10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x Quarterly report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2009

¨ Transition report pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______ to _______

001-33674

(Commission file number)

AGFEED INDUSTRIES, INC.

(Exact name of small business issuer as specified in its charter)

Nevada	20-2597168
(State or other jurisdiction	(IRS Employer
of incorporation or organization)	Identification No.)

Rm. A1001-1002, Tower 16

Hengmao Int'l Center

333 S. Guangchang Rd.

Nanchang, Jiangxi Province

China 330003

(Address of principal executive offices)

011-86-0791-6669093

(Issuer’s telephone number)

N/A

 (Former name, former address and former fiscal year, if changed since last report)

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 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 x

Non-accelerated filer ¨                                                                      Smaller reporting company¨

(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

On November 5, 2009, 43,925,263 shares of the registrant's common stock were outstanding.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II – OTHER INFORMATION		36
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Submission of Matters to a Vote of Security Holders	36
Item 5.	Other Information	36
Item 6.	Exhibits	36
SIGNATURES		37

2

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

PART I – FINANCIAL INFORMATION

Item 1.        Financial Statements

	September 30,			December 31,
	2009			2008
	(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	36,480,253		$	24,839,378
Accounts receivable, net of allowance for doubtful accounts of $246,847 and $520,413		16,222,992			9,462,380
Advances to suppliers		1,211,852			518,829
Other receivables		408,620			2,066,030
Inventory		22,019,710			20,616,560
Prepaid expenses		1,506,462			1,166,646
Debt issue costs		42,291			246,223
Total current assets		77,892,180			58,916,046
PROPERTY AND EQUIPMENT, net		23,060,443			20,810,094
CONSTRUCTION-IN-PROCESS		10,276,793			10,853,389
INTANGIBLE ASSETS		43,819,722			43,833,705
OTHER ASSETS		2,887,066			2,641,902
TOTAL ASSETS	$	157,936,204		$	137,055,136
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term loans	$	4,401,000		$	-
Accounts payable		6,738,882			5,214,596
Other payables		1,104,883			5,766,741
Unearned revenue		365,163			321,664
Accrued expenses		452,612			164,558
Accrued payroll		685,234			818,052
Tax and welfare payable		385,503			465,875
Interest payable		102,531			121,139
Total current liabilities		14,235,808			12,872,625
CONVERTIBLE NOTES, net of debt discount of $99,524 and $579,444		900,476			3,220,556
TOTAL LIABILITIES		15,136,284			16,093,181
COMMITMENTS AND CONTINGENCIES (Note 11)		-			-
EQUITY:
AgFeed stockholders' equity:
Common stock, $0.001 per share; 75,000,000 shares authorized;
43,917,558 issued and 43,550,263 outstanding at September 30, 2009
38,300,436 issued and 37,933,141 outstanding at December 31, 2008		43,918			38,300
Additional paid-in capital		107,654,125			90,903,261
Other comprehensive income		4,187,956			4,167,217
Statutory reserve		4,230,516			3,236,054
Treasury stock (367,295 shares)		(1,811,746	)		(1,811,746	)
Retained earnings		28,458,229			22,311,258
Total AgFeed stockholders' equity		142,762,998			118,844,344
Noncontrolling interest		36,922			2,117,611
Total equity		142,799,920			120,961,955
TOTAL LIABILITIES AND EQUITY	$	157,936,204		$	137,055,136

The accompanying notes are an integral part of these consolidated financial statements.

3

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues	$	45,115,442		$	49,426,274		$	117,072,486		$	97,208,685
Cost of goods sold		37,554,278			37,124,058			98,486,258			70,438,683
Gross profit		7,561,164			12,302,216			18,586,228			26,770,002
Operating expenses
Selling expenses		960,574			970,268			2,823,783			2,597,470
General and administrative expenses		2,888,845			2,021,549			6,606,537			4,364,858
Total operating expenses		3,849,419			2,991,817			9,430,320			6,962,328
Income from operations		3,711,745			9,310,399			9,155,908			19,807,674
Non-operating income (expense):
Other expense		(387,979	)		(257,493	)		(384,503	)		(283,063	)
Interest income		75,344			44,860			188,460			171,095
Interest and financing costs		(192,963	)		(605,391	)		(970,391	)		(5,244,592	)
Foreign currency transaction loss		(18,121	)		(10,007	)		(14,819	)		(553,753	)
Total non-operating income (expense)		(523,719	)		(828,031	)		(1,181,253	)		(5,910,313	)
Income before provision for income taxes		3,188,026			8,482,368			7,974,655			13,897,361
Provision for income taxes		292,647			201,904			794,155			414,993
Net income including noncontrolling interest		2,895,379			8,280,464			7,180,500			13,482,368
Less: Net income (loss) attributed to noncontrolling interest		(962	)		64,309			39,067			425,403
Net income attributed to AgFeed		2,896,341			8,216,155			7,141,433			13,056,965
Other comprehensive income
Foreign currency translation gain		168,640			315,925			20,739			3,104,053
Comprehensive Income	$	3,064,981		$	8,532,080		$	7,162,172		$	16,161,018
Weighted average shares outstanding :
Basic		42,420,914			33,267,815			39,984,438			31,049,732
Diluted		43,329,228			33,557,457			40,641,679			31,377,267
Earnings per share attributed to AgFeed common stockholders:
Basic	$	0.07		$	0.25		$	0.18		$	0.42
Diluted	$	0.07		$	0.24		$	0.18		$	0.42

The accompanying notes are an integral part of these consolidated financial statements.

4

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended September 30,
	2009			2008
	(unaudited)			(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income including noncontrolling interest	$	7,180,500		$	13,482,368
Adjustments to reconcile net income including noncontrolling interest
to net cash provided by operating activities:
Depreciation		1,952,213			973,164
Amortization		49,286			35,240
Loss on disposal of assets		882,854			16,774
Stock based compensation		427,551			55,962
Amortization of debt issuance costs		203,932			1,441,624
Amortization of discount on convertible debt		479,920			3,392,619
(Increase) / decrease in assets:
Accounts receivable		(6,759,546	)		(3,439,556	)
Other receivables		1,201,329			(1,837,551	)
Inventory		(1,777,302	)		(8,312,612	)
Advances to suppliers		(716,870	)		(478,535	)
Prepaid expenses		(340,333	)		(261,938	)
Other assets		(244,980	)		(1,552,469	)
Increase / (decrease) in current liabilities:
Accounts payable		1,624,279			3,454,401
Other payables		(2,347,476	)		2,849,755
Unearned revenue		43,465			118,530
Accrued expenses		287,838			571,447
Accrued payroll		(132,716	)		374,101
Tax and welfare payable		(80,312	)		213,163
Interest payable		(18,608	)		251,319
Net cash provided by operating activities		1,915,024			11,347,806
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment		(7,486,470	)		(9,052,476	)
Acquisition of intangible assets		(35,314	)		(72,262	)
Cash paid for purchase of subsidiaries		(2,518,089	)		(65,134,359	)
Cash from the sale of subsidary		835,770			-
Net cash used in investing activities		(9,204,103	)		(74,259,097	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock		10,000,000			57,200,058
Offering costs paid		(1,740,072	)		(6,079,530	)
Proceeds from short-term loans		4,541,500			-
Proceeds from exercise of warrants		6,580,010			2,138,848
Proceeds from issuance of convertible notes		-			19,000,000
Issuance costs for convertible notes		-			(1,716,666	)
Payment on note payable		-			(1,161,297	)
Capital contributed by noncontrolling interest holders		118,664			936,320
Repayment of contribution of noncontrolling interest holder		(586,800	)		-
Net cash provided by financing activities		18,913,302			70,317,733
Effect of exchange rate changes on cash and cash equivalents		16,652			462,472
NET INCREASE IN CASH & CASH EQUIVALENTS		11,640,875			7,868,914
CASH & CASH EQUIVALENTS, BEGINNING BALANCE		24,839,378			7,696,209
CASH & CASH EQUIVALENTS, ENDING BALANCE	$	36,480,253		$	15,565,123
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	212,414		$	164,810
Income taxes paid	$	616,693		$	209,582

 The accompanying notes are an integral part of these consolidated financial statements.

5

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

Note 1 - Organization and Basis of Presentation

The unaudited consolidated financial statements were prepared by AgFeed Industries, Inc. pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America were omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K.  The results for the nine months ended September 30, 2009 are not necessarily indicative of the results to be expected for the full year ending December 31, 2009.

Organization and Lines of Business

AgFeed Industries, Inc. formerly known as Wallace Mountain Resources Corp., (hereinafter referred to as the “Company” or “AgFeed”) was incorporated in the State of Nevada on March 30, 2005.

On October 31, 2006, the Company entered into and closed a share purchase agreement with Nanchang Best Animal Husbandry Co., Ltd., a corporation formed under the laws of the People’s Republic of China (“Nanchang Best”), and each of Nanchang Best’s shareholders (the “Nanchang Purchase Agreement”). Pursuant to the Nanchang Purchase Agreement, the Company acquired all of the issued and outstanding capital stock of Nanchang Best from the Nanchang Best shareholders in exchange for 16,128,000 shares of common stock.

Contemporaneously, on October 31, 2006, the Company entered into and closed a share purchase agreement with Shanghai Best Animal Husbandry Co., Ltd., a corporation formed under the laws of the People’s Republic of China (“Shanghai Best”), and each of Shanghai Best’s shareholders (the “Shanghai Purchase Agreement”). Pursuant to the Shanghai Purchase Agreement, the Company acquired all of the issued and outstanding capital stock of Shanghai Best from the Shanghai Best shareholders in exchange for 3,072,000 shares of common stock.

The exchanges of shares with Nanchang Best and Shanghai Best were accounted for as a reverse acquisition under the purchase method of accounting since the stockholders of Nanchang Best and Shanghai Best obtained control of the Company. On November 17, 2006, Wallace Mountain Resources Corp. changed its name to AgFeed Industries, Inc.  Accordingly, the merger of Nanchang Best and Shanghai Best into the Company were recorded as a recapitalization of Nanchang Best and Shanghai Best, with Nanchang Best and Shanghai Best being treated as the continuing entities. Nanchang Best and Shanghai Best had common shareholders and common management. The share exchange agreements were treated as a recapitalization and not as a business combination; therefore, no pro forma information is disclosed. At the date of this transaction, the net assets of the legal acquirer were $59,762.

