Edgar Filing: Origin Agritech LTD

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2016

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-51576

Origin Agritech Limited

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

British Virgin Islands

(Jurisdiction of incorporation or organization)

No. 21 Sheng Ming Yuan Road, Changping District, Beijing 102206, China

(Address of principal executive offices)

Mr. William S. Neibur

No. 21 Sheng Ming Yuan Road, Changping District, Beijing 102206, China

Tel: (86-10) 5890-7588

Fax: (86-10) 5890-7577

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class		Name of each exchange on which registered
Ordinary Shares		The NASDAQ Global Select Market

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period (September 30, 2016) covered by the annual report:22,873,541ordinary shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

¨Yes xNo

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

¨Yes xNo

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.

xYes ¨No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 c) Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

xYes ¨No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

¨Large accelerated filer ¨Accelerated filer xNon-accelerated filer

Indicate by a check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP x	International Financial Reporting Standard as	Other ¨
	Issued by the International Accounting Standards
	Board ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

¨Item 17 ¨Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨Yes xNo

ORIGIN AGRITECH LIMITED

TABLE OF CONTENTS

INTRODUCTION		4

PART I		7
Item 1.	Identity of Directors, Senior Management and Advisors	7
Item 2.	Offer Statistics and Expected Timetable	7
Item 3.	Key Information	7
Item 4.	Information on the Company	28
Item 4A	Unresolved Staff Comments	44
Item 5.	Operating and Financial Review and Prospects	44
Item 6.	Directors, Senior Management, and Employees	61
Item 7.	Major Shareholders and Related Party Transactions	68
Item 8.	Financial Information	70
Item 9.	The Offer and Listing	71
Item 10.	Additional Information	72
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	78
Item 12.	Description of Securities Other than Equity Securities	79

PART II		79
Item 13.	Defaults, Dividend Arrearages, and Delinquencies	79
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	79
Item 15.	Controls and Procedures	79
Item16A.	Audit Committee Financial Expert	82
Item 16B.	Code of Ethics	82
Item 16C.	Principal Accountant Fees and Services	82
Item 16D.	Exemption from the Listing Standards for Audit Committees	83
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	83
Item 16F.	Change in registrant’s certifying accountant	83
Item 16G.	Corporate Governance	83

PART III		83
Item 17.	Financial Statements	83
Item 18.	Financial Statements	83
Item 19.	Exhibits	84

INTRODUCTION

Except where the context otherwise requires and for purposes of this Annual Report only:

“we,” “us,” “our company,” “our,” the “Company” and “Origin” refer to Origin Agritech Limited and, in the context of describing our operations, also includes State Harvest Holdings Limited and the following, which are collectively described in this Annual Report as “our PRC Operating Companies”: Beijing Origin State Harvest Biotechnology Limited, or Origin Biotechnology, Beijing Origin Seed Limited, or Beijing Origin, and its five subsidiaries, Changchun Origin Seed Technology Development Limited, or Changchun Origin, Henan Origin Cotton Technology Development Limited, or Henan Origin, Denong Zhengcheng Seed Limited, or Denong, Linze Origin Seed Limited, or Linze Origin, Xinjiang Originbo Seed Limited, or Xinjiang Origin.

“last year,” “fiscal year 2016,” “the year ended September 30, 2016” and “the fiscal year ended “September 30, 2016” refer to the twelve months ended September 30, 2016, which is the period covered by this Annual Report;

all references to “Renminbi,” “RMB” or “yuan” are to the legal currency of China; all references to “U.S. dollars,” “dollars,” “$” or “US$” are to the legal currency of the United States. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding. The translation of Renminbi amounts into United States dollar amounts has been made for the convenience of the reader. Such translation amounts should not be construed as representations that the Renminbi amounts could be readily converted into United States dollar amounts at that rate or any other rate;

“China” or “PRC” refers to the People’s Republic of China, excluding Taiwan, Hong Kong, and Macau;

“Hong Kong” refers to the Hong Kong Special Administrative Region of the People’s Republic of China; and

“shares” and “ordinary shares” refer to our ordinary shares, “preferred shares” refers to our preferred shares

FORWARD-LOOKING INFORMATION

This Annual Report on Form 20-F contains forward-looking statements that are based on our current expectations, assumptions, estimates, and projections about our company and industry. All statements other than statements of historical fact in this Annual Report are forward-looking statements. These forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “estimate,” “plan,” “believe,” “is/are likely to” or other similar expressions. The forward-looking statements included in this Annual Report relate to, among others:

our goals and strategies which includes the sales of specific PRC assets used in the marketing and distribution of seeds and the international and North America expansion, including how we implement our goals and strategies and use the asset sale proceeds;

our expectations for our future business and product development, business prospects, results of business operations and current financial condition;

expected changes in our margins and certain costs or expenditures, inclusive of changes in our costs;

our future pricing and licensing strategies or policies;

our ability to successfully anticipate market demand for our seed products;

our ability to acquire and integrate acquisitions into our growth strategies and to generate sufficient value to justify their acquisition and development cost and any reorganization we undertake with respect to the Company;

our plans for seed development, including our ability to successfully develop and produce seeds, and receive regulatory approval for and distribute proprietary seed products;

our expectations regarding our seed development and other biotechnology activities under licenses from third parties, and production results of our contracted farming production base;

future development of agricultural biotechnology as a whole and the impact and acceptance of genetically modified crop seeds in our industry;

address the scope and impact of the governing and regulatory policies and laws regarding genetically modified seed products in our market, and our ability to apply for and receive necessary approvals and to develop, produce, market and distribute genetically modified crop seeds;

compliance with government registration and regulation;

our plans to license or co-develop seed products or technologies;

our plans to expand our business-level or corporate-level operations and product offerings in China and North America, in particular the United States;

likelihood of recurrence of accounting charges or impairments;

expected changes in our sources of revenues and income base from our business operations or other sources;

competition in the crop seed industry in China and other international markets;

future development of the crop seed industry in China and other international markets;

our plans for current staffing requirements and research and development;

our ability to successfully raise capital to accommodate company needs which are under acceptable terms and at an acceptable share price; and

adequacy of our facilities for our operations.

We believe it is important to communicate our expectations to our shareholders. However, there may be certain events in the future that we are not able to predict with accuracy or over which we have no control. The risk factors and cautionary language discussed in this Annual Report provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations in these forward-looking statements, including among other things:

changing interpretations of Generally Accepted Accounting Principles and the adoption or use of International Accounting Standards in the future;

outcomes of PRC and international government reviews, inquiries, investigations and related litigations;

continued compliance with government regulations of PRC and other governments;

legislative and regulatory environments, requirements or changes adversely affecting the businesses in which we and our PRC operating companies are engaged;

fluctuations in our customer demand;

management of the growth of our business and introduction of genetically modified products;

timing of approval, production, and market acceptance of new products, inclusive of our genetically modified products;

general economic conditions in the PRC and worldwide; and

geopolitical events and regulatory changes.

The forward-looking statements in this Annual Report involve various risks, assumptions, and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, we cannot be certain that our expectations will materialize. Our actual results could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in the risk factors included in this Annual Report.

This Annual Report contains information relating to the crop seed market, in China, which is based on various assumptions. The crop seed market may not grow at the rates we project, or at all, or there may be contractions in the market. The failure of the markets in which we operate to grow at the projected rates may have a material adverse effect on our business and the market price of our shares. In addition, the relatively new and rapidly changing nature and acceptance of the genetically modified crop seed industry subjects any projections or estimates relating to the growth prospects or future condition of our markets to significant uncertainties. Furthermore, if any one or more of the assumptions underlying the market data turns out to be incorrect, actual results may differ based on these assumptions.

This Annual Report also contains information regarding the sale of certain assets of Origin. The transactions being disclosed in this Annual Report are subject to various pre-closing conditions and there is no guarantee that the transactions will be closed or will be closed under the same terms and conditions as we have previous disclosed.

The forward-looking statements made in this Annual Report relate only to events or information as of the date of the statements. Readers should read these statements in conjunction with the risk factors disclosed in this Annual Report.

All forward-looking statements included herein attributable to us or other parties or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, we undertake no obligations to update these forward-looking statements to reflect events or circumstances after the date of this Annual Report or to reflect the occurrence of unanticipated events.

PART I

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not Applicable.

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

ITEM 3.

KEY INFORMATION

Selected financial data.

The following selected consolidated financial information was derived from our fiscal year end consolidated financial statements. The following information should be read in conjunction with those statements and Item 5, “Operating and Financial Review and Prospects.” Our summary consolidated statements of operations and comprehensive income data for the fiscal years ended September 30, 2014, 2015 and 2016 and our summary consolidated balance sheet data as of September 30, 2015 and 2016, as set forth below, are derived from, and are qualified in their entirety by reference to, our audited consolidated financial statements, including the notes thereto, which are included in this Annual Report. The summary statement of operations and comprehensive income data for the fiscal years ended September 30, 2012 and 2013 and the summary balance sheet data as of September 30, 2012, 2013 and 2014, set forth below are derived from our audited consolidated financial statements which are not included herein.

Our consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States, or U.S. GAAP.

	2012			2013			2014			2015			2016
	RMB’000			RMB’000			RMB’000			RMB’000			RMB’000			USD’000(1)
Consolidated statement of income and comprehensive income data:
Net revenues		552,111			481,694			415,177			376,553			335,251			50,204
Cost of revenues		(387,783	)		(315,082	)		(301,148	)		(264,039	)		(259,253	)		(38,823	)
Gross profit		164,328			166,612			114,029			112,514			75,998			11,381
Selling and marketing		(56,437	)		(55,375	)		(58,972	)		(39,987	)		(38,079	)		(5,702	)
General and administrative		(77,585	)		(66,153	)		(46,428	)		(40,684	)		(62,159	)		(9,308	)
Research and development		(37,629	)		(42,162	)		(40,377	)		(48,741	)		(44,032	)		(6,594	)
Other income, net		3,852			15,241			7,269			18,238			6,964			1,042
Total operating expenses		(167,799	)		(148,449	)		(138,508	)		(111,174	)		(137,306	)		(20,562	)
Income (loss) from operations		(3,471	)		18,163			(24,479	)		1,340			(61,308	)		(9,181	)
Interest income		2,547			1,776			596			775			162			24
Interest expenses		(4,029	)		(11,326	)		(19,743	)		(18,634	)		(14,251	)		(2,134	)
Equity in earnings / Loss on disposal of associated company		4,030			5,161			(2,274	)		-			-			-
Loss on disposal of subsidiary		-			-			(2,623	)		-			-			-
Income (loss) before income taxes		(923	)		13,774			(48,523	)		(16,519	)		(75,397	)		(11,291	)
Income tax (expense) benefit		(1,862	)		(4,462	)		38,383			(1,295	)		(1,436	)		(215	)
Net income (loss) before non-controlling interests		(2,785	)		9,312			(10,140	)		(17,814	)		(76,833	)		(11,506	)
Non-controlling interests		(1,351	)		1,818			(613	)		(4,006	)		(11,255	)		(1,686	)
Net income (loss) attributable to Origin Agritech Limited		(1,434	)		7,494			(9,527	)		(13,808	)		(65,578	)		(9,820	)
Net income (loss) per share:
Basic		(0.06	)		0.32			(0.42	)		(0.61	)		(2.87	)		(0. 43)
Diluted		(0.06	)		0.32			(0.42	)		(0.61	)		(2.87	)		(0.43	)
Shares used in computation:
Basic		23,382,812			23,259,127			22,743,853			22,794,791			22,858,541			22,858,541
Diluted		23,382,812			23,278,443			22,743,853			22,794,791			22,858,541			22,858,541

	Sept 30			Sept 30			Sept 30			Sept 30			Sept 30
	2012			2013			2014			2015			2016
	RMB’000			RMB’000			RMB’000			RMB’000			RMB’000			USD’000(1)
Consolidated balance sheet data:
Cash and cash equivalents		152,789			131,978			46,268			66,025			54,509			8,163
Current working capital (2)		(46,153	)		(67,436	)		(79,660	)		(90,381	)		(136,399	)		(20,426	)
Total assets		975,437			1,158,072			1,064,870			985,829			880,626			131,874
Deferred revenues		23,243			22,069			19,029			11,248			7,008			1,049
Total current liabilities		605,195			751,978			704,611			634,140			614,502			92,022
Total liabilities		662,005			837,827			755,283			695,091			662,009			99,136
Non-controlling interests		52,385			54,203			53,590			49,584			38,329			5,740
Total Origin Agritech Limited shareholders’ equity		261,047			266,042			255,997			241,194			180,288			26,998

(1) Translation of Renminbi amounts into United States dollar amounts has been made for the convenience of the reader for the year ended September 30, 2016 and has been made at the exchange rate quoted by the closing rate by the State Administration of Foreign Exchange in China on September 30, 2016 of RMB6.6778 to US$1.00. Such translation amounts should not be construed as representations that the Renminbi amounts could be readily converted into United States dollar amounts at that rate or any other rate.

(2) Current working capital is the difference between total current assets and total current liabilities.

Exchange Rate Information

The conversion of Renminbi into U.S. dollars in this Annual Report is based on the statistics of the State Administration of Foreign Exchange with respect to our historical financial statements. The consolidated financial statements are presented in Renminbi as the reporting currency. The translation of Renminbi amounts into United States dollar amounts has been made for the convenience of the reader and has been made at the exchange rate quoted by the closing rate by the State Administration of Foreign Exchange in China on September 30, 2016 of RMB6.6778 to US$1.00. Unless otherwise noted, for the years ended September 30, 2012, 2013, 2014, 2015 and 2016, all translations from Renminbi to U.S. dollars in this Annual Report were made at RMB6.3410, RMB6.1480, RMB6.1525, RMB6.3613 and RMB6.6778 per US $1.00, respectively, which were the prevailing year or period end closing rates for those periods. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The PRC government imposes controls over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade.

The following table sets forth information concerning exchange rates between the Renminbi and the U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this Annual Report or will use in the preparation of our periodic reports or any other information to be provided to you. The source of the rates is the State Administration of Foreign Exchange in China. At September 30, 2015 the closing exchange rate was RMB6.3613 for one U.S. dollar. As of January 9, 2017, the closing exchange rate was RMB6.9262 for one U.S. dollar.

	Average (1)		High		Low		Period-end
2011		6.4576		6.6349		6.3165		6.3549
2012		6.3189		6.3482		6.2787		6.3410
2013		6.2318		6.3449		6.1475		6.1480
2014		6.1446		6.1710		6.0930		6.1525
2015		6.1644		6.4085		6.1079		6.3613
2016		6.5377		6.6971		6.3154		6.6778
April 2016		6.4762		6.5120		6.4579		6.4589
May 2016		6.5315		6.5790		6.4565		6.5790
June 2016		6.5874		6.6528		6.5497		6.6312
July 2016		6.6774		6.6971		6.6472		6.6511
August 2016		6.6474		6.6908		6.6056		6.6908
September 2016		6.6715		6.6908		6.6513		6.6778
October 2016		6.7442		6.7858		6.7008		6.7641
November 2016		6.8375		6.9168		6.7491		6.8865
December 2016		6.9182		6.9508		6.8575		6.9370

(1) Annual averages are calculated from month-end rates. Monthly averages are calculated using the average of the daily rates during the month.

Capitalization and indebtedness.

Not Applicable

Reasons for the offer and use of proceeds.

Not Applicable.

Risk factors.

Risks relating to our business

If we do not manage our ongoing growth successfully, our growth and chances for profitability may be hindered or impeded.

We continue to be a growth orientated company, with a focus on researching and developing our corn seeds and biotechnology, and licensing our traits and seed germplasm characteristics within China and around the globe. All these activities are expected to create significant demands on our corporate administrative, operational, and financial personnel and other human resources and on our cash flow needs and the requirement for additional working capital. Our current resources may not be adequate to support our planned operations and expansion. These demands and ongoing industry factors, such as overproduction or government policy changes, the increase in cost of seed distribution, may hinder our cash flow as our profit margins and sales may be adversely affected. For other reasons our expansion efforts may also not be successful.

We require short-term financing to fund our working capital.

The nature of the agricultural seed production industry involves expenses and revenues cycles that are seasonal in nature. In the third and fourth quarters of our fiscal year, we may face seed production costs that are in excess of our cash flow sources. The advance payments we make to our seed producing farmers may exceed the amount of deposits we receive from our customers, the seed distributors and end users. We have customarily relied upon short term bridge loans to cover our expenses pending receipt of cash payment from farmers at the time of seed purchases. Although historically we have had access to sufficient financing to manage our cash flow cycles, we cannot be certain that we will be able to obtain sufficient debt financing on terms that are satisfactory to us to maintain consistent operating results. Downgrades in our credit rating, tightening of related credit facilities or financial markets or other limitations on our ability to access short-term financing would increase our interest costs and adversely affect our operating results and operations.

Because of the nature of our business, which has seasonal variation, it is likely that our future financial performance will fluctuate from period to period.

The industry in which we operate is seasonal in nature. The sales season of corn and rice seeds lasts from October to June; the sales season of canola seeds lasts from July to September. We generally do not have significant sales revenues from July to September, which results in cyclical changes of our cash flow and operating activities. As a result, if we are unable to generate sufficient working capital from operations and working capital facilities, we may encounter liquidity difficulties from the period of July through September, which may harm our operations. The seasonal nature of our business causes our operating results to fluctuate from quarter to quarter. Any unexpected seasonal or other fluctuations could cause the price of our common shares to fall. As a result, you may not rely on comparisons of our quarterly operating results as an indication of our future performance.

In addition, as a seed producer our profits depend on our ability to secure sufficient orders from customers and sufficient seed production from the seed production farms. We also have to manage our inventory levels and respond to competitive forces in our markets. An adverse change in the seed market conditions may have material adverse effects on our operating results if we cannot adjust our operating and marketing strategy to respond to such changes. The results of our operations will be adversely affected by reduced orders and profit margins in the event of a slowdown in market demand, constraint on the market supply, an increase in business competition, a decrease in government subsidies to farmers, increased costs, or for other reasons. As such, there is a risk that we will not be able to achieve or maintain profitability or our historical results.

Aged inventory may result in an increase of our expenses and cause operating losses.

We normally produce seeds according to our annualized production estimate that is developed at least one year before delivery to our customers. If our production plan is too aggressive, we could produce more seeds than the market demands, resulting in larger amounts of inventory that remain unsold. We may decide not to sell these aged seeds as crop seed products, taking into account factors such as the quality of the seeds and commodity pricing. In that case, the aged inventory may be sold as common feed products at greatly reduced prices. Aged inventory could result in asset impairment risk, in which case we would suffer a loss and incur an increase in our cost of revenues and a decrease in gross profit. Over the last several years, due to competition and our production levels, we have experienced larger amounts of inventory and had to liquidate our aged seeds resulting in unanticipated losses, which has affected our operating results.

If we are unable to match our production to customer demand, our business, financial condition and results of operations may be adversely affected.

We attempt to produce seeds according to an annualized production plan based on estimated customer demand, our assessment of industry wide inventory, and growing capacities that is developed before we sell and deliver crop seeds to distributors. Chinese farmers, the end users of our crop seeds, generally decide to purchase our products based on market prices, economic and weather conditions and other factors that we and our distributors may not be able to fully or accurately anticipate in advance. In recent years, end-users and distributors began to purchase seeds online and order closer to the time of use, which makes it more difficult for us to produce according to an annualized production plan. If we fail to accurately estimate the volume and types of products sought by farmers and otherwise adequately manage production amounts, which may also be adversely affected by weather conditions, we may produce more seeds than we are able to sell, resulting in excess inventory and aged seeds. On the other hand, if we underestimate demand, we may not be able to satisfy demand for our crop seeds, and thus damage our customer relations and end-user loyalty. Additionally, the ordering closer to the time of use has made it more difficult to estimate needed inventory quantities to fulfill orders, and this has resulted in over production and consequential write downs of inventory. Our failure to estimate farmers’ future needs and to match our production to the demand, overall industry inventory and competition may adversely affect our business, financial condition and results of operations. In addition, inadequate distributor liquidity could affect distributors’ ability to pay for our products and, therefore, affect our sales or our ability to collect on our receivables. Partly from the shift to on-line purchasing, our receipt of orders is now closer to the time of use, this timing shift has required us to increase our borrowing to cover production costs, whereas in the past, we partly financed our operations from advances on orders, which were paid many months in advance of delivery. The increased borrowing has added, and will continue to add, to the cost of operations.

The successful development and commercialization of our biotech pipeline of products will be important for our growth.

We conduct our own research and development efforts for genetically modified seeds, referred to as GM, and we have entered into agreements with the Chinese Academy of Science and the China Agricultural Academy of Science in the PRC working on genetic modifications and other biotechnologies that give us the right to market the seeds and technologies they develop. We are also seeking other development and marketing arrangements with other entities in China and elsewhere. There can be no assurance that these efforts will produce improved seed varieties. Commercial success frequently depends on being the first company to enter a particular market. The length of time and the risk associated with breeding and biotech pipelines are similar and interlinked because both are required as a package for commercial success in markets where biotech traits are approved for growers. Regulatory requirements affect the development of our biotech products, including the GM crop testing of seeds containing the biotech traits, which could harm our business and results of operations if regulations are not satisfied. The testing procedures can be lengthy and costly, with no guarantee of success. It could have an adverse effect on our operations if our genetically modified products are unable to pass the safety evaluation of genetically modified agricultural organisms.

There has been a worldwide increase in the development and application of genetically modified agricultural products to enhance crop seed quality and increase crop yields. The production and commercial sales of genetically modified corn and rice seeds have been allowed in China only recently. As government policies change to allow more genetically modified seeds and demand develops for these products, we expect that we will produce more genetically modified products to meet customer demand to the extent we are able. There is a risk that our current steps to respond to the potential competitive threat posed by genetically modified agricultural products, including our research and development activities with respect to genetically modified crop seeds, may not enable us to compete successfully.

The potential uncertainty in the government regulation in China of genetic technology and genetically modified, or GM, agricultural products and the acceptance of these products by the public could have an adverse effect on our business.

We continue to undertake the transition from a conventional hybrid seed company to an agricultural biotechnology company. It is a slow process because genetically modified seed products are controversial, and genetic modification has not yet been widely accepted in many countries in the world. The government has only recently begun to approve GM crops for commercial cultivation. Consumer reaction to GM products is also becoming a factor in the approval process and the ability of companies, such as ours, to market and sell our products. The relative novelty and the potential uncertainty in the government regulation of genetic technology and ultimate consumer acceptance will have an effect on our business development strategy and may cause us to re-evaluate our development programs for developing new seeds.

The government may not approve or limit commercialization of genetically modified corn products, which could have an adverse impact on the future of the company.

With the successful approval for commercial use of genetically modified phytase corn, we continue to pursue the commercialization of phytase corn and the development of other seed biotechnology products. Even though we believe biotechnology is important in agricultural applications, we cannot predict whether or when the government will approve the full commercialization of genetically modified corn. The government may not approve the full commercialization of GM corn, and it may even ultimately conclude to limit or ban commercialization and/or research relating to genetically modified corn and other seed products. Any of these actions could have an adverse impact on our future development, and we would not be able to recover our research and development costs spent in developing biotechnology products.

Our operations outside China will be subject to foreign regulatory and legislative requirements, and it will be costly to comply with those regulatory requirements. If we are unable to meet these requirements, we will not be able to distribute our products.

Foreign regulatory and legislative requirements will impact the development, manufacture and distribution of our products in the global market. Certain markets may require rigorous testing and pre-approval prior to a market release of the GM seeds. For example, prior to the entry into the United States market, we believe that we will need to obtain regulatory approval from various federal and state governmental agencies. The United States Department of Agriculture has to determine if there are any “plant pest” issues with the specific crop and traits. Further, because we use Bt genes in our some of our products, the US Environmental Protection Agency (the “EPA”) will have to determine if there are any pesticide-related traits that are subject to regulation. We may be required to submit a Microbial Commercial Activity Notice (MCAN) to the EPA, which includes detailed information describing the seed’s characteristics and genetic construction, health and environmental effects, and other data, before our GM seeds can be used in the United States for commercial purposes. Finally, even if our products have the required certificates and permits, we continuously will be subject to Food and Drug Administration (“FDA”) regulations about food safety, which place responsibility on the seed producer to assure the safety of the GM seed in the food chain. We may also need to provide to the FDA information to prove that our GM crop seeds are “substantially equivalent” to non-modified versions of the seed. In the United States, we will also be subject to state regulations: for example, some states have required specific labeling, banned planting and cultivation, and imposed additional certification requirements for use of GM seeds. These types of central and local government regulation and restrictions exist in many other countries around the world.

Obtaining and maintaining permits and certificates for production and sales, and obtaining and maintaining testing, planting and import approvals for our GM seeds, can be time-consuming and costly, with no guarantee of success. In addition, regulatory and legislative requirements may change over time which may affect our sales and profitability in those markets. The failure to receive necessary permits or approvals could have long-term effects on our ability to produce and sell some or all of our current and future products outside China and adversely affect our revenues.

The degree of public acceptance or perceived public acceptance of our biotechnology products can affect our operations.

Although all genetically modified products must go through rigorous testing, some opponents of the technology consistently attempt to raise public concern about the potential for adverse effects of genetically modified seed products on human or animal health, other plants and the environment. The potential for the adventitious presence of commercial biotechnology traits in conventional seed, or in the grain or products produced from conventional or organic crops, is another factor that could affect the public’s acceptance of these traits. Public concern can affect the timing of, and whether we are able to obtain, government approvals. Even after approvals are granted, public concern may lead to increased regulation or legislation, which could affect our business and operations, and may adversely affect sales of our products to farmers, due to their concerns about available markets for the sale of crops or other products derived from biotechnology.

Future success in our global business expansion includes accessing customers in markets outside of China, specifically North America as an initial expansion target. We may not be able to establish an adequate customer base and distribution network outside of China.

We have never sold products in North America and have no current brand reputation in the North America market. To enter into the North American market, we will need to collaborate with strategic partners to; access commercial products that we can bring into our systems, and work with partners to pass through required regulatory hurdles and develop pre-commercial products. Credibility of our strategic partner’s brands within our systems will solidify the Origin reputation and brand. Failure to establish these strategic partnerships and ability to sell into the target markets will adversely affect our Company in establishing brand recognition, obtaining market share, and generating sales and revenues.

The global competition in biotechnology will affect our business.

We believe we are a leader in biotechnology in China since we have been conducting our proprietary biotechnology research program for many years and have built the first internal biotech research center among domestic Chinese crop seed companies. However, if and when multinational corporations engaged in the crop seed business expand into the agricultural market in China, they may have a greater portfolio of seed products and more advanced technologies than us. Major multinational competitors have a long history in the research and commercialization of their products, sophisticated marketing capabilities and strong intellectual property estates, all of which may give them competitive advantage over us. Any of these competitive advantages could cause our existing or future products to become less competitive or outdated, and adversely affect our product acceptance in the market place and our results of operations.

We face significant international competition in the GM seed market and the competition may affect our overall sales.

The GM seed market outside China is highly competitive, dominated by a limited number of companies. Many of our competitors have greater experience of the GM market and substantially greater resources in the research and development of plant biotechnology. These companies also have substantial production facilities for crop seeds. In addition, our competitors have established market presence, have obtained patent protection in some instances for different seeds, and have built up their brand reputation and distribution networks globally. In the United States Monsanto Company and E.I. DuPont de Nemours and Company (Pioneer), dominate the GM corn seed market with approximately 70% of that market. Our competitors’ extensive GM portfolio of seeds and their success in developing new traits in the seeds could render our existing products less competitive in those markets, resulting in reduced sales compared to our expectations.

Even if we can successfully introduce our GM corn seeds into the United States market, we may not be able to maintain our market advantage by improving our GM seeds to fit the needs of the United States market.

GM seeds varieties need to be improved and altered over time because the weed and insects develop resistance to herbicides and pesticides, which render the benefits of the GM traits less effective. GM seeds need to be altered to tolerate higher doses and/or new varieties of herbicides and pesticides and other farming practices. We believe that among other things, this characteristic of GM seeds gives us an opportunity to introduce our products into the United States GM corn seeds market. Even if we can successfully enter into the United States GM corn seeds market, we will be required to continue to invest in new research to develop our portfolio of GM corn seeds so that our GM corn seeds can adapt to new herbicides and pesticides and soil, weather and growing conditions. If our GM corn seed portfolio do not keep pace or goes in a direction that is not effective in the market, our position in the market would be adversely impacted.

Our Operation outside of China is subject to special risks and restrictions, which may negatively affect our results of operations.

Historically we have conducted most of our research, manufacturing and distribution business in China. Although we are in the process of expanding our operation globally, beyond China, there is no guarantee that we can successfully enter into any market outside of China. Our expansion outside of China is subject to special risks, including fluctuations in foreign exchange rates, exchange control regulations, public understanding and acceptance of Chinese GMO products, changes in local political and economic conditions and import and trade restrictions

We depend on licensed seed products for the majority of our revenues. If we lose the right to produce and sell licensed seeds, we will lose substantial revenues and suffer substantial losses.

A substantial portion of our past and current revenues are derived from licensed hybrid seeds instead of our internally developed proprietary hybrid seeds. The majority of the licensed hybrid seeds that we sell have been developed and produced under our license agreements with the Corn Research Institute in Li County, Hebei Province (currently known as Shijiazhuang Liyu Technology Development Co., Ltd., and referred to as Liyu herein), the Henan Agricultural University and the Zhengzhou Rui Yuan Agricultural Science and Technology Development Co., Ltd. If we are not able to develop and produce the licensed seed products, if the current license agreements are terminated, or if we are unable to renew some of these license agreements on commercially reasonable terms or at all, we will suffer a substantial loss of our product offerings and, consequently, our revenues will be substantially limited and our financial condition and results of operations may be adversely affected.

We have a relatively short operating history and are subject to the risks of any growing enterprise, any one of which could limit our growth and our product and market development.

It continues to be difficult to predict how our business will develop over the long term. Accordingly, we are still facing all of the risks and uncertainties encountered by companies in the earlier stages of development and expansion, such as:

uncertain and continued market acceptance for our product extensions and our services;

evolving nature of the crop seed industry in the PRC, where significant consolidation may occur, leading to the formation of companies which may be better able to compete with us than is currently the case;

changing competitive conditions, technological advances or customer preferences could harm sales of our products or services;

maintaining our competitive position in the PRC and competing with Chinese and international companies, many of which have longer operating histories and greater resources than us;

successfully entering into the U.S. market and gaining recognition for our products in the U.S. market;

maintaining our current licensing arrangements and entering into new ones to expand our product offerings;

continuing to offer commercially successful products to attract and retain a larger base of direct customers and ultimate users;

continuing our existing arrangements with production farms that grow our seed products and entering into new arrangements with additional production farms;

maintaining effective control of our costs and expenses; and

retaining our management and skilled technical staff and recruiting additional key employees.

If we are not able to meet the challenges of building our businesses and managing our growth, the likely result will be slowed growth, lower margins, additional operational costs and lower income.

Any diversion of management attention to matters related to corporate reorganization or any delays or difficulties encountered in connection with integrating or changing operations may have an adverse effect on our core business, results of operations, and/or financial condition.

We are in the process of expanding our business internationally, particularly into the United States. Corporate reorganization activities present challenges, including geographical coordination, personnel integration and retention of key management personnel, system integration and the unification of corporate culture. These efforts could divert management attention from our core business, cause a temporary interruption of or loss of momentum in our business and the loss of key personnel from the acquired companies. In addition, any proposed acquisitions and corporate reorganization activities will cause us to incur substantial costs, none of which are generally recoverable.

From time to time we must evaluate whether or not to discontinue a line of business or an expansion effort, which if discontinued could have an adverse impact on our financial position.

From time to time we evaluate whether or not to continue a particular line of business or an expansion effort. In the past we implemented restructuring programs to eliminate our activities in agricultural chemicals and cotton seed development, sales centers, seed distribution and other unprofitable activities. Whenever a company undertakes to discontinue a line of business, there are expenses associated with the sale or closing of those related operations, which are reflected in the accounting for discontinued operations. The actual and accounting costs for discontinued operations may have an adverse effect on the financial position of the company in the period of discontinuance, which may result in an adverse market reaction and decline in our stock price.

We or our licensors may be subject to intellectual property infringement claims, which may force us to incur substantial legal expenses and, if determined adversely against us or our licensors, may materially disrupt our business.

We cannot be certain that our licensed or self-developed proprietary seed products do not or will not infringe the intellectual property rights held by third parties. We, or any of our licensors, may be subject to legal proceedings and claims from time to time related to the intellectual property of others. If we, or any of our licensors, are found to have violated the intellectual property rights of others, we may be required to pay damages and be enjoined from using such intellectual property, and we may incur new or additional licensing fees if we wish to continue using the infringing products, or be forced to develop or license alternative products. In addition, we may incur substantial expenses in defending against these third party infringement claims, regardless of their merit.

Efforts to protect our intellectual property rights and to defend against claims can increase our costs and may not always succeed. Any failures could adversely affect our sales and results of operations or restrict our ability to conduct our business.

Intellectual property rights are important to our business. We endeavor to obtain and protect our intellectual property rights where our products are produced. However, we may be unable to obtain protection for our intellectual property. Even if protection is obtained, competitors, growers or others in the chain of commerce may raise legal challenges to our rights or illegally infringe our rights, including through means that may be difficult to prevent, detect or defend. In addition, because of the rapid pace of technological change and the confidentiality of patent applications in some jurisdictions, competitors may be issued patents from applications that were unknown to us prior to issuance. These patents could reduce the value of our commercial or pipeline products or, to the extent they cover key technologies on which we have unknowingly relied, require that we obtain licenses at a financial cost to us or cease using the technology, no matter how valuable the patents may be to our business. We cannot assure you that we would be able to obtain such licenses on acceptable terms. Also, litigation may be necessary to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of the proprietary rights of others. There is a risk that the outcome of such potential litigation may not be in our favor. Such litigation may be costly and may divert management attention as well as consume other resources which could otherwise be devoted to our business. An adverse determination in any such litigation will impair our intellectual property rights and may harm our business, prospects and reputation. In addition, we have no insurance coverage against litigation costs due to lack of this kind of insurance being available in China, and we would have to bear all costs arising from such litigation to the extent we are unable to recover such costs from other parties. The occurrence of any of the foregoing may harm our business, results of operations and financial condition.

Finally, implementation of PRC intellectual property-related laws has historically been lacking, primarily because of the ambiguities in the PRC laws and the difficulties in enforcement. Accordingly, intellectual property rights and confidentiality protections in China may not be as effective as they are in the United States or other countries, which increases the risk that we may not be able to adequately protect our intellectual property. The increase in counterfeiting seed products in the market is also affecting the sales of our products.

Our business may not be profitable if we do not continue to identify and market products considered valuable by our customers.

