP (1)		Difference		Non-GAAP (2)

Income from Operations	(6,243	)	-		(6,243	)	6,689		-		6,689

Interest Expense	(5,439	)	(1,633	)	(3,806	)	(2,458	)	(763	)	(1,695	)
Other Income/ (Expense)	93		-		93		(7,192	)	(7,483	)	291
Changes in Fair Value of Embedded Derivatives
Changes in Fair Value of Embedded Derivatives	2,979		2,979		0		483		483		0

Share of Earnings in Equity Investee, Interest Income, Income Tax Expenses, and Minority Interests

	2,234		-		2,234		(3,502	)	-		(3,372	)


Net Income (Loss)	(6,376	)	1,346		(7,722	)	(5,980	)	(7,893	)	1,913

EPS	(0.27	)	0.06		(0.34	)	(0.26	)	(0.34	)	0.08

Weighted Average
Number of Shares
Basic and Diluted	22,987,270				22,987,270		23,013,692				23,013,692

(1) Reflects operating results in accordance with U.S. generally accepted accounting principles (or GAAP).

(2) Non-GAAP amounts exclude repurchase-related special items, the amortization of the discount of the convertible notes and the gains from the write-downs of the fair value of embedded derivatives.

As of September 30, 2008 and 2009, we had approximately RMB102.26 million (US $15.00 million) and RMB121.26 million (US $17.76 million), respectively, in cash and cash equivalents. Our cash and cash equivalents primarily consisted of cash on hand.

Our Advances from Customers at September 30, 2009 were RMB219.963 million (US $32.21 million), an increase of 58.47% from RMB138.80 million (US $20.44 million) at September 30, 2008. Inclusive of any currency changes, based on US $, the year over year increase in revenues to US $32.21 million from US $20.44 was 57.58%.

The Company will host a teleconference on January 14, 2010, at 8:00 a.m. EDT / 9:00 p.m. Beijing time to discuss the fiscal year end results. To participate in the call, please dial +1-877-407-9210 in North America, or +1-201-689-8049 internationally, approximately 15 minutes prior to the scheduled start time.

Founded in 1997 and headquartered in Beijing, Origin Agritech Limited (NASDAQ GS: SEED) is China’s leading, vertically-integrated agricultural biotechnology company specializing in research, development and production to supply the growing populations of China. Origin develops, grows, processes, and markets high quality, hybrid crop seeds to farmers throughout China and parts of Southeast Asia via a network of approximately 3,800 first-level distributors and 65,000 second-level distributors and retailers, and possesses a pipeline of genetically modified seed products including glyphosate resistant corn and Bt Corn. The first genetically modified corn seed product for China, Phytase corn, was approved in November 2009 of which Origin possesses exclusive rights. For further information, please log on www.originagritech.com.

This release contains forward-looking statements. All forward-looking statements included in this release are based on information available to us on the date hereof. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results to differ materially from those implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "targets," "goals," "projects," "continue," or variations of such words, similar expressions, or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Neither we nor any other person can assume responsibility for the accuracy and completeness of forward-looking statements. Important factors that may cause actual results to differ from expectations include, but are not limited to, those risk factors discussed in Origin's filings with the SEC including its annual report on Form 20-F to be filed. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

CONSOLIDATED BALANCE SHEETS
(In thousands, except number of share and per share data)

	September 30,
	2008		2009		2009
	RMB		RMB		US$
Assets
Current assets:
Cash and cash equivalents	102,263		121,255		17,756
Restricted bank deposits (note 13)	-		500		73
Accounts receivable, less allowance for doubtful amounts of RMB842 as of September 30, 2008 and 2009	4,686		5,692		834
Due from related parties (note 4)	10,542		7,004		1,026
Advances to suppliers (note 5)	1,937		1,937		284
Advances to growers	45,488		24,681		3,614
Inventories (note 6)	387,734		341,770		50,047
Income tax recoverable (note 19)	1,697		1,725		253
Prepaid expenses and other current assets (note 7)	11,195		8,725		1,277

Total current assets	565,542		513,289		75,164
Land use rights, net (note 8)	21,055		20,496		3,001
Plant and equipment, net (note 9)	146,372		152,962		22,399
Equity investments (note 10)	65,384		65,453		9,585
Goodwill (note 1)	16,665		16,665		2,440
Acquired intangible assets, net (note 11)	32,305		36,648		5,367
Deferred income tax assets (note 19)	26,192		15,040		2,202
Other assets (note 12)	20,781		3,991		584

Total assets	894,296		824,544		120,742

Liabilities, minority interests and shareholders’ equity
Current liabilities:
Short-term borrowings (note 13)	163,940		80,290		11,757
Accounts payable	7,924		13,938		2,041
Note payable (note 14)	-		117,896		17,264
Due to growers	14,033		9,619		1,409
Due to related parties (note 4)	15,671		15,699		2,299
Advances from customers	138,804		219,963		32,210
Deferred revenues	34,848		18,280		2,677
Income tax payable	39,059		39,661		5,808
Other payables and accrued expenses (note 15)	73,297		31,476		4,609