On December 20, 2006, the Company acquired 100% of the capital stock of Guangxi Huijie Sci. & Tech. Feed Co, Ltd. (“Guangxi Huijie”).  On November 6, 2007, the Company acquired 90% of the capital stock of Lushan Breeder Pig Farm Co., Ltd. (“Lushan”).  In 2008, the Company purchased 29 more hog producing farms and one feed company.  The Company’s ownership interest in these hog farms ranges from 80% to 100%.

The Company is engaged in the research and development, manufacturing, marketing, distribution and sale of pre-mix fodder blended feed and feed additives primarily for use in China's domestic pork husbandry market. The Company operates production plants in Nanchang, Shanghai, Nanning, Shandong, and Hainan provinces.  The Company sells to distributors and large-scale swine farms.  The Company is also engaged in the business of raising, breeding and selling hogs for use in China's pork production and hog breeding markets through one breeder farm and 29 meat hog producing farms located in Jiangxi, Shanghai, Hainan, Guangxi, and Fujian provinces.

6

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

Basis of Presentation

The accompanying consolidated financial statements include the accounts of AgFeed Industries, Inc. and its wholly-owned and majority-owned subsidiaries.  All significant inter-company accounts and transactions have been eliminated in consolidation.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). The Company’s functional currency is the Chinese Yuan Renminbi (“RMB”); however the accompanying consolidated financial statements have been translated and presented in USD.

Noncontrolling Interest

In 2008, the Company purchased interests in 29 producing hog farms and one feed company ranging from 55% to 100% (The Company has subsequently purchased the noncontrolling interest in certain of these hog farms).  As a result of these purchases, the Company recognized initial noncontrolling interest on its consolidated balance sheet of $508,150. The net income (loss) attributed to noncontrolling interest has been separately designated in the accompanying statement of income and other comprehensive income.

Certain amounts presented for prior periods that were previously designated as minority interest have been reclassified to conform to the current year presentation. Effective January 1, 2009, the Company adopted SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (codified in Financial Accounting Standards (“FASB”) Accounting Standards Codification (“ASC”) Topic 810), which established new standards governing the accounting for and reporting of noncontrolling interests (NCIs) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs (previously referred to as minority interests) be treated as a separate component of equity, not as a liability (as was previously the case); that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions, rather than as step acquisitions or dilution gains or losses; and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such allocation might result in a deficit balance. This standard also required changes to certain presentation and disclosure requirements. The provisions of the standard were applied to all NCIs prospectively, except for the presentation and disclosure requirements, which were applied retrospectively to all periods presented. As a result, upon adoption, the Company retroactively reclassified the “Minority interest” balance previously included in the “Other liabilities” section of the consolidated balance sheet to a new component of equity with respect to NCIs in consolidated subsidiaries. The adoption also impacted certain captions previously used on the consolidated statement of income and other comprehensive income, largely identifying net income including NCI and net income attributable to AgFeed. 

Foreign Currency Translation

The accounts of the Company’s Chinese subsidiaries are maintained in RMB and the accounts of the U.S. parent company are maintained in the U.S. Dollar (USD).   The accounts of the Chinese subsidiaries were translated into USD in accordance with SFAS No. 52, "Foreign Currency Translation" (codified in FASB ASC Topic 830), with the RMB as the functional currency for the Chinese subsidiaries. According to the Statement, all assets and liabilities were translated at the exchange rate on the balance sheet date, stockholders’ equity are translated at the historical rates and statement of operations items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive Income” (codified in FASB ASC Topic 220).

7

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

Note 2 – Summary of Significant Accounting Policies

Use of Estimates

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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassification

Certain prior period amounts were reclassified to conform to the current presentation.

Cash and Cash Equivalents

Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.

Accounts Receivable

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves.

Advances to Suppliers

The Company makes advances to certain vendors for purchases of material. The advances to suppliers are interest free and unsecured.

Inventories

Inventory is stated at the lower of cost, as determined by weighted-average method, or market. Management compares the cost of inventories with the market value, and allowance is made for writing down the inventories to their market value, if lower. Costs of raised animals include proportionate costs of breeding, including depreciation of the breeding herd, plus the costs of maintenance through the balance sheet date. Purchased pigs are carried at purchase cost plus costs of maintenance through the balance sheet date.

Property & Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:

Office equipment	5 years
Operating equipment	10 years
Vehicles	5 years
Swine for reproduction	3.5 years
Buildings	20 years

8

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

The following are the details of the property and equipment at September 30, 2009 and December 31, 2008:

	September 30,			December 31,
	2009			2008
Office equipment	$	525,041		$	433,157
Operating equipment		2,978,045			2,042,522
Vehicles		818,872			655,853
Swines for reproduction		13,332,849			13,137,425
Buildings		9,104,282			6,673,822
Total		26,759,089			22,942,779
Less accumulated depreciation		(3,698,646	)		(2,132,685	)
	$	23,060,443		$	20,810,094

Depreciation expense for the three and nine months ended September 30, 2009 and 2008 was $669,254 and $1,952,213, and $424,729 and $973,164, respectively.

Construction-in-Process

Construction-in-process consists of amounts expended for building construction. Once building construction is completed, the cost accumulated in construction-in-process is transferred to property and equipment.

Long-Lived Assets

The Company applies the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (codified in FASB ASC Topic 360), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations for a Disposal of a Segment of a Business.” The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS No. 144. SFAS No. 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. Based on its review, the Company believes that, as of September 30, 2009 there were no significant impairments of its long-lived assets.

9

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

Intangible Assets

Net intangible assets at September 30, 2009 and December 31, 2008 are as follows:

	September 30,			December 31,
	2009			2008
Right to use land	$	825,007		$	809,174
Customer list		293,400			293,400
Computer software		143,475			108,135
Intangible related to hog farm acquisitions		42,744,247			42,744,247
Total		44,006,129			43,954,956
Less Accumulated amortization		(186,407	)		(121,251	)
Intangibles, net	$	43,819,722		$	43,833,705

Per the People's Republic of China's (“PRC”) governmental regulations, the PRC Government owns all land. The Company leases land per real estate contracts with the government of the PRC for varying period ranging from 30 years to 50 years.  Accordingly, the right to use land for these feed companies is amortized over 50 years or the lease term, if shorter, and the computer software is amortized over three to nine years.  For hog farms, the Company generally signed land leases with original owners of the farms.

Revenue Recognition

The Company's revenue recognition policies are in compliance with SEC Staff Accounting Bulletin (SAB) 104. Revenue is recognized when services are rendered to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. The Company is not subject to VAT withholdings.  The Company gives volume rebates to certain customers based on volume achieved. The Company accrues sales rebates based on actual sales volume.

Advertising Costs

The Company expenses the cost of advertising as incurred or, as appropriate, the first time the advertising takes place.  Advertising costs for the three and nine months ended September 30, 2009 and 2008 were not significant.

Stock-Based Compensation

The Company accounts for its stock-based compensation in accordance with SFAS No. 123R, “Share-Based Payment, an Amendment of FASB Statement No. 123” (codified in FASB ASC Topic 718).  The Company recognizes in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees.  There were 210,000 options outstanding at September 30, 2009.

10

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

Income Taxes

The Company utilizes SFAS No. 109, “Accounting for Income Taxes” (codified in FASB ASC Topic 740), which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company adopted the provisions of FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes,” on January 1, 2007. As a result of the implementation of FIN 48, the company made a comprehensive review of its portfolio of tax positions in accordance with recognition standards established by FIN 48. As a result of the implementation of Interpretation 48, the Company recognized no material adjustments to liabilities or stockholders’ equity. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.  Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of income. The adoption of FIN 48 has no material impact on the Company’s financial statements.

Foreign Currency Transactions and Comprehensive Income

US GAAP requires that recognized revenue, expenses, gains and losses be included in net income. Certain statements, however, require entities to report specific changes in assets and liabilities, such as gain or loss on foreign currency translation, as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of comprehensive income. The functional currency of the Company’s Chinese subsidiaries is the RMB. The unit of Renminbi is in Yuan. Translation gains of $4,187,956 and $4,167,217 at September 30, 2009 and December 31, 2008, respectively, are classified as an item of other comprehensive income in the stockholders’ equity section of the consolidated balance sheet.  During the three and nine months ended September 30, 2009 and 2008, other comprehensive income in the consolidated statements of income and other comprehensive income included translation gain of $168,640 and $20,739, and $315,925 and $3,104,053, respectively.

Basic and Diluted Earnings Per Share

Earnings per share is calculated in accordance with the SFAS No. 128, “Earnings Per Share”. SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15) (codified in FASB ASC Topic 260). Net earnings per share for all periods presented has been restated to reflect the adoption of SFAS No. 128. Basic earnings per share is based upon the weighted average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

11

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

The following is a reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations for the three and nine months ended September 30, 2009 and 2008:

Three Months Ended	September 30, 2009				September 30, 2008
			Per Share				Per Share
	Shares		Amount		Shares		Amount
Basic  earnings per share		42,420,914	$	0.07		33,267,815	$	0.25
Effect of dilutive stock options and warrants		908,314		-		289,642		(0.01	)
Diluted earnings per share		43,329,228	$	0.07		33,557,457	$	0.24

Nine Months Ended	September 30, 2009				September 30, 2008
			Per Share				Per Share
	Shares		Amount		Shares		Amount
Basic  earnings per share		39,984,438	$	0.18		31,049,732	$	0.42
Effect of dilutive stock options and warrants		657,241		-		327,535		-
Diluted earnings per share		40,641,679	$	0.18		31,377,267	$	0.42

Statement of Cash Flows

In accordance with SFAS No. 95, “Statement of Cash Flows” (codified in FASB ASC Topic 230), cash flows from the Company’s operations are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

Segment Reporting

SFAS No. 131, “Disclosure About Segments of an Enterprise and Related Information” (codified in FASB ASC Topic 280) requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company determined it has two reportable segments (See Note 10).  The Company had previously reported its feed operations as three separate segments since the three operations were located in difference Provinces.  The Company has determined that its feed operations should be reported as one segment.

Fair Value of Financial Instruments

On January 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements” (codified in FASB ASC Topic 820).  SFAS No.157 defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosures requirements for fair value measures. The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.  The three levels are defined as follow:

● Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

12

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

● Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

As of September 30, 2009, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value.