To be profitable, our crop seed depends on recurring and sustained reorders. Reorder rates are inherently uncertain due to several factors, many of which are outside our control. These factors include changing customer preferences, competitive price pressures, and our failure to develop acceptable new products, development of higher quality products by competitors, weather conditions and general economic conditions.

Our revenue generating business currently focuses on crop seed development and production and does not permit us to spread our business risks among different businesses and, thus, a disruption in our seed production or the industry would harm us more immediately and directly.

Our crop seed business is the principal revenue generating business activity of the Company. Therefore, our business opportunities, revenues and income could be more immediately and directly affected by disruptions from factors including drought and other natural disasters, epidemics, or widespread problems affecting the crop seed industry, such as limited farmer credit, payment disruptions or customer rejection of genetically modified crop seeds, among other things. If there is a disruption as described above, our revenues and income will be reduced, and our business operations may have to be scaled back.

We are dependent on revenues from our corn seed products and, therefore, our operating results could be disproportionately and negatively impacted if we are unable to sell a sufficient amount of corn seed at satisfactory margins.

Corn seed represents the principal source of revenues for the Company. For the fiscal year ended September 30, 2016, sales of our corn seed products comprised approximately of 91% our revenues, as compared to 88% for the fiscal year ended September 30, 2015. Our dependence on corn seed makes us particularly vulnerable to any negative market changes that might occur in this product line. In particular, if the demand for our corn seed products generally decreases or if the supply exceeds demand, then corn prices will be driven downwards and our margins will be negatively impacted, which would have an adverse effect on our business, results of operations and financial condition.

Failure to develop and market new products could impact the Company’s competitive position and have an adverse effect on the Company’s financial results.

The Company’s operating results are largely dependent on its ability to renew its pipeline of new seed products and services and to bring those products and services to the market. This ability could be adversely affected by difficulties or delays in product development such as the inability to identify viable new products, greater than anticipated development costs, technical difficulties, regulatory obstacles, competition, lack of demand, insufficient intellectual property protection, or lack of market acceptance of new products and services. Due to the lengthy development process, technological challenges and intense competition, there can be no assurance that any of the products the Company is currently developing, or could begin to develop in the future, will achieve substantial commercial success. Consequently, if we are not able to fund our research and development activities and deliver new products to the markets we serve on a timely basis, our growth and operations will be harmed. In addition, sales of the Company’s new products could cannibalize sales of some of its current products, offsetting the benefit of even a successful product introduction.

If we fail to introduce and commercialize new crop seed, we will not be able to recover research, development and cover our other costs.

We cannot guarantee the development and performance of new crop seed varieties, whether licensed or proprietary, or that they will meet our customers’ expectations. Farmers generally need time to learn about new seed varieties and how to plant and tend them. Their traditional planting experience may make it difficult for them to adapt to the new varieties. The process and timing for new seed products to gain market recognition and acceptance is long and uncertain. If we fail to introduce and commercialize a new seed variety that meets the demand of farmers and to provide the proper education about the seeds to distributors, farmers and the public, we may not be able to generate sufficient sales to cover our costs or generate a financial return on our investment.

One or more of our distributors could engage in activities that are harmful to our brand and to our business.

Our crop seed products are sold primarily through distributors. The distributors are responsible for ensuring that our products have the appropriate licenses to be sold to farmers in the PRC provinces. If the distributors do not apply for and receive the appropriate licenses, their sales of our products in those provinces may be illegal, and we may be subject to government sanctions, including confiscation of illegal revenues and a fine of between two and three times the amount of such illegal revenues. Unlicensed sales in a province may also cause a delay for our other distributors in receiving a license from the authorities for that province, which could further adversely impact our sales in that province. In addition, distributors may sell our products under another brand that is licensed in a particular province if our product is not licensed there. If our products are sold under another brand, the purchasers will not be aware of our brand name, and we will be unable to cross-market other crop seed varieties or other products as effectively to these purchasers. Moreover, our ability to provide appropriate customer service to these purchasers will be negatively affected, and we may be unable to develop our local knowledge of the needs of these purchasers and their environment. If any of our distributors sell inferior crop seeds produced by other companies under our brand name, our brand and reputation could be harmed, which could make marketing of our branded crop seeds more difficult.

We may be exposed to product quality claims, which may cause us to incur substantial legal expenses and, if determined adversely against us, may cause us to pay significant damage awards.

The performance of our seeds depends on climate, geographical areas, cultivation method, farmers’ degree of knowledge and other factors in addition to genetic traits and the quality of our seeds. Natural disasters may also affect the performance of our seeds, particularly when farmers are not able to timely and effectively respond to those disasters. Furthermore, the cultivability of some farmland is deteriorating because of toxic and hazardous materials resulting from farmers’ overuse of chemical herbicides and pesticides and the fall-out from other sources of environmental pollution. These factors generally cause underproduction, but farmers may attribute underproduction to seed quality. We may be subject to legal proceedings and claims from time to time relating to our seed quality. The defense of these proceedings and claims can be both costly and time consuming and may significantly divert efforts and resources of our management personnel. An adverse determination in any such proceeding could subject us to significant liability and damage our market reputation and prevent us from achieving increased sales and market share. Protracted litigation could also result in our customers or potential customers deferring or limiting their purchase of our products.

Our revenues depend on the ability of a large number of farmers to buy seed for cash because financing for purchases of this size and type is not available; therefore, if a substantial number of our customers become unable to pay for seed, our sales, revenues and operating results will decline.

We have a large and diversified customer base in the PRC. The large customer base provides some protection to us against a loss of revenues due to the inability of our customers to pay for seed that has been previously ordered. The unavailability of credit for farmers in the PRC, however, reduces the ability of those farmers to withstand the effects of difficult economic times. The lack of credit could prevent farmers from fulfilling their purchasing commitments to us with the result that we may suffer a lower amount of recognized revenues or our revenues and results of operations may be reduced.

Fluctuations in commodity prices can increase our costs and decrease our sales.

We purchase the crop seed that we sell from our production growers at market prices and retain the seed in inventory until it is sold. These purchases constitute a significant portion of the manufacturing costs for our seeds. We use hedging strategies to mitigate the risk of short-term changes in these prices, but we are unable to avoid the risk of medium and long-term changes in the market and overall availability of our seeds due to weather and production vagaries associated with growing plants. Additionally, we cannot predict with certainty the overall national inventory of competing crop seeds held by our competitors, which amount of seeds will have an impact on market prices and alternative product for farmers to choose from. Accordingly, increases in commodity prices may negatively affect our cost of goods sold or cause us to increase seed prices, which could adversely affect our sales. Farmers’ incomes are also affected by commodity prices; as a result, commodity prices could have a negative effect on their ability to purchase our products.

Price increases for energy costs and raw materials could have a significant impact on our ability to sustain and grow earnings.

Our production and distribution processes consume significant amounts of energy and raw materials, especially in connection with the transportation of our products where the costs are subject to worldwide supply and demand and other factors beyond the control of the Company. Significant variations in the cost of energy, which primarily reflect market prices for oil and raw materials, may affect the Company’s operating results from period to period though this has not been a factor in the past. When possible, the Company purchases raw materials through negotiated long-term contracts to minimize the impact of price fluctuations. The Company has taken actions to offset the effects of higher energy and raw material costs through selling price increases, productivity improvements and cost reduction programs. Success in offsetting higher raw material costs with price increases is largely influenced by competitive and economic conditions and could vary significantly depending on the market served. If the Company is not able to fully offset the effects of higher energy and raw material costs, it could have a significant impact on the Company’s financial results.

Storage systems for seeds have to be managed carefully, which if not so managed may result in damage to the seeds in storage and, thus, result in operating losses.

Seed storage, among other things, requires careful management of the temperature and humidity of the storage conditions. Any failure of the storage requirements to maintain the efficacy of the seeds may result in damage to the seeds in storage and, thus become unsellable for planting. If there is damage to stored seed, we may have to take impairment in respect of our inventory, which could result in operating losses.

We have limited business insurance coverage in China.

PRC insurance companies do not offer extensive business insurance products. As a result, we have very limited business liability insurance, business disruption insurance, or product liability coverage for our operations in China. We have determined that the difficulties associated with acquiring such insurance on commercially acceptable terms make it impractical for us to obtain such coverage. Most likely we would bear the effects of any business disruption, litigation or natural disaster resulting in our incurring substantial costs and the diversion of our resources, and could adversely affect our operations and financial condition.

We rely on producing farmers for the production of our crop seed products of which the vast majority has been operating with us for a long period of time. Although our relationship with those farmers has been stable in the past, there are no assurances that those relationships will remain stable in the future. Instability of this kind could limit the amount of seed products available to us for sale to customers and threaten customer loyalty.

We believe we maintain a favorable relationship with the farmers in our seed production network. In addition, the fact that we rely on a large number of farmers to produce crop seeds means that not one or even several farmers can, acting independently, adversely affect our business. However, events such as a shift in pricing caused by an increase in the value of commodity food crops other than seed crops, increase in land prices or competition could disrupt our chain of supply. Any of these disruptions could limit the supply of seeds that we obtain in any given year, adversely affecting supply and thereby lowering revenues in the subsequent marketing season. Such disruption could also damage our distributor relationships and farmer loyalty to us if we cannot supply the quantity of seed expected by them.

Agreements between our subsidiaries may not reflect terms that would have resulted from arm’s length negotiations among unaffiliated third parties.

Agreements between our subsidiaries that have been entered into, including the technical services agreements, by and among Beijing Origin, Changchun Origin, Henan Origin and Origin Biotechnology, may not reflect terms that would have resulted from arm’s-length negotiations among unaffiliated third parties. These agreements relate to, among other things, the transfer of intellectual property rights and the provision of technical research, production and distribution services.

If our rights to lease land from farmers were subject to a dispute, or if their legality or validity were challenged, our operations could be disrupted.

PRC law provides for the registration of land ownership and land-use rights and for the issuance of certificates evidencing land ownership or the right to use land. The administrative system for registration of land ownership and land-use rights, however, is not well-developed in rural areas where most of our crop seed production bases are located. As a result, we generally are not able to verify through the land registry system the ownership or land-use rights of the parties from whom we have leased land. Despite our efforts to obtain representations from the farmers that they own the land, possess land-use rights or have the right to sub-contract the land-use right on behalf of the holder of such rights, there is nevertheless a risk that they have not legally and validly granted the right to use the land to us. Moreover, there is a risk that farmers may, in breach of the terms of the applicable leases, enter into leases with other third parties in respect of land-use rights which they have previously granted to us, or that they have not entered into leases with third parties before entering into leases with us.

There is a risk that the legality or validity of our leases will be subject to dispute or challenge in the future. If our leases become subject to a dispute or challenge, our operations on such land, especially our research and development on crop breeding, could be suspended and we could lose our rights to use such land which could adversely affect our business, financial condition and results of operations.

The introduction of other animal feeds in the future may dramatically reduce the consumption of corn, which may affect our corn seed sales.

Currently, an important use of our corn seed product is as animal feed. The corn is either used as delivered or is mixed with other feed products and additives. Thus far, there has not been an animal feed product that can be substituted for corn that provides the same benefits. However, in the event that other animal feed capable of supplying the same nutrients at similar or lower prices is introduced to the market, farmers may be incentivized to switch to that product partially or completely depending on the efficacy and economics. In that event, our corn seed sales may be adversely impacted, and given the predominant position of corn seed as a percentage of our total sales, our sales and financial positions could be adversely affected.

Normal operation of the Company may be disrupted due to improper handling of safety procedures in various facilities.

We engage in operating and processing activities with machinery equipment that can result in serious accidents. If our procedures are not effective, or if an accident occurs, we could be subject to liabilities arising out of personal injury or death, our operations could be interrupted and we might have to shut down or abandon affected facilities. In particular, our new Xinjiang processing facilities have commenced formal operation only recently. Workers may not be as familiar with the operation of the equipment and technicians may not be able to respond to emergencies as effectively and expeditiously as those in other established facilities, therefore increasing the likelihood of serious accidents occurring. Accidents could cause us to expend significant amounts of remediate safety issues or to repair damaged facilities.

The transactions contemplated by that the Master Transaction Agreement may not be completed on the terms or timeline currently contemplated, or at all, as Origin or the Shihui may be unable to satisfy the conditions or obtain the approvals required to complete the transactions or such approvals may contain material restrictions or conditions.

In September 2016, we entered into a Master Transaction Agreement, along with our controlled companies, with Beijing Shihui Agricultural Development Co.Ltd. (“Shihui”), for the purpose of selling our commercial seed production and distribution assets and certain other assets in the PRC (the “Sale”).The transaction involves special risks to our results, including but not limited to, the failure to consummate or delay in consummating the proposed transaction; the risk that a condition to closing of the proposed transaction may not be satisfied or that required financing for the proposed transaction may not be available to Shihuior may be delayed; the risk that a regulatory approval that may be required for the proposed transaction is delayed, is not obtained, or is obtained subject to conditions that are not anticipated; the effect of the announcement of the proposed transaction on our relationships with our customers, operating results, and business generally; and adverse changes in general economic or market conditions. We also need to obtain shareholders’ approval to be able to consummate the transaction, which may not be obtained. If the Sale cannot be completed, our results will be adversely impacted.

If the sale of the production facilities for seeds is completed, the anticipated benefits from the transactions may not be realized.

The consummation of the sale of designated seed production assets is expected to provide us with resources to re-invest in its new strategic business model for and from China. This strategy is focused on upgrading research & development, enabling the licensing of Origin’s biotech traits and seed gemplasm, and establishing e-commerce business in North America for the non-GM and organic markets. Through this new strategy, we intends to diversify its business and reduce the risks we face in our operations but those anticipated benefits may not be realized and the sale may bring additional risks to our operations:

we currently generate a significant portion of our revenue from the corn seed production and distribution business in China. Without that segment of the revenue, our operation results may be negatively impacted;

we currently have little presence outside of China, in the future, we may not be able to successfully expand our biotechnology and planned genetic research and introduce our products to non-Chinese markets and obtain new customers in those markets;

because of the foreign exchange regulations in China, we may not be able to use the proceeds from the sale to fund our foreign offices and provide necessary funding for the expansion of our foreign operations;

we may face additional government regulations in the new markets; and

we may have difficulties in achieving anticipated cost savings, business opportunities and growth prospects from the sale.

Risks relating to our industry in the PRC

The Chinese agricultural market is highly competitive and our growth and results of operations may be adversely affected if we are unable to compete effectively.

The agricultural market in China is highly fragmented, largely regional and competitive, and we expect competition to increase and intensify over time within the sector. We face significant competition in our crop seed business. Our competitors may have greater financial, research and development resources than us. Competition may also result from consolidation or other market forces within the crop seed industry in China, the privatized crop seed producers that were operated by the local governments in China, large state-owned seed companies, and potential participation of large state owned companies in the seed industry. Our competitors may be better able to take advantage of industry consolidation and acquisition opportunities than us. The reform and restructuring of the previously state-owned seed enterprises will likely lead to the reallocation of market share in the seed industry, and our competitors may increase their market share by participating in the restructuring of the state-owned seed companies. Privatization will likely mean that these producers will need to develop more efficient and commercially viable business models in order to survive. In addition, the PRC government currently restricts foreign ownership of any domestic seed development and production business to no more than 49%. When and if such restrictions are lifted, multinational corporations engaged in the seed business may expand into the agricultural market in China. These companies have significantly greater financial, technological and other resources than us and may become our major competitors in China. With the changing industry dynamics, we could face increasing competition from existing and new seed suppliers, and from time to time, market changes could alter the supply/demand balance significantly for each selling season. If competition intensifies, our margins may be compressed by more competitive pricing in the short term and may also be compressed in the long term, and we may lose our market share and experience a negative impact on our margins, revenues and results of operations.

Natural or man-made disasters could damage seed production, which would cause us to suffer production losses and material reduction of revenues.

We produce our seeds using a network of producing farmers who plant the crops and harvest the seeds for use as crop seeds for the next growing season. As a result, the source of supply for our seeds is subject to all of the risks associated with any agricultural enterprise, including natural disasters such as widespread drought, flood, snowstorm, pestilence and plant diseases, and man-made disasters such as environmental contamination. Other man-made incidents may damage our products, such as arson or other acts that may adversely affect our crop seed inventory in the winter storage season. Furthermore, natural or man-made disasters may cause farmers to migrate from the farmland, which would decrease the number of end users of our products. While our use of a large number of farmers provides some protection against a widespread failure of any particular crop, the majority of our seed production farmers are located in Gansu, Sichuan, Hunan, and Xinjiang provinces, making them subject to risks that are somewhat local in nature.

We primarily rely on arrangements with farmers to produce our crop seed products. If we were unable to continue these arrangements or enter into new arrangements with other farmers, our total land acreage devoted to crop seed production would decrease and our growth would be inhibited.

We have access to over 3,200 hectares of farmland in several provinces mainly through contractual arrangements with farmers for seed production. These production agreements to produce crop seeds are typically one year in duration, covering one growing season. In the event that prices for other crops increase, these farmers may decide to farm other crops in breach of our seed production agreements with them. If we were unable to find new village collectives willing to produce crop seeds for us, our business and results of operations would be materially and adversely affected. Any of these disruptions could materially and adversely affect our supply of crop seeds and our revenues. Such disruptions could also damage distributor relationships and farmer loyalty if we cannot supply them with the quantities and varieties of seeds that they expect.

Crop seed prices and sales volumes may decrease in any given year with a corresponding reduction in sales and margins and results of operations.

Although we follow a branded product strategy to differentiate our products from our competitors, the crop seed market continues to behave largely as a commodity market in China. There could be periods of instability in the future during which commodity prices and sales volumes may fluctuate greatly. Commodity prices can be affected by industry inventory levels, general economic conditions, weather, disease and aspects of demand such as financing, competition and trade restrictions. As a result, the price that we are able to demand for our seeds is somewhat dependent on the size of the supply of our seeds in relation to total market supply and demand. The amount of revenues that we receive in any given year is subject to change. Because production decisions are made prior to the time when order volume or market price is known, it is possible that we will have too much or not enough products available, each with the attendant impact on revenues, margins and results of operations.

Prices of crop seed products in China may fluctuate due to changes in supply and demand.

The profitability of our operations is affected directly by the selling prices of our products. We benchmark the prices of our crop seed products against the prevailing domestic market prices of crop seed products of similar quality and attributes. The price of crop seed products in China may fluctuate greatly depending on the market in any giving year. If the general prices for crop seed products were to decline at a faster rate than our cost of production and sales or to increase at a slower rate than our cost of production and sales, our profit margins will decrease and our ability to generate operating results at historical levels will be adversely affected.

Risks relating to our business organization and structure

Under PRC law, foreign entities are not currently permitted to own more than 49% of a seed production company. In order to address those restrictions, Origin, a non-Chinese entity that cannot directly own the shares of our PRC operating subsidiaries, namely, Beijing Origin, Changchun Origin, and Henan Origin will instead hold the right to control such shares in all respects, including voting, dividends, nomination of directors, and corporate management, through stock consignment agreements executed by the owners of the stock of these companies. In addition, if we engage in the research, production and sale of genetically modified seed products, then foreign entities are not currently permitted to own any portion of the seed production company, therefore we have to carefully structure our company.

There is the risk, however, that a consigning shareholder will not fulfill its obligations under the stock consignment agreement. In that event, we may need to resort to the PRC courts to have our rights under the applicable agreement enforced. Such enforcement will cause us to incur legal expenses. In addition, while a case is pending there will be uncertainty regarding our rights as to the three PRC operating subsidiaries involved. A PRC court may decide not to enforce the agreements in whole or in part. To the extent these agreements are neither observed nor enforced as intended, the PRC operating subsidiaries will not be controlled by us as intended, which will affect our enterprise value and restrict our ability to obtain the income and other rights of ownership associated with the consigned stock. It may also prevent the consolidation of our financial statements with the PRC operating subsidiaries, which would reduce the reported earnings of the consolidated companies. The uncertainty of ownership may also adversely affect the market value of our ordinary shares.

The stock consignment agreements relating to our control of the stock of our PRC operating subsidiaries (not including Origin Biotechnology) may be terminated after three years upon mutual agreement between us and the consignees. One of the PRC consignees, Dr. Han also serves as our directors and owns 4,503,827 shares of our ordinary stock. Holding this amount of stock will allow these officers to control or greatly influence the selection of directors and matters submitted to a vote of our shareholders, including voting to terminate the stock consignment agreements.

There are corporate protections in place designed to protect our interests, such as an independent Board of Directors, an audit committee comprised of independent directors that must approve insider transactions, a code of conduct requiring fair dealing with the Company, and the British Virgin Islands statutory provision that a disposition of more than 50% of the assets of a company must be approved by a majority of the shareholders. Moreover, if consigned stock is transferred to us as provided in the stock consignment agreements when the restrictions under PRC law are lifted, that stock will no longer be subject to the stock consignment agreements, and the termination of the stock consignment agreements would then have no effect on the ownership of that stock. However, if the stock consignment agreements are terminated, then we would lose our rights with respect to the consigned stock and the profits from the issuing corporation. Such a loss would impair the value of the Company and would reduce our ability to generate revenues.

Risks relating to doing business in China

If we do not comply with PRC regulations, we may not be able to operate our business or we may be fined, both of which would adversely affect our business, operations and revenues.

The PRC has many regulations relating to the seed business, including obtaining and maintaining operating licenses and permits. Seed products must be licensed and undergo a stringent review process before they may be sold in the PRC. Environmental regulation in the future may be potentially concerned with the development, growing and use of GM seed products. We believe we currently have all the necessary licenses for our business, and that we are in compliance with applicable laws and regulations. If we are not in compliance, we may be fined or lose the ability to sell a particular seed or operate our business altogether. If the fines are substantial or if our ability to sell or operate is withdrawn, this will result in additional costs or the loss of revenues and could prevent us from continuing as an operating business.

If we do not comply with applicable government regulations, we may be prohibited from continuing some or all of our operations, resulting in a reduction of growth and ultimately market share due to loss of competitive position.

Continuation of our business revenues depends on receiving approval from the PRC government to market new seed hybrids that we are developing and will develop. In addition, there may be circumstances under which the governmental approvals granted are subject to change without substantial advance notice, and it is possible that we could fail to obtain the approvals needed to expand our business. The failure to obtain or to maintain such approvals would limit the number and quality of products that we would be able to offer. This reduction in product offerings would cause a reduction in the growth previously experienced and over time would result in the loss of market share from the competitive pressures of seeds developed by others that would likely be better than our products.

The technical services agreements between Origin Biotechnology and the other operating subsidiaries may be subject to scrutiny by the PRC tax authorities for transfer pricing adjustments.

We could face adverse tax consequences if the PRC tax authorities determine that our technical service agreements between Origin Biotechnology and the other PRC operating subsidiaries, namely, Beijing Origin, Changchun Origin, and Henan Origin, were not entered into based on arm’s length negotiations. If the PRC tax authorities determine that these agreements were not entered into on an arm’s length basis, they may adjust our income and expenses for PRC tax purposes in the form of a transfer pricing adjustment. A transfer pricing adjustment could result in a reduction, for PRC tax purposes, of deductions recorded by the three PRC operating subsidiaries, which could adversely affect us by:

increasing the PRC operating subsidiaries’ tax liability without reducing Origin Biotechnology’s tax liability, which could further result in late payment fees and other penalties to our PRC operating subsidiaries for under-paid taxes; or

limiting Origin Biotechnology’s ability to maintain preferential tax treatment and government financial incentives, which, if the transfer pricing adjustment is significant, could result in Origin Biotechnology failing to qualify for those preferential tax treatments and government financial incentives.

As a result, any transfer pricing adjustment could have an adverse impact on our financial condition.

Our business benefits from certain PRC government subsidies for the agricultural sector. Expiration of, or changes to, these incentives could have a material adverse effect on our operating results.

The PRC government has in recent years reduced taxes and increased subsidies and other support across the agricultural industry. For instance, the government subsidizes farmers for their seed purchases, and has increased spending on rural infrastructure. Sales of agricultural products from producers to intermediaries or to farmers are exempt from PRC Value-Added Tax (“VAT”). The discontinuance of preferential treatments granted by the Chinese government to the seed industry and farmers could adversely affect our earnings. In addition, subsidy policies may have an adverse effect on our ability to market our products. Farmers can buy crop seeds designated as “high-quality” at subsidized prices, however, the designation of seeds as “high-quality” is at the discretion of the local government. It is possible that this policy could result in preferential treatment for local seed producers, with locally produced seeds being designated as “high-quality” while ours are not designated as such. If such preferential treatment were to occur, the price for our seeds to farmers in those provinces would be higher than the subsidized local seeds, and our sales in that province could suffer, which could adversely affect our results of operations.

The discontinuation of any of the preferential tax treatments currently available to our PRC subsidiaries could materially increase our tax liabilities.

Prior to January 1, 2008, under applicable PRC tax laws, companies established in China were generally subject to a state and local enterprise income tax, or EIT, at rates of 30% and 3%, respectively. In addition, an enterprise qualified as a “high and new technology enterprise,” including agricultural companies, located in certain specified high-tech zones was entitled to a preferential state EIT rate of 15% and could enjoy an exemption from the state EIT for the first three years since its establishment and a 50% reduction of the state EIT for the succeeding three years. The qualification of a “high and new technology enterprise” was subject to an annual or biennial evaluation by the relevant government authority in China. Beijing Origin is entitled to a preferential tax rate of 15% as a new technology company. Additionally, Beijing Origin has recently received the “breed-produce-distribute” integrated crop seed license and is currently applying for more favorable tax rate.

In 2007, the National People’s Congress, enacted the Enterprise Income Tax Law, or the New EIT Law, and in December 2007, the State Council promulgated the implementing rules of the EIT Law, both of which became effective on January 1, 2008. The EIT Law significantly curtails tax incentives granted to foreign-invested enterprises under the previous tax law. The EIT Law, however, (i) reduces the top rate of enterprise income tax to 25%, (ii) permits companies to continue to enjoy their existing tax incentives, subject to certain transitional phase-out rules, and (iii) introduces new tax incentives, subject to various qualification criteria. Under the phase-out rules, enterprises established before the promulgation date of the EIT Law and which were granted preferential EIT treatment under the then effective tax laws or regulations may continue to enjoy their tax holidays until their expiration and will gradually transition to the uniform 25% EIT rate over a five-year transition period. In addition, the new technology enterprise qualification of our PRC subsidiaries is subject to a biennial re-assessment by the relevant PRC government authority. In the event the preferential tax treatment for our PRC subsidiaries is discontinued, the affected entity will become subject to the standard PRC enterprise income tax rate. There is no assurance that the local tax authorities will not, in the future, change their position and discontinue any of our preferential tax treatments, potentially with retroactive effect. The discontinuation of any of our preferential tax treatments could materially increase our tax obligations, and our application for more favorable tax rate based on our “breed-produce-distribute” integrated crop seed license may not be approved.

Under China’s Enterprise Income Tax Law, we may be classified as a “resident enterprise” of China. Such classification could result in unfavorable tax consequences to us and our non-PRC shareholders

Under the current Enterprise Income Tax Law, or the New EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules of the EIT Law define de facto management as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. However, it is unclear how tax authorities will determine tax residency based on the facts of each case. If the PRC tax authorities determine that our British Virgin Islands holding company is a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to enterprise income tax on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. Second, under the EIT Law and its implementing rules dividends paid to holding companies outside of China which are “resident enterprises will be subject to a 10% withholding tax. It is possible that future guidance issued with respect to the new “resident enterprise” classification could be applied to our British Virgin Islands sub-holding company with similar consequences. Therefore, any dividends paid by our PRC subsidiaries may be subject to a 10% withholding obligation.

In addition to the uncertainty in how the new “resident enterprise” classification could apply, it is also possible that the rules may change in the future, possibly with retroactive effect.

Adverse changes in political and economic policies of the PRC, including its policy of reforming its economic system, could have an adverse effect on the growth of private businesses in the PRC such as ours.

Since the late 1970’s, the PRC has been reforming its economic system and changing from a planned economy based on governmental dictates and priorities to one that uses market forces to influence deployment of economic resources, labor and capital and to determine business endeavors. We cannot predict whether or not the government will continue to encourage economic liberalization and further loosens its control over the economy and encourage private enterprise. We also cannot predict the timing or extent of future economic reforms that may be proposed. Any re-imposition of planned economy regulation or similar kinds of restrictions could reduce the freedom of private businesses to operate in a profitable manner, restrict inflows of capital or stifle investor willingness to participate in the PRC economy. To the extent we need additional capital; any restrictions on foreign ownership, foreign investment and repatriation of profits will hamper our ability to find capital outside of the PRC.

A return to profit repatriation controls may limit our ability to pay dividends and expand our business, and may reduce the attractiveness of investing in PRC business opportunities.

PRC law allows enterprises owned by foreign investors to remit to other countries their current account items, such as profits, dividends and bonuses earned in the PRC, and the remittance does not require prior approval by the State Administration of Foreign Exchange, or SAFE, upon the proper production of qualified commercial vouchers or legal documents as required by the regulations. However, dividend payments are subject to prior satisfaction of corporate and withholding tax obligations, corporate reserve requirements and board determined social benefit allocations. SAFE regulations generally require extensive documentation and reporting about other kinds of payments to be transmitted outside of China, some of which is burdensome and slows payments. If there is a return to payment restrictions and reporting, the ability of a PRC company to attract investors will be reduced.

Also, our investors may not be able to obtain the benefits of the profits of the business generated in the PRC for other reasons. Relevant PRC laws and regulations permit payment of dividends only from accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. Each of our subsidiaries and our affiliated entities in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital, and to further set aside a portion of its after-tax profits to fund the employee welfare fund at the discretion of the shareholders’ meeting or the board. These reserves are not distributable as cash dividends. In addition, the PRC tax authorities may require us to adjust our taxable income under the contractual arrangements we currently have in place in a manner that would materially and adversely affect our subsidiary’s ability to pay dividends and other distributions to us. Any limitation on the ability of our subsidiary and our affiliated entity to distribute dividends or other payments to us could materially limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses or otherwise fund and conduct our business.

Pursuant to PRC enterprise income tax law, dividends payable by a foreign-invested enterprise, or FIE, including Origin Biotechnology, from sources in the PRC to its foreign investors are subject to a 10% withholding tax, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. No such treaty currently exists with the British Virgin Islands. Prior to 2008, dividend payments to foreign investors made by FIEs were exempt from PRC withholding tax.

Any fluctuations in exchange rates may adversely affect your investment.

The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions. Because our earnings and cash from operations are denominated in Renminbi, as the reporting currency, fluctuations in exchange rates between U.S. dollars and Renminbi will affect our balance sheet and earnings per share when stated in U.S. dollars. The translation of Renminbi amounts into United States dollar amounts has been made for the convenience of the reader. Such translation amounts should not be construed as representations that the Renminbi amounts could be readily converted into United States dollar amounts at that rate or any other rate. The appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would affect our financial results when reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. Fluctuations in the exchange rate will affect the relative value of any dividend we issue which will be exchanged into U.S. dollars, the value of any U.S. dollar denominated investments we make in the future and any earnings on such investments.

There are government regulations that limit or prohibit foreign investment in the PRC, which may restrict our growth.

Notwithstanding the general restriction on foreign investment in the seed industry in the PRC, our corporate structure currently enables us to receive foreign investment. Our continued ability to receive foreign investment may be important to our ability to continue to expand our business rapidly and to manage that expansion effectively. We cannot be certain that a change in the regulations allowing us to receive foreign investment will not occur. In the event of such a change, our plan to expand our business could be disrupted.

PRC regulations relating to offshore investment activities by PRC residents may increase the administrative burden we face and create regulatory uncertainties that could restrict our overseas and cross-border investment activity. Failure by our shareholders who are PRC residents to make any required applications and filings pursuant to such regulations may prevent us from being able to distribute profits, if any, and could expose us and our PRC resident shareholders to liability under PRC law.

SAFE promulgated regulations that require registration with local SAFE offices in connection with direct or indirect offshore investment by PRC residents, including PRC individual residents and PRC corporate entities. These regulations apply to our shareholders who are PRC residents and also apply to our prior and future offshore acquisitions. In particular, the SAFE regulations require PRC residents to file with competent SAFE offices information about offshore companies in which they have directly or indirectly invested and to make follow-up filings in connection with certain material transactions involving such offshore companies, such as increases or decreases in investment amount, transfers or exchanges of shares, mergers or divisions, long-term equity or debt investments, or external guarantees or other material events that do not involve return investment.

The SAFE regulations required prior registration of direct or indirect investments previously made by PRC residents in offshore companies. If a PRC resident with a direct or indirect stake in an offshore parent company fails to make the required SAFE registration, the PRC subsidiaries of such offshore parent company may be prohibited from making distributions of profit to the offshore parent and from paying the offshore parent proceeds from any reduction in capital, share transfer or liquidation in respect of the PRC subsidiaries. Further, failure to comply with various SAFE registration requirements described above could result in liability under PRC law for foreign exchange evasion.

We believe our major shareholders who are PRC residents, or whose shares are beneficially owned by PRC residents, have completed foreign exchange registration with the local foreign exchange bureau according to these SAFE regulations. However, with these regulations there is uncertainty concerning the reconciliation of the new regulations with other approval requirements, it is unclear how the regulations, and any future legislation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. We cannot assure you that all of our shareholders who are PRC residents will comply with our request to make or obtain any applicable registrations or approvals required by the regulations or other related legislation. The failure or inability of our PRC resident shareholders to receive any required approvals or make any required registrations may subject us to fines and legal sanctions, restrict our overseas or cross-border investment activities, limit our PRC subsidiary to make distributions or pay dividends or affect our ownership structure. As a result, our business operations and our ability to distribute a dividend to you could be adversely affected.

The PRC legal system has inherent uncertainties that could limit the legal protections available to you.

Nearly all of our assets and all of our operations are in the PRC. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but are not binding on subsequent cases and have limited precedential value. Since 1979, the PRC legislative bodies have promulgated laws and regulations dealing with such economic matters as foreign investment, corporate organization and governance, commerce, taxation and trade. However, because of the limited volume of published decisions and their non-binding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. The laws in the PRC differ from the laws in the United States and may afford less protection to our non-PRC shareholders.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in the PRC based on United States judgments against us, our subsidiaries, officers and directors.

We are incorporated in the British Virgin Islands and our PRC operating subsidiaries are formed under PRC law. Substantially all of our assets are located in the PRC. In addition, some of our directors and executive officers reside within the PRC, and substantially all of the assets of these persons are located within the PRC. It may not be possible to affect service of process within the United States or elsewhere outside the PRC upon our directors, or executive officers and experts, including effecting service of process with respect to matters arising under United States federal securities laws or applicable state securities laws. The PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States and many other countries. As a result, recognition and enforcement in the PRC of judgments of a court in the United States or many other jurisdictions in relation to any matter, including securities laws, may be difficult or impossible. Furthermore, an original action may be brought in the PRC against our assets and our subsidiaries, our directors and executive officers and experts only if the actions are not required to be arbitrated by PRC law and only if the facts alleged in the complaint give rise to a cause of action under PRC law. In connection with any such original action, a PRC court may award civil liability, including monetary damages.