Total current liabilities	487,576		546,822		80,074
Long-term borrowings (note 13)	940		-		-
Convertible notes, net of discount of RMB79,935 as of September 30, 2008 (note 14)	65,294		-		-
Embedded derivatives-redemption feature (note 14)	33,580		-		-
Other long-term liabilities (note 16)	3,658		-		-

Total liabilities	591,048		546,822		80,074
Minority interests	39,224		51,389		7,525
Commitments and contingencies (note 23)
Shareholders’ equity:
Preferred stock (no par value; 1,000,000 shares authorized, none issued)	-		-		-
Common stock (no par value; 60,000,000 shares authorized, 23,013,692 shares issued and outstanding as of September 30, 2008 and 2009)	-		-		-
Additional paid-in capital	388,860		391,620		57,347
Retained earnings (deficit)	(84,690	)	(125,507	)	(18,379	)
Treasury stock at cost (498,851 shares) (note 18)	(29,377	)	(29,377	)	(4,302	)
Accumulated other comprehensive loss	(10,769	)	(10,403	)	(1,523	)

Total shareholders’ equity	264,024		226,333		33,143

Total liabilities, minority interests and shareholders’ equity	894,296		824,544		120,742

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except number of share and per share data)

	Year ended September 30,
	2007		2008		2009		2009
	RMB		RMB		RMB		US$

Revenues	489,379		513,490		592,492		86,761
Cost of revenues	(462,852	)	(404,795	)	(392,842	)	(57,526	)

Gross profit	26,527		108,695		199,650		29,235

Operating expenses:
Selling and marketing	(57,994	)	(53,203	)	(55,648	)	(8,149	)
General and administrative	(92,246	)	(73,355	)	(64,833	)	(9,495	)
Research and development	(28,441	)	(24,513	)	(33,473	)	(4,902	)

Total operating expenses	(178,681	)	(151,071	)	(153,954	)	(22,546	)

Income (loss) from operations	(152,154	)	(42,376	)	45,696		6,689
Interest expense	(21,697	)	(36,939	)	(16,784	)	(2,458	)
Share of earnings (loss) in equity investee companies	(669	)	7,702		4,669		684
Interest income	10,942		5,199		2,036		298
Loss on repurchase of convertible notes (note 14)	-		-		(51,101	)	(7,483	)
Other income	1,312		628		1,991		291
Changes in the fair value of embedded derivatives	12,601		20,229		3,300		483

Income (loss) before income taxes and minority interests	(149,665	)	(45,557	)	(10,193	)	(1,496	)
Income tax expense (note 19)
Current	(8,737	)	(9,369	)	(580	)	(85	)
Deferred	8,786		13,364		(11,152	)	(1,633	)

Income tax expense	49		3,995		(11,732	)	(1,718	)

Income (loss) before minority interests	(149,616	)	(41,562	)	(21, 925	)	(3,214	)
Minority interests	(13,584	)	(1,724	)	(18,892	)	(2,766	)

Net income (loss)	(163,200	)	(43,286	)	(40,817	)	(5,980	)

Net income (loss) per share – basic (note 20)	RMB(7.01)		RMB(1.88)		RMB (1.77)		USD(0.26)

Net income (loss) per share – diluted (note 20)	RMB(7.01)		RMB(1.88)		RMB (1.77)		USD(0.26)

Shares used in calculating basic net income (loss) per share	23,268,062		22,987,270		23,013,692		23,013,692

Shares used in calculating diluted net income (loss) per share	23,268,062		22,987,270		23,013,692		23,013,692

Cash dividend per share	-		-		-		-

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	Year ended September 30,
	2007		2008		2009		2009
	RMB		RMB		RMB		US$