Joint Venture / Alliance

On April 15, 2009 a strategic alliance was signed between the Company and Hypor, a Hendrix Genetics company, to complement the Company’s growth strategy through genetics. Hypor will provide top line breeding stock to the Company’s existing base of 22,125 breeding sows and 4,043 gilts and will provide genetically superior animals to a new to- be-constructed sows farrow-to-finish nucleus unit known as the Wunnin farm. Hypor will join AgFeed International Protein (defined below) in establishing a western style of production taking the role as a long-term supplier of high health top quality genetics. This arrangement could lead to a multi level joint venture serving the Pan Asian market.

On July 13, 2009, the Company formed a joint venture with M2P2, LLC, a leading U.S. hog production and industry management consulting company.  The new company, AgFeed International Protein Technology Corp. (“AgFeed International Protein”) will focus on enhancing hog production systems for Chinese and other Pan Asian clients based on modern western standards to increase productivity and ensure the highest bio-security health standards in the Pan Asian hog industry.  AgFeed International Protein was formed to take advantage of the coming commercialization and consolidation of the hog industry being fostered by the Chinese central and local governments.  The Company will be the joint venture's first client.  AgFeed International Protein is owned 80.1% by the Company and certain affiliates and 19.9% by M2P2.

Recent Accounting Pronouncements

On July 1, 2009, the Company adopted Accounting Standards Update (“ASU”) No. 2009-01, “Topic 105 - Generally Accepted Accounting Principles - amendments based on Statement of Financial Accounting Standards No. 168 , “The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles” (“ASU No. 2009-01”).  ASU No. 2009-01 re-defines authoritative US GAAP for nongovernmental entities to be only comprised of the FASB Accounting Standards Codification™ (“Codification”) and, for SEC registrants, guidance issued by the SEC.  The Codification is a reorganization and compilation of all then-existing authoritative US GAAP for nongovernmental entities, except for guidance issued by the SEC.  The Codification is amended to effect non-SEC changes to authoritative US GAAP.  Adoption of ASU No. 2009-01 only changed the referencing convention of US GAAP in  Notes to the Consolidated Financial Statements.

In April 2009, the Financial Accounting Standards Board (“FASB”) issued FSP No. SFAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP No. SFAS 157-4”). FSP No. SFAS 157-4, which is codified in FASB ASC Topics 820-10-35-51 and 820-10-50-2, provides additional guidance for estimating fair value and emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. The Company adopted FSP No. SFAS 157-4 beginning April 1, 2009. This FSP had no material impact on the Company’s financial position, results of operations or cash flows.

13

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments,” which is codified in FASB ASC Topic 320-10. This FSP modifies the requirements for recognizing other-than-temporarily impaired debt securities and changes the existing impairment model for such securities. The FSP also requires additional disclosures for both annual and interim periods with respect to both debt and equity securities. Under the FSP, impairment of debt securities will be considered other-than-temporary if an entity (1) intends to sell the security, (2) more likely than not will be required to sell the security before recovering its cost, or (3) does not expect to recover the security’s entire amortized cost basis (even if the entity does not intend to sell). The FSP further indicates that, depending on which of the above factor(s) causes the impairment to be considered other-than-temporary, (1) the entire shortfall of the security’s fair value versus its amortized cost basis or (2) only the credit loss portion would be recognized in earnings while the remaining shortfall (if any) would be recorded in other comprehensive income. This FSP requires entities to initially apply the provisions of the standard to previously other-than-temporarily impaired debt securities existing as of the date of initial adoption by making a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The cumulative-effect adjustment potentially reclassifies the noncredit portion of a previously other-than-temporarily impaired debt security held as of the date of initial adoption from retained earnings to accumulated other comprehensive income. The Company adopted FSP No. SFAS 115-2 and SFAS 124-2 beginning April 1, 2009. This FSP had no material impact on the Company’s financial position, results of operations or cash flows.

In April 2009, the FASB issued FSP No. SFAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” which is codified in FASB ASC Topic 825-10-50.  This FSP essentially expands the disclosure about fair value of financial instruments that were previously required only annually to also be required for interim period reporting. In addition, the FSP requires certain additional disclosures regarding the methods and significant assumptions used to estimate the fair value of financial instruments. These additional disclosures are required beginning with the quarter ending June 30, 2009.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events,” codified in FASB ASC Topic 855-10-05, which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS No. 165 also requires entities to disclose the date through which subsequent events were evaluated as well as the rationale for why that date was selected. SFAS No. 165 is effective for interim and annual periods ending after June 15, 2009, and accordingly, the Company adopted this pronouncement during the second quarter of 2009. SFAS No. 165 requires that public entities evaluate subsequent events through the date that the financial statements are issued. The Company has evaluated subsequent events through November 8, 2009.

In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140,”  codified as FASB ASC Topic 860, which requires entities to provide more information regarding sales of securitized financial assets and similar transactions, particularly if the entity has continuing exposure to the risks related to transferred financial assets. SFAS No. 166 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets and requires additional disclosures. SFAS No. 166 is effective for fiscal years beginning after November 15, 2009. The Company does not believe the adoption of SFAS No. 166 will have an impact on its financial condition, results of operations or cash flows.

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R),” codified as FASB ASC Topic 810-10, which modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. SFAS No. 167 clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. SFAS No. 167 requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity. SFAS No. 167 also requires additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. SFAS No. 167 is effective for fiscal years beginning after November 15, 2009. The Company does not believe the adoption of SFAS No. 167 will have an impact on its financial condition, results of operations or cash flows.

14

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

Note 3 – Convertible Notes and Warrants

On February 25, 2008, the Company entered into a Securities Purchase Agreement with Apollo Asia Opportunity Master Fund, L.P., Jabcap Multi-Strategy Master Fund Limited, J-Invest Ltd., and Deutsche Bank AG London Branch (the “Investors”) in connection with a private placement transaction providing for, among other things, the issuance of senior convertible notes for aggregate gross proceeds of $19 million (the “Notes”) and warrants to purchase up to an aggregate of 380,000 shares (the “Warrants”) of the Company’s $0.001 par value per share common stock.  The notes mature on the third anniversary of the issuance date, bear interest at 7% per annum and are convertible into shares of the Company’s common stock at an initial conversion price of $10.00 per share.  The conversion price is subject to a “weighted average ratchet” anti-dilution adjustment. The conversion price is also subject to adjustment on a proportional basis, to the extent that the Company’s audited net income for the fiscal years ending 2008 and 2009 is less than $30 million and $40 million, respectively; subject to a per share floor price of $5.00.  Due to the Company not generating $30 million net income for the year ended December 31, 2008, the conversion price on the convertible notes was reduced to $5.00.  Due to the re-pricing of the conversion price, the Company recorded financing cost of $267,748 during the year ended December 31, 2008 which represents the difference between the fair value of the conversion feature at a $5.00 conversion price and the original $10.00 conversion price.  The fair value was determined by using the Black-Scholes pricing model with the following assumptions: expected life of 2.2 years, a risk free interest rate of 2.0%, a dividend yield of 0% and volatility of 102%.

The Notes impose penalties on the Company for any failure to timely deliver any shares of its common stock issuable upon conversion.

In connection with the issuance of the Notes and the Warrants issued to the Investors on February 25, 2008, the Company paid $1,716,666 in debt issuance cost which is amortized over the life of the Notes.  For the three and nine months ended September 30, 2009 and 2008, the Company amortized $7,584 and $203,932 and  $148,766 and $1,441,624, respectively, of the aforesaid issuance costs as interest and financing costs in the accompanying consolidated statements of operations.

The Notes contain certain limitations on conversion. For example, they provide no conversion may be made if, after giving effect to the conversion, the Investor would own in excess of 9.99% of the Company’s outstanding shares of common stock. In addition, the Notes provide no conversion may be made if the conversion would cause the Company to breach of its obligations under the rules and regulations of the Nasdaq Global Market, unless the Company obtains stockholder approval for such issuances as required by such rules and regulations.

The Warrants are immediately exercisable, expire on February 25, 2011 and entitle their holders, in the aggregate, to purchase up to $3,800,000 worth of shares of common stock at an initial exercise price of $10.00 per share.

The exercise price of the Warrants is subject to a “weighted average ratchet” anti-dilution adjustment. The exercise price is also subject to adjustment, on a proportional basis, to the extent that the Company’s audited net income for the fiscal years ending 2008 and 2009 is less than $30 million and $40 million, respectively; subject to a per share floor price of $5.00.  Due to the Company not generating $30 million net income for the year ended December 31, 2008, the exercise price on the Warrants was reduced to $5.00.  Due to the re-pricing of the exercise price, the Company recorded financing cost of $22,782 which represents the difference between the fair value of the $5.00 exercise price and the original $10.00 exercise price.  The fair value was determined by using the Black-Scholes pricing model with the following assumptions: expected life of 2.2 years, a risk free interest rate of 2.0%, a dividend yield of 0% and volatility of 102%.

The Warrants contain certain limitations on exercise. For example, they provide that no exercise may be made if, after giving effect to the exercise, the Investor would own in excess of 9.99% of the Company’s outstanding shares of common stock. In addition, the Warrants provide that no exercise may be made if it would cause the Company to be in breach of its obligations under the rules and regulations of the Nasdaq Global Market, unless the Company obtains stockholder approval for such issuances as required by such rules and regulations.

15

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

The Warrants granted to the Investor on February 25, 2008 and conversion feature in the above Notes are not considered derivative instruments that need to be bifurcated from the original security since the Warrants and the conversion price of the Notes have a floor of $5.00, which means the Company can determine the maximum shares that could be issued upon conversion. The Company determined the fair value of the detachable warrants issued in connection with the Notes to be $1,269,442, using the Black-Scholes option pricing model and the following assumptions:  expected life of 1 year, a risk free interest rate of 2.10%, a dividend yield of 0% and volatility of 70%. In addition, the Company determined the value of the beneficial conversion feature to be $2,770,442. The combined total discount for the Notes is $4,039,885 and is being amortized over the term of the Notes. For the three and nine months ended September 30, 2009 and 2008, the Company amortized $17,848 and $479,920 and $350,096 and $3,392,619, respectively, of the aforesaid discounts as interest and financing costs in the accompanying consolidated statements of operations.