A reversion in the Chinese government’s policy of favoring state owned enterprise including seed companies at the expanse of privately owned companies may disadvantage our competitive position in the industry.

In China, state owned enterprises including state owned seed companies typically enjoy preferential policy treatments such as more favorable access to capital, tax breaks and subsidies at various levels of governments. These treatments have created barrier of entry protecting state companies at the expense of private ones, both domestic and international. Despite the reform of the Chinese seed industry in 2008 and the anticipated market-driven industry consolidation going forward, any reversion in the Chinese government’s policy to protect state owned seed companies may again pose competitive challenges to non-state owned companies such as Origin.

We may become a passive foreign investment company, which could result in adverse U.S. tax consequences to U.S. holders.

Depending upon the value of our shares and the composition of our assets and income over time, we could be classified as a passive foreign investment company, or PFIC, by the IRS, for U.S. federal income tax purposes. If we were classified as a PFIC in any taxable year in which you hold our shares and you are a U.S. investor, you would generally be taxed at higher ordinary income rates, rather than lower capital gain rates, when we dispose of those shares at a gain in a later year, even if we are not a PFIC in that year. In addition, a portion of the tax imposed on your gain would be increased by an interest charge. Moreover, if we were classified as a PFIC in any taxable year, you would not be able to benefit from any preferential tax rate with respect to any dividend distribution that you may receive from us in that year or any later year. Finally, you would also be subject to special U.S. tax reporting requirements.

Based on our understanding and current assessment, we believe that we were not a PFIC for the taxable year 2015. However, there can be no assurance that we will not be a PFIC for the taxable year and/or later taxable years, as PFIC status is re-tested each year and depends on the facts in such year. For example, we would be a PFIC for the taxable year 2015 if the sum of our average market capitalization, which is our share price multiplied by the total number of our outstanding shares, and our liabilities over that taxable year is not more than twice the value of our cash, cash equivalents, and other assets that produce, or are held for the production of, passive income. We could also be a PFIC for any taxable year if the gross income that we and our subsidiaries earn from passive investments is substantial in comparison with the gross income from our business operations. While we will continue to examine our PFIC status, we cannot assure you that we will not be a PFIC for any future taxable year.

Risks relating to our shares

Certain provisions in our organizational documents may discourage our acquisition by a third party, which could limit your opportunity to sell your shares at a premium.

Our memorandum and articles of association include provisions that could limit the ability of others to acquire control of us. Under those provisions, our board of directors has the power to issue preferred shares with such rights attaching to them as they decide and this power could be used in a manner that would delay, defer or prevent a change of control of us. These provisions could have the effect of depriving you of the opportunity to sell your shares at a premium over prevailing market prices by discouraging third parties from seeking to acquire control of us in a tender offer or similar transactions.

We qualify as a foreign private issuer and, as a result, are subject to reduced requirements with respect to the reporting of financial statements and other material events to our shareholders and the SEC.

As a foreign private issuer, we are obligated to file an Annual Report with audited financial statements and Form 6-K reports with the United States Securities and Exchange Commission, or the SEC, at such times as we release information to the public either voluntarily or pursuant to the laws of the British Virgin Islands or the PRC. Therefore, the regularity of financial and other information may be less than would be applicable to a domestic United States registered company under the rules and regulations of the SEC. Investors may not receive information on a timely basis, which could increase their risk of investment in us.

Because we are a foreign private issuer, we have elected to follow British Virgin Islands law in connection with compliance under the NASDAQ Marketplace Rules, which restrict the application of the NASDAQ corporate governance requirements.

The NASDAQ Marketplace Rules permit foreign private issuers to elect not to be governed by all the corporate governance rules. We have elected to avail ourselves of the exemption provided by NASDAQ, and we have elected to be governed by only the British Virgin Island laws and the terms of our memorandum and articles, which for example do not require us to hold an annual meeting each year. Consequently, investors may not have the ability to express their opinion on our business and the actions of directors through the voting process for directors. In other respects, we do follow the NASDAQ Marketplace Rules, such as having a nominations and compensation committee, but these are voluntary and may be eliminated at any time.

Leverage and debt service obligations may adversely affect our cash flows.

We currently have short-term borrowings of approximately RMB190 million (US$28.45 million) and the current portion of long-term borrowings of approximately RMB27.06 million (US$4.05 million) and long-term borrowings of approximately RMB20 million (US$3.00 million). The degree to which we are leveraged could, among other things:

require us to dedicate a portion of our near term cash flows from operations and other capital resources to debt service;

make it difficult for us to obtain necessary financing in the future for working capital, acquisitions or other purposes on favorable terms, if at all;

make us more vulnerable to industry downturns and competitive pressures;

limit our flexibility in planning for, or reacting to changes in, our business, and

require us to dedicate a portion of our near term cash flows from operations and other capital resources to debt service;.

Our ability to meet our debt service obligations will depend upon our future performance, which will be subject to financial, business and other factors affecting our operations, many of which are beyond our control.

Future sales by us or our existing shareholders could depress the market price of our ordinary shares.

If we or our existing shareholders sell a large number of shares of our ordinary stock, or if we sell additional securities that are convertible into ordinary stock, the market price of our ordinary stock could decline significantly. Further, even the perception in the public market that we or our existing shareholders might sell shares of ordinary stock could depress the market price of our ordinary stock.

Our auditor, like other independent registered public accounting firms operating in China, is not permitted to be subject to inspection by Public Company Accounting Oversight Board, and as such, investors may be deprived of the benefits of such inspection.

The independent registered public accounting firm that issues the audit reports included in our annual reports filed with the SEC, as an auditor of companies that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United States), or PCAOB, is required by the laws of the United States to undergo regular inspections by PCAOB to assess its compliance with the laws of the United States and professional standards. Because our auditor is located in China, a jurisdiction where PCAOB is currently unable to conduct inspections without the approval of the PRC authorities, our auditor, like other independent registered public accounting firms operating in China, is currently not inspected by PCAOB. Inspections of other firms that PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The inability of PCAOB to conduct inspections of independent registered public accounting firms operating in China makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections.

On May 24, 2013, the PCAOB announced that it has entered into a Memorandum of Understanding (“MOU”) on Enforcement Cooperation with the China Securities Regulatory Commission (the “CSRC”) and the Ministry of Finance (the “MOF”). The MOU establishes a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations in both countries’ respective jurisdictions. More specifically, it provides a mechanism for the parties to request and receive from each other assistance in obtaining documents and information in furtherance of their investigative duties. In addition to developing enforcement MOU, the PCAOB has been engaged in continuing discussions with the CSRC and MOF to permit joint inspections in China of audit firms that are registered with the PCAOB and audit Chinese companies that trade on U.S. exchanges.

ITEM 4.

INFORMATION ON THE COMPANY

History and development of the Company.

Origin was first incorporated in the British Virgin Islands on February 10, 2005, and is governed by the BVI Business Companies Act, 2004, or BCA, by re-registration on July 10, 2006.

Chardan China Acquisition Corp., the predecessor of Origin, was a blank check company organized as a corporation under the laws of the State of Delaware on December 5, 2003, formed for the purpose of effecting a business combination with companies having operations based in China.

On December 20, 2004, Chardan entered into a stock purchase agreement, referred to as the Stock Purchase Agreement, with State Harvest, a company incorporated in the British Virgin Islands on October 6, 2004, and all the shareholders of State Harvest. On February 10, 2005, Chardan formed a wholly-owned subsidiary under the laws of the British Virgin Islands, under the name “Origin Agritech Limited” to effect the stock acquisition of State Harvest. Chardan merged into Origin to re-domesticate out of the United States, and immediately thereafter, Origin acquired all of the issued and outstanding stock of State Harvest, which acquisition included three controlled affiliated operating companies, namely, Beijing Origin, Changchun Origin, and Henan Origin. These three controlled operating companies are organized under the laws of the PRC.

On June 26, 2007, our common shares began trading on the NASDAQ Global Select Market, where they continue to trade. Prior to trading on that market, our common shares had been listed on the Nasdaq Global Market from November 8, 2005 to June 25, 2007.

Over the years, our strategic focus has been on the corn seed business and corn seed biotechnologies in China. In 2015, we announced our strategic transition from a traditional seed company to a biotechnology seed company after more than 10 years of successful development in biotech seed products. We have developed transgenic corn seed products including our first generation biotech product phytase traits, second generation biotech product glyphosate tolerance traits and our new technologies of stacked traits of Bt and glyphosate tolerance genes. In 2016, we completed the laboratory and field production trials for our first generation PEST/WEED trait. We anticipate that in 2017, our first generation WEED and PEST/WEED traits will be incorporated into the elite corn inbred lines of ours and into the products of leading Chinese seed industry partners preparing for future regulatory approval and commercialization.

Built on the success of biotech pipelines, we announced our intention to expand our business globally in 2016. In August 2016, we established our North America office in Des Moines, Iowa. We have also successfully requested and received the first transgenic corn seed export permit from China’s Government agencies, following required protocols. Our U.S. collaborator has secured an importation permit for these seeds from the United States Department of Agriculture(“USDA”). In late 2016 corn seeds containing our lead trait event and a back-up were successfully shipped from China to the US and planted in a USDA designated greenhouse. Furthermore, corn seeds carrying our insect resistance and herbicide tolerance technologies developed in China will enter collaborative field experiments next summer to conduct testing required by the USDA, Environmental Protection Agency and the Food and Drug Administration.

To further shift our focus from seed production and distribution to seed biotechnologies, in September 2016, we entered into a Master Transaction Agreement, along with our controlled companies Beijing Origin Seed Limited (“Beijing Origin”), Denong Zhengcheng Seed Limited (“Denong”), Changchun Origin Seed Technology Development Limited, (“Changchun Origin”), Linze Origin Seed Limited (“Linze Origin”), with Beijing Shihui Agricultural Development Co. Ltd., a company incorporated under the Laws of the PRC (“Shihui”), for the purpose of selling our commercial seed production and distribution assets and certain other assets in the PRC to Shihui(the “Sale”).We will retain our biotech research facilities and business in China after the Sale. The Sale is designed to further orient Origin becoming a multi-national seed development company, capitalizing on its biotechnology assets and skills and to allow us to focus on strategic partnerships both within China and around the globe. The future focus of Origin will be expansion into the United States and other markets through licensing its biotech traits and seed germplasm characteristics and continuing to develop both genetically and non-genetically modified corn and other seeds.

Our principal executive offices are located at No. 21 Sheng Ming Yuan Road, Changping District, Beijing 102206, China, and our telephone number is (86-10) 5890-7588. Our North America operations and international relations center is located at 666 Walnut Street, Des Moines, IA 50309.

Business Overview.

Overview

Origin Agritech Limited, along with its subsidiaries, is an agricultural biotechnology company located in the PRC. We specialize in crop seed breeding, genetic improvement, and the production, processing, distribution of seeds as well as related technical services. We are staffed by 389 employees as of September 30, 2016, Origin operates 9 breeding stations, 5 production and processing centers, and 5 marketing centers nationwide with sales centers located in key crop-planting regions. Our main corn seed production facilities are located in Gansu province and Xinjiang province. After our 2015 transformation, Origin is now organized into a simple structure of two fundamental business lines: Biotech & Product Development under State Harvest and Seed Production& Distribution under Beijing Origin. In addition, State Harvest has built a solid capacity for breeding technologies, including marker-assisted breeding and doubled haploids technologies, which we believe along with its rich germplasm resources, will allow State Harvest to become a global seed technology company. Beijing Origin is focusing on seed production and distribution business in China. In September 2016, we entered into a Master Transaction Agreement pursuant to which we have agreed to sell the seed production and distribution business to Beijing Shihui Agricultural Development Co. Ltd. After the Closing of the Sale, we will focus on growing our biotech research capacity and biotech portfolio and emerging product pipeline through State Harvest. We will also retain the management persons and staff operating the biotech research and plant breeding activities, who will continue to be located in the PRC. The transaction is designed to further orient Origin becoming a multi-national seed development company, capitalizing on its biotechnology assets and skills and to allow the Company to focus on strategic partnerships both within China and around the globe. The future focus of Origin will be expansion into the United States and other markets through licensing its biotech traits and seed germplasm characteristics and continuing to develop both genetically and non-genetically modified corn and other seeds.

We built China’s first in-house agricultural biotechnology research center in 2005 and have been leading the development of biotechnology among crop seed companies in China since then. In 2009, the Company’s phytase corn was the first transgenic corn to receive the Bio-Safety Certificate from China’s Ministry of Agriculture. Over many years of proprietary development and collaboration with leading research institutes, Origin has established a robust seed product and germplasm pipeline, including products with glyphosate tolerance and insect resistance (Bt) traits. After the Sale, through the retained ownership of Xinjiang Origin, the Company will maintain its “Green Pass” status, providing the company with the competitive advantage of introducing new hybrid varieties to the Chinese market under an expedited government approval process.

The Company’s current products include hybrid varieties of corn, rice and canola seeds, which represented 99.86% of our sales in fiscal year 2016. Hybrid corn seeds remain our strongest product line, generating 91% of our sales in fiscal year 2016. We believe that we are a leading, technology-focused crop seed company operating in China. We have sought to broaden our usage and penetration of our latest plant breeding techniques, modern biotechnology, and innovative information and research management to develop and deliver high-yield seeds to the Chinese farmer. Our goal is to lead the industry by providing farmers with unique enabling technology and services, producing and protecting higher crop yields. Our activities include the specialization in the research and development, production, and sales and marketing of crop seeds (corn, rice, and canola) throughout the PRC.

During the last several years, we have continued to develop our established plant genetic engineering technology platforms, including transforming herbicide tolerance, insect resistance, nitrogen efficiency, and drought stress tolerance traits into corn inbred lines. Of note, we made significant strides in developing our exclusive herbicide tolerance, insect resistance and phytase products. In November 2009, our genetically modified phytase corn received the Bio-Safety Certificate from PRC’S Ministry of Agriculture. This was the world’s first genetically modified phytase corn and also the first genetically modified corn seed product in China. The certificate was renewed by the Ministry of Agriculture in January 2015. We are also actively pursuing the approval of other GM seed products in China including glyphosate resistant corn and bacillus thuringiensis, or BT, corn.

We seek to utilize modern biotechnology in China more effectively and plan to use China’s emerging technology base for our future development. In particular, from time to time we enter and further develop cooperative agreements with publicly funded research institutes in China. In exchange for providing funding to these institutes, we receive rights, which are frequently exclusive rights, to market any seeds developed by these institutes. When a seed is ready to be marketed, we negotiate with the institute to establish an arrangement by which we are permitted to sell the newly developed seeds in exchange for the payment of certain fees to the institute. We believe that these cooperative agreements allow us to access new products without expending substantial costs for our own research and development.

On the global front, in the first quarter of 2015, we submitted a patent application to the United States Patent and Trademark Office for our glyphosate-tolerance technologies which entered public stage in 2016. In addition, we have also applied for a patent in Brazil for similar biotechnologies. In 2016, we filed a patent application on insect resistant corn technology with Patent Cooperation Treaty (PCT), an international patent system assists applicants seeking patent protection of their inventions internationally. We also file a patent on insect resistant corn technology in Argentina in 2016. We believe these patents will strengthen further our leading position in the genetically modified seed technologies in China and will allow us to expand our biotechnology position in the international seed market.

We also entered into two commercial licensing agreements with DuPont Pioneer, the advanced seed and genetic business of DuPont, in April 2016 and January 2017. Pursuant to the April license, the Company and DuPont will jointly develop new seeds for Chinese farmers, and pursuant to the January license, we will gain access to DuPont’s non-GM corn seed products and bring such products into Origin’s North America non-GM/Organic business.

In August 2016,we established our North American operations in Des Moines, Iowa. Although our Key biotech and seed breeding operations will continue to be based in China, including the plant breeding and biotech research and development center, the Xinjiang Origin seed company and the critical off-season winter nursery in Hainan, we plan to expand partnerships on biotech traits globally via our new Des Moines center.

Research and Development

Developments in the science of genetics have allowed seed producers to create entirely new species of plants, rather than merely new varieties of existing species. Compared with conventional varieties, the obvious advantages of these new species, known as GM varieties, are higher yield, better quality and increased disease-resistance and herbicide tolerance. Farmers plant GM varieties to save time and cost, while also reducing field labor. GM corn, soybean and cotton have been widely used in the United States and many other countries to guard against insect damage and to increase yield. Since receiving the Chinese government approval in 1997, cotton that has been genetically modified to guard against damage from borer insects is now widely planted and accepted in China. The Chinese market has widely accepted GM cotton and the PRC Ministry of Agriculture has approved GM corn and rice traits. We believe that GM food crop seeds in time will be approved by the PRC Ministry of Agriculture for production and sale and will be accepted in the Chinese market over time.

Utilizing our existing hybrid seed product line, we seek to further increase crop yield and produce higher quality seeds with the addition of GM traits. We commenced our own biotechnology research program in early 2000’s with a goal of having technology in place to produce GM products when demand for these products is sufficiently high. In 2005, we built an internal research and development center in China for GM crop seeds, which we believe was the first such facility to be utilized by a Chinese crop seed company. Our key focus remains on biotechnology for GM varieties of corn, which has accelerated significantly. We currently employ people who are primarily engaged in genetic transformation, molecular biomarker testing and genetic mapping activities. Our development efforts go beyond our internal biotechnology center, as this unit serves as a central hub to connect with other research facilities throughout China. We are collaborating with the Chinese Academy of Sciences, Peking University and China Academy of Agriculture Science in the field of biotechnology. These co-operations help enhance our research capabilities and will help enable us to develop and commercialize our products. We have established several plant genetic engineering technology platforms, which incorporate increased herbicide tolerance, insect resistance, nitrogen efficiency, and drought stress tolerance traits into corn inbred lines. The GM traits and products we are working on now include increased herbicide tolerance, insect resistance, nitrogen efficiency, and drought stress tolerance in corn. We developed phytase GM corn, the first genetically modified corn seed product in China. Notwithstanding our obtaining the Bio-Safety Certificate from the Chinese government, there can be no assurance that GM products generally will be approved in China, and we expect that the introduction and acceptance of GM products will be cautious.

In addition to biotechnology, our internal research and development also invests considerable effort in the conventional breeding of hybrid crop seed and we currently have 9 breeding stations across the country. For our total research and development activities, we employed 72 full time research personnel in this area as of September 30, 2016. In August 2016, we hired a new Chief Technology Officer, Dr. Jihong Liang, to direct our global biotechnology and plant genetic research, and to coordinate and accelerate external collaborations with private, academic and governmental partners to further develop our technologies, traits and seed products. In order to maintain our position as a quality producer of advanced products and develop new seed products through our biotechnology programs, we have targeted to invest approximate 7-13% of our revenue into research and development activities. Once we close the Sale of the commercial assets of Beijing Origin in 2017, we plan to use a part of the net proceeds from the Sale to invest in biotechnology trait and seed germplasm research and development.

The Company has received government funding for research and development activities. Such funding was received in the fiscal years of 2014, 2015 and 2016 in the amounts of RMB7.61 million, RMB7.08 million, and RMB10.37 million respectively.

Seasonality

Because we are an agricultural seed production company, we experience several aspects of seasonality in our operations and revenues. The seasonal nature of our business causes our operating results to fluctuate from quarter to quarter. The sales season of corn and rice seeds lasts from October to June; the sales season of canola seeds lasts from July to September. Historically, in the third to fourth quarters of our fiscal year, we face costs that are in excess of our cash flow sources. The advance payments we make to our seed producing farmers may exceed the amount of deposits we receive from our customers, the seed distributors and end users. The exact timing of these deposit payments is dependent on the Chinese lunar calendar, which varies from one calendar year to the next. To mitigate the impact on cash flow, we customarily have relied upon short term bridge loans to cover our expenses pending receipt of the cash payments from farmers at the time of their seed purchases.

Commercial Production

We produce most of our hybrid seeds by contracting with local farmers in China to whom we provide parental seeds and technical support. Currently, we have 127 production personnel and seed conditioning plants located in Gansu, Xinjiang, Jilin, Henan, and Sichuan, with our main production facilities in Gansu province and Xinjiang province. The facilities of Xinjiang Origin, along with the seed production land of the Fifth Agricultural Construction Division, deploy modern technologies and full mechanization throughout the entire production process from land preparation and seeding to product packaging. This processing facility employs advanced corn husker system, which is one of the largest corn husker systems in the world. The production base uses modern drip irrigation systems and advanced farming equipment for corn seed production. Together, our production centers work to supply parental seeds to our producer-farmers, who plant, grow and harvest the hybrid to produce seeds for us. This network of local farmers who produce our seeds is an important element of our strategy to produce an increasing number of products with consistent quality. We are the first Chinese seed company to obtain the ISO9001-2000 certification by the China Certification Center for Quality Mark. With a strict seed quality control system, we have sufficient processing capability and advanced equipment to allow us to operate efficiently and maintain a high quality of seed products. By employing these practices, we have achieved product quality on par with that of our foreign competitors and that is consistently well received by our customers.

According to the sales plan we develop for each year, before the growing season, we choose the planting area according to the trait of the seed variety, and enter into a seed booking production agreements with the local farmers. Under the agreement, we provide the producer-farmers with the parental seed, as well as the technical support in the course of farming. After the growing season, we purchase the seeds that meet our quality specifications from the farmers.

National Marketing and Distribution

We have our own sales organization consisting of 71 employees who oversee all aspects of our distribution and retail sale network and promote our sales within the distribution chain. In addition, these individuals provide high-level technical service to our end customers.

The terms of our distributor agreements provide for territorial exclusivity for a distributor on a designated product, usually on a county-wide basis. To enforce exclusivity and monitor product locations, we assign a code to each distributor and mark all packaging sent to the distributor with this code. Careful monitoring of territorial integrity and enforcement of contractual penalties, which may include termination of distribution rights and cancellation of discounts on prices, provides stability and profitability within the distribution network and aims to provide quality services and product availability. We believe that we enjoy a positive reputation with our distributors for our implementation and enforcement of this exclusive distribution system. Distributors buy our seeds at a wholesale price established by us and are required to make payments to us prior to delivery.

Distributors that place orders and make deposits on orders for sales to be made the following year at least two months prior to delivery are generally offered a discount. At the end of the annual sales season, we set a discounted final sales price. The discounted final sales price results from the fact that the PRC government sets the price for agricultural commodities after we have sold our seeds to distributors. Seed prices fluctuate with agricultural commodity prices. This correlation is particularly strong for corn seeds that can be consumed as food and used as seeds. For example, if the price for corn for consumption increases, the price for corn seeds will increase as well. Once the PRC government has set the price for agricultural commodities, we negotiate with distributors the final price for our seeds which reflects the price the distributors sold our seeds to farmers and includes any season discount we may offer to such distributors. If the final price is lower than the preliminary price previously offered by us, we will return the difference to our distributors. Although the final price could technically be higher than the preliminary price, we have never experienced such a result. As a result of our discount policy, we cannot set the final price of our seeds to distributors prior to the end of their selling season to farmers. Selling seasons vary among distributors from region to region and from year to year, and generally start in October and end in June of the following year for most of our products. We deliver our products and receive payments on a relatively predictable schedule. First, we request and generally receive a cash deposit, followed by a further pre-payment of the expected sales price. Then, we deliver products to our customers and receive confirmation of delivery. Finally, we set the final sales price of our delivered products to a customer based on the total volume of product delivered to that customer.

The specific terms of the distributor agreements vary depending on negotiations and the nature of the distributor and its prospective territory. There usually is an initial payment made by the distributors to the Company for the distribution right which is applied in whole or in part to future orders, depending upon compliance with the terms of the agreement. The agreement also delineates pricing adherence requirements and permissible discounting sales, territory, ordering and supply obligations, returns, market support and other regular business terms and dispute resolution provisions. We have also established cell-phone based ordering and sales management systems. We further reduced the distribution layers by selling directly to retailers in certain regions. We are currently exploring various commission based sales incentive plans in seven regions.

Our sales team assists distributors in writing monthly sales plans. During the harvest season, we invite farmers and others in the seed distribution chain to attend production demonstrations in cooperation with local villages and seed distributors. At these demonstrations, our teams show our seeds, explain planting techniques, discuss industry best practices and disseminate promotional materials. These marketing and production demonstrations help create new demand, not only in each village where demonstrations are held, but also in nearby villages, for both the current season and for succeeding years.

Our technical service department has a 24-hour toll-free telephone number available for our producer-farmers and distributors, through which they can obtain solutions to specific technical problems. We also provide customers with limited on-site help. We also enlist the help of our distributors to provide help and advice to farmers. We believe that our focus on customer service and technical support have helped us to build brand identity and loyalty and have contributed to our total sales volume.

Product and technical service brochures are provided throughout the distribution network and have proved to be a valuable tool in promoting the sale of our crop seed products and the recognition of the Origin brand.

In the recent years, through the arrangement with Beijing Shihui Agricultural Development Co. Ltd. (“Shihui”), our biggest distributor, our distribution network has been moving towards on-line distribution and other channels. We have also engaged Shihui to take over more of our distribution channel and sales centers. Shihui is a related party in that the two principal shareholders are the brother and son of Dr. Han Gengchen, our Chairman of the Board.

Intellectual Property

Our intellectual property includes trademarks and patents relating to our seed products. All of the intellectual property has been registered for IP protection in China (or is the subject of a pending application), and is used in connection with our seed products packaging, production and distribution. Although we do not require our distributors to pay any license fee for the seed products, the value of the intellectual property has been reflected in selling price directly. Our intellectual property is crucial to our business, and bears directly on our ability to generate revenues.

We currently have fourteen Chinese patents registered with the State Intellectual Property Office (“SIPO”) of China. Among these fourteen patents, thirteen domestic patents and one PCT patent are related to the biotechnology corn seed. One of the thirteen patents relating to the method of producing hybrid corn seed is jointly owned by Henan Agriculture University and Beijing Origin. Also, we have applied for two additional patents in the field of our biotechnology corn seed, and the applications have been accepted and are now being reviewed by SIPO.

In addition, we currently have thirty one Chinese trademarks registered with the Trademark Office of China’s State Administration for Industry and Commerce (“SAIC”). Also, we have applied for four additional trademarks, and the applications have been accepted and are now being reviewed by the Trademark Office of China’s SAIC.

In addition to the domestic patents and patent applications, we have filed patent application outside of China. During the first quarter of fiscal year 2015, we submitted a patent application to the United States Patent and Trademark Office for our glyphosate-tolerance technologies which entered public stage in 2016. In addition, we have also applied for a patent in Brazil for similar biotechnologies. In 2016 we filed a patent application on insect resistant corn technology with Patent Cooperation Treaty (PCT), an international patent system assists applicants seeking patent protection of their inventions internationally. We also file a patent on insect resistant corn technology in Argentina in 2016. We believe these patents will strengthen further our leading position in the genetically modified seed technologies in China and will allow us to expand our biotechnology position in the international seed market.

As of September 2016, we had eighteen proprietary corn seed products, ten proprietary rice seed products and one proprietary canola seed product that are in commercial production and distribution.

Licensed Seed Products

In addition to the development of our own proprietary seeds, we have licenses to distribute seeds developed by independent research and development institutions. Currently, we have licenses to distribute seventeen varieties of corn seed, twenty six varieties of rice seed and seven varieties of canola seed.

Under a typical license agreement, one of our PRC Operating Companies will obtain a license for a designated product for exclusive production and marketing within China. The license fees vary in their method of determination, but generally they are either a percentage of revenues from the sale of the variety or a flat fee arrangement. Beijing Origin has these types of agreements with China Academy of Sciences Microbiology Institute, Shijiazhuang Liyu Technology Development Co., Ltd.(Liyu) in Hebei Province, Henan Puyang Agricultural Academy, Tieling Agricultural Academy, Liaoning Benxi Agricultural Academy, Sichuan Agricultural Academy, Corn Research Institution of Beijing Agricultural Forestry Academy, Huafeng Seed Limited, Liaocheng Huafeng Corn Breeding Research Institution, Food Corn Research Institution of Yunnan Agricultural Academy, Henan Agriculture University, Hubei Province Shiyan Agricultural Sciences Institute, China Rice Research Institution, Zhengzhou Rui Yuan Agricultural Science and Technology Development Co., Ltd,among others. These agreements generally have no fixed term or termination date. The agreements may be terminated for breach by either party. We may terminate the agreements at any time, in effect, by not producing seeds there under, without penalty.

In addition to the exclusive license agreements set forth above, we also have non-exclusive license agreements. The non-exclusive license fees tend to be lower than the typical exclusive license fees. Those licensors that lack production ability or distribution channels of their own grant us the right to produce, distribute and propagate the covered variety of seeds, provide us with technical materials and instructions, supervise seed quality and evaluate growing areas. We are responsible for undertaking all the propagation costs and maintaining quality standards. The agreements may be terminated for breach by either party. We may terminate the agreements at any time by not producing seeds there under, without penalty.

With regards to the licensed GM varieties, we have entered into a strategic cooperation agreement with the China Academy of Agriculture Science, or CAAS, to work on biotechnology research and development. That agreement gives us the right to produce and sell the GM crop varieties that are developed in connection with this arrangement, subject to our obligation to reimburse certain of CAAS’ expenses.

We also entered into two commercial licensing agreements with DuPont Pioneer, the advanced seed and genetic business of DuPont, in April 2016 and January 2017. Pursuant to the April license, we and DuPont will jointly develop new seeds for Chinese farmers, and pursuant to the January license, we will gain access to non-GM corn seed products and bring such products into Origin’s North America non-GM/Organic business.

The Chinese Crop Seed Market

The Chinese agricultural sector is primarily made up of small, family-oriented farms. Increasingly, corn is becoming an important crop in China because it has a number of uses, including the use as livestock feed, source of industrial products and a source of fuel in the form of ethanol. In addition, rice is an important human food crop and canola is used to produce cooking oil.

The Chinese agricultural seed industry is fragmented, with the corn seed market in particular being served by approximately 5,000 small, local seed suppliers. Most of these seed companies were established in the 1960s and 1970s by local county governments to address Chinese central government agricultural initiatives. They were designed at the time to provide service and support to local farmers. These local seed providers usually sell varieties of agricultural seeds that have been grown in their respective locales for years. The number of small suppliers is generally contracting as licensing is becoming more stringent and seed products are advancing beyond what they offer.

Improved seed products have been generally available in China through large multinational suppliers, the largest being Pioneer Hi-Bred International, Inc., or Pioneer, Monsanto Company, or Monsanto, and Syngenta AG, or Syngenta, each of which established operations in China more than a decade ago. Their products, however, are limited to those developed through traditional plant and seed selection.

Our business strategy focuses on meeting the needs of small Chinese farmers and includes the following elements:

(i.)

producing and distributing high-quality seed products, initially under third-party licenses and, over time, increasingly internally developed proprietary seeds, to deliver superior value to our distributor-customers and their farmer-customers;

(ii.)

devising a process for obtaining regulatory approvals for new crop seeds (a Chinese legal requirement) that is efficient and effective;

(iii.)

establishing a broad network of producer-farmers and distributor-farmers in several regions to participate in the seed development process and to produce approved crop seeds for commercial distribution;

(iv.)

creating an effective distribution system using a relatively small network of primary distributors, only one in each county with exclusive territories, with which we can deal directly and efficiently which, in turn, develop their own secondary distribution network to reach out directly to the consumer- farmers. This distribution network is not only a means for securing and fulfilling orders, but acts as a conduit for our marketing and technical support activities;

(v.)

relying on a number of marketing activities to retain existing customers and attract new ones. These marketing activities include:

a demonstration program that provides technical assistance to customers regarding the correct seed choice and proper cultivation methods;

a database of over 15 million customers that we use to keep repeat sales at a high level, an important component of revenue growth; and

(vi.)

delivering service and technical support to customers throughout the growing season for its products. End-user customers can contact us through a dedicated call center that handles up to 1,000 calls per day. Field service representatives are dispatched within 48 hours of a customer’s request for help.

The average lifespan of a typical product in our industry is five to seven years. After this period, the product may begin to lose potency and develops material genetic weaknesses that make the product significantly less attractive in the marketplace. New hybrids are approved every year and the speed at which technology changes is partially driven by the amount of high quality hybrids produced in the local region for the local seed type. One product may dominate a particular region for a three to five year time period, and then the dominance may shift depending on the available seeds for the local soil types.

Competition

We face competition at three primary levels, including large Chinese companies, small local seed companies, and large multinational hybrid and GM seed producers. Currently, we believe that we can compete effectively with each of these competitors and that we can continue to do so in the future. Each of these groups of competitors is discussed in turn below.

Larger Domestic Seed Companies.

While there are six seed companies that control approximately 25% of the corn seed market of China, we believe we may possess the most competitive technology base, including the capability to develop and commercialize genetically modified seeds. However, there is little public information in this regard, and as a result other companies’ internal research pipelines remain unclear. Much of the genetically-modified product research remains at the academic level. The majority of the largest crop seed companies have been in existence for considerably longer periods of time than we have, and though they have sophisticated breeding techniques, are somewhat entrenched in their ways. Some of these larger entities are evolved state owned enterprises and some stayed as state-owned entities. We compete within this group on the basis of our consistent product quality, brand identity, customer and technical support, enforcement of our intellectual property rights and a pipeline of proprietary products.

Smaller Local Seed Companies.

The local seed companies in China are the legacy of the centrally planned agricultural economy that was predominant in China until recently. Most of these were affiliated with county governments, which played a role in determining what crops would be grown and by whom. As was often the case with planned economies, these extensions of the bureaucracy had no profit motive, and no incentive to improve efficiencies, increase sales or innovate with new products. Market expansion was limited by the tight geographic boundaries within which they were designed to operate.

The majority of these local companies lack the scale and the resources to compete with us in a number of ways. They lack access to the improved, proprietary hybrids. For the most part they do not have effective marketing, advertising, technical support or customer service operations. The majority of our recent growth has come from acquiring customers from these operations. We believe that the existing trend will continue, and that eventually some of these smaller, local distributors can be integrated into our distribution network.

Multinational Seed Companies.

At the opposite end of the competitive spectrum from the local seed companies are the large multinational companies, including Pioneer (DuPont), Monsanto and Syngenta. These companies present a formidable competitive threat because of their financial resources, the high quality of their seed products, and biotechnological capabilities. These companies will present significant competition in the international and United States market context. However, the unique aspects of the Chinese crop seed market, which distinguish it from the market in Western countries, have proven a significant hurdle for market success for these very large companies, even though they have come to the market through joint ventures formed with existing Chinese seed companies.