Operating activities:
Net loss	(163,200	)	(43,286	)	(40,817	)	(5,980	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	22,032		22,298		21,266		3,114
Loss on disposal of plant and equipment	851		823		457		67
Gain on disposal of acquired intangible assets	(104	)	-		-		-
Gain on disposal of debt securities	(3,339	)	(3,845	)	-		-
Change in the fair value of embedded derivatives	(12,601	)	(20,229	)	(3,300	)	(483	)
Impairment on receivables	2,464		(1,051	)	26		4
Inventory write down	77,244		18,005		7,395		1,083
Impairment on intangible assets	2,325		1,962		-		-
Loss on repurchase of convertible note	-		-		51,101		7,483
Interest expense and amortization of discount on convertible notes	4,127		18,824		3,799		557
Written-off of acquired research and development expenses	2,196		-		-		-
Deferred income tax assets	(8,786	)	(13,364	)	11,152		1,633
Minority interests	13,584		1,724		18,892		2,766
Share-based compensation expense	5,284		10,104		2,760		404
Share of earnings in equity investee companies	669		(7,702	)	(4,669	)	(684	)
Changes in operating assets and liabilities:
Accounts receivable, net	8,323		(902	)	(1,006	)	(147	)
Due from related parties	(516	)	3,251		3,538		518
Advances to growers	28,354		(21,036	)	20,807		3,047
Advances to suppliers	2,530		(908	)	-		-
Inventories	(57,477	)	43,468		38,569		5,648
Income tax recoverable	426		63		(28	)	(4	)
Prepaid expenses and other current assets	7,510		(1,803	)	2,444		358
Other assets	75		(295	)	10,182		1,491
Accounts payable	(31,238	)	(6,441	)	6,014		881
Due to growers	(20,983	)	(3,778	)	(4,414	)	(646	)
Due to related parties	(6,102	)	11,438		16,856		2,468
Advances from customers	(44,182	)	56,617		81,159		11,884
Deferred revenues	(863	)	11,610		(16,568	)	(2,426	)
Income tax payable	-		-		602		88
Other long-term liabilities	2,458		200		(3,658	)	(536	)
Other payables and accrued expenses	(303	)	(18,549	)	(13,676	)	(2,003	)

Net cash provided by (used in) operating activities	(169,242	)	57,198		208,883		30,588

CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)

	Year ended September 30,
	2007		2008		2009		2009
	RMB		RMB		RMB		US$

Investing activities:
Dividends received	1,200		1,200		4,600		674
Purchase of plant and equipment	(36,526	)	(19,662	)	(18,804	)	(2,754	)
Purchase of debt securities	(286,270	)	(215,907	)	-		-
Loan to shareholders of a subsidiary	(825	)	-		-		-
Repayment of loan from shareholders of a subsidiary	-		3,000		-		-
Proceeds from disposal of plant and equipment	8,002		2,019		1,395		204
Proceeds from disposal of acquired intangible assets	267		49		-		-
Proceeds from sale of debt securities	297,020		346,048		-		-
Purchase of land use rights	(5,458	)	-		-		-
Acquisition of equity method investment	(30,330	)	-		-		-
Deposits for purchase of acquired technology and land use rights	-		(6,732	)	(2,650	)	(388	)
Deposits for purchase of plant and equipment	(122	)	(448	)	(332	)	(49	)
Business acquisition, net of cash acquired	(31,872	)	-		-		-
Purchase of intangible assets	(6,034	)	(1,937	)	(100	)	(15	)
Net cash provided by/(used in) investing activities	(90,948	)	107,630		(15,891	)	(2,328	)

Financing activities:
Restricted bank deposits	-		-		(500	)	(73	)
Proceeds from short-term borrowings	361,400		283,000		134,850		19,747
Repayment of short-term borrowings	(346,000	)	(388,400	)	(219,440	)	(32,134	)
Repayment of third party loans	(6,256	)	(1,208	)	(4,560	)	(668	)
Repurchase of convertible notes	-		(106,849	)	(68,290	)	(10,000	)
Proceeds from issuance of convertible bonds	302,384		-		-		-
Dividends paid to minority interest	-		-		(17,993	)	(2,635	)
Advance from a shareholder	1,623		-		-		-
Exercise of staff options	-		1,432		-		-
Repurchase of treasury stock	(29,377	)	-		-		-
Net cash provided by (used in) financing activities	283,774		(212,025	)	(175,933	)	(25,763	)

Net increase (decrease) in cash and cash equivalents	23,584		(47,197	)	17,059		2,494
Cash and cash equivalents, beginning of year	140,953		162,314		102,263		14,975
Effect of exchange rate changes on cash and cash equivalents	(2,223	)	(12,854	)	1,933		287
Cash and cash equivalents, end of year	162,314		102,263		121,255		17,756

Supplemental disclosure of cash flow information:
Income taxes paid	8,311		9,306		6		1

Interest paid	18,280		18,566		11,574		1,695

CONTACT:
Origin Agritech Limited
Irving Kau
Acting Chief Financial Officer
Tel: 011.86.136.8108.0243 or 949.726.8101
Email: Irving.kau@originseed.com.cn

	Revenues		Gross Margin
	Year ended	Year ended	Year ended		Year ended
	September	September	September		September
	30, 2009	30, 2008	30, 2009		30, 2008

	RMB’000	RMB’000
Hybrid Corn seeds*	411,405	355,890	40.60	%	35.58	%
Hybrid Rice seeds*	125,135	95,083	16.5	%	16.93	%
Hybrid Cotton seeds*	9,917	16,622	49.9	%	36.93	%
Hybrid Canola seeds*	42,747	23,774	41.99	%	66.54	%
Total normal sales*	589,272	491,428	35.60	%	31.56	%