During the year ended December 31, 2008, $15,200,000 of the Notes were converted into 1,520,000 shares of common stock and during the nine months ended September 30, 2009, $2,800,000 of the Notes were converted into 560,000 shares of common stock.

Note 4 – Short-Term Loans

Short term loans at September 30, 2009 are follows:

Short term bank loan payable to Shanghai Pudong Development Bank.  The loan accrues interest at 5.84% and is due May 24, 2010.  The loan is collateralized by buildings and land use rights.	$	4,401,000
	$	4,401,000

Note 5 – Stockholders’ Equity

Treasury Stock

During the year ended December 31, 2008, the Company purchased 367,295 shares of its common stock on the open market (treasury shares) for $1,811,746.  The Company accounted for the purchase of these treasury shares using the cost method.

Private Placement

On May 8, 2009, the Company closed a private placement offering by issuing 2,329,645 shares of common stock for gross proceeds of $10 million.  The Company paid $1,103,835 in costs related to this offering which was offset against the offering proceeds.  The Company also issued 1,164,822 common stock purchase warrants to the investors and 244,613 common stock purchase warrants to the placement agent.  The warrants are exercisable immediately; have an exercise price of $4.50 per share and expire on May 8, 2014. The Company determined the fair value of the 1,409,435 warrants issued in connection with this private placement offering to be $4,379,181, using the Black-Scholes option pricing model and the following assumptions:  expected life of 5 year, a risk free interest rate of 2.50%, a dividend yield of 0% and volatility of 109%.  The value of the warrants was recorded directly to additional paid in capital as these warrants were issued in connection with the sale of the Company’s equity securities.

16

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

Exercise of Warrants

During the nine months ended September 30, 2009, certain warrants holders exercised 300,000 warrants in connection with a cashless exercise provision in the warrant agreement that resulted in the issuance of 95,473 shares of the Company’s common stock.  In addition, during the nine months ended September 30, 2009, certain warrant holders exercised 2,632,004 warrants that resulted in gross proceeds to the Company of $6,580,010.

Equity Credit Agreement

On September 9, 2009, the Company entered into an Equity Credit Agreement with an institutional investor, which was amended and restated as of November 9, 2009, providing for, among other things, the issuance of shares of its common stock at any time and from time to time during the next two years for gross proceeds of up to $50,000,000. In connection with the closing of the transaction, the Company also issued warrants to purchase an additional 400,000 shares of its common stock during a five year period at an exercise price of $5.75 per share. The fair value of these warrants was charged to additional paid in capital as they were issued in connection with an equity instrument.  This transaction closed on September 9, 2009.  No shares have been issued under the terms of the Equity Credit Agreement.

Note 6 – Employee Common Welfare

The total expense for the employee common welfare was $44,548 and $259,747, and $12,009 and $101,426 for the three and nine months ended September 30, 2009 and 2008, respectively.  The Company has recorded welfare payable of $1,938 and $3,336 at September 30, 2009 and December 31, 2008, respectively, which is included in tax and welfare payable in the accompanying consolidated balance sheet.  The Chinese government abolished the 14% welfare plan policy at the beginning of 2007.  The Company is not required to establish welfare and common welfare reserves. The balance of welfare payable is remaining amount due under the welfare plan provided for prior to 2007.

Note 7 – Statutory Common Welfare Fund

As stipulated by the Company Law of the PRC, net income after taxation can only be distributed as dividends after appropriation has been made for the following:

i. Making up cumulative prior years’ losses, if any;

ii. Allocations to the “Statutory surplus reserve” of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company’s registered capital;

iii. Allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company’s “Statutory common welfare fund”, which is established for the purpose of providing employee facilities and other collective benefits to the Company’s employees; and

iv. Allocations to the discretionary surplus reserve, if approved in the stockholders’ general meeting.

Pursuant to the new Corporate Law effective on January 1, 2006, there is now only one "Statutory surplus reserve" requirement. The reserve is 10 percent of income after tax, not to exceed 50 percent of registered capital.

The Company appropriated $392,124 and $994,462 and $296,845 and $1,145,668 as reserve for the statutory surplus reserve and welfare fund for the three and nine months ended September 30, 2009 and 2008, respectively.

17

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

Note 8 – Stock Options and Warrants

Stock Options

Following is a summary of stock option activity:

	Options outstanding		Weighted Average Exercise Price		Weighted average remaining contractual life		Aggregate Intrinsic Value
Outstanding, December 31, 2008		180,000	$	9.27		4.65	$	-
Granted		30,000		3.30
Forfeited		-		-
Exercised		-		-
Outstanding, September 30, 2009		210,000	$	8.42		3.99	$	61,200
Exercisable, September 30, 2009		6,666	$	8.85		3.42	$	-

The assumptions used in calculating the fair value of options granted using the Black-Scholes option- pricing model for options granted during 2009:

Risk-free interest rate		2.5	%
Expected life of the options	5 years
Expected volatility		109	%
Expected dividend yield		0	%

The exercise price for options outstanding at September 30, 2009 is as follows:

Number of Options	Exercise  Price
30,000	$	3.30
20,000	$	8.85
160,000	$	9.32
210,000

For options granted during 2009 where the exercise price equaled the stock price at the date of the grant, the weighted-average fair value of such options was $2.61 and the weighted-average exercise price of such options was $3.30.  No options were granted during 2009, where the exercise price was less than the stock price at the date of the grant or the exercise price was greater than the stock price at the date of grant.  At September 30, 2009, the unamortized compensation costs related to nonvested options amounted to $473,134, which will be expensed through the second quarter of 2012.

18

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

Warrants

Following is a summary of the warrant activity:

Outstanding, December 31, 2008	4,323,204
Granted	1,809,435
Forfeited	-
Exercised	2,932,004
Outstanding, September 30, 2009	3,200,635

The exercise price for warrants outstanding at September 30, 2009 is as follows:

Number of Warrants	Exercise  Price
1,168,000	$	2.50
1,409,435	$	4.50
3,200	$	5.00
400,000	$	5.75
220,000	$	10.00
3,200,635

Note 9 – Taxes

Local PRC Income Tax

Pursuant to the tax laws of China, general enterprises are subject to income tax at an effective rate of 25%.

On June 5, 2007, Shanghai Best received a tax exemption certificate from the local tax bureau and is exempt from income tax from January 1, 2007 to December 31, 2008, followed by a reduced tax rate of 15% for the next three years.

Hog production is an income tax exempt sector in China and sow owners receive government grants and subsidies.

A reconciliation of tax at United States federal statutory rate to provision for income tax recorded in the financial statements is as follows:

	For the Three Months Ended
	September 30, 2009			September 30, 2008
Tax provision at statutory rate		34	%		34	%
Foreign tax rate difference		(9	)%		(9	)%
US NOL for which no benefit is realized		2	%		-
Effect of tax holiday/tax exemption		(18	)%		(23	)%
		9	%		2	%

19

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

	For the Nine Months Ended
	September 30, 2009			September 30, 2008
Tax provision at statutory rate		34	%		34	%
Foreign tax rate difference		(9	)%		(9	)%
US NOL for which no benefit is realized		2	%		1	%
Effect of tax holiday/tax exemption		(17	)%		(23	)%
		10	%		3	%

The effect of the change of tax status was accounted for in accordance with SFAS No. 109, par. 28, which states that the effect of a change in tax status is computed as of the date of change and is included in the tax provision for continuing operations. Management believes that the local tax authorities would not have waived past taxes had it not been for the change in the Company’s subsidiary’s tax status.

If the Company had not been exempt from paying income taxes, income tax expense for the three and nine months September 30, 2009 would have been approximately $956,000 and $2,251,000 and earnings per share would have been reduced by $0.02 and $0.05; and income tax expense for the three and nine months ended September 30, 2008 would have been approximately $2,711,000 and $4,309,000 and earnings per share would have been reduced by $0.08 and $0.13, respectively.

Foreign pretax earnings approximated $9,600,000 and $18,900,000 for the nine months ended September 30, 2009 and 2008 respectively. Pretax earnings of a foreign subsidiary are subject to U.S. taxation when effectively repatriated. The Company provides income taxes on the undistributed earnings of non-U.S. subsidiaries except to the extent that such earnings are indefinitely invested outside the United States. At September 30, 2009, approximately $38,300,000 of accumulated undistributed earnings of non-U.S. subsidiaries was indefinitely invested. At the existing U.S. federal income tax rate, additional taxes of $3,400,000 would have to be provided if such earnings were remitted currently.

Note 10 – Segment Information

The Company’s predominant businesses are the research and development, manufacture, marketing, distribution, and sale of pre-mix, concentrates and complete feeds and feed additives primarily for use in China’s domestic pork husbandry market and the raising, breeding, and selling of pigs.  The Company operates in two segments:  animal feed nutrition and hog production.

The Company’s feed company in Shanghai is located in the Qingcun Town, Fengxian district, Shanghai and sells its products to approximately 651 customers, consisting of 425 distributors and 261 large scale pig farms.  Its feed company in Guangxi is located in Coastal Industrial Park, Liangqin district, Nanning city, Guangxi Province and sells its products to approximately 686 customers, consisting of 471 distributors and 215 large scale pig farms.  Its feed company in Nanchang is located in Chang Bei District Industrial Park, in Nanchang, Jiangxi province and sells its products to approximately 693 customers, consisting of 474 distributors and 219 large scale pig farms. The hog farms are engaged mainly in raising, breeding, and sale of pigs all over the country and are located in the PRC provinces of Jiangxi, Shanghai, Hainan, Guangxi and Fujian.