The principal difference between the Chinese and Western seed markets is that in China a large number of low volume sales are made to local farmers, while in the West, relatively few sales of very large volumes make up the majority of product sales. As a result, success in the Chinese seed market depends on marketing and distributing effectively to a very large number of small customers. Relatively few Chinese companies have achieved any degree of success in doing so, and the international competitors only have limited success after many years of trying and heavy investment.

These multinationals rely heavily on GM seed products in the non-PRC markets. Our market research indicates that most of the superior products that the multinationals have to offer are genetically modified. GM seed products have only begun to be accepted in China, and the extent of this acceptance is not yet determinable. To date, phytase corn and Bt Rice are the only genetically modified major food crop seed products that have received safety certificate, yet to obtain approval for commercial seed sale in China. The limited GM technology approval therefore currently limits their competitive advantage.

Should GM seed products become approved by the government on a larger scale and begin to gain broader acceptance in the market, as we expect they will in the future, the large biotech companies would become more serious competitors. However, they will also continue to face numerous obstacles in competing with us, including the significant lead time associated with obtaining approval of a new seed (usually at least six years) and the need to establish effective sales, marketing and distribution networks to manage the large volume of small purchases that is characteristic of the Chinese market.

PRC Government Regulation

We operate our business mainly in China under a legal regime that consists, at the national level, of the State Council, which is the highest authority of the executive branch of the PRC central government, and several ministries and agencies under its leadership, including:

Ministry of Agriculture and its local authorities;

Ministry of Commerce and its local authorities;

State Administration of Foreign Exchange and its local authorities;

State Administration of Industry and Commence and its local authorities;

State Environmental Protection Administration; and

State Administration of Taxation, and the Local Taxation Bureau.

The following sets forth a summary of the significant regulations or requirements that affect our business activities in China and our shareholders’ right to receive dividends and other distributions from us.

PC Seed Law and Other Relevant Regulations

Participation in the crop seed business is a highly regulated activity in the PRC. In July 2000, China enacted its Seed Law, which became effective on December 1, 2000. The Seed Law was revised in August 2004. The Seed Law sets forth provisions concerning the development, government approval, production, and distribution of crop seeds. Various provinces have enacted regulations to implement the Seed Law. In September 2011, the Ministry of Agriculture published and implemented the Administrative Measures on Production and Business Operation Permission of Crop Seeds.

In November 2015, China's top legislature adopted revisions to the Seed Law which became effective on January 1, 2016. The revised law left the major-crop seed approval system unchanged, but has cut those that need to be approved by regulators before hitting the market from 28 kinds to five major seeds — rice, corn, wheat, soybean and cotton — so as to stimulate seed research innovation while guaranteeing China's food security. Producers for seeds other than the abovementioned five major ones will only need to register their products at the regulators said the new law.

Under the Seed Law and the new adopted administrative measures, for a company to engage in the seed business, it must obtain two licenses. One is the production license, which is issued at the provincial level, entitling the holder to engage in seed production in that province. The production license specifies the types of seeds that may be produced, the location of the production of the seeds, and the term of the production license. The second is a license to distribute seeds. Generally, a distribution license is issued by the government at the county level or above. A seed company must obtain a provincial-level license to distribute major crop seeds in that province. In addition, a national level license is necessary for a seed company to distribute seeds nationwide. Among other standards, the amount of the licensee’s registered capital determines if the distribution license is issued at the national or local level and the new adopted administrative measures have increased the registered capital requirements significantly.

to obtain a national distribution license, the licensee must have a registered capital of at least RMB100 million. More importantly, the new adopted administrative measures now requires the licensee to meet various qualitative and quantitative measures to prove the capability of vertically integrated operations of crop seed breeding, established seed production base, and well-organized distribution and service system.

to obtain a provincial license to distribute hybrid seed varieties, the licensee must have a registered capital of at least RMB30 million; and

to obtain a provincial license to distribute non-hybrid seed varieties, the licensee must have a registered capital of at least RMB5 million.

A separate license is required to import and export seeds. To obtain this license, the applicant must have a minimum registered capital of RMB30 million.

In September 2012, the MOA issued the first group of Breed-Produce-Distribute Vertically-Integrated Crop Seed Distribution Licenses (BPDVI License) based on the new administrative measures. Beijing Origin was included as a licensee among the first 32 crop seed companies that received the BPDVI License.

In addition to the license(s) needed to engage in the seed production and distribution business, each seed must undergo a stringent regulatory review before it may be sold in China. A seed production company cannot receive a license to engage in seed production, regardless of the level of its registered capital, until it has secured rights to an approved seed product.

The testing of seeds for approval can be conducted at the provincial level or the national level. However, seeds that have been approved at the provincial level can only be distributed in the province in which the approval was issued. An approval at the national level means the approved seed can be distributed nationwide.

The procedure for provincial examination and approval requires the applicant to:

submit the application to the provincial variety authorization committee;

Undergo two growing seasons of monitored growth in at least five different locations in the province. Seeds submitted for testing are planted together with control seeds, which is typically the most popular seed with farmers in the testing locations. Only seeds that have an increased yield of 8% or higher versus the control seeds and that rank in the top six among all seeds then being tested are cleared to proceed to the second year of testing, during which the results of the initial test season must be confirmed; and

go through one successful growing season of trial production, also in at least five different locations. If successful, a provincial examination certificate is granted and a public announcement is made.

The procedure for national examination and approval requires the applicant to:

submit the application to the national variety authorization committee;

complete two growing seasons of monitored production in at least five different locations. Only seeds that have 8% or higher yield compared to control seeds and that also rank in the top six among all seeds being tested in that cycle can proceed to the second year of testing; and

complete one successful growing season of trial production in at least five different locations.

Seeds developed outside of China must also follow the above procedures before they can be distributed in China.

The ability to process an application for approval is an important element of success, especially in view of the long timeframe associated with obtaining approval after the seed has been developed. Failures and delays in getting the approvals on a timely basis can seriously disrupt the planning that is critical to successful commercial production. A minimum of six years - three to obtain approval and three to develop the first crop of seed for commercial distribution - is required to bring a seed to the market after it has been developed. Because of our extensive network of seed-producing farmers, we have consistently been able to bring new products to the market within a short period of time. Other seed companies often take an additional season or more to bring an approved product to the market. This loss of an entire growing season can be a significant disadvantage for other companies.

Genetically Modified Organisms Safety Regulations – PRC

GM products continue to be controversial in China, and, to date, very few GM products have been approved. There is public concern regarding the potential for adverse effects of GM products on human health. In May 2001, the State Council of China enacted the Agricultural Genetically Modified Organisms Safety Regulation. The Ministry of Agriculture enacted the Agricultural Genetically Modified Organisms Safety Assessment Approach which became effective in July 1996 and was revised in March 2002. These enactments set forth provisions concerning the classification, testing, safety evaluation and identification of GM crop seeds.

Considering the degree of risk faced by humans, animals, plants, micro-organisms and the ecological environment, agricultural genetically modified organisms are divided into the following four levels:

Safety level I: no danger;

Safety level II: low danger;

Safety level III: moderately dangerous;

Safety level IV: highly dangerous.

Agricultural genetically modified organisms testing generally goes through three stages including an intermediate test, environmental release and production test. When finished with the production test, a company can apply for the Safety Certificate of agricultural genetically modified organisms.

Due to the fact that we are engaged in the GM seed business in China, we must comply with the Seed Law as well as the GM regulations described above.

International Expansion of Our Biotechnology Business

We plan to expand our biotechnology business internationally, with an initial focus on introducing our GM corn seed products into the United States. Currently, it is estimated that more than 90% of the corn grown in the United States market is genetically modified. The GM corn seed varieties need to be improved and altered over time to maintain efficacy of the traits and quality of the seeds because of variable weather and soil conditions, farming practices and changing resistance of weeds and insects to herbicides and pesticides. It appears, however, that farmers, when faced with changing conditions for, or growing resistance to pests and weeds to the benefits of, one variety of GM seeds, tend to stay with GM products changing over to new varieties, rather than abandoning GM products. We believe that this character of the GM corn seeds and the farmer’s behavior give us an opportunity to introduce our double stacked products into the United States market. We also believe that the United States market is more receptive to GM products, and the governments and farmers are more willing to promote and use GM seeds.

GM products in the United States are regulated under health, safety, and environmental legislation, mostly at the federal level under the Coordinated Framework for Regulation of Biotechnology. United States regulation focuses on the nature of the product rather than the process in which they are produced. Plant GM products are regulated by the United States Department of Agriculture’s Animal and Plant Health Inspection Service under the Plant Protection Act. GM products in food, drugs and biological products are regulated by the Food and Drug Administration under the Federal Food, Drug and Cosmetic Act and the Public Health Service Act. GM products that have pesticide and microorganism qualities are regulated by the Environmental Protection Agency pursuant to the Federal Insecticide, Fungicide and Rodenticide Act and the Toxic Substances Control Act. The importation of GM plants are regulated under the Plant Protection Act, which can be used to prohibit or restrict the importation, entry, exploitation and movement in interstate commerce of any plant that may result in the introduction of plant pests and noxious weeks within the United States. GM plants are considered potential plant pests, and therefore are subject to a notification process, permitting process and determination of non-regulated status before entry into the United States market.

Additionally, some states in the United States separately are establishing regulation with respect to GM plants. These regulations take a number of forms, including banning the planting and cultivating of GM plants, labeling requirements and permitting requirements. We may have to meet these requirements depending on the anticipated markets for our products.

We are currently exploring various strategies in connection with the introduction of our products into the United States market. Our products have no market presence in the North American market at this time. We will need to establish our brand reputation and introduce our products to the United States farmers via marketing and distribution networks. We may need to enter into licensing arrangements and/or arrangements with local distributors, independent retailers and dealers, and agricultural cooperatives and agents to market our brand and our products in different regions. We also will have to establish production facilities to the extent that we need to produce seeds to meet demand. We believe our products are highly valuable in the United States GM corn seed market and will attract the local distributors’ interests.

The United States seed market is highly competitive. It is estimated that Monsanto Company and E.I. DuPont de Nemours Inc. (Pioneer) dominate the corn seed market in the United States, with about 70% of the market. It is estimated that independent seed producers only have about 11% of the market. We believe that we will have to compete based on many different aspects of the United States market, including seed traits, overall seed quality, customer acceptance and service, and value added technology. Additionally, our ability to compete will be impacted by shifts in acreage planted with corn, commodity price changes, and weather conditions and planting practices. Our competitive position will also be affected by government farm subsidies and government programs that favor certain crops and seeds such as those that encourage and subsidize GM seeds to be used in marginal lands and draught prone areas.

Foreign Ownership Restrictions of Chinese Companies

Currently, China restricts foreign ownership of businesses in the seed industry. A foreign invested enterprises, or FIE that is engaged in the production, marketing, distribution and sale of food crop seeds is limited to 49% foreign ownership pursuant to the Regulation on the Approval and Registration of Foreign Investment Enterprises in Agricultural Seed Industry (effective on September 8, 1997) and the Foreign Investment Industrial Guidance Catalogue (effective on December 1, 2007).

In addition to restrictions in the conventional seed business, China forbids FIEs from engaging in the development, production and distribution of genetically modified corn seeds pursuant to the Foreign Investment Industrial Guidance Catalogue distributed by the Ministry of Commence of China in 2007. Furthermore, FIEs need to obtain government approvals to engage in the breeding of GM research and testing pursuant to the Agricultural Genetically Modified Organisms Safety Regulation.

Tax

Origin and State Harvest are both tax-exempted companies organized in the British Virgin Islands.

Our PRC Operating Company Subsidiaries are organized in the PRC and governed by PRC laws. PRC enterprise income tax, or EIT, is calculated based on taxable income determined under PRC accounting principles. Under the New EIT law, effective January 1, 2008, FIEs and domestic companies are now subject to a uniform EIT rate of 25% and the tax exemption, reduction and preferential treatments which were applicable only to FIEs were ended. However, any enterprises established before the promulgation of the New EIT law in 2008 that were entitled to preferential tax treatments for a fixed period continued to be entitled to such preferential tax treatment until the expiration of those periods.

The applicable tax rate of the PRC New EIT to Beijing Origin is 15% since January 1, 2008, because Beijing Origin has been approved as new technology enterprises and enjoys the reduced New EIT rate of 15% while our other operating companies are subject to the New EIT at a uniform rate of 25%. The preferential treatment in EIT to Xinjiang Origin is 2 years of exemption and 3 years of half reduction from January 1, 2012 and December 31, 2016. Xinjiang Origin is currently in the status of ‘half EIT’ for the year ended September 30, 2016. Linze Origin is entitled to a preferential tax rate of 15% from January 1, 2016 and December 31, 2016.

Pursuant to the Provisional Regulation of China on Value Added Tax, or VAT, and their implementing rules, all entities and individuals that are engaged in the sale of goods, the provision of repairs and replacement services and the importation of goods in China are generally required to pay VAT at a rate of 17% of the gross sales proceeds received, less any deductible VAT already paid or borne by the taxpayer. Pursuant to the Notice of the Ministry of Finance and the State Taxation Administration on Exempting the Value Added Tax for Agricultural Material, self-produced agricultural products sold by agricultural producers shall be exempt from VAT. Pursuant to an approval document received from Beijing Haidian District State Tax Bureau, Beijing Origin has been entitled to exemption from VAT since August 1, 2001. Denong has also been exempted from VAT since January 1, 2006.

Dividend Distribution

Under PRC law, FIEs in China, including Origin Agritech may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting principles. In addition, FIEs in China are required to set aside at least 10% of their after-tax profit based on PRC accounting standards each year for their general reserves until the accumulative amount of such reserves reaches 50% of registered capital. These reserves are not distributable as cash dividends. The Board of Directors of a FIE has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, and expansion (development) funds which may not be distributed to equity owners except in the event of liquidation. The amount set aside as of September 30, 2015 and 2016 were RMB24,789 and RMB24,789, respectively. We are currently in compliance with all applicable PRC laws and regulations relating to our business.

Organizational structure.

Origin Agritech is a holding company with no operations of its own. We conduct our operations in China primarily through our PRC Operating Companies. The following diagram illustrates our current organizational structure:

(1)

We do not have any ownership interest in Beijing Origin, Henan Origin, Changchun Origin, Denong, Linze Origin and Xinjiang Origin, rather, through State Harvest, we have entered into a series of stock consignment agreements for Beijing Origin, Henan Origin and Changchun Origin with their respective shareholders which provides us control of Beijing Origin and its subsidiaries.

The table below lists each of our group companies, their place of incorporation and their percentage of ownership interest:

	Place of incorporation	Percentage
Name	(or establishment)/operation	of ownership

State Harvest	British Virgin Islands	100% owned by Origin

Origin USA	Des Moines, Iowa, USA	100% owned by Origin

Origin Biotechnology	Haidian District, Beijing, PRC	100% owned by State Harvest

Beijing Origin	Haidian District, Beijing, PRC	97.96% controlled by State Harvest

Henan Origin	Zhengzhou, Henan Province, PRC	92.04% owned by Beijing Origin

Changchun Origin	Changchun, Jilin Province, PRC	99.83% owned by Beijing Origin

Denong	Chengdu, Sichuan Province, PRC	98.58% owned by Beijing Origin

Linze Origin	Linze, Gansu Province, PRC	100% owned by Beijing Origin

Xinjiang Origin	Jinbo City, Xinjiang Province, PRC	51% owned by Beijing Origin

Stock Consignment Agreements

As discussed above in “Foreign Ownership Restrictions,” under Chinese law, foreign ownership of businesses engaged in the breeding of new varieties, development, production, marketing, distribution and sale of hybrid food crop seeds is limited to 49% pursuant to the Regulation on the Approval and Registration of Foreign Investment Enterprises in Agricultural Seed Industry and The Foreign Investment Industrial Guidance Catalogue. State Harvest, as a non-Chinese corporation, may not directly own more than 49% of any of the PRC Operating Companies. However, Chinese law does not forbid the owner of stock to consign rights associated with the stock, as long as the owner does not transfer title to the stock. Moreover, if we engage in the research and development of genetically modified seed products, then foreign entities are not currently permitted to own any of the seed production company.

To gain control over the PRC Operating Companies (other than Origin Biotechnology, which is not subject to the 49% ownership restriction and which State Harvest entirely owns), State Harvest entered into a series of stock consignment agreements with shareholders of those companies or, in the case of Denong and Xinjiang Origin, with Beijing Origin, the parent of those entities. These agreements consign to State Harvest or Beijing Origin all of the rights of ownership of the shares involved other than legal title, effectively transferring the control of the shares subject to the agreements to State Harvest. Those rights include the right to manage in all respects the shares held in title by the shareholders that are parties to them, including all shareholder rights to call meetings of shareholders, to submit shareholder proposals, to elect directors, to vote the shares on all matters and to exercise all other rights of a shareholder in respect of the shares consigned. More specifically, the consignment agreements include giving the right to select, replace and increase the number of the directors and supervisors, recommend new directors and supervisory personnel and to exercise management rights, controlling rights and decision-making power over the shares of the subject company. Additionally, the shares of the PRC operating companies are pledged.

Each title holder of these shares has agreed not to interfere with State Harvest’s or Beijing Origin’s exercise of its rights and to cooperate fully and promptly to permit them to exercise its authority over the consigned shares. This includes all limitations on the ability of the consignee to transfer or dispose of the shares to someone other than to the consignee, give guarantees using the shares, consign the shares to another, alter the ownership proportion in any way, dispose of any rights in the ownership of the shares, and agree to any debt or restructuring of the shares. The consignee has the right to take all action in respect of the consigned shares to avoid any damage or infringement of its rights, including in the event of the consigning shareholder’s bankruptcy. The consignee, under the agreements, has virtually all of the property rights of the consigned shares, including the profits, interests, dividends, bonuses and residual assets, except for legal title. If in the future any stock subject to the consignment agreements can be legally transferred to State Harvest then, without further action by the consignee, it shall be transferred to the consignee in whole or in part for no additional consideration to the consigning shareholder.

The stock consignment agreements also provide that if and when the restriction on foreign ownership of food production companies to 49% is removed or the allowed ownership percentage is increased, the consigned shares will then be transferred to the consignee. If not, the consignment agreements continue in full force and govern the consignee’s rights over the shares.

The agreements are subject to force majeure limitations. The term of the agreements is initially three years, but they are automatically renewed indefinitely until both the consignee and the consignor agree to terminate. There is no unilateral right of termination except in the event of a breach, in which event the non-breaching party may cancel the consignment agreement after notice and a reasonable cure period has passed and the breach continues. The consigning shareholders have warranted their authority to enter into the agreements and that the consignee has the exclusive right to control the shares that are subject to the consignment agreements. The agreements are binding on the successors, assignors and heirs of the respective consigning shareholders.

The importance of the stock consignment agreements is that, under U.S. GAAP, the consignee corporation may consolidate the financial reporting of those PRC Operating Companies whose shares are subject to stock consignment agreements in the manner of wholly and majority owned subsidiaries and enjoy the economic benefits of such subsidiaries. Each stock consignment agreement is subject to enforceability and other limitations of the laws and rules of PRC. The consignee may not transfer the consignment agreement, except as permitted by PRC law. However, we may transfer our interest in the intermediate consignee corporation without limitation. If there is non-performance by the shareholder or some or all of an agreement is unenforceable, we and the consignee may lose the benefits of the agreements and suffer severe economic loss as a result. No assurance can be given that the consignee will be able to enforce its rights vis-à-vis the consigning shareholders in the courts of the PRC, and we are not aware of any cases where these types of stock consignment agreements have been interpreted by PRC courts.

We believe that these agreements are enforceable under current PRC law. However, none of these kinds of agreements have yet been subject to judicial review or interpretation. The consignment agreements provide that if there is any interpretation of the terms by a PRC court, the agreements should be construed in such a way as to give the consignee as much of the full and actual ownership and full beneficial rights and benefits of the consigned stock as is possible, so as to approximate full ownership under all applicable law.

In the event that the consignment agreement is not enforced or is terminated because of a breach by the consignee that is not cured, the right to the underlying stock would be lost and the economic rights would be terminated. However, such a termination would not terminate the separate agreements entered into by Beijing Origin, Henan Origin and Changchun Origin to transfer technology from those companies to Origin Biotechnology, so even in the event of a termination of a consignment agreement, the consignee would continue to own the applicable PRC entity’s technology and intellectual property through Origin Biotechnology, its wholly owned subsidiary (see “Technical Service Agreements” below). Also, the termination of one shareholder’s consignment agreement does not cause the termination of any of the other consignment agreements, so it would only result in a reduction in consigned shares under the consignee’s control.

The following is a table of the parties to the consignment agreements

PRC Operating Company	Consigning Owner	% of Shares Consigned
Beijing Origin	Gengchen Han		34.40	%
	Yasheng Yang		28.68	%
	Liang Yuan		25.80	%
	Yuping Zhao		3.99	%
	Weidong Zhang		3.13	%
	Weicheng Chen		1.96	%
			97.96	%
Changchun Origin	Beijing Origin		99.00	%
	Gengchen Han		1.00	%
			100.00	%
Henan Origin	Beijing Origin		92.04	%
	Yingli Zhang		4.08	%
	Yasheng Yang		3.88	%
			100.00	%

Technical Service Agreements

All of the intellectual property rights of Beijing Origin, Changchun Origin and Henan Origin are held by Origin Biotechnology pursuant to technical service agreements with each of these respective entities dated December 25, 2004. The purpose of this arrangement was to permit better management and licensing of the intellectual property that the three assignors developed. Under the technical service agreements, Origin Biotechnology will provide technical research and production and distribution services to Beijing Origin, Changchun Origin, and Henan Origin. These services include support in the research and development of agricultural seeds, analysis of breeding technologies, environment and feasibility suggestions, technical tutorials and breeding field supervision, market analysis and seed promotion, insect prevention and technical education to distributors and farmers. The fees payable under the agreements are variable, depending on differing formulae for different categories of seeds, and are to be charged on the sales of certain seed products in each fiscal year. These agreements are considered intra-company transactions.

Master Transaction Agreement

In September 2016, Origin entered into a Master Transaction Agreement to sell its seed production and distribution business to Beijing Shihui Agricultural Development Co.Ltd. (“Shihui”). The overall transaction will be conducted in two steps. The first step will be the sale of the equity held by Beijing Origin of each of the Denong, Changchun Origin and Linze Origin companies, and the second step will be the sale of a company holding the Zhengzhou Branch Assets and the office building in Beijing. Beijing Origin will also orchestrate with the parties that own minor percentages of Changchun Origin, not now owned by Beijing Origin, to purchase their ownership equity amounts so that Shihui acquires from Beijing Origin all of the equity of Changchun Origin in the first step of the transaction. The second step requires Beijing Origin to effect a restructuring to form a company to own the current office building located in Beijing, PRC and certain other assets (together the “Zhengzhou Branch Assets”), which company will be sold to Shihui so as to transfer the building and assets to Shihui. By separate agreement Shihuiwill enter into license arrangements to pay Beijing Origin a royalty for the present and future seed portfolio and a technology access fee for the research and development effort that Beijing Origin will provide going forward in the areas of product discovery and development, hybrid registration, trait integration and intellectual property protection.

At the first closing, Shihuiwill pay to Beijing Origin RMB200 million (approximately US$30,000,000), for the 98.58% equity ownership interest in Denong, 100% equity ownership interest Changchun Origin and 100% equity ownership interest in Linze Origin (together the “VIE Subsidiaries”). The first closing is conditioned (among other things) on Beijing Origin acquiring the current minority percentage ownership of Changchun Origin that is held by the Company’s Chairman, so as to deliver to Shihui 100% of the equity ownership of Changchun Origin. The minority interest of Denong will continue to be held by two third parties and will not be sold to Shihui. At the second closing, Shihui will pay to Beijing Origin RMB190 million (approximately US$28,500,000) and the RMB10 million (approximately US$1,500,000) deposit, which has been received in September 2016, will be used for settle for the 100% ownership interest in an entity formed by Beijing Origin as part of its reorganization to hold the Zhengzhou Branch Assets. The total consideration to be paid to Beijing Origin will be RMB400 million (approximately US$60,000,000).

Shihui will assume the outstanding liabilities of the acquired subsidiaries and the Zhengzhou Branch Assets, except for certain outstanding bank loans. The current bank loans aggregating RMB100 million (approximately US$ 15,000,000) will be transferred to Beijing Origin, subject to the approval and agreement of the bank lenders. If the bank loans cannot be transferred, then the purchase price will be reduced for the outstanding amount due, but any guarantees provided by Dr. Han Gengchen will be terminated without liability to Beijing Origin or Dr. Han.

Beijing Origin has agreed to use its reasonable best efforts (i) to complete the restructuring of the company so as to be able to complete the second closing, to acquire the portion of Changchun Origin that it does not own, and to transfer certain assets, the Linze Branch Assets, to Linze Origin. Additionally, all intercompany accounts between Beijing Origin and its retained affiliates, on the one hand, and the acquired subsidiaries, on the other hand, regardless of any due dates, existing prior to the first closing will be paid in full before or at the first closing. Shihui and Beijing Origin will negotiate separate license agreements regarding Shihui’s continued use of the trademarks and trade names owned by Beijing Origin and licensing designated seeds developed by Beijing Origin or Beijing Biotechnology. Origin Agritech and Beijing Origin are jointly responsible for all transfer, documentary, sales, use, stamp, recording, value added, registration, conveying taxes and fees in connection with the sale of the various types of assets to Shihui.

Beijing Origin has agreed that for ten years after the closing, without the written consent of Shihui, it and its affiliated entities will not directly conduct any business in the distribution of crop seeds in the PRC, except for the distribution of crop seeds in Xinjiang province by Xinjiang Origin. This limitation will not prohibit Origin, Beijing Origin or Beijing Biotechnology from conducting the businesses of crop seed licensing, transgenic materials licensing, transgenic traits licensing or other activities related to its intellectual property in the PRC. This non-competition provision will terminate if more than 50% of the equity interest or assets of Origin Agritech are acquired by an independent third party during the restrictive period.

To be able to complete the transaction, the transaction will need to be approved by our shareholders. Also, Beijing Origin will be required to obtain waivers of a right of first refusal to purchase the Denong shares being sold to Shihui held by Leshan Agricultural Science Institute and Sichuan Neijiang Agricultural Science Institute, each of whom currently own a small percentage of the shares of Denong.

Property, plant and equipment.

Our principal executive offices are located in the Changping District in Beijing where we own approximately 10,320 square meters of office space, and the right to use approximately 19,250 square meters of land. The land uses right, and the property, plant, and equipment of our headquarters in Beijing currently secures a loan of RMB60 million. This loan was extended by China Construction Bank. The office building in Beijing is expected to be sold to Buyer at the Closing of the Sale.

We own or lease manufacturing facilities, laboratories, seed production and other agricultural facilities, office space, warehouses, research stations and breeding centers in Gansu, Henan, Liaoning, Jilin, Inner Mongolia, Yunnan, Jiangsu, Shanxi, Sichuan, Hainan, Hubei, Anhui, Hunan, Jiangxi and Xinjiang provinces, and in the Tongzhou District of Beijing. These facilities include approximately 457,000 square meters of land, including additional 200,000 square meters of land in Bole, Xinjiang Province, and approximately 22,500 square meters of office. The leased facilities are rented at regular commercial rates, and management believes other facilities are available at competitive rates should it be required to change locations or add facilities.

We leased an office space in the United States at 666 Walnut Street, Des Moines, IA 50309. The office space is approximately 87 square meters and is rented at the regular commercial rate. The Des Moines location serves as our North America operations and international relations center and our Chief Executive Officer, Chief Financial Officer and a few independent contractors are located in the Des Moines location.

From 2012 to date, our capital expenditures consisted primarily of construction and purchase of plant and equipment, which are located in the PRC and financed mainly by bank borrowing. The Xinjiang Origin’s plant was the major investment in this period. The table below sets forth the amount of our capital expenditures for the periods shown:

For the year ended
September 30,

2014

2015

2016

RMB

USD

26.01 million

20.36 million

16.96 million

2.54 million

We believe that our existing facilities are adequate to conduct our current and foreseeable future business operations.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not Applicable

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion of our financial results of operations and condition is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in this Annual Report on Form 20-F. This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect,” “anticipate,” “intend,” “believe,” or similar language. All forward-looking statements included in this Annual Report are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Actual results could differ materially from those projected in these forward-looking statements. In evaluating our business, you should carefully consider the information provided under the caption “Risk Factors” in this Annual Report on Form 20-F. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.

Operating Activities and Results.

Corporate Strategies Origin started as a hybrid corn seed company in 1997 as the first private seed company in China. With the success in and strong cash flow from the hybrid corn seed business, Origin started its seed biotechnology research in early 2000’s and established Origin Life Science Center in 2005. The Company has since focused on the seed biotech product development and funded the biotech R&D with its free cash flow from the traditional hybrid seed business.

After more than 10 years of seed biotech development, the Company is now essentially becoming a biotech company focused on its GMO (Genetically Modified Organism) technologies and product pipelines that are waiting to be commercialized. At the same time, the Company has already built up state-of-the-art seed production bases and solid distribution channels in China and continues to generate cash flow from the hybrid seed business.

With the success in biotech product development, especially the successful field trials of the stacked traits of insect resistance Bt genes and glyphosate tolerance genes, the Company announced in June, 2015 its strategies going forward. The Company is now reorganized into two business units: Biotech & Product Development under State Harvest and Seed Production & Distribution under Beijing Origin.

Under the new corporate structure, the Company plans to enter the seeds and traits market in North America with its GMO product pipelines under State Harvest represented by its first generation FEED/ENVIRONMENT trait phytase transgenic corn, first generation WEED(herbicide tolerance) tolerance corn seed, and its first generation WEED/PEST stacked traits of herbicide tolerance and insect resistance. While waiting for the approval for commercial planting in China, State Harvest plans to introduce these agri-biotech products into the United States seed market. In addition, State Harvest has also built a solid capacity for breeding technologies, including marker-assisted breeding and doubled haploids technologies, which along with its germplasm resources, will allow State Harvest to become a global seed technology company.

Beijing Origin, the current operating entity in China, focuses on the seed production and distribution business in China.

Biotechnology Progress While we continue to advance our GMO product pipelines with phytase traits and glyphosate tolerance technologies, the most significant progress made in the last several years is in the new biotech pipelines of stack traits of insect resistance (Bacillus Thuringiensis, or Bt) and herbicide tolerance. 2016 marks the fifth year that our double stacked products of Bt and glyphosate tolerance genes were tested in the field against the technologies currently used in the global market. Additionally, we have started to introduce triple stacked and quadruple stacked traits of Bt and herbicide tolerance genes.

In 2016, Origin completed the laboratory and field production trials for its first generation PEST/WEED trait. In these trials, molecular characteristics, field efficacy, environmental safety and food safety were thoroughly evaluated and the results met critical biosafety regulation standards. Dossiers summarizing the laboratory and field-test studies internal to Origin and in collaboration with third party research labs were submitted in November 2016 to request Phase 5 Safety Certificate approval. It is anticipated that in 2017, Origin’s first generation WEED and PEST/WEED traits will be incorporated into the elite corn inbred lines of Origin and into the products of leading Chinese seed industry partners preparing for future regulatory approval and commercialization

Biotechnology Corn Seed Product Pipelines and Regulatory Approval in China

For the double stacked Bt and GT genes, our repeated field testing in both our northern testing site (for summer testing) and southern testing site (for winter testing and with heavy natural insect pressure) has shown very positive and stable insect resistance results. We believe the Bt gene (Cry1Ah) used in our double stacked traits could be highly valuable in the North American corn seed market, a major reason we plan to enter the U.S. corn seeds and traits market.

Origin’s first generation biotechnology trait for insect resistance and herbicide tolerance (PEST/WEED) has been successfully exported from China to the U.S. with permits from the Chinese and U.S. governments. This initiates the global regulatory approval process and represents the first export of such technology by a Chinese company to a strategic partner based in the U.S. Origin has successfully requested and received the first transgenic corn seed export permit from China’s Government agencies, following required protocols. Specifically, our U.S. collaborator has secured an importation permit for these seeds from the United States Department of Agriculture(“USDA”). In late 2016 corn seeds containing our lead trait event and a back-up were successfully shipped from China to the US and planted in a USDA designated greenhouse.

Corn seeds carrying Origin’s insect resistance and herbicide tolerance technologies developed in China will enter collaborative field experiments next summer to conduct testing required by the USDA, Environmental Protection Agency and the Food and Drug Administration.

Based on our successful development in biotech seed products, we have continued to take steps to secure our biotechnologies intellectual property protections. We believe these patents will strengthen our position in the genetically modified seed technologies and will allow us to maintain our leading position in China and enter the global biotech traits market.

Operating Improvement Progress

On the operating improvement front, we were able to overcome the challenges in another difficult year in the seed industry in China by significantly reducing the operating costs and managing our inventory reduction efforts.

Following the corporate restructuring in fiscal year 2012 and operational improvements in fiscal years 2013, 2014 and 2015, we achieved further significant improvement in operating efficiency and cost reduction in fiscal year 2016. As of September 30, 2016, Origin has a total of 389 employees, compared with 856, 713, 678, 531 and 430 employees as of September 30, 2011, 2012, 2013, 2014 and 2015, respectively. Excluding restructuring cost , expenses related to expansion of operation in North America and one-time stock compensation expense,the G&A costs in fiscal year 2016 was RMB38.1 million (US$5.7 million), compared to RMB86.7 million, RMB77.6 million, RMB66.2 million, RMB46.4 million and RMB40.7 million in FY2011, FY2012, FY2013, 2014 and FY2015, respectively. The G&A expenses as the percentage of sales declined from 15.3% in FY2011 to 11.3% in FY2016. We believe our cost reduction efforts were important to the improvements in our financial performance during the challenging year.

	FY2011		FY2012		FY2013		FY2014		FY2015		FY2016
Number of employees at the end of period		856		713		678		531		430		389
General & Administrative expenses¹, RMB in thousands		86,748		77,585		66,153		46,428		40,684		38,079
G&A expenses as the percentage of revenue, %		15.3		14.1		13.7		11.2		10.8		10.9

¹The general & administrative expenses in FY2016 excluding restructuring cost, expenses related to expansion of operation in North America and one-time stock compensation expense.

Our cash flow from operating activities had a significant recovery as we manage our inventory and sales efforts product by product. Net cash provided by operating activities was RMB47.9 million (US$7.2 million) for the fiscal year ended September 30, 2016 compared with net cash provided of RMB52.2 million and net cash used of RMB85.6 million for the fiscal year ended September 30, 2015 and 2014, respectively. We believe that the progress that the Company has made in the operating improvements will improve the Company’s cash flow from operating activities in the next years.

Overall Analysis

Total revenues for the fiscal year ended September 30, 2016 were RMB335.3 million (US$50.2 million), a decrease of 11.0% from RMB376.6 million during the fiscal year ended September 30, 2015. Overall, the year-over-year decrease in revenues was mainly due to the lower volumes for the corn and rice seeds as the result of market oversupply and increasing competition.

Corn seed accounted for 91% of our overall sales. Total revenues from corn seeds were RMB306.4 million (US$45.9 million) in fiscal year 2016, compared with RMB331.3 million in fiscal year 2015. Revenues from the rice product line for the year ended September 30, 2016 decreased to RMB19.7 million (US$3.0 million) from RMB29.2 million in the fiscal year 2015. Sales of canola seeds decreased to RMB8.7 million (US$1.3 million) in fiscal year 2016 compared to RMB15.7 million in fiscal year 2015. Revenues of Biotech & Product Development,related to conversion and testing fees from DuPont Pioneer and KWS SAAT SE, for the year ended September 30, 2016 increased to RMB 0.5 million (US$0.1 million) from RMB 0.3 million in fiscal year 2015.

Operating expenses for the fiscal year ended September 30, 2016 were RMB137.3 million (US$20.6 million), representing an increase of 23.5% from RMB111.2 million in the fiscal year 2015, which was mainly because of restructuring cost,expenses related to expansion of operation in North America and one-time stock compensation expense of RMB24.08 million (US$3.6 million). Selling and marketing expenses for the fiscal year ended September 30, 2016 were RMB38.1 million(US$5.7 million), a decrease of 4.8% year-over-year due mainly to the decline in salary as a result of decrease in headcount.

Operating loss for the fiscal year ended September 30, 2016 was RMB61.3 million (US$9.2 million), compared with operating income of RMB1.3 million in fiscal year 2015. The decrease in operating results was mainly due to decline in revenue and rise in operating expenses as a result of corporate restructuring.

Net loss attributable to Origin for the fiscal year ended September 30, 2016 was RMB65.6 million (US$9.8 million) compared to the net loss of RMB13.8 million for the fiscal year ended September 30, 2015.

Net loss per share was RMB(2.87) or US$(0.43) for the fiscal year 2016, compared with net loss per share of RMB(0.61) in fiscal year 2015.

As of September 30, 2015 and 2016, we had approximately RMB66.0 million and RMB54.5 million (US$8.2 million), respectively, in cash and cash equivalents. Total borrowings as of September 30, 2015 and 2016 were RMB285 million and RMB237 million (US$35.5 million), respectively. During fiscal year 2016, net cash provided by operating activities was RMB47.9 million (US$7.2 million) compared with RMB52.2 million for the fiscal year ended September 30, 2015. Net cash used in investing activities was RMB6.5 million (US$1.0 million) for the fiscal year ended September 30, 2016 compared with RMB20.4 million for the fiscal year ended September 30, 2015. Net cash used in financing activities was RMB48.8 million (US$7.3 million) for the fiscal year ended September 30,2016 compared with RMB9.5 million for the fiscal year ended September 30, 2015. The borrowing was mainly related to support the operations of Beijing Origin and Linze Origin, which had RMB210 million (US$31.5 million) bank loans for settlement of seed purchases, and RMB27.1 million (US$4.1 million) used for the corn seed production facilities in Xinjiang Origin and the Company’s working capital.

Research and Development Activities

Origin was built on its R&D platform and we believe a commitment to R&D is essential to the growth of the Company, particularly as we orientate our operations to biotechnology. During fiscal year 2016, we continue to make significant progress both in our conventional hybrid crop seed development programs and biotechnology R&D activities.

Key developments for Origin’s GM corn seeds:

Phytase: Four commercial hybrids with phytase traits have completed a number of variety production tests. These varieties with phytase traits have been submitted to the Chinese government (the Ministry of Agriculture) to obtain variety safety certificates. We are waiting for the final approval from the Chinese government.

Glyphosate Tolerance: One GM glyphosate tolerance event (the unique DNA recombination event that took place in one plant cell) completed a second year Phase 4 – Production Test and the summary of test results has been submitted to the MOA for the Phase 5 – Safety Certificate.

Glyphosate(G2) + Bacillus Thuringiensis (Bt): The double stacked traits of insect resistance and glyphosate tolerance genes have completed the Production Test (Phase 4). The lab and field tests conducted internally and in collaborations with 3^rd party research institutes and universities that are certified by MOA showed consistently positive performance same as that we have observed in the tests of previous years. The molecular characteristics, field efficacy of insect resistance and herbicide tolerance traits, agronomic performance, environmental safety, food safety of the transgenic event were thoroughly evaluated. These results meet the standards of the government GM regulations. The summary of these results has been submitted to MOA for safety certificate (phase 5).

Triple and Quadruple Stacked Traits: Stacked triple and quadruple traits of insect resistance and herbicide tolerance genes with different resistance mechanisms have been under intermediate testing. These traits are expected to increase herbicide tolerance and expand the insecticidal spectrum and durability. More than 3,000 events of the stacked traits are being screened in a greenhouse environment of Phase 1-Laboratory Research. Backcrossing Programs: Multiyear programs of backcrossing of our biotech products, including phytase, glyphosate tolerance, and stacked traits of Bt and G2 genes, into corn varieties from our own product lines as well as several product lines of multinational companies are progressing well. Successful backcrossing products into our own varieties are and will be submitted for government approvals in due course.

Hybrid Corn Seed Development Program:

The most significant development in the hybrid corn seed approval process in China is the introduction of the Corn Seed Green Pass Test System. Origin is now one of a few major seed companies in China able to use the national level Corn Seed Green Pass Test System. Under this system, Origin can introduce to the market our new hybrid varieties with the field tests conducted by us at our own test sites following aprotocol developed by the government. This is an important step to accelerate new product introduction to the market.

Previously in China, new hybrid seed varieties needed to go through an official approval process prior to sales. This approval process typically involves three to four years of registered trials and normally proceeds according to the following sequential steps:

Pre-Registration ¨ Registration Trial 1 ¨ Registration Trial 2 ¨ Field Demo ¨ Approval

Each step leading up to approval takes approximately one year unless it needs to be repeated. In some localities the Registered Trial 2 and Field Demo steps are treated as one and the same step.

In the standard official approval process, the government test sites are limited by the size of test fields. So seed companies are limited in the amount of varieties submitted for testing. Under the new Corn Seed Green Pass Test System, Origin can conduct testing of much larger pools of varieties even in the early stage, which allows us to better screen the varieties from our breeding programs and introduce the best varieties earlier.

During fiscal year 2016, the second year under the new Green Pass Test System, we had more than 36 tests going through different stages of the testing stages. As the results of multiyear testing, we received registration approval for 2 of our new varieties. During the fiscal years 2014 to 2016, we received a total of 17 approvals for our corn seed hybrid products.

Hybrid Corn Seed Registration and Approval

					Registration
	Pre-Registration	Registration	Registration		Trial 2 +
Year	Trial	Trial 1	Trial 2	Field Demo	Field Demo	Approved

2011	72	16	5	5	4	0
2012	33	18	5	5	3	3
2013	44	12	3	6	2	7
2014	18	6	3	5	3	8
2015	13	27	4	3	N/A	7
2016	9	13	6	5	3	2

Research and Development Outlook

With the continued growth of the Chinese economy, demand for higher levels of food production and agricultural products have increased substantially, and we expect that this demand will continue. This demand is being driven by several factors: by consumer desire for high-quality food products, increasing usage of agricultural products as bio-fuels, and dwindling arable land. The Chinese central government has taken a series of measures to deal with these issues. One of the approaches has been the approval of GM plant varieties. Compared with conventional varieties, the advantages of GM varieties include higher yield, higher quality and increased disease and weed resistance. Farmers plant GM varieties to save time and cost, while reducing the amount of field work. GM corn, soybean, and cotton have been widely used in the United States and in many other developed countries to guard against insect damage and to increase crop yields. A 10% to 15% increase in crop yields with the successful application of biotechnology has been routinely reported by Monsanto and Syngenta. According to the U.S. Department of Agriculture, the planted area for GM corn increased from 160,000 hectares in 1996 to about 35 million hectares in 2013 in the United States representing 90% of the corn grown. Since receiving approval from the Chinese government, cotton has been genetically modified to guard against damage from insects, such as the borer, and these varieties are now widely planted throughout China. GM cotton is widely accepted in the Chinese market. The Chinese authorities have taken preliminary steps in approving GM crop seed research and commercialization to meet the increasing demand for agricultural food products, as evidenced by the approval of our phytase corn and BT rice seed. We expect the Chinese authorities to continue in this direction, albeit with caution.

In the past several years, our focus on biotechnology research has continued to accelerate significantly. We initially were approved for the first GM corn seed crop in China. Our glyphosate-tolerant gene has been approved to advance to the next phase of development. We seek to become the leader in biotechnology and GM product commercialization in China. We expect that GM crop seeds will eventually gain wide acceptance in China and for this reason we have pursued biotechnology seed development and invested in genetic modification programs that focus on improving yields, product quality, and insect resistance and disease tolerance for corn seeds and other selected crop seeds. The development of biotechnology attributes remains a cornerstone of our business strategy. As a result, a significant proportion of our management resources are dedicated to building these capabilities across the Company for the introduction into the PRC domestic crop seed market.

During the past few years, we have established several plant genetic engineering technology platforms. These include introducing traits such as herbicide tolerance, insect resistance, nitrogen efficiency, and drought stress tolerance into inbred corn lines. We seek to efficiently utilize modern biotechnology in China and aim to expand beyond China.

Currently, we possess exclusive rights to five genetic traits in various stages of testing and development. We have continued to build our technology platform based upon cooperative relationships with top universities and research institutes in China. These cooperative arrangements allow us to limit our own risk exposure and fixed cost structure and maximize our flexibility in developing applicable technology.

Under government regulations, a registrant company must follow the following procedures prior to registration and marketing GM crops in China. Each step (except laboratory research) has an associated reporting and approval process established by the Ministry of Agriculture, the clearance of which is necessary in order to proceed:

Laboratory Research: defined by genetic manipulations and research work conducted under a control system within laboratory;

Intermediate Testing Phase: a small-scale test conducted under a regulated control system;

Environmental Release Test: a medium-scale test conducted under natural condition by taking relatively secure measures;

Production Test: a relatively large-scale test before production and application; and

Obtaining the safety certificate on genetically modified organisms

Since we are considered a domestic Chinese company, we can proceed through all five phases of the GM approval in China, while international entities are restricted to only phrase one, and currently forbidden to proceed to phases two through five. We have already had several of our products submitted to testing in phases two through four, and one product has completed the five-step process. We are the first company to obtain approval to produce and sell GM corn seeds in China.

If GM seed products are approved by the government on a broader scale and begin to gain widespread acceptance in the market, which we expect will occur in the future, large international biotech companies could likely become more serious competitors. However, they may continue to face numerous obstacles in competing with us in China. Foreign companies are currently prohibited from developing or producing genetically modified plant seeds, breeding livestock and poultry, or producing aquatic seed according to Catalog Guiding Foreign Investment Industries (distributed by Ministry of Commence of China). As a result, we believe we will continue to be in a strong competitive position in the genetically modified segment of the seed market when it becomes meaningful and legally permissible to do so.

As part of our internal efforts, we developed genetic markers to enhance the selection of disease resistance corn lines to accelerate the breeding process. In addition, we continued to utilize our previously implemented data mining infrastructure to search for stable and high-yielding hybrids. Our business model draws from existing and new technologies using both conventional breeding and advancement in biotechnology. We aim to build upon our current hybrid base where we have accumulated parental seeds with advantageous traits optimized to local soil conditions.

Our accomplishments with hybrid crop seeds provide a foundation to launch into a range of GM products. Our agronomists and technical support provide the platform for us to educate farmers on the benefits of GM products. Our accumulated germplasm from conventional breeding techniques forms a basis to transform our genetic traits. Our high-end processing, production, and quality control will continue to ensure high-quality seed production. Our nationwide footprint and comprehensive data mining infrastructure allow for the matching of products with their most appropriate locations throughout China.

Key factors affecting our growth, operating results and financial condition

We expect our future growth, operating results and financial condition to be driven and affected by a number of factors and trends including but not limited to:

our ability to strategically manage our growth and expansion, organically or through mergers and acquisitions. If we do not manage our growth effectively, our growth may slow down and we may not be able to achieve or maintain profitability;

our ability to fit acquisitions and our corporate reorganization into our growth strategies to generate sufficient value to justify their cost;

our ability to develop new products through research and development;

our ability to expand internationally and develop our business in different regulatory, distribution and competitive markets;

our ability to evaluate our business lines and take action to discontinue aspects of our business as well as to take cost savings measures for the future growth of the company;

our ability to partner or joint venture for the creation of more advanced bio-technology products;

market fluctuations in the demand for and supply of crop seeds in China and our ability to anticipate market demand and adjust our volume and product mix to maximize revenues and maintain sufficiently high margins to achieve and maintain profitability;

our ability to continue to license or acquire crop seeds from third party developers and our ability to develop proprietary crop seeds;

our ability to continue to effectively market and distribute our core products through active agronomic assistance;

future consolidations in the crop seed industry in China that may give rise to new or strengthened competitors;

the possibility that the crop seed industry in China may favor genetically modified seeds over hybrid seeds, and our ability to develop, produce, market, and sell such products;

the possibility of major natural disasters in China, which may have an adverse impact on our business and results of operation, as there is currently no agriculture insurance available in China against natural disasters;

the Chinese government’s continuing support for the growth and development of the agriculture sector;

the impact of regulation affecting our industry;

our benefits from certain government incentives including tax incentives, the expiration of which, or changes to which, could have an adverse effect on our operating results;

the possibility that excess supply of one or more of our products in our markets may drive down prices and reduce our margins, especially if we are unable to sufficiently differentiate our products from those of our competitors thereby enabling us to charge higher prices; and

our ability to correctly estimate growers’ future needs, and match our product varieties and production levels to meet those needs.

Revenues

The most significant factor that affects our sale of crop seeds in China is the demand for and supply of crop seeds in the overall China market. As a result, the price we are able to set for our seeds is dependent on the aggregate supply of crop seeds from us and our competitors in relation to crop seed demand in any growing season. Any potential fluctuation in the demand and supply of seeds in China may cause significant volatility in the pricing of crop seeds in China and, as a consequence, in our operating results and financial condition. In addition, because decisions relating to our production volume are made before we know the volume of seed orders and the market price for such orders, we face the risk of either over-supplying the market or under-supplying the market, which could materially and adversely affect our revenues, operating results and ability to achieve or maintain profitability.

Deferred revenues

Because of our revenues recognition policy, we sometimes carry sizeable deferred revenues on our balance sheet. These deferred revenues reflect the value of our canola seeds delivered after evidence of a sale arrangement is confirmed, delivery to the customer is made and full pre-payment from the customer is received, but before the final sales price is fixed and determined. This aspect of our revenues recognition policy does not have a significant effect when deferred revenues in the periods being compared maintain approximately the same proportion to overall sales. However, when the proportion of our sales classified as deferred revenues varies significantly from year to year, as sometimes occurs, our revenues and earnings as reported in our financial statements may not accurately reflect our operating activities.

Cost of revenues

Our cost of revenues consists of expenses directly related to our crop seed sales. These expenses are primarily made up of the purchase prices for seeds, depreciation and amortization, shipping and handling costs, salary and compensation, license fees, supplies, and write-down of inventories.

Purchase price for seeds. The purchase price for seeds consists of the price we pay to farmers for the seeds they grow for us. The purchase price for seeds is the largest component of our cost of revenues and is likely to be the most variable element of our cost of revenues.

Depreciation and amortization. Depreciation consists of depreciation of property, plant and equipment. Amortization consists of amortization of our seed license fees.

Shipping and handling. Shipping and handling costs include costs associated with product delivery and handling costs related to transportation of goods from suppliers to factories and from factories to factories.

Salary and compensation. Salary and compensation expenses include wages, bonuses and other benefits, including welfare benefits. Salary and compensation included in our cost of revenues related to our production personnel. We expect that our salary and compensation expenses will increase in the future in conjunction with our intended growth.

License fees. License fees consist of royalty fees paid to independent research and development institutions.

Supplies. Supplies consist of items needed for production and packing costs for the seeds we produce.

Write-down of Inventories. Any excess of the cost over the net realizable value of the inventories is recognized as a provision for diminution in the value of inventories. Net realizable value is the estimated selling price in the normal course of business less the estimated costs to completion and the estimated expenses and related taxes necessary to make the sale.

Operating expenses, net

Our operating expenses, net consist of general and administrative expenses, research and development expenses, selling and marketing expenses and other income, net. Our operating expenses, net increased for the fiscal year ended September 30, 2016 compared to fiscal year 2015 was mainly due to one-time stock compensation expense and corporate restructuring cost.

General and administrative expenses. General and administrative expenses primarily consist of salary and compensation, depreciation and amortization, legal fees, professional expenses and other expenses, including travel and other general business expenses and office supplies.

Research and development expenses. Our research and development expenses primarily consist of salary and compensation expenses of personnel engaged in the research and development of our proprietary crop seeds and genetically modified products, travelling expenses, depreciation of plant and equipment, rent and development efforts and the expenses paid to certain research institutes to carrying research projects on behalf of Origin during the period.

Selling and marketing expenses. Our selling and marketing expenses primarily consist of salary and compensation for our sales and marketing personnel, advertisement and promotion expenses, transportation expenses and related marketing expenses.

Equity award plans and award agreements

Our equity based awards are granted under the 2005, 2009 and 2014 Performance Equity Plans. We adopted the 2005 Plan in November 2005, under which we may issue equity based awards for up to 1,500,000 ordinary shares to our directors, officers, employees, individual consultants and advisors. On April 22, 2010, our company adopted the 2009 Performance Equity Plan, under which we may issue equity based awards for up to 1,500,000 ordinary shares to our directors, officers, employees, individual consultants and advisors. On December 22, 2014, our company adopted the 2014 Performance Equity Plan, under which we may issue equity based awards for up to 5,000,000 ordinary shares to our directors, officers, employees, individual consultants and advisors. In addition to current equity awards to the directors and officers, we plan to expand our equity awards to a broader range of employees in order to align our employee incentives towards the stock performance. There are equity awards currently outstanding for nil ordinary shares under the 2005 Plan, for 1,060,000 ordinary shares under the 2009 Plan and for 1,380,000 ordinary shares under the 2014 Plan.

On December 22, 2014 and January 2, 2016, the compensation committee of the Board of Directors approved the substitution of restricted stock for outstanding grants under Tranche 5&6 that no longer offer the kind of incentive opportunity originally sought for valued employees given the fall in the market price of the ordinary shares of the Company during the recent years. The revised terms of the stock options were accounted for as a modification in accordance with ASC 718-20. For the purpose of determining the amount of any incremental share-based compensation cost that may have resulted from the modification of the exercise prices, the Company compared the fair value of modified awards and that of the original awards, and determined that RMB0.61 million and RMB 0.54 million (US$0.1 million) of the modifications required the recognition of additional share-based payment expense, respectively.

As of September 30, 2016, all option based awards had an exercise price within the range of US$1.27 to US$2.55, and the awards expire 5-10 years from the date of grant and either vest immediately or vest over a period of 1 to 5 years, depending on the award. We recorded a total stock-based compensation expense of RMB1.32 million for the fiscal year ended September 30, 2014, and RMB1.61 million for the fiscal year ended September 30, 2015 and RMB8.80 million (US$1.32 million) for the fiscal year ended September 30, 2016.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are those that reflect significant judgments or uncertainties, and potentially result in materially different results under different assumptions and conditions. We have described below what we believe are our most critical accounting policies that involve a high degree of judgment and the methods of their application. For a description of all of our significant accounting policies, see Note 2 to our consolidated financial statements.

Revenues

We derive revenues primarily from the sale of various crop seeds, including corn, rice and canola seeds in China. We recognize revenues when pervasive evidence of a sales arrangement exists, products have been delivered, the price is fixed and determinable, collectability is reasonably assured, and the right of return has expired. Accordingly, we defer revenues recognition until all sale return privileges lapse, which generally occurs in May or June, and until the selling price has been finalized by our management and confirmation has been issued to the customer, which generally occurs at the end of our selling season. We sometimes carry a sizeable deferred revenues that reflects the value of our crop seeds delivered after evidence of a sales arrangement is confirmed, delivery to the customer is made and pre-payments from the customer are received, but before the final sales price is fixed and determined at the end of the selling season. This aspect of our revenues recognition policy does not have a significant effect when deferred revenues in the periods being compared remain approximately the same proportion to overall sales. However, when the proportion of our sales classified as deferred revenues varies significantly from year to year, as sometimes occurs, our revenues and earnings as reported in our financial statements may not exactly reflect our operating activities.

Impairment of long-lived assets

We perform the Goodwill Impairment Test on an annual basis. This process is conducted at the reporting unit level, defined as the lowest level of the Company, i.e., business units, subsidiaries, operating units, divisions, etc. As of September 30, 2016, the remaining goodwill on the books was exclusively arising from the acquisition of Denong. We conducted the annual Goodwill Impairment Test for the year ended September 30, 2016.

On September 26, 2016, the Company has entered into a definitive agreement to sell its proprietary China-based commercial corn seed production and distribution business, including Denong, for RMB400 million (approximately US$60 million) to Beijing Shihui Agricultural Development Co, Ltd (“Beijing Shihui”). Beijing Shihui is an internet agricultural enterprise that provides agricultural products and technology services to farmers, suppliers and agriculture-related enterprises in China. This transaction is subject to customary closing conditions and shareholder approval. It is expected to close in the first calendar quarter of 2017. We considered the implied fair value, i.e. consideration of the Sale, exceeds the carrying value of the reporting unit. Therefore, goodwill was not considered to be impaired as of September 30, 2016.

Write-down of Inventories

Our inventories are stated at the lower of cost or market value. Any excess of the cost over the net realizable value of the inventories is recognized as a provision for reduction in the value of inventories.

We assess the write-downs of inventories using three criteria: 1) the quality of seeds according to standards promulgated by the PRC government on the germination percentage and purity level of seeds; 2) a comparison of the inventory unit cost with the market selling price and subsequent write-down of those inventories where the unit cost exceeds its expected net selling price; and 3) evaluation of the unsold balance of the existing inventory that cannot be sold in the coming three years, based on sales forecasts and marketing plan.

We have assessed the product quality, unsold quantity and the amount unit cost exceed the selling price performed by our quality inspectors and sales staff on an annual basis, and accordingly, determined the inventory write-downs based on the assessment results. We believe that the current methodologies on impairment assessment are adequate to address the risks of inventory write-downs. For fiscal year 2016, we had a write down of RMB20.50 million (US$3.1 million) compared to RMB10.97 million for fiscal year 2015, which was mainly due to written down in related to product quality,and RMB21.98 million for fiscal year 2014.

Due to the nature of the seed industry, we normally produce seeds according to our annualized production that is developed at least one year before delivery to our customers. If our production plan is too aggressive, we could produce more seeds than the market demands, resulting in aged seeds. We may decide not to sell the aged seeds as crop seed products, taking into account factors such as the quality of the seeds and commodity pricing. In that case, the aged inventory may be sold as common feed products at greatly reduced prices. Aged inventory could result in asset impairment risk, in which case we would suffer a risk of additional inventory write-downs.

Income taxes

We record a valuation allowance to reduce our deferred tax assets to the amount that we believe to be more likely than not to be realized. In the event that we were to determine that we would be able to realize our deferred tax assets in the future, in excess of their recorded amount, an adjustment to our deferred tax assets would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to our deferred tax assets would be charged to income in the period such determination was made.

In previous years, the Company assessed the contingent tax liability that might arise from the Share Exchange Transaction (note 1) and considered such contingent tax liabilities are more-likely-than-not. As of September 30, 2013, contingent tax liability of RMB39,060 including late payment penalty and interest was included in the income tax payable in the accompanying consolidated balance sheet. The Company does not expect to incur tax liabilities at the higher end of the range which were estimated to be in the range RMB39,060 to RMB64,218, based on the information previously available.

In 2009, the Company reviewed the contingent tax position. On September 23, 2010, the Company filed a revised 2005 tax return (the “Revised Return”) to the United States Internal Revenue Service (the “IRS”), to modify and supplement the previously filed tax return regarding this tax liability. While the timeline for the IRS to question on the tax return and assess additional tax due is generally three years, this matter may take a prolonged period of time to resolve depending on the return time for IRS and the necessity, if any, of future appeals or re-evaluation.

For the period from the filing date of the Revised Return (i.e., September 23, 2010) to September 30, 2014, the IRS has not enquired the Company or Chardan to clarify the redomestication transaction by filing the Revised Return. The Company believes that Chardan has paid all necessary and required U.S. federal income tax arising out of the Chardan redomestication. The Company also believes that the time limit for the IRS to assess any additional income tax, which is expired at September 23, 2013, has passed by reason of the expiration of the stature of limitation. In this stance, the Company concludes no justification to make a reserve in its accounts for the contingent tax liability of RMB39,060 that might arise out of a redomestication. Accordingly, the contingent tax liability of RMB39,060 has been derecognized and recorded as a tax benefit in the statement of income and comprehensive income for the year ended September 30, 2014 due to the cessation of contingent taxable status.

The Company adopted FASB Accounting Standard Codification (“ASC”) 740. The Company’s policy on classification of all interest and penalties related to unrecognized tax benefits, if any, as a component of income tax provisions.

Stock-based compensation

We adopted FASB ASC 718-10, to measure our issued share options based on the grant-date fair value of the options and recognized as compensation expense over the requisite service period, with a corresponding addition to equity. We adopt the Black-Scholes Model to value the fair value of the share options.

Results of Operations

Fiscal Year Ended September 30, 2016 Compared To Fiscal Year Ended September 30, 2015

Revenues and Gross Margin

Total revenues for the fiscal year ended September 30, 2016 were RMB335.25 million (US$50.20 million), a decrease of 11.0% from RMB376.53 million during the fiscal year ended September 30, 2015. Overall, the year-over-year decrease in revenues was mainly due to the lower sales in corn and rice seed business as the result of fierce competition.

The table below lists the change in both revenues and gross margins exclusive of scrap sales, and conversion and testing services income between fiscal year 2016 and fiscal year 2015.

Items	Revenues							Gross Margin
	Year ended September 30, 2016		Year ended September 30, 2015		Change			Year ended September 30, 2016			Year ended September 30, 2015			Change in percentage point
	RMB’000		RMB’000
Hybrid Corn seeds		306,050		329,984		(7.3	)%		32.7	%		34.3	%		(1.6	)%
Hybrid Rice seeds		19,311		26,067		(25.9	)%		(50.3	)%		(20.8	)%		(29.5	)%
Hybrid Canola seeds		8,704		15,640		(44.3	)%		42.0	%		49.5	%		(7.5	)%
Total normal sales		334,065		371,691		(10.1	)%		28.2	%		32.7	%		(4.5	)%

Revenues from our hybrid corn seeds decreased by 7.3% to RMB306.05 million (US$45.83 million) in fiscal year 2016 from RMB329.98 million in fiscal year 2015, this year-over-year decrease was mainly due to the lower sales volume as the result of fierce competition in this year. Gross margin of our corn products decreased by 1.6% in fiscal year 2016 compared with fiscal year 2015, which was mainly due to higher average unit purchase cost of seed as a result of lower seed production yield for one of our key production centers this year.

Revenues from our hybrid rice seeds decreased by 25.9% to RMB19.31 million (US$2.89 million) in fiscal year 2016 from RMB26.07 million in fiscal year 2015, which was mainly due to increasing competition in the rice seed market. Revenues from our canola seeds decreased by 44.3% to RMB8.70 million (US$1.30 million) in fiscal year 2015 compared with RMB15.64 million in fiscal year 2015.

Gross margin

The gross margin was 22.7% in fiscal year 2016 compared with 29.9% in fiscal year 2015, which was mainly due to higher average unit purchase cost of seed as a result of lower seed production yield for one of our key production centers this year.

Operating expenses

Operating expenses for fiscal year 2016 increased to RMB137.31 million (US$20.56 million) from RMB111.17 million in fiscal year 2015. Higher operating expense for fiscal year 2016 was mainly due to one-time stock compensation expense, expenses related to expansion of operation in North America and corporate restructuring cost of RMB24.08 million, and decrease in other income of RMB11.3 million.

Selling and marketing

Selling and marketing expenses for fiscal year 2016 decreased to RMB38.08 million (US$5.7 million) from RMB39.99 million in fiscal year 2015. Lower expenses were due to decline in salary as a result of the shift in the marketing strategy.

General and administrative

General and administrative expenses (“G&A”) increased to RMB62.16 million (US$9.31 million) in fiscal year 2016 from RMB40.68 million in fiscal year 2015. The increase was mainly due to one-time stock compensation expense of RMB7.20 million, expenses related to expansion of operation in North America of RMB4.67 million and corporate restructuring cost of RMB12.21 million, respectively.

Research and development

Research and development expenses (“R&D”) decreased to RMB44.03 million (US$6.59 million) in fiscal year 2016 from RMB48.74 million in fiscal year 2015. We typically target R&D investment in the range of 7-13% of our total revenues although the actual investment fluctuates depending on the realization of R&D projects and the level of expansion our R&D will experience as we focus on biotechnology development.

Other income, net

Other income decreased to RMB6.96 million (US$1.04 million) in fiscal year 2016 from RMB18.24 million in fiscal year 2015. The decrease was mainly due to the reversal of liabilities aged over five years with amount of approximately RMB9.0 million in last year.

Loss from operations

As a result of the impact of the components described above, loss from operations were RMB61.31 million (US$9.18 million) in fiscal year 2016 compared with operating income of RMB1.34 million in fiscal year 2015.

Interest expense

Interest expense was RMB14.25 million (US$2.13 million) for the fiscal year 2016 compared to RMB18.63 million a year ago. This mainly represents bank loans from the Beijing, Xinjiang and Linze entities this year.

Net Loss

Net loss attributable to Origin for the fiscal year ended September 30, 2016 were RMB65.58 million (US$9.82 million), compared with the net loss of RMB13.81 million during the fiscal year ended September 30, 2015. The year-over-year increase in the net loss was mainly due to decrease in revenue and rise in operating expenses this year described above.

Fiscal Year Ended September 30, 2015 Compared To Fiscal Year Ended September 30, 2014

Revenues and Gross Margin

Total revenues for the fiscal year ended September 30, 2015 were RMB376.55 million (US$59.19 million), a decrease of 9.3% from RMB415.18 million during the fiscal year ended September 30, 2014. Overall, the year-over-year decrease in revenues was mainly due to the lower sales in corn and rice seed business as the result of fierce competition.

The table below lists the change in both revenues and gross margins exclusive of scrap sales, and conversion and testing services income between fiscal year 2015 and fiscal year 2014.

Items	Revenues							Gross Margin
	Year ended September 30, 2015		Year ended September 30, 2014		Change			Year ended September 30, 2015			Year ended September 30, 2014			Change in percentage point
	RMB’000		RMB’000
Hybrid Corn seeds		329,984		355,436		(7.2	)%		34.3	%		33.2	%		1.1	%
Hybrid Rice seeds		26,067		36,146		(27.9	)%		(20.8	)%		(10.0	)%		(10.8	)%
Hybrid Canola seeds		15,640		20,615		(24.1	)%		49.5	%		48.8	%		0.7	%
Total normal sales		371,691		412,197		(9.8	)%		32.7	%		30.8	%		1.9	%

Revenues from our hybrid corn seeds decreased by 7.2% to RMB329.98 million (US$51.87 million) in fiscal year 2015 from RMB355.44 million in fiscal year 2014, this year-over-year decrease was mainly due to the lower sales volume as the result of fierce competition in this year. Gross margin of our corn products increased by 1.1% in fiscal year 2015 compared with fiscal year 2014, which was mainly because the average unit sale price increased by approximately 5% this year.

Revenues from our hybrid rice seeds decreased by 27.9% to RMB26.07 million (US$4.10 million) in fiscal year 2015 from RMB36.15 million in fiscal year 2014, which was mainly due to increasing competition in the rice seed market. Revenues from our canola seeds decreased by 24.1% to RMB15.64 million (US$2.46 million) in fiscal year 2015 compared with RMB20.62 million in fiscal year 2014.

Gross margin

The gross margin was 29.9% in fiscal year 2015 compared with 27.5% in fiscal year 2014, which was mainly because the average unit sale price of corn seed increased by approximately 5% this year.

Operating expenses

Operating expenses for fiscal year 2015 decreased to RMB111.17 million (US$17.48 million) from RMB138.51 million in fiscal year 2014. Lower operating expense for fiscal year 2015 was mainly due to lower advertisement and transportation expenses, continuous cost control and higher other operating income.

Selling and marketing

Selling and marketing expenses for fiscal year 2015 decreased to RMB39.99 million (US$6.3 million) from RMB58.97 million in fiscal year 2014. Lower expenses were due to the shift in the marketing strategy.

General and administrative

General and administrative expenses (“G&A”) decreased to RMB40.68 million (US$6.40 million) in fiscal year 2015 from RMB46.43 million in fiscal year 2014. This reduction in G&A expenses reflects our efforts to improve our operating efficiency and cost reduction.

Research and development

Research and development expenses (“R&D”) increased to RMB48.74 million (US$7.66 million) in fiscal year 2015 from RMB40.38 million in fiscal year 2014. We typically target R&D investment in the range of 7-13% of our total revenues although the actual investment fluctuates depending on the realization of R&D projects and the level of expansion our R&D will experience as we focus on biotechnology development.

Other income, net

Other income increased to RMB18.24 million (US$2.87 million) in fiscal year 2015 from RMB7.27 million in fiscal year 2014. The increase was mainly due to the reversal of liabilities aged over five years with amount of approximately RMB9.0 million (US$1.41 million) this year.

Income from operations

As a result of the impact of the components described above, income from operations were RMB1.34 million (US$0.21 million) in fiscal year 2015 compared with operating loss RMB24.48 million in fiscal year 2014. The increase in operating results was mainly due to decline in operating expenses this year.

Interest expense

Interest expense was RMB18.63 million (US$2.93 million) for the fiscal year 2015 compared to RMB19.74 million a year ago. This mainly represents bank loans from the Beijing, Xinjiang and Linze entities this year.

Net Loss

Net loss attributable to Origin for the fiscal year ended September 30, 2015 were RMB13.81 million (US$2.17 million), compared with the net loss of RMB9.53 million during the fiscal year ended September 30, 2014. The year-over-year increase was mainly due to the reversal of tax liabilities with amount of RMB39 million in last year.