20

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

The following tables summarize segment information for the three and nine months ended September 30, 2009 and 2008:

	Three			Three			Nine			Nine
	Months			Months			Months			Months
	Ended			Ended			Ended			Ended
	9/30/2009			9/30/2008			9/30/2009			9/30/2008
Revenues from unrelated entities
Animal feed nutrition	$	17,150,476		$	12,434,506		$	38,400,249		$	33,664,079
Hog production		27,964,966			36,991,768			78,672,237			63,544,606
	$	45,115,442		$	49,426,274		$	117,072,486		$	97,208,685
Intersegment revenues
Animal feed nutrition	$	3,343,116		$	3,275,020		$	9,789,287		$	5,115,566
Hog production		232,027			659,209			550,882			665,191
	$	3,575,143		$	3,934,229		$	10,340,169		$	5,780,757
Total Revenues
Animal feed nutrition	$	20,493,592		$	15,709,526		$	48,189,536		$	38,779,645
Hog production		28,196,993			37,650,977			79,223,119			64,209,797
Less Intersegment revenues		(3,575,143	)		(3,934,229	)		(10,340,169	)		(5,780,757	)
	$	45,115,442		$	49,426,274		$	117,072,486		$	97,208,685
Income from operations
Animal feed nutrition	$	2,105,772		$	2,621,737		$	5,231,919		$	6,319,700
Hog production		2,265,649			6,913,473			5,452,101			14,276,685
Holding Company		(659,676	)		(224,811	)		(1,528,112	)		(788,711	)
	$	3,711,745		$	9,310,399		$	9,155,908		$	19,807,674
Interest income
Animal feed nutrition	$	19,911		$	27,372		$	68,770		$	80,524
Hog production		8,780			5,420			19,093			12,820
Holding Company		46,653			12,068			100,597			77,751
	$	75,344		$	44,860		$	188,460		$	171,095
Interest and financing costs
Animal feed nutrition	$	85,632		$	27,270		$	100,991		$	35,055
Hog production		64,011			209			71,156			211
Holding Company		43,320			577,912			798,244			5,209,326
	$	192,963		$	605,391		$	970,391		$	5,244,592
Income tax expense
Animal feed nutrition	$	292,647		$	201,904		$	794,155		$	414,993
Hog production		-			-			-			-
Holding Company		-			-			-			-
	$	292,647		$	201,904		$	794,155		$	414,993
Net Income
Animal feed nutrition	$	1,756,494		$	2,439,622		$	4,689,193		$	5,399,943
Hog production		1,802,712			6,564,762			4,677,829			13,577,045
Holding Company		(662,865	)		(788,229	)		(2,225,589	)		(5,920,023	)
	$	2,896,341		$	8,216,155		$	7,141,433		$	13,056,965
Provision for depreciation
Animal feed nutrition	$	33,626		$	62,380		$	202,685		$	143,540
Hog production		635,628			362,349			1,749,528			829,624
	$	669,254		$	424,729		$	1,952,213		$	973,164

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AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

	As of		As of
	9/30/08		12/31/08
Total Assets
Animal feed nutrition	$	36,025,899	$	31,076,964
Hog production		104,471,526		96,454,117
Holding Company		17,438,779		9,524,055
	$	157,936,204	$	137,055,136

Note 11 – Commitments and Contingencies

At September 30, 2009, the Company had commitments to expend approximately $732,000 in connection to building construction currently in process.

Note 12 – Acquisition and Dispositions

During the three months ended June 30, 2009, the Company purchased the non-controlling interest of 30% and 45% in two hog farms for $370,026 and $896,348, respectively.  As a result of the purchase of the non-controlling interest, the excess of the purchase price over the carrying value of the non-controlling interest of $159,249 and $263,291, respectively, was recorded against additional paid in capital.

During the three months ended September 30, 2009, the Company purchased the non-controlling interest of 40% and 40% in two hog farms for $987,655 and $264,060, respectively.  As a result of the purchase of the non-controlling interest, the excess of the purchase price over the carrying value of the non-controlling interest of $639,754 and $248,713, respectively was recorded against additional paid in capital.

Also, during the three months ended June 30, 2009, the Company sold its 70% interest in a subsidiary for $307,650.  This subsidiary had not commenced operations.  In addition, during the three months ended September 30, 2009, the Company sold its 60% interest in a subsidiary for $528,120 and recognized a gain on disposition of $54,382.

22

AGFEED INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(unaudited)

Note 13 – Subsequent Events

The Company has evaluated subsequent events through November 8, 2009, the date management and audit committee approved the financial statements.

In October 2009, in connection with the construction of its first large western model farm in Da Hua, China, the Company placed $4,000,000 in a separate bank account for the construction of this farm.  In addition, the Company paid a construction deposit of $1,001,050 to an international construction company for the construction of the Da Hua farm.

Subsequent to September 30, 2009, the Company issued 375,000 shares of its common stock for as a result of the exercise of warrants.

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CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”.  We have based these forward-looking statements on our current expectations and projections about future events.  These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.  In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” anticipate,” believe,” estimate,” continue,” or the negative of such terms or other similar expressions.  Factors that might cause or contribute to such a discrepancy include, but are not limited to, those listed under the heading “Risk Factors” and those listed in our other SEC filings.  The following discussion should be read in conjunction with our Financial Statements and related Notes thereto included elsewhere in this report. Throughout this Quarterly Report we will refer to AgFeed Industries, Inc., together with its subsidiaries, as “AgFeed,” the “Company,” “we,” “us,” and “our.”

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a Nevada corporation engaged in the animal nutrition (premix, concentrates and complete feeds) and commercial hog producing business in China through our operating subsidiaries.

Our animal nutrition business consists of the research and development, manufacture, marketing and sale of premix feed and blended feed for use in the domestic animal husbandry markets, primarily for hog production in China.  Premix is an animal feed additive that is broadly used in commercial animal production worldwide. The use of premix feed can significantly reduce an animal’s growth cycle, enabling the animal to reach market size sooner. We have been in the premix feed business since 1995 and now operate five premix feed manufacturing facilities located in the cities of Nanchang, Shandong, Shanghai, Nanning, and Hainan.

We entered the hog breeding and production business in November 2007.  In this business, we mainly produce hogs for slaughter and sell breeding stock.  We have one breeder farm and 29 meat hog producing farms in the Jiangxi, Shanghai, Hainan, Guangxi and Fujian provinces.

We were incorporated as Wallace Mountain Resources Corp. on March 30, 2005 in Nevada.  Since October 31, 2006, our principal place of business has been based in China.  As a result of a merger into a wholly-owned subsidiary, we changed our name to AgFeed Industries, Inc. on November 17, 2006.

AgFeed had revenues of $117.07 million for the nine months ended September 30, 2009 compared to revenues of $97.21 million for the nine months ended September 30, 2008.  The increase (20.4%) was the result of expanding market share in our feed business and the hog farm acquisitions and expansions we made beginning in late 2007 and throughout 2008.

Animal Nutrition Business

We manufacture, distribute, market and sell three main product lines - additive premix, concentrates and complete feeds for use in all stages of a pig’s life.  We conduct these operations through our subsidiaries Nanchang Best, Shanghai Best, Guangxi Huijie, Shandong AgFeed Agribusiness Co., Ltd. ("Shandong Feed"), and Hainan HopeJia Feed Co., Ltd. ("HopeJia"). We also provide extensive technical and veterinary support free of charge to our customers.

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Nanchang Best, Shanghai Best, Guangxi Huijie, Shandong Feed and HopeJia are collectively referred to as our "feed operating companies."  They operate manufacturing facilities in Nanchang, Shanghai, Nanning, Shandong, and Hainan provinces, primarily serving the Hog industry.  Each subsidiary independently conducts local marketing and sales efforts.  We share sales referrals and leads among the subsidiaries, but our subsidiaries do not compete against each other for new sales. Nanchang Best and Guangxi Huijie are primarily responsible for our ongoing research and development efforts and share their expertise in this area with all of our manufacturing operations.  There are no formal written agreements relating to these services as each of these companies are our wholly owned subsidiaries.

As of September 30, 2009, we have established relationships with approximately 1,286 independently owned feed distribution chain stores that sell our products exclusively, targeting backyard and small hog farms. These complement our direct sales to approximately 775 large commercial hog farms. We rely on the distributors to market and sell our products to smaller hog farms.  Approximately 80% of China’s total annual hog production is supplied by backyard and small farms that raise less than 100 hogs per year per family. Through our network of distributors and direct sales, we are able to market our premix feed to the producers of more than 65% of China’s annual hog production.

AgFeed is one of a handful of companies that received “Green Certification” from the Minister of Agriculture of PRC for its premix products under the brand label “BEST.”  This means that these products are safe, environmentally friendly, and can effectively promote the healthy growth of pigs. According to current government regulations, pork cannot be accredited by the government as “green” unless it is produced using government certified green feed. Having our feed certified as green requires us to adhere to strict operational controls and procedures. This green certification laid the foundation for our Hog Farms to produce hogs providing high quality “Green” pork products. It is also an incentive for other commercial hog farms to enter into sales contracts with our feed operations.

AgFeed invests capital in research and development to maintain and improve on a superior quality product while experimenting with environmentally sensitive premix formulas. We will continue to invest up to 1% of our revenues to increasing our long-term profitability and competitiveness.

Revenue increased in our animal feed lines due to our aggressive sales practices and the anticipated increases of corn and soy prices by hog farmers due to the country wide drought suffered in the past year.

According to the Access Asia Limited 2008 market analysis in their study titled “Fresh & Processed Meat in China 2009,” food preferences are changing rapidly in China. Chinese people now eat much more meat than previously. But there is also a growing diversity in the average diet. The fresh meat market is expected to grow over 23% from 2009 to 2013. This market value is estimated to be over $70.0 billion by 2013.  Pork will continue to be 62.5% of all fresh meat sold.  Poultry, lamb, veal, mutton and beef will constitute 36% of the growth. In view of this we decided to explore the expansion and funding to serve the animal nutrition products needed for this growing market.

Hog Production Business

We breed, raise and sell hogs for use in China's pork production and hog breeding markets.  We own one breeder farm (Lushan) and 29 meat hog producing farms located in Jiangxi, Shanghai, Hainan, Guangxi, and Fujian provinces, which are strategically located in or near the largest pork consumption areas in the PRC.

We entered the hog farming business on November 9, 2007 as a result of our acquisition of ninety percent (90%) of the capital stock of Lushan.  Lushan owns and operates a breeder hog farm in Jiangxi Province.  Lushan is a mid-scale hog farm engaged in the business of raising, breeding and selling hogs in the PRC for use in the pork production market in the PRC.  Lushan operates as a majority-owned subsidiary of Nanchang Best.  In 2008, we acquired at least a majority interest in 29 meat hog producing farms in the Jiangxi, Shanghai, Hainan, Guangxi, and Fujian provinces through our subsidiaries - Nanchang Best, Shanghai Best, Guangxi Huijie and Jiangxi Best Swine Development Co. ("Best Swine").  Our meat hog producing farms generate revenue primarily from the sale of meat hogs to slaughterhouses.  Our meat hogs are sold primarily in Jiangxi, Shanghai, Hainan, Guangxi, Fujian, Guangdong and other neighboring provinces.  

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Lushan generates revenue primarily from the sale of breeder hogs to commercial hog farms and, to a lesser extent, the sale of meat hogs to hog slaughterhouses.  It also generates revenue by providing consulting services to hog farmers in the areas of feed production, feed formulation and veterinary services.  Lushan's customers include large-scale hog farms, mid-scale hog farms and small-scale farms.  Our breeder hogs are sold throughout the PRC, primarily in southeastern China.

Capital spending for the first nine months of 2009 consisted of approximately $3.97 million on building renovations, equipment purchases and environmental expenditures, $1.84 million on swine purchases for reproduction and $3.51 million related to construction in progress.  Our current capital spending plans over the next two and a half years include an estimated $4.2 million for bio security, $4.0 million for environmental compliance and projects and $8.3 million for genetics programs.  For 2009, AgFeed plans to achieve a production capacity of up to 650,000 hogs.  In the first nine months of 2009 AgFeed sold approximately 409,000 head with an average selling price of $166 per head as compared to sales of 410,000 hogs with an average selling price of $219 per head for all of 2008 for market weight (lard) pigs. There were additional pigs sold at various weights so the cumulative total is 511,000 total head for the nine months ended September 30, 2009.

On April 15, 2009 we formed a strategic alliance with Hypor. The alliance has four phases: (1) upgrading the genetic base of our existing herds; (2) creating a sow farrow-to -finish nucleus facility (Wunnin Farms) to supply superior breeding stock to be utilized in our production systems and for sale to outside commercial hog farms; (3) establishing high health, top quality genetics to the farms being developed by AgFeed International Protein; and (4) developing gene transfer centers to maximize the use of the top performing boars in China across AgFeed's production system.

On July 13, 2009, we formed a joint venture with M2P2. This joint venture, AgFeed International Protein Technology Corp., will focus on enhancing hog production systems for Chinese and other Pan Asian clients based on modern western standards to increase productivity and ensure the highest bio-security health standards in the Pan Asian hog industry.  The joint venture was formed to take advantage of the coming commercialization and consolidation of the hog industry being fostered by the Chinese central and local governments.  We will be the joint venture's first client.  AgFeed International Protein is owned 80.1% by us and certain affiliates and 19.9% by M2P2. On November 9, 2009 a groundbreaking ceremony will be held in Da Hua, China (Jiangxi Province) celebrating the start of construction of our first large western model farm. This is the first of six farms that will be constructed in South China. AgFeed International Protein Technology Corp.has completed all phases of design and blueprints for these farms and has been working with international and local construction firms to ensure success.

AgFeed's current strategic plan calls for development of a platform for the production and sale of approximately 2.5 million hogs into the Chinese market between now and the end of 2011. The key element to this future growth is scientific breeding, which is underscored by our arrangement with Hypor. In April 2009 we began this by stocking the 1,200 sow farrow-to-finish Lushan Breeding Farm with the Hypor Large White Pureline Sows, the Hypor Landrace Pureline Boars and the Duroc Terminal Sire. Starting in November 2009, AgFeed will stock its second breeder farm (GANDA) with like genetics.  In the third quarter, AgFeed International Protein will begin to build the first of six new farms that will house an additional 20,000 genetically superior sows and 400 boars.  When fully operational, we anticipate that these farms will produce 500,000 pigs per year. We believe the genetics program will be accretive to earnings by second half 2010. It is anticipated that the cost to build the six farms will be approximately $45 to $50 million over the next two years.

AgFeed's investment plans also include modernization of our existing pork production facilities, investment in reporting and cash management systems and the training of our employees, and the development of enhanced environmental and health safety programs including upgraded bio security measures. These actions are part of our effort to improve on the standards of the new China Food Safety Law that was implemented on June 1, 2009 and to ensure the production of consistently high quality, safe pork. 

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According to the China Feed Industry Association, the PRC has the world's largest and most profitable market for hog production, which processed 625 million hogs in 2008, compared to approximately 100 million in the US. More than 1.2 billion Chinese consume pork as their primary source of meat. 63% of all meat consumed in the PRC is pork. Chinese consumers consume more pork each year than the rest of the world combined. Pork production in China is a key political, social and security issue for consumers. The Chinese government supports hog producers with favorable tax status and subsidies, insurance, vaccines, caps on feed costs and land use grants. Hog production is exempt from all taxes and sow owners receive government grants and subsidies.  The Food Safety Law, which went into effect on June 1, 2009, provides a legal basis for the government to strengthen food safety control “from the production line to the dining table.”

The importance the PRC puts on hog production is exemplified by the adoption of new policies and enactment of new laws benefiting hog producers. In January 2008, the Chinese central government instituted a set of measures that could prevent large declines in hog prices with the view of stabilizing hog production and hog prices in order to protect the interest of hog farms. In July 2008, the NDRC announced that they were channeling $5.6 billion RMB for livestock farm construction and another $2.8 billion RMB to support live pig production. China needs a minimum of 410,000,000 live hogs to balance the anticipated consumption rate for 2009. As of June 2009, China had 450,000,000 live hogs to meet that demand.

 Critical Accounting Policies

In presenting our financial statements in conformity with accounting principles generally accepted in the United States, we are required to make certain estimates and assumptions that affect the amounts reported therein.  Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain as they pertain to future events.  However, events that are outside of our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions.  If there is a significant unfavorable change to current conditions, it will likely result in a material adverse impact to our consolidated results of operations, financial position and liquidity. We believe that the estimates and assumptions we used when preparing our financial statements were the most appropriate at that time.  Presented below are those accounting policies that we believe require subjective and complex judgments that could potentially affect reported results.

Use of Estimates.  Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which were prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.  On an ongoing basis, we evaluate our estimates, including those related to impairment of long-lived assets and allowance for doubtful accounts.  We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions; however, we believe that our estimates, including those for the above-described items, are reasonable.

Areas that require estimates and assumptions include valuation of accounts receivable and inventory, determination of useful lives of property and equipment, estimation of certain liabilities and sales returns.

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Allowance For Doubtful Accounts.  We continually monitor customer payments and maintain a reserve for estimated losses resulting from our customers’ inability to make required payments. In determining the reserve, we evaluate the collectability of our accounts receivable based upon a variety of factors. In cases where we become aware of circumstances that may impair a specific customer’s ability to meet its financial obligations, we record a specific allowance against amounts due. For all other customers, we recognize allowances for doubtful accounts based on our historical write-off experience in conjunction with the length of time the receivables are past due, customer credit worthiness, geographic risk and the current business environment. Actual future losses from uncollectible accounts may differ from our estimates.

Inventories.  Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. We evaluate our ending inventories for estimated excess quantities and obsolescence. Our evaluation includes the analysis of future sales demand by product, within specific time horizons. Inventories in excess of projected future demand are written down to net realizable value. In addition, we assess the impact of changing technology on inventory balances and writes-down inventories that are considered obsolete. Inventory obsolescence and excess quantities have historically been minimal.

 Long-Lived Assets.  We periodically assess potential impairments to our long-lived assets in accordance with the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 requires, among other things, that an entity perform an impairment review whenever events or changes in circumstances indicate that the carrying value may not be fully recoverable.  Factors we considered include, but are not limited to: significant underperformance relative to expected historical or projected future operating results; significant changes in the manner of use of the acquired assets or the strategy for our overall business; and significant negative industry or economic trends. When we determine that the carrying value of a long-lived asset may not be recoverable based upon the existence of one or more of the above indicators of impairment, we estimate the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future undiscounted cash flows and eventual disposition is less than the carrying amount of the asset, we recognize an impairment loss. An impairment loss is reflected as the amount by which the carrying amount of the asset exceeds the fair market value of the asset, based on the fair market value if available, or discounted cash flows. To date, there has been no impairment of long-lived assets.

Property and Equipment.  Useful lives of property and equipment is based on historical experience and industry norms. Changes in useful lives due to changes in technology or other factors can affect future depreciation estimates.

Revenue Recognition.  Our revenue recognition policies are in compliance with SEC Staff Accounting Bulletin (SAB) 104. Revenue is recognized when services are rendered to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of AgFeed exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. We are not subject to VAT withholdings.  We give volume rebates to certain customers based on volume achieved.

We make estimates and judgments when determining whether the collectability of revenue from customers is reasonably assured.  Management estimates regarding collectability impact the actual revenues recognized each period and the timing of the recognition of revenues.  Our assumptions and judgments regarding future collectability could differ from actual events, thus materially impacting our financial position and results of operations. 

Sales returns and allowances have historically been insignificant.  Accordingly, estimating returns is not critical.  However, if circumstances change, returns and allowance may impact the company’s earnings. There are no differences in our arrangements with our different types of customers.  Accordingly, we do not have different revenue recognition policies for different types of customers.   We offer credit terms ranging from 30 to 90 days for most customers.  From some large customers, we may extend these terms beyond 90 days.

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Recent Accounting Pronouncements

On July 1, 2009, we adopted Accounting Standards Update (“ASU”) No. 2009-01, “Topic 105 - Generally Accepted Accounting Principles - amendments based on Statement of Financial Accounting Standards No. 168, “The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles.”  ASU No. 2009-01 re-defines authoritative US GAAP for nongovernmental entities to be only comprised of the FASB Accounting Standards Codification™ (“Codification”) and, for SEC registrants, guidance issued by the SEC.  The Codification is a reorganization and compilation of all then-existing authoritative US GAAP for nongovernmental entities, except for guidance issued by the SEC.  The Codification is amended to effect non-SEC changes to authoritative US GAAP.  Adoption of ASU No. 2009-01 only changed the referencing convention of US GAAP in  Notes to the Consolidated Financial Statements.

In April 2009, the FASB issued FSP No. SFAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.” FSP No. SFAS 157-4, which is codified in FASB ASC Topics 820-10-35-51 and 820-10-50-2, provides additional guidance for estimating fair value and emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. The Company adopted FSP No. SFAS 157-4 beginning April 1, 2009. This FSP had no material impact on our financial position, results of operations or cash flows.