B. Liquidity and Capital Resources.

As of September 30, 2014, 2015 and 2016, we had approximately RMB46.27 million, RMB66.03 million and RMB54.51 million (US$8.2 million), respectively, in cash and cash equivalents. Our cash and cash equivalents primarily consisted of cash on hand and short term liquid investments with maturities of three months or less deposited with banks and other financial institutions. We believe our working capital is sufficient to meet our present requirements.

We financed our operations through cash generated from operating activities and bank borrowings. As of September 30, 2016, we had a total short-term borrowings of RMB190 million (US$28.45 million) and long-term borrowings of RMB47.06 million(US$7.05 million). Please see Note 13 to our consolidated financial statement for the details of bank borrowing.

The following table shows our cash flows with respect to operating activities, investing activities and financing activities for the 12 months ended September 30, 2012, 2013, 2014, 2015 and 2016.

Item	September 30
(In thousands)
	2012			2013			2014			2015			2016			2016
	RMB			RMB			RMB			RMB			RMB			US$
Net cash provided by (used in) operating activities		82,713			(146,109	)		(85,639	)		52,189			47,905			7,174

Net cash used in investing activities		(143,383	)		(68,279	)		(561	)		(20,359	)		(6,481	)		(971	)

Net cash provided by (used in) financing activities		83,400			191,687			394			(9,466	)		(48,816	)		(7,310	)

Net (decrease) increase in cash and cash equivalents		22,730			(22,701	)		(85,806	)		22,364			(7,392	)		(1,107	)

Cash and cash equivalents, beginning of year		129,942			152,789			131,978			46,268			66,025			9,888

Effect of exchange rate changes on cash and cash equivalents		117			1,890			96			(2,607	)		(4,124	)		(618	)

Cash and cash equivalents, end of year		152,789			131,978			46,268			66,025			54,509			8,163

Operating activities:

Net cash provided by operating activities was RMB47.91 million (US$7.2 million) for the fiscal year ended September 30, 2016, compared with RMB52.19 million for the fiscal year ended September 30, 2015. The cash inflow this year in the operating activities was mainly due to inventory decrease of RMB50.97 million (US$7.63 million), increase in amount due to related party of RMB58.3 million (US$8.73 million) and RMB55.70 million (US$8.34 million) lower advance received from the customers.

Investing activities:

Net cash used in investing activities was RMB6.48 million (US$0.97 million) for the fiscal year ended September 30, 2016, compared cash used of RMB20.36 million for the fiscal year ended September 30, 2015. The decrease was mainly due to deposits received from disposal of commercial seed business and decline in purchase of equipment and intangible assets.

Financing activities:

Net cash used in financing activities was RMB48.82 million (US$7.31 million) for the fiscal year ended September 30, 2016, compared with RMB9.47 million for the fiscal year ended September 30, 2015. The increase was mainly due to the repayment of borrowings.

Due to the cyclical nature of cash flow inherent in our business, the majority of cash flow from operations is received during the second half of the calendar year, which corresponds to the fourth quarter and the subsequent first quarter of our fiscal year. We use bank credit facilities to cover cash outflow related to operating expenses during the portion of the year when sales receipts are low. We believe, in longer run, we can generate sufficient cash flows from operating activities to finance our R&D activities and operating expansions. We also can access sufficient borrowing capacity from local banks to satisfy our seasonal liquidity needs.

The nature of our business involves cycles in expenses and revenues that are not always in phase. Most often in the third to fourth quarters of our fiscal year, we may face costs that are in excess of our cash flow sources during that period. Whether that occurs, and to what extent it occurs, depends on the amount of deposits received from customers compared with the advanced payments made by us to our seed producing farmers and the final payment for seed procurement. The exact timing of these payments is determined by the Chinese lunar calendar, which varies from one calendar year to the next. As a result, in some years our working capital needs are greater than in others. This aspect of the business is the reason we have customarily relied upon short term loans to cover our expenses pending receipt of cash payment from farmers at the time of seed purchases. We, on a consolidated basis, have had access to sufficient financing in the past to manage these cash flow cycles. We have consistently repaid our short-term borrowings at or before maturity.

Relevant PRC laws and regulations permit payments of dividends by our PRC operating companies only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. In addition, the statutory general reserve fund requires that annual appropriations of 10% of net after-tax income be set aside prior to payment of any dividends. As a result of these and other restrictions under PRC laws and regulations, our PRC Operating Companies are restricted in their ability to transfer a portion of their net assets to us either in the form of dividends, loans or advances.

Even though we currently do not require any such dividends, loans or advances from our PRC Operating Companies, we may in the future require additional cash resources from our PRC Operating Companies due to changes in business conditions, to fund future acquisitions or developments, or merely to declare and pay dividends or distributions to our shareholders, although we currently have no intention to do so.

Research and Development, Patents and Licenses, etc.

We focus our research and development efforts on agro-biotechnology, crop breeding and the development of new crop seeds. In November 2001, we established a seed research and development center in Tongzhou, Beijing, which conducts research and development of commercial crop breeding. In September 2005, we established the “Origin Life Science Research Center” in Zhong-Guan-Cun (ZGC) Life Science Park in Beijing, the principal activities of which include crop gene engineering, molecular marker-assisted breeding, and molecular identification. We also have ten breeding stations located in different regions in China.

We have established technological cooperative relationships with five universities and sixteen research institutes in China, including Beijing University, China Agricultural University, Chinese Academy of Sciences, and Henan Agriculture University. We employ 81 full-time research personnel.

Our research and development expenditures were RMB37.63 million, RMB42.16 million, RMB40.38 million, RMB48.74 million and RMB44.03 million for fiscal years ended September 30, 2012, 2013, 2014, 2015 and 2016, respectively. Our continued research and development spending is a result of our efforts to self-develop seed varieties and biotechnology traits both through joint development and in-house efforts.

The company has received government funding for research and development activities. Such funding was received in the fiscal years 2014, 2015 and 2016 in the amounts of RMB7.61 million, RMB7.08 million and RMB10.37 million(US$1.55 million), respectively.

Trend Information.

Other than as disclosed elsewhere in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments or events in the period from October 1, 2015 to September 30, 2016 that were reasonably likely to have a material effect on our net revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions, or that had the trends relating to the current-year increases in expenses and reduction in revenues and profits.

Off-balance Sheet Arrangements.

We do not have any off-balance sheet guarantees, interest rate swap transactions or foreign currency forward contracts or outstanding derivative financial instruments. We do not engage in trading activities involving non-exchange traded contracts.

Tabular Disclosure of Commitments and Contingencies.

We have various contractual obligations that will affect our liquidity. The following table sets forth our contractual obligations as of September 30, 2016.

	Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Capital Commitment		5,172		5,172		-		-		-
Short term Debt Obligations		190,000		190,000		-		-		-
Long term Debt Obligations		47,057		27,057		20,000		-		-
Interest on Debt Obligations		17,279		17,042		237		-		-
Operating Lease Obligations		6,691		1,642		1,124		908		3,017
Total		266,199		240,913		21,361		908		3,017

Safe Harbor.

Except for historical facts and financial data, the information included in Items 5.A through 5.D and 5.F is deemed to be a “forward looking statement” as that term is defined in the statutory safe harbors. The safe harbor provided in Section 27A of the Securities Act and Section 21E of the Exchange Act shall apply to all forward-looking information provided in this Item 5.

ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors and Senior Management.

The following table sets forth certain information regarding our directors and executive officers as of September 30, 2016.

Name	Age	Position

William S. Niebur	59	President, Chief Executive Officer and Director
Shashank Aurora	55	Chief Financial Officer
Jihong Liang	58	Chief Technology Officer
Gengchen Han	61	Chairman of the Board
James Kang	57	Independent Director (through January 2016)
Min Tang	63	Independent Director
Michael W. Trimble	59	Independent Director
David W. Bullock	52	Independent Director
James Chen	51	Chief Financial Officer (through January 2016)

Dr. William S. Niebur is the President and the Chief Executive Officer of Origin and joined Origin in April, 2016. Dr. Niebur most recently served with DuPont Pioneer as Vice President and General Manager with strategic oversight responsibility for China, East Asia and Oceania. Dr. Niebur has been in the seed business for more than three decades, beginning his career as a corn geneticist in Princeton, Ill. He went on to gain extensive global experience, first overseeing research and development while living in Europe, then returning to North America as the company’s global Vice President for R&D, and finally moving into business operations managing seed businesses in East and North Asia. In 2015, Dr. Niebur was named as one of 50 people “Shaping the Future of the U.S.-China Relationship” in the Pacific Power Index, publicized by Foreign Policy Group. Dr. Niebur was instrumental in integrating technologies into plant genetics programs and was granted several patents which led to the commercialization of more than 30 branded products during his scientific career. Dr. Niebur holds both his Bachelor of Science and Master of Science degrees from Iowa State University. He earned his doctorate in plant breeding and cytogenetics from the University of Minnesota.

Mr. Shashank Aurora has been serving as the Chief Financial Officer of Origin since May, 2016. Mr. Aurora most recently served DuPont Pioneer in the capacity of global services finance director. With more than two decades of experience with the organization, he led numerous DuPont Pioneer entities across the globe to strong financial results, including locations in Africa, Canada, China, India, Latin America and Pakistan. Mr. Aurora earned his Bachelor of Life Sciences degree from Nizam College, Osmania University, in Hyderabad, India, along with certifications as FCA from The Institute of Chartered Accountants of India and CPA from the American Institute of Certified Public Accountants. He is fluent in English and Hindi, and is familiar with Arabic.

Dr. Jihong Liang has been serving as the Chief Technology Officer of Origin since August, 2016. Prior to Origin, Dr. Liang most recently served as the head of Syngenta’s global rice seed research and development. He has nearly 25 years of global industry experience, leading research and development at companies such as Syngenta, Monsanto and the Monsanto-Cargill joint venture Renessen. He has held leadership positions in multiple disciplines, including technology scouting, global crop strategy planning, market research and business development in China, Singapore and the United States. Liang’s scientific work has resulted in 10 patents globally and numerous research articles published in world-class scientific journals. Dr. Liang earned his Bachelor of Science degree in microbiology from China Agricultural University, doctorate in biochemistry from the University of Wisconsin-Madison, post-doctoral fellowship in molecular biology from the University of Chicago and Master of Business Administration from Keller Graduate School of Management in St. Louis.

Dr. Gengchen Han is the Chairman of Origin and was formerly the President and the Chief Executive of Origin. Dr. Han is also the Executive Chairman of Beijing Origin and its affiliated companies, a position that he has held since founding the business in 1997. Dr. Han was the Co-Chief Executive Officer and Chief Executive Officer of the Company from its inception in 1997 until January 1, 2009 and from August 1, 2011 to April 25, 2016. Dr. Han has more than 20 years of experience in research and development of hybrid seed products, particularly corn seed. From 1982 until 1984, Dr. Han was a lecturer at the Henan Agriculture University. From 1984 to 1987, Dr. Han received his Ph.D. degree in Plant Breeding and Cytogenics from Iowa State University. From 1989 until 1990 he worked for the International Maize and Wheat Improvement Center, or CIMMYT, in Mexico. He worked for Pioneer Hi-bred International from 1990 to 1996; his positions there included Regional Technical Coordinator for Asia/Pacific and Regional Supervisor for China Business.

Dr. Min Tang has been a director of Origin since January 2009. Dr. Tang is currently the Executive Vice Chairperson of China Social Entrepreneur Foundation, a social development and entrepreneurship education initiative. Previously, Dr. Tang sat as the Deputy Secretary General of the China Development Research Foundation in charge of financial reform, energy conservation, and social development for the Development Research Center reporting to the State Council of China. Prior to his position, Dr. Tang worked in Asia Development Bank for 18 years. From 2000-2007, he was the Chief Economist of Asian Development Bank Resident Mission in China. Dr. Tang received his masters and PhD. degree in Economics from University of Illinois at Urbana Champaign, USA.

Dr. Michael W. Trimble has been a director of Origin since May 2006. Dr. Trimble is the founder of Trimble Genetics International LLC, or Trimble Genetics, and has been the President of Trimble Genetics since 2001. Trimble Genetics is a plant genetics research company that has expanded business and research relationships to include activities in North America, South America, Asia, Europe, the Middle East and Africa. Dr. Trimble is a leader in plant genetics research with over thirty years of experience in crop breeding and the agricultural seed industry. Dr. Trimble is an inventor of numerous patents in the field of plant genetics. Dr. Trimble graduated with a Ph.D. degree from the University of Minnesota and also completed graduate programs at Purdue University and Iowa State University.

Mr. David W. Bullock, former Chief Financial Officer of Graham Packaging Company Inc. (“GRM”) and former Chief Operating Officer, Executive Vice President and Chief Financial Officer of UAP Holding Corporation (“UAPH”),was appointed to Origin’s Board of Directors and will replace Mr. Larry Kenneth Cordell as the Chair of the Audit Committee and an Independent Director to the Company effective January 1, 2015. Mr. Bullock served as the CFO of GRM, a global manufacturer of rigid plastics containers, from 2009 until the sale of the company in 2011. From 2002 to 2008, Mr. Bullock served as Chief Operating Officer, as well as Executive Vice President and Chief Financial Officer, of UAPH, a distributor of agricultural-related products. Prior to UAPH, Mr. Bullock held various positions with FMC Corporation, Air Products and Chemicals Inc., and Westinghouse Electric. Mr. Bullock currently serves as a director of Building Materials Holding Corp. Mr. Bullock received an M.B.A. from Cornell University and a B.S. in Electrical Engineering from Lehigh University.

Dr. Z. James Chenwas the Chief Financial Officer of Origin from January 2012 to January 2016. Prior to Origin, Dr. Chen served as an Investment Manager at Abu Dhabi Investment Authority (ADIA) and he worked as an equity research analyst at Morgan Joseph and BB&T Capital Markets. Dr. Chen also worked as a Product Manager at Celanese and as a License Product Technology Manager at Univation Technologies, a joint venture between ExxonMobil and Dow Chemical. Dr. Chen received his Ph.D. Degree in Chemical Engineering from the University of Connecticut and his M.B.A degree from New York University.

Compensation.

The aggregate cash compensation paid to our directors and executive officers as a group was RMB8.8 million (US$1.3 million) for the twelve months ended September 30, 2016. Options granted are stated in the chart found below.

2005 Performance Equity Plan

On November 8, 2005 the company adopted the 2005 Performance Equity Plan, under which we are able to issue equity awards with the right to acquire up to 1,500,000 ordinary shares to our directors, officers, employees, individual consultants and advisors. The main purpose of the plan was to provide an existing structure and renewable benefit plan for senior management and directors and others providing services to the company. We had outstanding awards for nil ordinary shares under the 2005 Plan at September 30, 2016.

2009 Performance Equity Plan

On April 22, 2010, our company adopted the 2009 Performance Equity Plan, under which we are able to issue equity awards with the right to acquire up to 1,500,000 ordinary shares to our directors, officers, employees, individual consultants and advisors. The main purpose of the plan was to provide an existing structure and renewable benefit plan for senior management and directors and others providing services to the company. We had outstanding awards for1,060,000 ordinary shares under the 2009 Plan at September 30, 2016.

2014 Performance Equity Plan

On December 22, 2014, the company adopted the 2014 Performance Equity Plan, under which we are able to issue equity awards for up to 5,000,000 ordinary shares to our directors, officers, employees, individual consultants and advisors. The main purpose of the plan is to provide an existing structure and renewable benefit plan for senior management and directors and others providing services to the company. In addition to current equity awards to the directors and officers, we plan to expand our equity awards to a broader range of employees in order to align our employee incentives towards our stock performance. We had outstanding awards for 1,380,000 ordinary shares under the 2014 Plan at September 30, 2016.

Those awards held by the current directors and officers are listed below.

Name	Ordinary Shares Underlying Outstanding Option		Exercise Price			Grant Date	Expiration Date
Gengchen Han		120,000	$	2.55	/Share	January 3, 2012	January 2,2017
		120,000	$	1.44	/Share	January 2, 2013	January 1,2018
		120,000	$	1.27	/Share	January 2, 2014	January 1,2019
		120,000	$	1.48	/Share	January 2, 2015	January 1,2020
		120,000	$	1.38	/Share	January 4, 2016	January 4, 2021
William S. Niebur		600,000	$	2.05	/Share	April 19, 2016	April 19, 2026
Michael Trimble		5,000	$	2.55	/Share	January 3, 2012	January 2,2017
		5,000	$	1.44	/Share	January 2, 2013	January 1,2018
		5,000	$	1.27	/Share	January 2, 2014	January 1,2019
		5,000	$	1.48	/Share	January 2, 2015	January 1,2020
		5,000	$	1.38	/Share	January 4, 2016	January 4, 2021
Min Tang		5,000	$	2.55	/Share	January 3, 2012	January 2,2017
		5,000	$	1.44	/Share	January 2, 2013	January 1,2018
		5,000	$	1.27	/Share	January 2, 2014	January 1,2019
		5,000	$	1.48	/Share	January 2, 2015	January 1,2020
		5,000	$	1.38	/Share	January 4, 2016	January 4, 2021
Shashank Aurora		200,000	$	1.65	/Share	May 16, 2016	May 16, 2026
David W. Bullock		5,000	$	1.48	/Share	January 2, 2015	January 1,2020
		5,000	$	1.38	/Share	January 4, 2016	January 4, 2021
Jihong Liang		200,000	$	2.00	/Share	August 3, 2016	August 3, 2026

Board Practices.

Terms of directors and executive officers

Our directors are not subject to a specific term of office and hold office until the next annual meeting of shareholders or until such director’s earlier resignation, removal from office, death or incapacity. Any vacancy on the board of directors resulting from death, resignation, removal or other cause and any newly created directorship resulting from any increase in the authorized number of directors between meetings of shareholders may be filled either by the affirmative vote of a majority of all the directors then in office (even if less than a quorum) or by a resolution of shareholders.

Our officers are appointed by the board of directors and hold office until their successors are duly elected and qualified, but may be removed at any time, with or without cause, by resolution of directors. Any vacancy occurring in any office may be filled by resolution of directors.

Employment Agreements

Dr. Han, our Chairman has an employment agreement with us. The agreement currently has a term of three years commencing on January 1, 2015. Dr. Han is entitled to insurance benefits, five weeks’ vacation, a car and reimbursement of business expenses and, if necessary, relocation expenses. The agreement is terminable by Origin for death, disability and cause. Dr. Han may terminate the agreement and his employment for good reason, which includes Origin’s breach, the executive’s loss of his seat on the board of directors, and change of control of Origin. In the event of termination for good reason or without cause, the executive will receive compensation and benefits under his employment agreement through the earlier of two years from the date of termination or through the term of the agreement. The agreements contain provisions for the protection of confidential information and a three-year non-competition period within China.

Dr. Niebur, our President and CEO has an employment agreement with us. The agreement currently has a term of five years commencing on April 22, 2016. Dr. Niebur is entitled to employee benefits including medical and life insurance, five weeks of paid vacation, travel expenses, vehicle allowance, and Directors and Officers insurance. The agreement will terminate upon any of the following: (i) termination upon death; (ii) termination for disability; (iii) termination for cause; (v) resignation without good reason; and (vi) resignation for good reason. Provided, however that: (a) Executive must provide notice of a good reason event within thirty (30) days after the act or omission which constitutes good reason first occurs, (b) the Company shall be provided thirty (30) days following such notice to remedy such or omission, and following any such notice to remedy Executive shall no longer have good reason to terminate employment, and (c) if the Company does not, or is not able to, remedy such act or omission, Executive must terminate his employment within sixty (60) days after the occurrence of such act or omission first occurs.

Mr. Aurora, our CFO has an employment agreement with us. The agreement currently has a term of five years commencing on May 16, 2016. Mr. Aurora is entitled to employee benefits including medical and life insurance, five weeks of paid vacation, travel expenses, vehicle allowance, and Directors and Officers insurance. The agreement will terminate upon any of the following: (i) termination upon death; (ii) termination for disability; (iii) termination for cause; (v) resignation without good reason; and (vi) resignation for good reason. Provided, however that: (a) Executive must provide notice of a good reason event within thirty (30) days after the act or omission which constitutes good reason first occurs, (b) the Company shall be provided thirty (30) days following such notice to remedy such or omission, and following any such notice to remedy Executive shall no longer have good reason to terminate employment, and (c) if the Company does not, or is not able to, remedy such act or omission, Executive must terminate his employment within sixty (60) days after the occurrence of such act or omission first occurs.

Dr. Liang, our CTO has an employment agreement with us. The agreement currently has a term of five years commencing on August 3, 2016. Dr. Liang is entitled to employee benefits including medical and life insurance, five weeks of paid vacation, Directors and Officers insurance, and relocation. The agreement will terminate upon any of the following: (i) termination upon death; (ii) termination for disability; (iii) termination for cause; (v) resignation without good reason; and (vi) resignation for good reason. Provided, however that: (a) Executive must provide notice of a good reason event within thirty (30) days after the act or omission which constitutes good reason first occurs, (b) the Company shall be provided thirty (30) days following such notice to remedy such or omission, and following any such notice to remedy Executive shall no longer have good reason to terminate employment, and (c) if the Company does not, or is not able to, remedy such act or omission, Executive must terminate his employment within sixty (60) days after the occurrence of such act or omission first occurs.

Messrs. Niebur, Aurora and Liang each was granted performance-based restricted stock units (“PSU”) of the Company. Specifically, Mr. Niebur was granted 800,000 PSU, Mr. Aurora was granted 300,000 PSU and Mr. Liang was granted 300,000 PSU. The PSU will vest in two portions. The first portion of the PSU will vest when certain performance criteria are met. The remaining portion of the PSU will vest on the fifth anniversary of the grant, provided that certain performance criteria have been met and the employment of the grantee is not terminated prior to the fifth anniversary. On the vesting date, the grantee is entitled to receive an amount of Ordinary Share of the Company equals to 50%, 100% or 150% (depending on the performance criteria attained) multiplied by the amount of vested PSU the grantee holds. If the performance criteria threshold is not met prior to the earlier of the fifth anniversary or the grantee’s termination, then none of the grantee’s PSU will be vested.

Board committees

Our board of directors has established an Audit Committee, a Compensation Committee and a Nominations Committee.

Audit Committee

The members of our Audit Committee are David W. Bullock(chairman), Michael Trimble and Min Tang. Our board of directors has determined that all of our Audit Committee members are independent directors within the meaning of Nasdaq Marketplace Rule 4200(a)(15) and meet the criteria for independence set forth in Rule 10A-3(b)(1) of the Securities Exchange Act of 1934.

The board of directors has determined that each of Messrs. David W. Bullock (chairman),Michael Trimble and Min Tang has an understanding of Generally Accepted Accounting Principles and financial statements, the ability to assess the general application of such principles in connection with our financial statements, including estimates, accruals and reserves, experience in analyzing or evaluating financial statements of similar breadth and complexity as our financial statements, an understanding of internal controls and procedures for financial reporting and an understanding of Audit Committee functions.

The board of directors believes that Mr. Bullock qualifies as an “audit committee financial expert” within the meaning of all applicable rules. The board of directors believes that Mr. Bullock has financial expertise from his degrees in business, his activities as a chief executive officer and chief financial officer of various companies, and his consulting activities in the areas of accounting, corporate finance, capital formation and corporate financial analysis.

We adopted an Audit Committee charter, amended by the board of directors at the board meeting held on August 16, 2007, under which the Audit Committee is responsible for reviewing the scope, planning and staffing of the audit and preparation of our financial statements. This includes consultation with management, the auditors and other consultants and professionals involved in the preparation of the financial statements and reports. The Audit Committee is responsible for performing oversight of our relationship with our independent auditor. The Audit Committee also has a general compliance oversight role in assuring that our directors, officers and management comply with our code of ethics, reviews and approves related party transactions, deals with complaints regarding accounting, internal controls and auditing matters, and oversees compliance with accounting and legal requirements applicable to us.

Pursuant to the terms of its charter, as amended, the Audit Committee’s responsibilities include, among other things:

annually reviewing and reassessing the adequacy of the Audit Committee’s form of charter;

reviewing our annual audited financial statements with our management and our independent auditors and the adequacy of our internal accounting controls;

reviewing analyses prepared by management and independent auditors concerning significant financial reporting issues and judgments made in connection with the preparation of our financial statements;

engaging of the independent auditor;

reviewing the independence of the independent auditors;

reviewing our auditing and accounting principles and practices with the independent auditor and reviewing major changes to our auditing and accounting principles and practices as suggested by the independent auditor or our management;

appointment of the independent auditor; and

approving professional services provided by the independent auditors, including the range of audit and non-audit fees.

The Audit Committee pre-approves the services to be provided by our independent auditors. The Audit Committee also reviews and recommends to the board of directors whether or not to approve transactions between us and any officer or director that occurs outside the ordinary course of business.

Compensation Committee

The members of our Compensation Committee are Min Tang (interim chairman), Michael Trimble and David Bullock. The Compensation Committee also administers our equity award plans, including the authority to make and modify awards under the 2005, 2009 and 2014 Performance Equity Plans. The current charter of the Compensation Committee, which was adopted March 16, 2007, provides that the committee is responsible for:

reviewing and making recommendations to our board of directors regarding our compensation policies and forms of compensation provided to our directors, officers and other senior employees;

reviewing and determining performance-based awards and compensation for our officers and other employees;

reviewing and determining share-based compensation (including the 2005, 2009 and 2014 Performance Equity Plans) for our directors, officers, employees and consultants;

administering our equity incentive plans (including the 2005, 2009 and 2014 Performance Equity Plans) in accordance with the terms thereof; and

such other matters that are specifically delegated to the Compensation Committee by our board of directors from time to time.

Nominating Committee

Our Nominating Committee consists of Michael W. Trimble (chairman), Min Tang and David Bullock. The Nominating Committee is responsible for overseeing the selection of persons to be nominated to serve on our board of directors. The Nominating Committee will identify, evaluate and recommend candidates to become members of the Board of Directors with the goal of creating a balance of knowledge and experience. The Nominating Committee is not a fully independent committee.

Pursuant to a vote by the board of directors taken at a board meeting held March 16, 2007, the Nominating Committee charter was amended. Pursuant to the terms of its charter, as amended, the Nominating Committee’s responsibilities include, among other things:

actively seeking and evaluating qualified individuals to become new directors as needed;

reviewing current directors’ suitability when their terms expire or one has a significant change in status;

making recommendations with respect to succession planning for the co-chief executive officer and other officers; and

such other matters that are specifically delegated to the Nominating Committee by our board of directors from time to time.

Summary of Significant Differences in Corporate Governance Practices for Purposes of Rule 5615 of the NASDAQ Marketplace Rules

We are incorporated under the laws of the British Virgin Islands. Our ordinary shares are registered with the SEC and are listed on the NASDAQ Global Select Market. As a result, our corporate governance framework is subject to laws of the British Virgin Islands, or BVI, the securities laws and regulations of the United States and the listing requirements of the NASDAQ Stock Market.

Under Rule 5615 of the Nasdaq Marketplace Rules, a foreign private issuer may follow its home country practice in lieu of the requirements of the Nasdaq Marketplace Rules. Rule 5605 requires U.S. domestic listed companies have a majority of independent directors on its board of directors. We are not required to have a majority of independent directors on our board of directors under BVI laws. However, currently, three of our five directors are independent directors under applicable NASDAQ rules.

Under Rule 5605 a U.S. domestic listed company is required to have a nominations committee and compensation committee. We are not required to have such committees under the BVI laws, however, we do have these two committees, and follow the Nasdaq Marketplace rules in the independence requirements.

Under Rule 5620, a U.S. domestic issuer must solicit proxies and provide proxy statements for all meetings of shareholders. There are no such mandatory requirements under BVI laws, and therefore, we are not required to hold an annual meeting of the shareholders. There were no specific items that our board of directors requested the shareholders to vote on.

Under Rule 5635, a US domestic listed company is required to obtain shareholder approval of equity award plans and issuances of equity securities in excess of certain amounts when at less than market or book value. There are no such mandatory requirements under BVI law. We do not plan to get shareholder approval for future increases in the 2005 Plan, 2009 Plan and 2014 Plan or for any other equity award plan approved by the directors in the future or for issuances of equity securities that exceed 20% of the outstanding shares of the Company if they are sold at less than market or book value.

We have filed documentation with NASDAQ exempting the company under those provisions that BVI law does not require.

Employees.

We had 474,387 and 349 employees as of September 30, 2014, 2015 and 2016, respectively, excluding Xinjiang Origin. Substantially all of our employees are located in China. The following table sets forth the number of our employees categorized by our areas of operations and as a percentage of our workforce as of September 30, 2016:

Areas of Operations	Number of Employees		Percentage of Total
Research and Development		72		20.6	%
Sales and Marketing		71		20.3	%
Production		127		36.4	%
Quality Control		19		5.4	%
Others		60		17.3	%
Total		349		100.0	%

We offer our employees additional annual merit-based bonuses in accordance with the overall performance of our company, his or her department and the individual. We are required by applicable PRC regulations to contribute amounts approximate to 20%, 7.7%, 9.7%, 1%, 0.6% and 0.7%, of our employees’ aggregate salary to a pension contribution plan, a medical insurance plan, a housing fund, an unemployment insurance plan, a personal injury insurance plan and a maternity insurance plan, respectively, for our employees.

Our employees are not covered by any collective bargaining agreement. We believe that we have a good relationship with our employees.

Xinjiang Origin, at its corn seed processing facility, had 57, 43 and 40 employees as of September 30, 2014, 2015 and 2016, respectively.

During the last five years, the Company has initiated corporate wide restructuring programs and operating improvement efforts. During these initiatives, Origin has reduced the total number of employees from 856 as of September 30, 2011 to 389 as of September 30, 2016. As a result, the Company has paid out RMB3.05 million, RMB1.83 million, RMB4.50 million, RMB2.0 million and RMB3.54 million as the severance packages for the fiscal year 2012, 2013, 2014, 2015 and 2016, respectively.

E. Share ownership.

The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of January 4, 2017, by each of our directors and executive officers who beneficially own our ordinary shares, and other principal shareholders.

	Shares Beneficially Owned ( * )
	Number		Percentage of Total
Directors and Executive Officers:
Gengchen Han, Chairman of the Board (1)(2)		4,503,827		21.34	%
Min Tang, Director (1)(3)		20,000		0.09	%
Michael W. Trimble, Director (4)		105,000		0.46	%
William S. Niebur, Chief Executive Officer and President(1)(5)		500,000		2.14	%
Shashank Aurora, Chief Financial Officer(1)(6)		66,667		0.29	%
Jihong Liang, Chief Technology Officer(1)(7)		66,667		0.29	%
David Bullock, Director (1)(8)		10,000		0.04	%

* Beneficial ownership and percentage is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended.

(1)

The business address of each of the individuals is c/o 21 Shengmingyuan Road, Changping District, Beijing, PRC 102206 and 666 Walnut Street, Des Moines, IA 50309. See Item 6B. “Directors, Senior Management, and Employees – Compensation” for discussion of option included in the table granted under the 2005, 2009 and 2014 Performance Equity Plans.

(2)

The shares reported in the above table are held by Dr. Han through a personal holding company, Sinodream Limited, a company formed under the laws of the British Virgin Islands of which he is the sole shareholder, officer and director. Therefore, Dr. Han will have voting and dispositive authority over all the shares. Includes 480,000 shares that may be acquired under stock options held by Dr. Han.

(3)

Includes 20,000 shares that may be acquired under stock options by Mr. Tang.

(4)

The business address of Mr. Trimble is 6159 Brandywine Drive, Johnston, IA 50131. Includes 20,000 shares that may be acquired under stock options held by Mr. Trimble.

(5)

Includes 500,000 shares that may be acquired under stock options held by Dr. Niebur and excludes 100,000 shares that may be acquired under stock option by Dr. Niebur.

(6)

Includes 66,667 shares that may be acquired under stock options held by Mr. Aurora. Excludes 133,333 shares that may be acquired under stock options held by Mr. Aurora.

(7)

Includes 66,667 shares that may be acquired under stock options held by Dr. Liang. Excludes 133,333 shares that may be acquired under stock options held by Dr. Liang.

(8)

Includes 10,000 shares that may be acquired under stock options held by Mr. Bullock.

None of the above shareholders have voting rights that differ from the voting rights of other shareholders.

A substantial number of the ordinary shares are held in “street name,” and the company believes that a large portion of these shares represent holdings of non-United States shareholders through brokers in non-United States jurisdictions. Because these holdings are in street name, the company cannot determine the actual number or jurisdictions in which these shares are held.

ITEM 7

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major shareholders.

Please refer to Item 6.E “Directors, Senior Management and Employees – Share Ownership.”

Related party transactions.

Stock Consignment Agreements

In order to comply with PRC regulations, we operate our business in China through our PRC Operating companies. We have entered into stock consignment agreements with our PRC Operating Companies other than Origin Biotechnology. The following is a summary of the material provisions of these agreements, which are also discussed under Item 4.C of this Annual Report.

The stock consignment agreements give the consignee corporation, State Harvest, control over the shares of the three PRC Operating Companies. The agreements give State Harvest the right to manage in all respects the shares held in title by the shareholders, including all shareholder rights to call meetings of shareholders, to submit shareholder proposals, to elect directors, to vote the shares on all matters and to exercise all other rights of a shareholder in respect of the consigned shares. More specifically, the consignment agreements give State Harvest the right to select, replace and increase the number of the directors, supervisors and recommend new director and supervisor persons, and to exercise management rights, controlling rights and decision-making power over the shares of the PRC Operating Companies. The shareholders agreed not to interfere with State Harvest’s exercise of its rights and to cooperate fully and promptly to permit State Harvest to exercise its authority over the consigned shares. This includes all limitations on the ability of each consignee to transfer or dispose of the shares other than to State Harvest, give guarantees using the shares, consign the shares to another, alter their ownership proportions in any way, dispose of any rights in the ownership of the shares, agree to any debt, waive rights or restructure the shares. State Harvest has the right to take all action in respect of the consigned shares to avoid any damage or infringement of its rights, including in the event of the consigning shareholder’s bankruptcy. State Harvest, under the consignment agreements, has all rights in the consigned shares, including rights to profits, interest, dividends, bonuses and residual assets. If in the future any stock subject to the consignment agreements can be legally transferred to State Harvest, then without further action or payment by State Harvest, it shall be transferred to State Harvest in whole or in part for no additional consideration to the consigning shareholder. The term of each consignment agreement is initially three years, but is automatically renewed indefinitely until both consigners and the consignee agree to terminate. For more information about the stock consignment agreements, See Item 8.01 “Other Events” of our Form 8-K filed with the Securities and Exchange Commission on August 8, 2005. Shares in the PRC operating companies are pledged under these stock consignment agreements.