In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments,” which is codified in FASB ASC Topic 320-10. This FSP modifies the requirements for recognizing other-than-temporarily impaired debt securities and changes the existing impairment model for such securities. The FSP also requires additional disclosures for both annual and interim periods with respect to both debt and equity securities. Under the FSP, impairment of debt securities will be considered other-than-temporary if an entity (1) intends to sell the security, (2) more likely than not will be required to sell the security before recovering its cost, or (3) does not expect to recover the security’s entire amortized cost basis (even if the entity does not intend to sell). The FSP further indicates that, depending on which of the above factor(s) causes the impairment to be considered other-than-temporary, (1) the entire shortfall of the security’s fair value versus its amortized cost basis or (2) only the credit loss portion would be recognized in earnings while the remaining shortfall (if any) would be recorded in other comprehensive income. This FSP requires entities to initially apply the provisions of the standard to previously other-than-temporarily impaired debt securities existing as of the date of initial adoption by making a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The cumulative-effect adjustment potentially reclassifies the noncredit portion of a previously other-than-temporarily impaired debt security held as of the date of initial adoption from retained earnings to accumulated other comprehensive income. The Company adopted FSP No. SFAS 115-2 and SFAS 124-2 beginning April 1, 2009. This FSP had no material impact on our financial position, results of operations or cash flows.

In April 2009, the FASB issued FSP No. SFAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” which is codified in FASB ASC Topic 825-10-50.  This FSP essentially expands the disclosure about fair value of financial instruments that were previously required only annually to also be required for interim period reporting. In addition, the FSP requires certain additional disclosures regarding the methods and significant assumptions used to estimate the fair value of financial instruments. These additional disclosures are required beginning with the quarter ending June 30, 2009.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events,” codified in FASB  ASC Topic 855-10-05, which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS No. 165 also requires entities to disclose the date through which subsequent events were evaluated as well as the rationale for why that date was selected. SFAS No. 165 is effective for interim and annual periods ending after June 15, 2009, and accordingly, we adopted this pronouncement during the second quarter of 2009. SFAS No. 165 requires that public entities evaluate subsequent events through the date that the financial statements are issued. We have evaluated subsequent events through November 8, 2009.

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In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140,” codified as FASB ASC Topic 860, which requires entities to provide more information regarding sales of securitized financial assets and similar transactions, particularly if the entity has continuing exposure to the risks related to transferred financial assets. SFAS No. 166 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets and requires additional disclosures. SFAS No.166 is effective for fiscal years beginning after November 15, 2009. We do not believe the adoption of SFAS No.166 will have an impact on our financial condition, results of operations or cash flows.

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R),” codified as FASB ASC Topic 810-10, which modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. SFAS No. 167 clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. SFAS No. 167 requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity. SFAS No. 167 also requires additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. SFAS No.167 is effective for fiscal years beginning after November 15, 2009. We do not believe the adoption of SFAS No. 167 will have an impact on our financial condition, results of operations or cash flows.

Results of Operations

Comparison of Three Months Ended September 30, 2009 and 2008:

	Three Months Ended September 30,				$			%
	2009		2008		Change			Change
Revenues	$	45,115,442	$	49,426,274	$	(4,310,832	)		(8.72	)
Cost of goods sold		37,554,278		37,124,058		430,220			1.16
Gross profit		7,561,164		12,302,216		(4,741,052	)		(38.54	)
Operating expenses		3,849,419		2,991,817		857,602			28.66
Interest and financing costs		192,963		605,391		(412,428	)		(68.13	)
Net income		2,896,341		8,216,155		(5,319,814	)		(64.75	)

Revenues.   The decrease of $4.3 million was primarily due to a decrease in the selling price of hogs plus the high quantity sold (183,878 versus 96,415) which was offset by the increase in animal feed sales. On a year-over-year basis hog sales declined by $9.1 million of which $3.6 million is attributed to the quantity sold (weight) and $5.5 million was due to actual sales prices.

Feed revenues were up by $3.5 million although the average sales price per unit was lower than last year due to aggressive sales programs and the increases in price of corn and soy.  A key milestone is the increase in the sales of complete feed.  Our total feed sales in the third quarter of 2009 were approximately 23.3 thousand metric tons which added to our first half of 2009 of 43.5 thousand metric tons which equals 76.8 thousand metric tons for the nine months ended September 30, 2009.  Our goal for 2009 is 100,000 metric tons.

The decrease in revenues as described above was due to a sell off of hog inventory sell off,  consumer reaction to H1N1A scare, the country wide drought, an increased in corn prices of 7% and soybeans by 4%, and aggressive sales programs all had negative effects of results of operations.

Cost of Goods Sold. We experienced increases in the unit cost of goods sold for our two business lines during the three months ended September 30, 2009 compared to the same period in 2008.  These raw materials constitute approximately 60 - 75% of our raw material costs.   Corn and soybean meal cost rose 7% and 4%, respectively, versus the 3rd quarter of 2008. China has implemented programs to mitigate additional price increases in order to stabilize these markets.

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In order to provide excellent customer service and differentiate ourselves from our competition, at our customers’ request, we supply them with customized formulations of our products.  In any given month, the cost of various additives used in our production fluctuates, which can result in temporary increases in the unit cost of goods sold.  These increased costs offset our increases in revenues.  Even though this may have an adverse effect on our short term profits, we take the long-term view that this practice results in increased customer loyalty, builds the AgFeed brand and will ultimately lead to increased sales and gross profits.  In addition, we are presently experiencing more stable pricing in these additives, which we anticipate will stabilize our cost of goods sold.

Gross Profit.  Gross margins decreased to 16.8% from 24.9% during the three months September 30, 2009 as compared to the same period in 2008.  The decrease in gross margin can be attributed to the increase in the cost of hog feed and the lower sales price as compared to 2008 selling prices that averaged $0.45 per kilogram higher.  This was offset somewhat by actions taken at the beginning of 2009, including expansion of our product distribution channels, and our entry into long-term contracts for key product ingredients which locked in favorable cost savings.

Selling, General and Administrative Expenses.  Selling, general and administrative expense includes overhead expenses such as rent, management and staff salaries, general insurance, marketing, accounting, legal and offices expenses. Our selling expenses for the three months ended September 30, 2009 were approximately 1% less than the corresponding period in 2008.  General and administrative expenses for our feed business increased by approximately $400,000 or approximately 94% from the corresponding period in 2008 principally due to the overall expansion of our feed business and the increase of our allowance for doubtful accounts of approximately $210,000.  Our corporate expenses also increased by approximately $430,000 due to higher professional fees.  General and administrative expenses for our hog farms for the three months ended September 30, 2009 increased by approximately 3% over the corresponding period in 2008 due to more hog farms being in operation in 2009.

Interest and Financing Costs. We incurred interest and financing costs of $192,963 and $605,391during the three months ended September 30, 2009 and 2008, respectively, principally as a result of the interest on our of convertible notes issued during February 2008 and short-term loans.  During the three months ended September 30, 2009 and 2008, $0 and $1.5 million, respectively, of the convertible notes were converted into shares of common stock which resulted in accelerated amortization of the debt discounts and debt issue costs associated with the convertible debt.

Due to appreciation in RMB against the USD in 2008, we incurred a loss on foreign translation of $10,007 during the three months ended September 30, 2008, as we could not timely convert USD deposits into RMB as a result of bank policies and related banking rules in the PRC. This was a one time, non-recurring charge for the period.

Income Taxes. Hog production is an income tax exempt sector in China and sow owners receive government grants and subsidies.  Some of our feed manufacturing companies benefit from exemption from value-added tax.

Net Income.  The decrease in our net income was due to a decrease in our sales, the increase in our cost of sales and higher operating expenses.  We continued to benefit from the tax exempt status for our hog production business.

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Comparison of Nine Months Ended September 30, 2009 and 2008:

	Nine Months Ended September 30,				$			%
	2009		2008		Change			Change
Revenues	$	117,072,486	$	97,208,685	$	19,863,801			20.43
Cost of goods sold		98,486,258		70,438,683		28,047,575			39.82
Gross profit		18,586,228		26,770,002		(8,183,774	)		(30.57	)
Operating expenses		9,430,320		6,962,328		2,467,992			35.45
Interest and financing costs		970,391		5,244,592		(4,274,201	)		(81.50	)
Net income		7,141,433		13,056,965		(5,915,532	)		(45.31	)

Revenues.   The increase was due to volume sales of both hogs and animal feed products. Hog sales of 511,000 for nine months ended September 30, 2009 exceeded total hog sales of 410,000 hogs for all of 2008. Animal feed sales volume for nine months ended September 30, 2009 exceeded 73,000 metric tons doubling the volume for the comparative period of 2008. However, the increase in revenue described above was offset by lower sales prices, an increase in ingredient costs, consumer reaction to the H1N1A scare and the country wide drought.

Cost of Goods Sold. We experienced increases in the unit cost of goods sold for our two business lines during the nine months ended September 30, 2009 compared to the same period in 2008.  These raw materials constitute approximately 60 - 75% of our raw material costs.   Corn and soybean meal cost rose 7% and 4%, respectively, versus the nine months ended September 30, 2008. China has implemented programs to mitigate additional price increases in order to stabilize these markets.

In order to provide excellent customer service and differentiate ourselves from our competition, at our customers’ request, we supply them with customized formulations of our products.  In any given month, the cost of various additives used in our production fluctuates, which can result in temporary increases in the unit cost of goods sold.  These increased costs offset our increases in revenues.  Even though this may have an adverse effect on our short term profits, we take the long-term view that this practice results in increased customer loyalty, builds the AgFeed brand and will ultimately lead to increased sales and gross profits.  In addition, we are presently experiencing more stable pricing in these additives, which we anticipate will stabilize our cost of goods sold.

Gross Profit.  Gross margins decreased to 15.9% from 27.5% during the nine months September 30, 2009 as compared to the same period in 2008.  The decrease in gross margin can be attributed to the increase in the cost of hog feed that began in the last half of 2008 and continued into 2009 and a reduction in the selling price for our hogs.  The increase in the cost of hog feed was offset somewhat by actions taken in the first quarter of 2009, including expansion of our product distribution channels, and our entry into long-term contracts for key product ingredients which locked in favorable cost savings.

Selling, General and Administrative Expenses.  Selling, general and administrative expense includes overhead expenses such as rent, management and staff salaries, general insurance, marketing, accounting, legal and offices expenses. Our selling expenses for the nine months ended September 30, 2009 were approximately 9% more than the corresponding period in 2008 due to the expansion of our feed and hog farm operations and related increases in sales.  General and administrative expenses for our feed segment increased by approximately $530,000 or approximately 52% from the corresponding period in 2008 principally due to the overall expansion of our feed business and the increase of our allowance for doubtful accounts of approximately $210,000.  Our corporate expenses also increased by approximately $740,000 due to higher professional fees.  General and administrative expenses for our hog farms for the nine months ended September 30, 2009 increased by approximately $965,000 for 52% over the corresponding period in 2008 to due to more hog farms being in operations in 2009.

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            Interest and Financing Costs. We incurred interest and financing costs of $0.97 million and $5.24 million during the nine months ended September 30, 2009 and 2008, respectively, principally as a result of the issuance of $19 million principal amount of convertible notes issued during February 2008.   During the nine months ended September 30, 2009 and 2008, $2.8 million and $15.2 million, respectively, of the convertible notes were converted into shares of common stock which resulted in accelerated amortization of the debt discounts and debt issue costs associated with the convertible debt.

Due to appreciation in RMB against the USD in 2008, we incurred a loss on foreign translation of $553,753 during the nine months ended September 30, 2008, as we could not timely convert USD deposits into RMB as a result of bank policies and banking rules in the PRC. This was a one time, non-recurring charge.

Income Taxes. Hog production is an income tax exempt sector in China and sow owners receive government grants and subsidies.  Some of our feed manufacturing companies benefit from exemption from value-added tax.

Net Income.  The decrease in our net income was due to the increase in cost of goods sold and higher operating expenses. We continued to benefit from the tax-exempt status for our hog production business.  The higher sales and the benefits from economies of scale in our business resulting in a modest increase in operating efficiency was offset by higher cost of sales and a charge to earnings to reflect the increase in our derivative liability. We continued to benefit from the tax-exempt status for our hog production business.

Off-Balance Sheet Arrangements

There were no off-balance sheet arrangements during the nine months ended September 30, 2009 that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our interests.  

Liquidity and Capital Resources

At September 30, 2009, we had $36.5 million in cash and cash equivalents on hand.

During first quarter of 2008, we completed two financings.  We received aggregate gross proceeds of $22 million through the sale of 2,444,448 shares of common stock at $9 per share.  We received aggregate proceeds of $19 million through the issuance of three year convertible notes bearing interest at 7% and convertible into common stock at $10 per share.  In connection with the convertible notes, we issued 380,000 warrants which are exercisable immediately and have a $10 strike price.  The exercise price on the warrants was subsequently reduced to $5 per share.  We paid offering costs of $3,432,670 related to the sale of shares and $1,716,666 related to the issuance of the convertible notes.

On April 16, 2008, we entered into a Securities Purchase Agreement with institutional investors in connection with a registered direct offering of securities providing for the issuance of 625,000 shares of our common stock at price of $16.00 per share for aggregate gross proceeds of $10,000,000.  We paid $703,472 in costs related to this offering.

On April 22, 2008, we entered into Securities Purchase Agreements with institutional investors in connection with a registered direct offering of securities providing for the issuance of 1,322,836 shares of the Company’s Common Stock at $19.05 per share for aggregate gross proceeds of $25.2 million.  We paid $1,772,752 in costs related to this offering.

 On December 29, 2008, we completed a financing and raised gross proceeds of $8.75 million through the sale to institutional investors of 5 million newly issued common stock units at $1.75 per unit under an effective Form S-3 Registration Statement. Each unit consists of one share of newly issued common stock and a warrant to purchase 0.7 of a share of common stock for $2.50 a share, which is exercisable over a five-year period.  We paid costs related to this offering of $1,227,616.

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From October 6, 2008 through October 31, 2008, the Company repurchased 367,295 shares of our common stock for $1,811,746. No additional shares have been repurchased.

On May 8, 2009, we closed a private placement by issuing 2,329,645 shares of common stock for gross proceeds of $10 million to certain institutional investors.  We also issued 1,164,822 common stock purchase warrants to the investors and 244,613 common stock purchase warrants to the placement agent for the transaction.  The warrants are exercisable immediately have an exercise price of $4.50 per share and expire on May 8, 2014. We paid costs related to this offering of $1.1 million.

On September 9, 2009, we entered into an Equity Credit Agreement with an institutional investor, which was amended and restated as of November 9, 2009, providing for, among other things, the issuance of shares of its common stock at any time and from time to time during the next two years for gross proceeds of up to $50,000,000. In connection with the closing of the transaction, we also issued warrants to purchase an additional 400,000 shares of its common stock during a five year period at an exercise price of $5.75 per share.  This transaction closed on September 9, 2009.  No shares have been issued under the terms of the Equity Credit Agreement.

During the third quarter of 2009, certain warrant holders exercised 2,632,004 warrants that resulted in gross proceeds of $6,580,010.

As of September 30, 2009, we had short-term loans outstanding of $4,401,000.  The loan was entered into during the second quarter of 2009 and is due in May 2010.

During the nine months ended September 30, 2009, we generated $1,915,024 of cash from our operating activities. The cash generated was generated primarily through the net income including noncontrolling interest, a decrease in other receivables and an increase in accounts payable offset by an increase in accounts receivable and inventory and a decrease in other payables.

We used approximately $9.2 million in investing activities during the nine months ended September 30, 2009; of which $7.5 million was for the acquisition of property and equipment and $2.5 million was for the purchase of the noncontrolling interest in two subsidiaries.  We also sold our interest in two subsidiaries for $835,770.

We generated $18.9 million in cash from financing activities as a result of the sale of 2,329,645 shares of our common stock for gross proceeds of $10 million and the exercise of 2,632,004 warrants for proceeds of $6.6 million.    We generated cash of $4,541,500 from issued short-term loans.   

At September 30, 2009, our accounts receivable balance was approximately $16.2 million, an increase of $6.8 million from December 31, 2008.

Our principal demands for liquidity are to increase capacity, purchase raw materials, distribute our products, consolidate our existing farm operations and make strategic acquisitions or investments in our industry as opportunities present themselves, as well as general corporate purposes.   We intend to use the net proceeds from the latest PIPE for the development of our genetics program and other growth initiatives. We may seek additional funds from the capital markets to further support our genetics program to increase hog production and profitability.  We expect our genetics program to be accretive to earnings in the near future.

We intend to meet our liquidity requirements, including capital expenditures related to the purchase of equipment, purchase of raw materials, and the expansion of our business, through cash flow provided by operations and funds raised through cash investments. 

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The majority of our revenues and expenses were denominated in RMB, the currency of the PRC.  There is no assurance that exchange rates between the RMB and the USD will remain stable.

Contractual Obligations

No contractual obligation occurred during the nine months ended September 30, 2009 and therefore it is not expected to have any effect on our liquidity and cash flow in future periods.

Inflation and Seasonality

Demand for our products remains fairly consistent throughout the year and we do not believe our operations have been materially affected by inflation or seasonality.

Item 3.            Quantitative and Qualitative Disclosures About Market Risk

Disclosures About Market Risk

We may be exposed to changes in financial market conditions in the normal course of business.  Market risk generally represents the risk that losses may occur as a result of movements in interest rates and equity prices.  We currently do not use financial instruments in the normal course of business that are subject to changes in financial market conditions. 

Currency Fluctuations and Foreign Currency Risk

Substantially all of our operations are conducted in the PRC, with the exception of our limited export business and overseas purchases of raw materials.  Most of our sales and purchases are conducted within the PRC in RMB, which is the official currency of the PRC.  The effect of the fluctuations of exchange rates is considered minimal to our business operations.

Substantially all of our revenues and expenses are denominated in RMB.  However, we use US dollars for financial reporting purposes.  Conversion of RMB into foreign currencies is regulated by the People’s Bank of China through a unified floating exchange rate system.  Exchange rate fluctuations may adversely affect the value, in U.S. dollar terms, of our net assets and income derived from its operations in the PRC.

Interest Rate Risk

We have interest rate risk related to the short-term notes entered into during the quarter ended September 30, 2009; however, we do not believe this interest rate risk is significant.

Credit Risk

We have not experienced significant credit risk, as most of our customers are long-term customers with superior payment records.  Our receivables are monitored regularly by our credit managers.

Item 4.            Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in the Exchange Act Rule 13a-15(e)) as of the end of the period covered by this quarterly report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.

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There was no change in the Company’s internal control over financial reporting that occurred during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.             Legal Proceedings

We know of no pending legal proceedings to which we are a party which are material or potentially material, either individually or in the aggregate. We are from time to time, during the normal course of our business operations, subject to various litigation claims and legal disputes. We do not believe that the ultimate disposition of any of these matters will have a material adverse effect on our consolidated financial position, results of operations or liquidity.

Item 1A.          Risk Factors

There have been no material changes from the disclosure provided in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2008, as amended.

Item 2.            Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.            Defaults Upon Senior Securities

None.

Item 4.            Submission of Matters to a Vote of Security Holders

None

Item 5.            Other Information

None.

Item 6.            Exhibits

(a) Exhibits

Exhibit Number	Description of Exhibit
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as amended.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).

36

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	AgFeed Industries, Inc.
November 9, 2009	By:	/s/ Xiong Junhong
		Xiong Junhong Chief Executive Officer (Principal Executive Officer)
November 9, 2009	By:	/s/ Selina Jin
		Selina Jin Chief Financial Officer (Principal Financial and Accounting Officer)

37

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I Junhong Xiong, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of AgFeed Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  November 9, 2009	By:	/s/ Xiong Junhong
		Xiong Junhong
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Selina Jin, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of AgFeed Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:  November 9, 2009	By:	/s/ Selina Jin
		Selina Jin
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of AgFeed Industries, Inc. (the “Company”) for the quarter ending September 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Xiong Junhong, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

(1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  November 9, 2009	By:	/s/ Xiong Junhong
		Xiong Junhong
		Chief Executive Officer

This certification accompanies each Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of AgFeed Industries, Inc. (the “Company”) for the quarter ending September 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Selina Jin, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

(1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  November 9, 2009	By:	/s/ Selina Jin
		Selina Jin
		Chief Financial Officer

This certification accompanies each Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.