Technical Service Agreements

As part of the reorganization of our PRC Operating Companies in late 2004 and early 2005, all of the intellectual property rights of Beijing Origin, Changchun Origin and Henan Origin have been and will continue to be transferred to Origin Biotechnology pursuant to technology service agreements dated December 25, 2004. The purpose of this was to permit the better management and licensing of the intellectual property that the three assignors have developed. Under the technology service agreements, Origin Biotechnology will provide technical research and production and distribution services for the seeds produced by the group. These services will include support in the research and development of agricultural seeds, analysis of breeding technologies, environment and feasibility suggestions, technical tutorials and breeding field supervision, market analysis and seed promotion, insect prevention and technical education to distributors and farmers. The initial term is for three years, but the agreements are automatically renewed unless both parties agree to a termination. The fees payable under the agreements are variable, depending on differing formulae for different categories of seeds. Generally, the fees will be as follows: RMB1.2 per kilogram of corn sold by the party receiving the technical services; RMB6 per kilogram of rice sold by the party receiving the technical services. The fees are to be confirmed and paid at the end of each growing season and only charged fees on the sales related to the seed rights owned by Origin Biotechnology.

Corn Originator Agreement

Beijing Origin entered into this agreement with Trimble Genetics International LLC, or Trimble Genetics, a plant genetics research company. Michael W. Trimble, one of our directors, is the founder and president of Trimble Genetics and currently owns 100% of its equity interest. Under this agreement, Beijing Origin hires Trimble Genetics as its agent to test, promote, license and collect research fees on hybrids involving inbred lines of corn developed by Beijing Origin. Trimble Genetics retains fifty percent of such research fees and pays the remaining fifty percent to Beijing Origin. This agreement is immaterial in amount or significance.

Corn Inbred and Hybrid Transfer and Use Agreement

Beijing Origin entered into this agreement with Trimble Genetics on September 6, 2002. Under this agreement, Trimble Genetics provides corn inbreds and hybrids to Beijing Origin for experimental testing purposes. The agreement applies to all corn inbreds and hybrids transferred from Trimble Genetics to Beijing Origin previously, currently or in the future. If a hybrid from the testing proves to be marketable, the parties will negotiate a license agreement. If for any reason, it is not possible to conclude a license agreement, Beijing Origin agrees to return all remnant inbred seed and to destroy any inbreds or hybrids that may have originated from the material provided by Trimble Genetics. This agreement is immaterial in amount or significance.

New Corn Seed Liyu 35 Joint Development Agreement

Beijing Origin entered into three Joint Development agreements with Liyu on March 30, 2006 to jointly develop a new hybrid corn seed, Liyu 35. The proprietary right to the seed developed under this agreement belongs to Liyu but Beijing Origin has exclusive production and marketing rights to this variety of seed. The agreement has no fixed term or termination date, but the agreement automatically terminates if the seeds produced by Beijing Origin are less than 3 million kilograms for three consecutive years, subject to limited exceptions. The fees payable by Beijing Origin represent a percentage of revenues from the sale of the varieties and plus a flat fee.

Joint Development Agreements

Beijing Origin is a party to three joint development agreements with Corn Research Institute of Li County in Hebei Province, China, to develop new hybrid corn seeds. Corn Research Institute of Li County was incorporated as Liyu on May 2004, of which a 30% equity interest was owned by Yang Yasheng, one of our major shareholders and a former director. Yang Yasheng transferred his 30% interest to Beijing Origin on September 2004. On March 11, 2004, Corn Research Institute of Li County, Liyu and Beijing Origin entered into an agreement pursuant to which all the rights and obligations of Corn Research Institute of Li County under the three joint development agreements were assumed by Liyu after the dissolution of Corn Research Institute of Li County. In accordance with these joint development agreements, the parties agreed to jointly develop six varieties of new corn hybrid seeds, Liyu 26, Liyu 16, Liyu 6, Liyu 15, Li 168, and Liyu 35. The proprietary rights to the varieties of seeds developed under these agreements belongs to Corn Research Institute of Li County, now Liyu but Beijing Origin has exclusive right to production and marketing of these seeds. The fees payable by Beijing Origin represent a percentage of revenues from the sale of the varieties, and plus a flat fee with respect to Liyu 26 and Liyu 16. The agreements have no fixed term or termination date. The agreements may be terminated for breach by either party. We may terminate the agreements at any time, in effect, by not producing seeds, without penalty.

Xinjiang Origin

In May 2011 Beijing Origin established Xinjiang Origin for seed production and distribution. Beijing Origin invested RMB51 million for a 51% ownership of Xinjiang Origin.

Technology Transfer Agreement

Beijing Origin, or its predecessor, entered into this agreement with Henan Agriculture University in 1998. Henan Agriculture University currently owns a 2.04% equity interest in Beijing Origin. Under this agreement, the proprietary right to the new variety of seed, Yuyu 22, belongs to Henan Agriculture University. Beijing Origin has the right to propagate, produce and sell the new corn variety. The fee payable under this agreement is RMB20 per mu (unit of area equivalent to 0.164 of an acre) of seed production area per year. There is no fixed term or termination date of this agreement.

IT and Distribution Arrangements with Beijing Shihui Agricultural Development Co, Ltd.

Based in Beijing, China, Beijing Shihui Agricultural Development Co, Ltd (“Shihui”) was established in 2010 by the brother of the Company’s Chairman, Dr. Han Gengchen. As of the date of this report, Dr. Han’s son and brother are the principal shareholders of Shihui. Shihui is mainly engaged in crop seed sales, information technology services and internet operations. Shihui has been providing seed distributing services to Origin since 2014.

During fiscal year 2015, the Company acquired information systems of RMB2.0 million from Shihui.

During 2014 and 2015, Shihui took over Origin’s sales employees and sales centers in Hubei, Sichuan, Xuzhou, Shenyang, Zhengzhou, Hunan and Shandong. During the fiscal year 2016, the sales to Shihui were RMB102.23 million (US$15.31 million), which accounted for 30.5% of the sales of the Company.

From time to time, the Company has provided security to the institutional lenders of Shihui, none of which has been called upon by the lenders.

Shihui’s office is located at the headquarters of Origin in Beijing, China. The rent charged to Shihui was RMB 0.25 million (US$0.04 million).

Master Transaction Agreement with Beijing Shihui

On September 26, 2016, the Company entered into a definitive agreement to sell its proprietary China-based commercial corn seed production and distribution business for RMB400 million (approximately US$60 million) to Shihui. This transaction is subject to customary closing conditions and shareholder approval. It is expected to close in the first calendar quarter of 2017. Shihui is a company of which the principal shareholders are the brother and son of Dr. Han Gengchen, our chairman of the board and of which the brother of Dr. Han is the principal executive officer.

Interests of experts and counsel.

Not applicable.

ITEM 8.

FINANCIAL INFORMATION

Consolidated statements and other financial information.

We have appended consolidated financial statements filed as part of this Annual Report. See Item 18 “Financial Statements.”

Legal Proceedings

We may from time to time be subject to various legal or administrative proceedings, either as plaintiff or defendant, arising in the ordinary course of our business. Except otherwise disclosed in this report, we are not currently a party to, nor are we aware of, any legal proceeding, investigation or claim that, in the view of our management, is likely to materially and adversely affect our business, financial position or results of operations.

Dividend Policy

We have never declared or paid any dividends, nor do we have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

Our board of directors by resolution may authorize payment of dividends if the directors are satisfied, on reasonable grounds, that Origin will, immediately after the distribution of dividends, (i) satisfy the solvency test as stipulated in Section 56 of the BVI Business Companies Act, (ii) any of our applicable contractual obligations and (iii) the laws of China. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.

Significant changes.

No significant changes since September 30, 2016

ITEM 9.

THE OFFER AND LISTING

Offering and listing details.

Origin’s ordinary shares are listed on the NASDAQ Global Select Market where they trade under the SEED ticker symbol.

The following table provides the historical high and low trading United States dollar prices for Origin’s ordinary shares for the periods indicated below:

	Nasdaq
	Price per Share (US$)
	High		Low
Annual Market Prices
Year 2012 (until September 30, 2012)		4.49		1.30
Year 2013 (until September 30, 2013)		1.89		1.34
Year 2014 (until September 30, 2014)		3.47		1.17
Year 2015 (until September 30, 2015)		2.89		1.02
Year 2016 (until September 30, 2016)		3.19		1.07

Quarterly Market Prices
First Quarter 2015, ended December 31, 2014		2.25		1.19
Second Quarter 2015, ended March 31, 2015		1.86		1.02
Third Quarter 2015, ended June 30, 2015		2.89		1.41
Fourth Quarter 2015, ended September 30, 2015		2.00		1.12
First Quarter 2016, ended December 31, 2015		1.78		1.30
Second Quarter 2016, ended March 31, 2016		1.64		1.07
Third Quarter 2016, ended June 30, 2016		2.65		1.32
Fourth Quarter 2016, ended September 30, 2016		3.19		1.76

Monthly Market Prices	NASDAQ Price per Share (US$)
	High		Low
Jul-16		2.38		1.76
Aug-16		2.40		1.90
Sep-16		3.19		2.11
Oct-16		2.75		2.35
Nov-16		2.87		2.39
Dec-16		2.66		2.23

Plan of distribution.

Not applicable.

Markets.

See Item 9.A above.

Selling shareholders.

Not applicable.

Dilution.

Not applicable.

Expenses of the issue.

Not applicable.

ITEM 10.	ADDITIONAL INFORMATION

Share capital.

Not applicable.

Memorandum and articles of association.

We incorporate by reference into this Annual Report the description of our amended and restated memorandum and articles of association contained in our 20-F annual report, as amended, initially filed with the Commission on July 14, 2006.

Material contracts.

We have not entered into any material contracts other than in the ordinary course of business and other than those described in Item 4, “Information on the Company,” Item 7, “Major Shareholders and Related Party Transactions,” filed (or incorporated by reference) as exhibits to this Annual Report or otherwise described or referenced in this Annual Report.

Exchange controls.

British Virgin Islands

There are no material exchange controls restrictions on payment of dividends, interest or other payments to the holders of our ordinary or preferred shares or on the conduct of our operations in the BVI, where we are incorporated. There are no material BVI laws that impose any material exchange controls on us or that affect the payment of dividends, interest or other payments to nonresident holders of our ordinary or preferred shares. BVI law and our amended and restated memorandum and articles of association impose no material limitations on the right of non-residents or foreign owners to hold or vote our ordinary or preferred shares.

China

Under the Foreign Currency Administration Rules promulgated in 1996 and revised in 1997, and various regulations issued by State Administration of Foreign Exchange, or SAFE, and other relevant PRC government authorities, RMB is convertible into other currencies without prior approval from SAFE only to the extent of current account items, such as trade related receipts and payments, interest and dividends and after complying with certain procedural requirements. The conversion of RMB into other currencies and remittance of the converted foreign currency outside PRC for the purpose of capital account items, such as direct equity investments, loans and repatriation of investment, requires the prior approval from SAFE or its local office. Payments for transactions that take place within China must be made in RMB. Unless otherwise approved, PRC companies must repatriate foreign currency payments received from abroad. Foreign-invested enterprises may retain foreign exchange in accounts with designated foreign exchange banks subject to a cap set by SAFE or its local office. Unless otherwise approved, domestic enterprises must convert all of their foreign currency proceeds into RMB.

On October 21, 2005, SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Reverse Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, which became effective as of November 1, 2005. According to the notice, a special purpose company, or SPV, refers to an offshore company established or indirectly controlled by PRC residents for the special purpose of carrying out financing of their assets or equity interest in PRC domestic enterprises. Prior to establishing or assuming control of an SPV, each PRC resident, whether a natural or legal person, must complete the overseas investment foreign exchange registration procedures with the relevant local SAFE branch. The notice applies retroactively. As a result, PRC residents who have established or acquired control of these SPVs that previously made onshore investments in China were required to complete the relevant overseas investment foreign exchange registration procedures by March 31, 2006. These PRC residents must also amend the registration with the relevant SAFE branch in the following circumstances: (i) the PRC residents have completed the injection of equity investment or assets of a domestic company into the SPV; (ii) the overseas funding of the SPV has been completed; (iii) there is a material change in the capital of the SPV. Under the rules, failure to comply with the foreign exchange registration procedures may result in restrictions being imposed on the foreign exchange activities of the violator, including restrictions on the payment of dividends and other distributions to its offshore parent company, and may also subject the violators to penalties under the PRC foreign exchange administration regulations.

On August 29, 2008, SAFE promulgated Notice 142 which regulates the conversion by a foreign-funded enterprise of foreign currency into RMB by restricting how the converted RMB may be used. Notice 142 requires that RMB funds converted from the foreign currency capital of a foreign-funded enterprise may only be used for purposes within the business scope approved by the applicable governmental authority and may not be used for equity investments within the PRC unless specifically provided for otherwise. In addition, SAFE strengthened its supervision over the flow and use of RMB funds converted from the foreign currency capital of a foreign-funded enterprise. The use of such RMB capital may not be changed without SAFE’s approval, and may not, in any case, be used to repay or prepay RMB loans if such loans are outstanding. Violations of Notice 142 will result in severe penalties, such as heavy fines as set out in the relevant foreign exchange control regulations.

Taxation.

The following is a general summary of certain material British Virgin Islands and U.S. federal income tax considerations. The discussion is not intended to be, nor should it be construed as, legal or tax advice to any existing or prospective shareholder. The discussion is based on laws and relevant interpretations thereof in effect as of the date hereof, all of which are subject to change or different interpretations, possibly with retroactive effect. The discussion does not address United States state or local tax laws, or tax laws of jurisdictions other than the British Virgin Islands and the United States.

Taxation in British Virgin Islands Taxation

The British Virgin Islands, or BVI, does not impose a tax on dividends paid by us to holders of our ordinary or preferred shares, nor does the BVI levy any capital gains or income taxes on us.

A holder of our ordinary or preferred shares who is not a resident of the BVI is exempt from the BVI income tax on dividends paid with respect to the ordinary or preferred shares. Holders of ordinary or preferred shares are not subject to the BVI income tax on gains realized on the sale or disposition of the ordinary or preferred shares.

Our ordinary and preferred shares are not subject to transfer taxes, stamp duties or similar charges in the BVI. However, as a business company, we are required to pay the BVI government an annual license fee based on the number of shares we are authorized to issue.

There is no income tax treaty or convention currently in effect between the United States and the BVI.

Taxation in China

We are a holding company incorporated in the BVI, which indirectly holds our equity interests in our PRC operating subsidiaries. The EIT Law and its implementation rules, both of which became effective as of January 1, 2008, provide that a PRC enterprise is subject to a standard income tax rate of 25%, and China-sourced income of foreign enterprises, such as dividends paid by a PRC subsidiary to its overseas parent, will normally be subject to PRC withholding tax at a rate of 10%, unless there are applicable treaties between the overseas parent’s jurisdiction of incorporation and China to reduce such rate.

According to the Notice Regarding Interpretation and Recognition of Beneficial Owners under Tax Treaties, the term “beneficial owner” refers to a person who has the right to own and dispose of the income and the rights or properties generated from the said income. The “beneficial owner” may be an individual, a company or any other organization which is usually engaged in substantial business operations. A conduit company is not a “beneficial owner.” The term “conduit company” refers to a company which is usually established for purposes of dodging or reducing taxes, and transferring or accumulating profits. Such a company is only registered in the country of domicile to satisfy the organizational form as required by law, but it does not engage in such substantial business operations as manufacturing, distribution and management.

Under the EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a resident enterprise and will normally be subject to an EIT of 25% on its global income. The implementing rules define the term “de facto management bodies” as “an establishment that exercises, in substance, overall management and control over the production, business, personnel, accounting, etc., of a Chinese enterprise.”

It remains unclear whether the PRC tax authorities would require or permit our overseas registered entities to be treated as PRC resident enterprises. We do not currently consider our company to be a PRC resident enterprise. However, if the PRC tax authorities determine that we are a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as interest on offering proceeds and non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Second, although under the EIT Law and its implementing rules dividends paid to us from our PRC subsidiaries would qualify as “tax-exempt income,” we cannot guarantee that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, it is possible that future guidance issued with respect to the new “resident enterprise” classification could result in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC shareholders and with respect to gains derived by our non-PRC shareholders from transferring our shares.

United States Federal Income Taxation

This discussion describes the material U.S. federal income tax consequences of the purchase, ownership and disposition of our ordinary shares. This discussion does not address any aspect of U.S. federal gift or estate tax, or the state, local or foreign tax consequences of an investment in our ordinary shares. This discussion applies to you only if you hold and beneficially own our ordinary shares as capital assets for tax purposes. This discussion does not apply to you if you are a member of a class of holders subject to special rules, such as:

dealers in securities or currencies;

traders in securities that elect to use a mark-to-market method of accounting for securities holdings;

banks or other financial institutions;

insurance companies;

tax-exempt organizations;

partnerships and other entities treated as partnerships for U.S. federal income tax purposes or persons holding ordinary shares through any such entities;

persons that hold ordinary shares as part of a hedge, straddle, constructive sale, conversion transaction or other integrated investment;

U.S. Holders (as defined below) whose functional currency for tax purposes is not the U.S. dollar;

persons liable for alternative minimum tax; or

persons who actually or constructively own 10% or more of the total combined voting power of all classes of our shares (including ordinary shares) entitled to vote.

This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, which we refer to in this discussion as the Code, its legislative history, existing and proposed regulations promulgated there under, published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis. In addition, this discussion relies on our assumptions regarding the value of our shares and the nature of our business over time.

You should consult your own tax advisor concerning the particular U.S. federal income tax consequences to you of the purchase, ownership and disposition of our ordinary shares, as well as the consequences to you arising under the laws of any other taxing jurisdiction.

For purposes of the U.S. federal income tax discussion below, you are a “U.S. Holder” if you beneficially own ordinary shares and are:

a citizen or resident of the United States for U.S. federal income tax purposes;

a corporation, or other entity taxable as a corporation, that was created or organized in or under the laws of the United States or any political subdivision thereof;

an estate the income of which is subject to U.S. federal income tax regardless of its source; or

a trust if (a) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) the trust has a valid election in effect to be treated as a U.S. person.

If you are not a U.S. person, please refer to the discussion below under “Non-U.S. Holders.”

For U.S. federal income tax purposes, income earned through a foreign or domestic partnership or other flow-through entity is attributed to its owners. Accordingly, if a partnership or other flow-through entity holds ordinary shares, the tax treatment of the holder will generally depend on the status of the partner or other owner and the activities of the partnership or other flow-through entity.

U.S. Holders

Dividends on ordinary shares

Subject to the “Passive Foreign Investment Company” discussion below, if we make distributions and you are a U.S. Holder, the gross amount of any distributions you receive on your ordinary shares will generally be treated as dividend income if the distributions are made from our current or accumulated earnings and profits, calculated according to U.S. federal income tax principles. Dividends will generally be subject to U.S. federal income tax as ordinary income on the day you actually or constructively receive such income. However, if you are an individual and have held your ordinary shares for a sufficient period of time, dividend distributions on our ordinary shares will generally constitute qualified dividend income taxed at a preferential rate as long as our ordinary shares continue to be readily tradable on the NASDAQ Global Select Market and certain other conditions apply. You should consult your own tax adviser as to the rate of tax that will apply to you with respect to dividend distributions, if any, you receive from us.

We do not intend to calculate our earnings and profits according to U.S. tax accounting principles. Accordingly, distributions on our ordinary shares, if any, will generally be taxed to you as dividend distributions for U.S. tax purposes. Even if you are a corporation, you will not be entitled to claim a dividends-received deduction with respect to distributions you receive from us. Dividends generally will constitute foreign source passive income for U.S. foreign tax credit limitation purposes.

Sales and other dispositions of ordinary shares

Subject to the “Passive Foreign Investment Company” discussion below, when you sell or otherwise dispose of ordinary shares, you will generally recognize capital gain or loss in an amount equal to the difference between the amount realized on the sale or other disposition and your adjusted tax basis in the ordinary shares, both as determined in U.S. dollars. Your adjusted tax basis will generally equal the amount you paid for the ordinary shares. Any gain or loss you recognize will be long-term capital gain or loss if your holding period in our ordinary shares is more than one year at the time of disposition. If you are an individual, any such long-term capital gain will be taxed at preferential rates. Your ability to deduct capital losses will be subject to various limitations.

Passive Foreign Investment Company

If we were a PFIC, in any taxable year in which you hold our ordinary shares, as a U.S. Holder, you would generally be subject to adverse U.S. tax consequences, in the form of increased tax liabilities and special U.S. tax reporting requirements.

We will be classified as a PFIC in any taxable year if either: (1) the average percentage value of our gross assets during the taxable year that produce passive income or are held for the production of passive income is at least 50% of the value of our total gross assets or (2) 75% or more of our gross income for the taxable year is passive income (such as certain dividends, interest or royalties). For purposes of the first test: (1) any cash, cash equivalents, and cash invested in short-term, interest-bearing debt instruments or bank deposits that is readily convertible into cash, will generally count as producing passive income or held for the production of passive income and (2) the average value of our gross assets is calculated based on our market capitalization. We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, 25% or more (by value) of the stock.

We believe that we were not a PFIC for the taxable year 2016. However, there can be no assurance that we will not be a PFIC for the taxable year 2016 and/or later taxable years, as PFIC status is re-tested each year and depends on the facts in such year. For example, we would be a PFIC for the taxable year 2016 if the sum of our average market capitalization, which is our share price multiplied by the total number of our outstanding shares, and our liabilities over that taxable year was not more than twice the value of our cash, cash equivalents, and other assets producing passive income or held for production of passive income. We could also be a PFIC for any taxable year if the gross income that we and our subsidiaries earn from passive investments is substantial in comparison with the gross income from our business operations.

If we were a PFIC, you would generally be subject to additional taxes and interest charges on certain “excess distributions” we make and on any gain realized on the disposition or deemed disposition of your ordinary shares, regardless of whether we continue to be a PFIC in the year in which you receive an “excess distribution” or dispose of or are deemed to dispose of your ordinary shares. Distributions in respect of your ordinary shares during a taxable year would generally constitute “excess distributions” if, in the aggregate, they exceed 125% of the average amount of distributions in respect of your ordinary shares over the three preceding taxable years or, if shorter, the portion of your holding period before such taxable year.

To compute the tax on “excess distributions” or any gain, (1) the “excess distribution” or the gain would be allocated ratably to each day in your holding period, (2) the amount allocated to the current year and any tax year before we became a PFIC would be taxed as ordinary income in the current year, (3) the amount allocated to other taxable years would be taxable at the highest applicable marginal rate in effect for that year, and (4) an interest charge at the rate for underpayment of taxes for any period described under (3) above would be imposed with respect to any portion of the “excess distribution” or gain that is allocated to such period. In addition, if we were a PFIC, no distribution that you receive from us would qualify for taxation at the preferential rate discussed in the “Dividends on ordinary shares” section above.

If we were a PFIC in any year, and if you are a U.S. Holder, you would be required to make an annual return on IRS Form 8621 regarding your ordinary shares. However, we do not intend to generate, or share with you, information that you might need to properly complete IRS Form 8621. You should consult with your own tax adviser regarding reporting requirements with regard to your ordinary shares.

If we were a PFIC in any year, you would generally be able to avoid the “excess distribution” rules described above by making a timely so-called “mark-to-market” election with respect to your ordinary shares provided our ordinary shares are “marketable.” Our ordinary shares will be “marketable” as long as they remain regularly traded on the NASDAQ Global Select Market. If you made this election in a timely fashion, you would generally recognize as ordinary income or ordinary loss the difference between the fair market value of your ordinary shares on the first day of any taxable year and their value on the last day of that taxable year. Any ordinary income resulting from this election would generally be taxed at ordinary income rates and would not be eligible for the reduced rate of tax applicable to qualified dividend income. Any ordinary losses would be limited to the extent of the net amount of previously included income as a result of the mark-to-market election, if any. Your basis in the ordinary shares would be adjusted to reflect any such income or loss. You should consult with your own tax adviser regarding potential advantages and disadvantages to you of making a “mark-to-market” election with respect to your ordinary shares. Separately, if we were a PFIC in any year, you would be able to avoid the “excess distribution” rules by making a timely election to treat us as a so-called “Qualified Electing Fund”, or QEF. You would then generally be required to include in gross income for any taxable year (1) as ordinary income, your pro rata share of our ordinary earnings for the taxable year, and (2) as long-term capital gain, your pro rata share of our net capital gain for the taxable year. However, we do not intend to provide you with the information you would need to make or maintain a QEF election and you will, therefore, not be able to make or maintain such an election with respect to your ordinary shares.

Non-U.S. Holders

If you beneficially own ordinary shares and are not a U.S. Holder for U.S. federal income tax purposes, or a Non-U.S. Holder, you generally will not be subject to U.S. federal income tax or withholding on dividends received from us with respect to ordinary shares unless that income is considered effectively connected with your conduct of a U.S. trade or business and, if an applicable income tax treaty so requires, as a condition for you to be subject to U.S. federal income tax with respect to income from your ordinary shares, such dividends are attributable to a permanent establishment that you maintain in the United States. You generally will not be subject to U.S. federal income tax, including withholding, on any gain realized upon the sale or exchange of ordinary shares, unless:

that gain is effectively connected with the conduct of a U.S. trade or business and, if an applicable income tax treaty so requires as a condition for you to be subject to U.S. federal income tax with respect to income from your ordinary shares, such gain is attributable to a permanent establishment that you maintain in the United States; or

you are a nonresident alien individual and are present in the United States for at least 183 days in the taxable year of the sale or other disposition and either (1) your gain is attributable to an office or other fixed place of business that you maintain in the United States or (2) you have a tax home in the United States.

If you are engaged in a U.S. trade or business, unless an applicable tax treaty provides otherwise, the income from your ordinary shares, including dividends and the gain from the disposition of ordinary shares, that is effectively connected with the conduct of that trade or business will generally be subject to the rules applicable to U.S. Holders discussed above. In addition, if you are a corporation, you may be subject to an additional branch profits tax at a rate of 30% or any lower rate under an applicable tax treaty.

U.S. information reporting and backup withholding rules

In general, dividend payments with respect to the ordinary shares and the proceeds received on the sale or other disposition of those ordinary shares may be subject to information reporting to the IRS and to backup withholding (currently imposed at a rate of 28%). Backup withholding will not apply, however, if you (1) are a corporation or come within certain other exempt categories and, when required, can demonstrate that fact or (2) provide a taxpayer identification number, to certify as to no loss of exemption from backup withholding and otherwise comply with the applicable backup withholding rules. To establish your status as an exempt person, you will generally be required to provide certification on IRS Form W-9, W-8BEN or W-8ECI, as applicable. Any amounts withheld from payments to you under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax liability, provide that you furnish the required information to the IRS.

HOLDERS OF OUR ORDINARY SHARES SHOULD CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES RESULTING FROM PURCHASING, HOLDING OR DISPOSING OF THE ORDINARY SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF THE TAX LAWS OF ANY STATE, LOCAL OR FOREIGN JURISDICTION AND INCLUDING ESTATE, GIFT, AND INHERITANCE LAWS.

Dividends and paying agents.

Not applicable.

Statement by experts.

Not applicable.

Documents on display.

We have filed this Annual Report on Form 20-F with the SEC under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Statements made in this Annual Report as to the contents of any document referred to are not necessarily complete. With respect to each such document filed as an exhibit to this Annual Report, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference.

We are subject to the informational requirements of the Exchange Act as a foreign private issuer and file reports and other information with the SEC. Reports and other information filed by us with the SEC, including this Annual Report on Form 20-F, may be inspected and copied at the public reference room of the SEC at 450 Fifth Street N.W. Washington D.C. 20549.

You can also obtain copies of this Annual Report on Form 20-F by mail from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed rates. Additionally, copies of this material may be obtained from the SEC’s Internet site at http://www.sec.gov. The SEC’s telephone number is 1-800-SEC-0330.

Subsidiaries information.

See Item 4. “Information on the Company, Subpart C – Organizational Structure.”

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk

Our significant interest-bearing financial liabilities are bank borrowings. Short-term and long-term borrowings account for 80% and 20%, respectively, of total borrowings as of September 30, 2016. Short-term borrowings will mature at various dates within the year ending September 30, 2016, which does not expose us to interest rate risk. Our interest rate risk arises primarily from long-term borrowings. During the year ended September 30, 2016, all of our long-term borrowings were issued at variable rates, hence exposing us to cash flow interest rate risk which is partially offset by cash held at variable rates.

Our exposure to market rate risk for changes in interest rates also relates to the interest income generated by excess cash invested in short term money market accounts and certificates of deposit. We have not used derivative financial instruments in our investment portfolio. Interest earning instruments carry a degree of interest rate risk. We have not been exposed nor do we anticipate being exposed to material risks due to changes in interest rates. However, our future interest income may fall short of expectations due to changes in interest rates.

Foreign currency risk

Substantially all our revenues and expenses are denominated in Renminbi and a substantial portion of our cash is kept in Renminbi, but a portion of our cash is also kept in U.S. dollars. Although we believe that, in general, our exposure to foreign exchange risks should be limited, the value of our shares will be affected by the foreign exchange rate between U.S. dollars and Renminbi. For example, to the extent that we need to convert U.S. dollars into Renminbi for our operational needs and the Renminbi appreciate against the U.S. dollar at that time, our financial position and the price of our shares may be adversely affected. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of declaring dividends on our shares or otherwise and the U.S. dollar appreciates against the Renminbi, the U.S. dollar equivalent of our earnings in China would be reduced.

We have recorded RMB4.08 million (US$0.61 million) of foreign exchange gain in our net income for the twelve months ended September 30, 2016, due to fluctuations in the currency exchange rate. The PRC government may further readjust the current rate at which Renminbi-U.S. dollar exchanges are exchanged, as well as re-evaluate its policy of using a fixed-rate regime to a basket of currencies govern foreign currency transactions, although the PRC government has not committed itself to take any such action currently. Since we have not engaged in any hedging activities, we may experience economic loss as a result of any foreign currency exchange rate fluctuations.

Inflation

In recent years, China has not experienced significant inflation, and thus inflation has not had a significant effect on our business during the past three years. According to the China Statistical Bureau, China’s overall national inflation rate, as represented by the general consumer price index, was approximately 3.1%, 1.6%, 1.6% and 1.9% in the fiscal year ended September 30, 2013, 2014, 2015 and 2016 respectively. Sustained or increased inflation in China could have an adverse impact on China’s economy, which could affect demand for our products or services or increase our cost of services or operating expenses. As we have not previously operated during a period of significant inflation, we cannot predict with confidence the effect that such inflation may have on our business.

ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable.

PART II

ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not Applicable.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

The rights of securities holders have not been materially changed during the period covered by this Annual Report.

ITEM 15.

CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures: As of September 30, 2016 (the “Evaluation Date”), the Company conducted an evaluation (under the supervision and participation of the Company’s management including the Chief Executive Officer and the Chief Financial Officer, pursuant to Rule 13a-15 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) of the effectiveness of the design and operation of the Company's disclosure controls and procedures. We have determined those controls are effective as of September 30, 2016.

(b) Report of Origin’s Management on Internal Control over Financial Reporting: Origin’s Board of Directors and management are responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the reliability of financial reporting and the preparation and fair presentation of its published consolidated financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective may not provide or detect misstatements and can only provide reasonable assurances with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Origin’s management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2016. In making this assessment, it used the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the evaluation under these criteria, the management hasn’t identified material weakness in the Company’s internal control over financial statement closing process, as a result, the management concluded that the Company’s internal control over financial reporting was effective.

(c) Attestation report of the registered public accounting firm. BDO China Shu Lun Pan Certified Public Accountants LLP, our independent registered public accounting firm, has audited our internal control over financial reporting as of September 30, 2016, and has issued an attestation report set forth below.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Origin Agritech Limited

We have audited the internal control over financial reporting of Origin Agritech Limited and its subsidiaries and variable interest entities (the “Company”) as of September 30, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 15(b), Report of Origin’s Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2016, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Origin Agritech Limited and its subsidiaries and variable interest entities as of September 30, 2015 and 2016, and the related consolidated statements of income and comprehensive income, equity, and cash flows for the years ended September 30, 2014, 2015 and 2016 and our report dated January 9, 2017 expressed an unqualified opinion thereon.

/s/BDO China Shu Lun Pan Certified Public Accountants LLP

BDO China Shu Lun Pan Certified Public Accountants LLP

Shenzhen, The People’s Republic of China

January 9, 2017

ITEM 16A.

AUDIT COMMITTEE FINANCIAL EXPERT.

The board of directors believes that Mr. David W. Bullock, a member of our Audit Committee, meets the criteria for an “audit committee financial expert” as established by the SEC and is an independent director.

Mr. Bullock will not be deemed an “expert” for any purpose, including, without limitation, for purposes of Section 11 of the Securities Act of 1933, as amended, as a result of being designated or identified as an audit committee financial expert. The designation or identification of Mr. Bullock as an audit committee financial expert does not impose on him any duties, obligations or liability that are greater than the duties, obligations and liability imposed on him as a member of our Audit Committee and board of directors in the absence of such designation or identification. The designation or identification of Mr. Bullock as an audit committee financial expert does not affect the duties, obligations or liability of any other member of our Audit Committee or board of directors, and Mr. Bullock is determined to be independent directors.

ITEM 16B.

CODE OF ETHICS.

On January 18, 2007, our board of directors adopted a code of ethics for senior executive and financial officers, including our chief executive officer and our principal financial officer (i) to promote the honest and ethical conduct of our senior executive and financial officers, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, (ii) to promote full, fair, accurate, timely and understandable disclosure in periodic reports required to be filed with or submitted to the SEC and in other public communications by us; (iii) to promote compliance with all applicable laws, rules and regulations that apply to us and our senior executive and financial officers; (iv) to deter wrongdoing; and (v) to promote prompt internal reporting of breaches of, and accountability for adherence to, this code. A copy of the code of ethics is filed as an exhibit to this Annual Report by incorporation by reference.

On January 18, 2007, our board of directors also adopted a code of conduct for our employees, including directors and officers. The purpose of this code of conduct is to provide a summary of certain of our key policies and procedures and to help ensure lawful and ethical conduct. A copy of the code of conduct is filed as an exhibit to this Annual Report by incorporation by reference.

ITEM 16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(a)

Audit Fees.

The aggregate fees billed for the fiscal year ended September 30, 2015 and 2016, for professional services rendered by BDO China Shu Lun Pan Certified Public Accountants LLP for the audits of internal controls over financial reporting and the consolidated financial statements as of and for the fiscal years ended September 30, 2015 and 2016 were RMB2.0 million and RMB2.0 million (US$0.30 million), respectively.

(b)

Audit - Related Fees.

The aggregate fees billed for the years ended September 30, 2015 and 2016 for professional services rendered by BDO China Shu Lun Pan Certified Public Accountants LLP for the performance of agree-upon procedures for the quarterly financial statements during the year ended September 30, 2015 and 2016 were RMB 0.19 million and RMB 0.19 million (US$0.03 million), respectively.

(c)

Tax Fees.

We did not enter into any engagement during the fiscal years ended September 30, 2015 or 2016 for professional services rendered by our principal accountant for tax compliance, tax advice or tax planning.

(d)

All Other Fees.

No fees were billed in either of the last two fiscal years for products and services provided by our principal accountant, other than the services reported in paragraphs (a) through (b) of this Item 16C for the fiscal years ended September 30, 2015 and 2016.

(e)

Audit Committee Pre-Approval Policies and Procedures.

Our Audit Committee pre-approves all auditing services and permitted non-audit services to be performed for us by our independent auditor, including the fees and terms thereof (subject to the de minimums exceptions for non-audit services described in Section 10A(i)(l)(B) of the Exchange Act that are approved by our Audit Committee prior to the completion of the audit).

(f)

Not applicable.

ITEM 16D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.

We have not been granted an exemption from the applicable listing standards for the Audit Committee of our board of directors.

ITEM 16E.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

None.

ITEM 16F.

CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT.

Not Applicable.

ITEM 16G.

CORPORATE GOVERNANCE.

As a foreign private issuer (“FPI”) whose securities are listed on the NASDAQ Global Market, we are permitted to follow certain home country corporate governance practices instead of the requirements of the NASDAQ Marketplace Rules (the “NASDAQ Rules”) pursuant to NASDAQ Rule 5615, which provides for an exemption from compliance with the NASDAQ Rule 5600 Series. We have provided to NASDAQ the necessary documentation to afford the Company these exemptions. See Item 6, Subpart C – Summary of Significant Differences in Corporate Governance Procedures for purposes of Rule 5615 of the NASDAQ Marketplace Rules.

PART III

ITEM 17. FINANCIAL STATEMENTS

We have provided financial statements pursuant to Item 18.

ITEM 18. FINANCIAL STATEMENTS

The following financial statements are filed as part of this annual report on Form 20-F.

ITEM 19. EXHIBITS

Index to Exhibits

Exhibit
Number		Description
1.1		Memorandum and Articles of Association of Origin Agritech Limited re-registered under the new Business Companies Act of the British Virgin Islands as of July 10, 2006 (Incorporated by reference to Exhibit 1.1 of our Annual Report 20-F (file no. 000-51576) filed with the Securities and Exchange Commission on July 14, 2006.

4.1		2005 Performance Equity Plan (Incorporated by reference to Annex D of the proxy statement/prospectus included in our Registration Statement S-4/A (file no. 333-124709) filed with the Securities and Exchange Commission on September 27, 2005).

4.2		2009 Performance Equity Plan (Incorporated by reference to Exhibit 4.1 of our Registration Statement on Form S-8 (file no. 333-166226) filed with the Securities and Exchange Commission on April 22, 2010).

4.3		Technical Service Agreement between Origin Biotechnology and Beijing Origin (Incorporated by reference to Exhibit 10.14 of our Registration Statement S-4/A (file no. 333-124709) filed with the Securities and Exchange Commission on August 22, 2005).

4.4		Technical Service Agreement between Origin Biotechnology and Henan Origin (Incorporated by reference to Exhibit 10.15 of our Registration Statement S-4/A (file no. 333-124709) filed with the Securities and Exchange Commission on August 22, 2005).

4.5		Technical Service Agreement between Origin Biotechnology and Changchun Origin (Incorporated by reference to Exhibit 10.16 of our Registration Statement S-4/A (file no. 333-124709) filed with the Securities and Exchange Commission on August 22, 2005).

4.6		Form of Stock Consignment Agreement (Incorporated by reference to Exhibit 10.17 of our Registration Statement S-4/A (file no. 333-124709) filed with the Securities and Exchange Commission on August 22, 2005).

4.7		Technology Transfer Agreement between Henan Agriculture University and Beijing Origin (YuYu22) (Incorporated by reference to Exhibit 10.27 of our Registration Statement S-4/A (file no. 333-124709) filed with the Securities and Exchange Commission on August 22, 2005).

4.8		Joint Development agreement with Corn Research Institute of Li County (1st Agreement) (Incorporated by reference to Exhibit 10.28 of our Registration Statement S-4/A (file no. 333-124709) filed with the Securities and Exchange Commission on August 22, 2005).

4.9		Joint Development Agreement with Corn Research Institute of Li County (2nd Agreement) (Incorporated by reference to Exhibit 10.29 of our Registration Statement S-4/A (file no. 333-124709) filed with the Securities and Exchange Commission on September 16, 2005).

4.10		Form Equity Transfer Agreement between Beijing Origin and shareholders of Denong Zhengcheng Seed Co., Ltd. pursuant to which Beijing Origin acquired 52.21% equity interest in Denong Zhengcheng Seed Co., Ltd. dated as of January 16, 2006 (Incorporated by reference to Exhibit 4.16 of our Annual Report 20-F (file no. 000-51576 ) filed with the Securities and Exchange Commission on July 14, 2006),

4.11		Equity Transfer Agreement between Beijing Origin and Jilin Academy of Agriculture Science dated as of December 6, 2005 (Incorporated by reference to Exhibit 4.17 of our Annual Report 20-F (file no. 000-51576) filed with the Securities and Exchange Commission on July 14, 2006).

4.12		Equity Transfer Agreement between Beijing Origin and China National Center for Biotechnology Development dated as of December 28, 2004 (Incorporated by reference to Exhibit 4.18 of our Annual Report 20-F (file no. 000-51576 ) filed with the Securities and Exchange Commission on July 14, 2006)

4.13		New Corn Seed Liyu 35 Joint Development Agreement between Beijing Origin and Shijiazhuang Liyu Technology Development Co., Ltd. dated as of March 30, 2006 (Incorporated by reference to Exhibit 4.20 of our Annual Report 20-F (file no. 000-51576 ) filed with the Securities and Exchange Commission on July 14, 2006).

4.14		Joint Development Agreement between Beijing Origin and Corn Research Institute of Li County dated January 31, 2002 (Incorporated by reference to Exhibit 4.21 of our Annual Report 20-F (file no. 000-51576) filed with the Securities and Exchange Commission on July 14, 2006).

4.15		Joint Development Agreement between Beijing Origin and Corn Research Institute of Li County dated January 9, 2003 (Incorporated by reference to Exhibit 4.22 of our Annual Report 20-F (file no. 000-51576) filed with the Securities and Exchange Commission on July 14, 2006).

4.16		2014 Performance Equity Plan (Incorporated by reference to Exhibit 4.16 of our Annual Report 20-F (file no. 000-51576 ) filed with the Securities and Exchange Commission on January 12, 2015),

4.17		Form of Master Transaction Agreement ((Incorporated by reference to Exhibit 10.2 of our Form 6-K (file no. 000-51576 ) filed with the Securities and Exchange Commission on September 27, 2016).

8.1*		List of Subsidiaries

11.1		Code of Ethics (Incorporated by reference to Exhibit 11.1 of our Annual Report 20-F (file no. 000-51576) filed with the Securities and Exchange Commission on February 15, 2007).

11.2		Code of Conduct (Incorporated by reference to Exhibit 11.2 of our Annual Report 20-F (file no. 000-51576) filed with the Securities and Exchange Commission on February 15, 2007).

12.1*		CEO Certification Pursuant to Rule 13a-14(a) (17 CFR 240.13a-14(a)) (17 CFR 240.13a-14(a)) or Rule 15d-1(a) (17 CFR 240.15d-14(a))

12.2*		CFO Certification Pursuant to Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule 15d-1(a) (17 CFR 240.15d-14(a))

13.1*		CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

13.2*		CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

15.1*		Consent of BDO China Shu Lun Pan Certified Public Accountants LLP to incorporation of its reports on the Registrant’s consolidated financial statements for fiscal years ended 2014, 2015 and 2016 and the effectiveness of the Registrant’s internal control over financial reporting as of September 30, 2016 into Registrant's Registration Statements on Form S-8 (#333-202947, #333-166226 and #333-145865)

Filed herewith.

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

Date: January 9, 2017	ORIGIN AGRITECH LIMITED

	/S/ William S. Niebur
	Name:	William S. Niebur
	Title:	Chief Executive Officer

ORIGIN AGRITECH LIMITED

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS		PAGE

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-2

CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2015 AND 2016		F-3

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE YEARS ENDED SEPTEMBER 30, 2014, 2015AND 2016		F-4

CONSOLIDATED STATEMENTS OF EQUITY FOR THE YEARS ENDED SEPTEMBER 30, 2014, 2015AND 2016		F-5

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 2014, 2015AND 2016		F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Origin Agritech Limited

We have audited the accompanying consolidated balance sheets of Origin Agritech Limited and its subsidiaries and variable interest entities (the “Company”) as of September 30, 2015 and 2016 and the related consolidated statements of income and comprehensive income, equity and cash flows for the years ended September 30, 2014, 2015 and 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of September 30, 2015 and 2016, and the results of its operations and its cash flows for the years ended September 30, 2014, 2015 and 2016, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of September 30, 2016, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated January 9, 2017 expressed an unqualified opinion thereon.

/s/ BDO China Shu Lun Pan Certified Public Accountants LLP

BDO China Shu Lun Pan Certified Public Accountants LLP

Shenzhen, The People’s Republic of China

January 9, 2017

F-2

ORIGIN AGRITECH LIMITED

CONSOLIDATED BALANCE SHEETS

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

	September 30,
	2015			2016			2016
	RMB			RMB			US$
ASSETS
Current Assets
Cash and cash equivalents		66,025			54,509			8,163
Restricted cash (note 13)		-			21,181			3,172
Accounts receivable, less allowance for doubtful amounts of RMB4,845 and RMB5,087 as of September 30, 2015 and 2016, respectively (note 4)		2,051			491			74
Advances to suppliers (note 5)		10,484			7,363			1,103
Advances to growers		20,796			21,672			3,245
Inventories (note 6)		439,562			368,086			55,121
Income tax recoverable		48			48			7
Other current assets (note 7)		4,793			4,753			711
Total current assets		543,759			478,103			71,596
Restricted cash (note 13)		20,280			-			-
Land use rights, net (note 8)		31,722			30,740			4,603
Plant and equipment, net (note 9)		324,905			313,749			46,984
Long-term investments (note 10)		18,721			18,721			2,803
Goodwill (note 2)		11,973			11,973			1,793
Acquired intangible assets, net (note 11)		31,390			24,930			3,733
Other assets (note 12)		3,079			2,410			362
Total assets(including amounts of the consolidated VIEs without recourse to the Company of RMB975,507 and RMB871,397 as of September 30, 2015 and 2016, respectively)		985,829			880,626			131,874

LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings (note 13)		220,000			190,000			28,453
Current portion of long-term borrowings (note 13)		24,000			27,057			4,052
Accounts payable		4,389			4,374			655
Due to growers		17,337			19,926			2,984
Due to related parties (note 3)		42,284			103,905			15,560
Advances from customers		264,547			208,844			31,274
Deferred revenues		11,248			7,008			1,049
Income tax payable (note 18)		37			-			-
Other payables and accrued expenses (note 14)		50,298			53,388			7,995
Total current liabilities		634,140			614,502			92,022
Long-term borrowings (note 13)		40,972			20,000			2,995
Other long-term liability (note 15)		19,939			27,507			4,119
Total liabilities(including amounts of the consolidated VIEs without recourse to the Company of RMB678,740 and RMB641,420 as of September 30, 2015 and 2016, respectively)		695,051			662,009			99,136

Commitments and contingencies (note 21)
Shareholders’ equity:
Preferred stock (no par value; 1,000,000 shares authorized, none issued)		-			-			-
Common stock (no par value; 60,000,000 shares authorized, 24,091,163 and 24,151,163 shares issued as of September 30, 2015 and 2016; 22,813,541 and 22,873,541 shares outstanding as of September 30, 2015 and 2016, respectively)		-			-			-
Additional paid-in capital		402,500			411,296			61,591
Accumulated deficit		(116,808	)		(182,386	)		(27,312	)
Treasury stock at cost (1,277,622 and 1,277,622 shares as of September 30, 2015 and 2016, respectively) (note 17)		(37,445	)		(37,445	)		(5,607	)
Accumulated other comprehensive loss		(7,053	)		(11,177	)		(1,674	)
Total Origin Agritech Limited shareholders’ equity		241,194			180,288			26,998

Non-controlling interests		49,584			38,329			5,740
Total equity		290,778			218,617			32,738

Total liabilities and equity		985,829			880,626			131,874

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

F-3

ORIGIN AGRITECH LIMITED

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

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

	Year ended September 30,
	2014			2015			2016			2016
	RMB			RMB			RMB			US$
Revenues, including sales to a related party of RMB nil, RMB40,586 and RMB102,234 for the years ended September 30, 2014, 2015 and 2016, respectively (note 3)		415,177			376,553			335,251			50,204
Cost of revenues		(301,148	)		(264,039	)		(259,253	)		(38,823	)
Gross profit		114,029			112,514			75,998			11,381
Operating expenses
Selling and marketing		(58,972	)		(39,987	)		(38,079	)		(5,702	)
General and administrative		(46,428	)		(40,684	)		(62,159	)		(9,308	)
Research and development		(40,377	)		(48,741	)		(44,032	)		(6,594	)
Other income, net		7,269			18,238			6,964			1,042
Total operating expenses, net		(138,508	)		(111,174	)		(137,306	)		(20,562	)

Income(loss) from operations		(24,479	)		1,340			(61,308	)		(9,181	)

Interest expense		(19,743	)		(18,634	)		(14,251	)		(2,134	)
Share of net loss of equity investments		(776	)		-			-			-
Loss on disposal of an equity method investment		(1,498	)		-			-			-
Loss on disposal of a subsidiary		(2,623	)		-			-			-
Interest income		596			775			162			24
Loss before income taxes		(48,523	)		(16,519	)		(75,397	)		(11,291	)

Income tax (expense) benefits(note 18)
Current		(677	)		(1,295	)		(1,436	)		(215	)
Deferred		-			-			-			-
Reversal of contingent tax liability		39,060			-			-			-
Income tax (expense) benefits		38,383			(1,295	)		(1,436	)		(215	)

Net loss		(10,140	)		(17,814	)		(76,833	)		(11,506	)
Less: Net loss attributable to non-controlling interests		(613	)		(4,006	)		(11,255	)		(1,686	)

Net loss attributable to Origin Agritech Limited		(9,527	)		(13,808	)		(65,578	)		(9,820	)
Other comprehensive loss
Net loss		(10,140	)		(17,814	)		(76,833	)		(11,506	)
Foreign currency translation difference		(56	)		(2,607	)		(4,124	)		(617	)
Comprehensive loss		(10,196	)		(20,421	)		(80,957	)		(12,123	)
Less: Comprehensive loss attributable to non-controlling interests		(613	)		(4,006	)		(11,255	)		(1,685	)
Comprehensive loss attributable to Origin Agritech Limited		(9,583	)		(16,415	)		(69,702	)		(10,438	)

Net loss attributable to Origin Agritech Limited per share - basic (note 19)		(0.42	)		(0.61	)		(2.87	)		(0.43	)

Net loss attributable to Origin Agritech Limited per share - diluted (note 19)		(0.42	)		(0.61	)		(2.87	)		(0.43	)

Shares used in calculating basic net loss per share		22,743,853			22,794,791			22,858,541			22,858,541

Shares used in calculating diluted net loss per share		22,743,853			22,794,791			22,858,541			22,858,541

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

F-4

ORIGIN AGRITECH LIMITED

CONSOLIDATED STATEMENTS OF EQUITY

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

	Equity attributable to Origin Agritech Limited
											Accumulated
						Additional					Other						Non-
	Common stock					Paid-in		Accumulated			Comprehensive			Treasury			controlling			Total
				Amount		Capital		Deficit			Loss			Stock			Interests			Equity
	Shares			RMB		RMB		RMB			RMB			RMB			RMB			RMB

Balance as of September 30, 2013		22,905,926			-		399,564		(93,473	)		(4,390	)		(35,659	)		54,203			320,245

Net loss for the year		-			-		-		(9,527	)		-			-			(613	)		(10,140	)
Share repurchased		(167,385	)		-		-		-			-			(1,786	)		-			(1,786	)
Share-based compensation expense		-			-		1,324		-			-			-			-			1,324
Translation adjustments		-			-		-		-			(56	)		-			-			(56	)
Balance as of September 30, 2014		22,738,541			-		400,888		(103,000	)		(4,446	)		(37,445	)		53,590			309,587

Net loss for the year		-			-		-		(13,808	)		-			-			(4,006	)		(17,814	)
Issuance of restricted share		75,000			-		-		-			-			-			-			-
Share-based compensation expense		-			-		1,612		-			-			-			-			1,612
Translation adjustments		-			-		-		-			(2,607	)		-			-			(2,607	)

Balance as of September 30, 2015		22,813,541			-		402,500		(116,808	)		(7,053	)		(37,445	)		49,584			290,778

Net loss for the year		-			-		-		(65,578	)		-			-			(11,255	)		(76,833	)
Issuance of restricted share		60,000			-		-		-			-			-			-			-
Share-based compensation expense		-			-		8,796		-			-			-			-			8,796
Translation adjustments		-			-		-		-			(4,124	)		-			-			(4,124	)
Balance as of September 30, 2016		22,873,541			-		411,296		(182,386	)		(11,177	)		(37,445	)		38,329			218,617
In US$ @ 6.6778					-		61,591		(27,312	)		(1,674	)		(5,607	)		5,740			32,738

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

F-5

ORIGIN AGRITECH LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year ended September 30,
	2014			2015			2016			2016
	RMB			RMB			RMB			US$

Operating activities:
Net loss attributable to Origin Agritech Limited		(9,527	)		(13,808	)		(65,578	)		(9,820	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		28,524			30,547			31,222			4,675
Loss on disposal of plant and equipment		943			152			257			38
Loss on disposal of a subsidiary		2,623			-			-			-
Loss on disposal of an equity method investment		1,498			-			-			-
Allowance for doubtful account		15			-			242			36
Provision for inventories		21,984			10,965			20,502			3,070
Non-controlling interests		(613	)		(4,006	)		(11,255	)		(1,685	)
Share-based compensation expense		1,324			1,612			8,796			1,317
Share of net loss of equity method investments		776			-			-			-
Changes in operating assets and liabilities:
Accounts receivable		914			(1,030	)		1,318			197
Due from related parties		702			2,698			-			-
Advances to growers		37,714			(37	)		(876	)		(131	)
Advances to suppliers		(7,983	)		7,267			3,121			467
Inventories		(67,541	)		65,841			50,974			7,633
Income tax recoverable		1,114			-			-			-
Other current assets		1,824			(425	)		40			6
Other assets		7,247			930			436			65
Accounts payable		(65	)		(136	)		(15	)		(2	)
Due to growers		(19,933	)		(606	)		2,589			388
Due to related parties		10,181			30,573			58,291			8,730
Advances from customers		(46,926	)		(60,098	)		(55,703	)		(8,342	)
Income tax payable		(39,060	)		37			(37	)		(6	)
Deferred revenues		(3,040	)		(7,781	)		(4,240	)		(635	)
Other long-term liabilities		(1,380	)		290			7,568			1,134
Other payables and accrued expenses		(6,954	)		(10,796	)		253			39

Net cash provided by (used in) operating activities		(85,639	)		52,189			47,905			7,174

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

F-6

ORIGIN AGRITECH LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued

(In thousands)

	Year ended September 30,
	2014			2015			2016			2016
	RMB			RMB			RMB			US$

Investing activities:
Proceeds from disposal of equity investment		900			-			-			-
Dividends received		3,000			-			-			-
Proceeds from disposal of a subsidiary, net of cash disposed		11,980			-			-			-
Deposits from proposed disposal of commercial seed business (note 25)		-			-			10,000			1,497
Purchase of plant and equipment		(10,502	)		(14,747	)		(15,714	)		(2,353	)
Proceeds from disposal of plant and equipment		6,174			172			483			72
Purchase of land use rights		(673	)		(900	)		-			-
Purchase of intangible assets		(11,440	)		(4,884	)		(1,250	)		(187	)
Net cash used in investing activities		(561	)		(20,359	)		(6,481	)		(971	)

Financing activities:
Restricted cash		(1,320	)		(4,610	)		(901	)		(135	)
Proceeds from short-term borrowings		305,000			235,000			195,000			29,201
Repayment of short-term borrowings		(285,000	)		(240,000	)		(225,000	)		(33,694	)
Proceeds from long-term borrowings		-			33,949			6,085			911
Repayment of long-term borrowings		(16,500	)		(33,805	)		(24,000	)		(3,593	)
Repurchase of common stock		(1,786	)		-			-			-
Net cash provided by (used in) financing activities		394			(9,466	)		(48,816	)		(7,310	)

Net increase (decrease) in cash and cash equivalents		(85,806	)		22,364			(7,392	)		(1,107	)
Cash and cash equivalents, beginning of year		131,978			46,268			66,025			9,888
Effect of exchange rate changes on cash and cash equivalents		96			(2,607	)		(4,124	)		(618	)
Cash and cash equivalents, end of year		46,268			66,025			54,509			8,163

Supplemental disclosures of cash flow information:
Refund of income taxes		586			-			-			-

Income taxes paid		148			1,258			1,436			215

Interest paid, net of interest capitalized		19,743			18,649			14,251			2,134

Supplemental disclosure of non-cash investing activities:
Proceeds from disposal of equity investment		900			-			-			-

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

F-7

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

ORGANIZATION AND PRINCIPAL ACTIVITIES

Origin Agritech Limited (“Agritech”), incorporated under the laws of the British Virgin Islands, and its subsidiaries and variable interest entities (together, the “Company”) are principally engaged in hybrid crop seed development, production and distribution. As of September 30, 2016, details of the Company’s subsidiaries and variable interest entities are as follows:

	Date of	Place of	Percentage
	Incorporation	Incorporation	of		Principal
Name	or Establishment	or Establishment	Ownership		Activity

Subsidiaries:
State Harvest Holdings Limited(“State Harvest”)	October 6, 2004	British Virgin Islands		100%	Investment Holding

Beijing Origin State Harvest Biotechnology Limited (“BioTech”)	December 1, 2004	People’s Republic of China (“PRC”)		100%	Hybrid seed technology development

Origin Agritech USA LLC	August 12, 2016	United States of		100%	Hybrid seed
(“Origin USA”)		America (“USA”)			technology development

Variable interest entity:
Beijing Origin Seed Limited (note (i)) (“Beijing Origin”)	December 26, 1997	PRC		-	Hybrid crop seed development, production and Distribution

Subsidiaries held by Beijing Origin:
Henan Origin Cotton Technology Development Limited (note (i)) (“Henan Cotton”)	March 2, 2001	PRC		92.04%	Hybrid crop seed development, production and distribution

Changchun Origin Seed Technology Development Limited (note (i)) (“Changchun Origin”)	April 29, 2003	PRC		99.83%	Hybrid crop seed development, production and distribution

Linze Origin Seed Limited (note (i)) (“Linze Origin”)	November 18, 2008	PRC		100%	Hybrid crop seed development, production and distribution

Xinjiang Originbo Seed Company Limited (note (i)) (“Xinjiang Origin”)	July 13, 2011	PRC		51%	Hybrid crop seed development, production and distribution

Denong Zhengcheng Seed Limited (“Denong”)	June 21, 2000	PRC		98.58%	Hybrid seed development, production and distribution

Note (i):

Beijing Origin Seed Limited, Henan Origin Cotton Technology Development Limited, Changchun Origin Seed Technology Development Limited, Linze Origin Seed Limited and Xinjiang Originbo Seed Company Limited are collectively referred to as “Beijing Origin”.

F-8

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

ORGANIZATION AND PRINCIPAL ACTIVITIES - Continued

Reorganization of State Harvest prior to the share exchange transaction with Chardan China Acquisition Corp. (“Chardan”)

On December 1, 2004, State Harvest established BioTech, a wholly-owned foreign enterprise (“WOFE”) under the laws of the PRC with an operating period of 20 years.

Under PRC law, foreign entities are not currently permitted to own more than 49% of a seed production company. In order to address those restrictions, State Harvest conducts substantially all of its business through contractual agreements with its variable interest entity (“VIE”), Beijing Origin. These agreements are summarized in the following paragraphs.

Stock Consignment Agreements

As discussed above in “Foreign Ownership Restrictions,” under Chinese law, foreign ownership of businesses engaged in the breeding of new varieties, development, production, marketing, distribution and sale of hybrid food crop seeds is limited to 49% pursuant to the Regulation on the Approval and Registration of Foreign Investment Enterprises in Agricultural Seed Industry and The Foreign Investment Industrial Guidance Catalogue. State Harvest, as a non-Chinese corporation, may not directly own more than 49% of any of the PRC Operating Companies. However, Chinese law does not forbid the owner of stock to consign rights associated with the stock, as long as the owner does not transfer title to the stock. To gain control over the PRC Operating Companies, State Harvest entered into a series of stock consignment agreements with shareholders of those companies.

State Harvest has been assigned 97.96% voting rights by the shareholders of Beijing Origin through a consignment agreement which includes the following terms: (1) The shares of Beijing Origin cannot be transferred without the approval of State Harvest; (2) State Harvest has the right to appoint all directors and senior management personnel of Beijing Origin and (3) The shareholder rights including voting rights require the transfer of the shares of Beijing Origin to State Harvest or any party designated by State Harvest within three years upon the removal of the PRC legal restriction.

Technical Service Agreements

Beijing Origin entered into Technical Service Agreements with BioTech dated December 25, 2004. Under these agreements, BioTech shall provide, with its own technical research resource and team, technical services for the production and distribution of agricultural seeds during the period of the agreements. In return, Beijing Origin is required to pay BioTech service fee calculated according to the weight of corn, rice and cotton seeds sold by the Beijing Origin.

Through the contractual agreements described above, State Harvest is deemed the sole beneficiary of Beijing Origin resulting in Beijing Origin being deemed a subsidiary of State Harvest under the requirements of Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 810-10-05. The agreements described above provided for effective control of Beijing Origin to be transferred to State Harvest at December 25, 2004. Neither State Harvest nor BioTech had any operating activity prior to entering into the consignment agreements with Beijing Origin. In substance, State Harvest has substantially all the same shareholders of Beijing Origin. This transaction has been accounted for on a basis similar to reorganization between entities under common control. Accordingly, State Harvest’s consolidated financial statements are prepared by including the consolidated financial statements of Beijing Origin through December 24, 2004, and subsequently the Company’s consolidated financial statements include the financial statements of State Harvest, its majority owned subsidiary and Beijing Origin through the date of the Share Exchange Transaction.

F-9

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

ORGANIZATION AND PRINCIPAL ACTIVITIES - Continued

Risks in relation to the VIE structure

Three of our PRC operating subsidiaries are controlled subsidiaries through stock consignment agreements rather than by direct ownership of shares, the terms of which may have to be enforced, which would require us to incur extra costs, create uncertainty as to ownership of the operating businesses involved and risk the possible loss of rights. There is the risk, however, that a consigning shareholder will not fulfill its obligations under the stock consignment agreement. In that event, we may need to resort to the PRC courts to have our rights under the applicable agreement enforced. Such enforcement will cause us to incur legal expenses. In addition, while a case is pending there will be uncertainty regarding our rights as to the three PRC operating subsidiaries involved. In addition, a PRC court may decide not to enforce the agreements in whole or in part. To the extent these agreements are neither observed nor enforced as intended, the PRC operating subsidiaries will not be controlled by us as intended, which will affect our enterprise value and restrict our ability to obtain the income and other rights of ownership associated with the consigned stock. It may also prevent the consolidation of our financial statements with the PRC operating subsidiaries, which would reduce the reported earnings of the consolidated companies. The uncertainty of ownership may also adversely affect the market value of our ordinary shares.

Whether or not a stock consignment agreement is terminated depends on the consensus of our Board and the consignees. Any such termination could result in a possible loss of certain rights or assets held by us without receiving fair value in return. The stock consignment agreements relating to our control of the stock of our PRC operating subsidiaries may be terminated after three years upon mutual agreement between us and the consignees. Holding this amount of stock will allow these officers to control or greatly influence the selection of directors and matters submitted to a vote of our shareholders, including voting to terminate the stock consignment agreements.

The Company has aggregated the financial information of Beijing Origin and its subsidiaries in the table below. The aggregated carrying amount of assets and liabilities of Beijing Origin and its subsidiaries after elimination of intercompany transactions and balances consolidated in the Company’s consolidated balance sheets as of September 30, 2015 and 2016 are as follows:

F-10

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

ORGANIZATION AND PRINCIPAL ACTIVITIES - Continued

Risks in relation to the VIE structure

	September 30,
	2015		2016		2016
	RMB		RMB		US$
ASSETS
Current Assets
Cash and cash equivalents		65,138		53,855		8,065
Restricted cash		-		21,181		3,172
Accounts receivable		2,051		491		74
Advances to suppliers		20,796		21,672		3,245
Advances to growers		10,483		6,885		1,031
Inventories		439,518		368,042		55,114
Income tax recoverable		49		48		7
Other current assets		4,292		4,730		708
Total current assets		542,327		476,904		71,416
Restricted cash		20,280		-		-
Land use rights, net		31,722		30,740		4,603
Plant and equipment, net		324,812		313,688		46,975
Equity investments		18,721		18,721		2,803
Goodwill		11,973		11,973		1,793
Acquired intangible assets, net		22,593		16,961		2,540
Other assets		3,079		2,410		362
Total assets		975,507		871,397		130,492
LIABILITIES
Current liabilities
Short-term borrowings		220,000		190,000		28,452
Current portion of long-term borrowings		24,000		7,023		1,052
Accounts payable		4,386		4,371		655
Due to growers		17,337		19,926		2,984
Due to related parties		40,757		103,905		15,560
Advance from customers		264,168		208,464		31,217
Deferred revenues		11,248		7,008		1,049
Income tax payable		37		-		-
Other payables and accrued expenses		49,845		53,216		7,969
Total current liabilities		631,778		593,913		88,938
Long-term borrowings		27,023		20,000		2,995
Other long-term liability		19,939		27,507		4,120
Total liabilities		678,740		641,420		96,053

As of September 30, 2015 and 2016, consolidated assets of RMB243,469 and RMB247,231, respectively, are collateral for the VIE’s obligations. These consolidated assets consisted of land use right of RMB18,519, and RMB17,867, plant and equipment of RMB197,627 and RMB192,928, and inventory of RMB27,323 and RMB36,436 as of September 30, 2015 and 2016, respectively.

The consolidated revenues of the Company has been generated from the VIE and its subsidiaries for the year ended September 30, 2014, 2015 and 2016 are 99.93%, 99.92% and 99.86%, respectively. The VIE and its subsidiaries also account for 98.95%and 98.98% of the total assets of the Company as at September 30, 2015 and 2016, respectively.

F-11

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

ORGANIZATION AND PRINCIPAL ACTIVITIES - Continued

Significant Transactions

On September 26, 2016, we entered into an Master Transaction Agreement, the with Beijing Shihui Agricultural Development Co., Ltd. ( “Beijing Shihui” or the “Buyer”, a related party being controlled by close family members of the Company’s Chairman), formerly known as Beijing Shihui Agricultural Ltd., under which the Buyer agreed to purchase the corn seed production and distribution assets, the office building in Beijing, PRC, and generally the business of commercial corn seed production and sales now operated by the Company as further described in note 25.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”); include the assets, liabilities, revenues, expenses and cash flows of all subsidiaries and variable interest entities. Intercompany balances, transactions and cash flows are eliminated on consolidation.

Convenience translation into United States dollars

The consolidated financial statements are presented in Renminbi. The translation of Renminbi amounts into United States dollar amounts has been made for the convenience of the reader and has been made at the exchange rate quoted by the middle rate by the State Administration of Foreign Exchange in China on September 30, 2016 of RMB6.6778 to US$1.00. Such translation amounts should not be construed as representations that the Renminbi amounts could be readily converted into United States dollar amounts at that rate or any other rate.

Use of estimates

The preparation of the consolidated 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are adjusted to reflect actual experience when necessary. Significant accounting estimates reflected in the Company’s consolidated financial statements include inventory valuation, account receivable valuation, useful lives of plant and equipment and acquired intangible assets, the valuation allowance for deferred income tax assets, valuation of goodwill, valuation of long-lived assets and share-based compensation expense. Actual results could differ from those estimates.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, cash accounts, interest bearing savings accounts, time certificates of deposit and debt securities with a maturities of three months or less when purchased.

Inventories

Inventories are stated at the lower of cost, determined by weighted-average method, or market. Work-in-progress and finished goods inventories consist of raw materials, direct labor and overhead associated with the manufacturing process.

The Company periodically performs an analysis of inventory to determine obsolete or slow-moving inventory and determine if its cost exceeds the estimated market value. Write down of potentially obsolete or slow-moving inventory are recorded based on management’s analysis of inventory levels.

F-12

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Land use rights, net

Land use rights are recorded at cost less accumulated amortization. Amortization is provided over the term of the land use right agreements on a straight-line basis for the beneficial period.

Plant and equipment, net

Plant and equipment are recorded at cost less accumulated depreciation and amortization. Maintenance and repairs are charged to expense as incurred. Depreciation is calculated on a straight-line basis over the following estimated useful lives:

Plant and building	20-40 years
Machinery and equipment	10-15 years
Furniture and office equipment	5-8 years
Motor vehicles	5-10 years
Leasehold improvements	Shorter of the useful lives or the lease term

The Company constructs certain of its facilities. In addition to costs under construction contracts, external costs directly related to the construction of such facilities, including duty and tariff, and equipment installation and shipping costs, are capitalized. Depreciation is recorded at the time assets are placed in service.

Leases

Leases are classified at the inception date as either a capital lease or an operating lease. For the lessee, a lease is a capital lease if any of the following conditions exist: a) ownership is transferred to the lessee by the end of the lease term, b) there is a bargain purchase option, c) the lease term is at least 75% of the property’s estimated remaining economic life or d) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases. The Company has no capital leases for any of the periods presented.

Goodwill

Goodwill represents the excess of aggregate purchase price over the fair value of net assets acquired in a business combination. Goodwill is not amortized, but instead tested for impairment at least annually or more frequently if certain circumstances indicate a possible impairment may exist. The Company adopted FASB ASC 350-10 and performs its annual impairment review of goodwill on September 30 of each year. Management evaluates the recoverability of goodwill using a two-step impairment test approach at the reporting unit level, which is determined to be the enterprise level. In the first step, the fair value of the reporting unit is compared to its carrying value including goodwill. Second, if the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the goodwill over the implied fair value of the goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a business combination.

F-13

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Goodwill - Continued

The carrying amount of the goodwill at September 30, 2015 and 2016 represents the cost arising from the business combinations in previous years and no impairment on goodwill was recognized for any of the periods presented for the Company. The movement for goodwill is as follow:

	September 30,
	2014		2015		2016
	RMB		RMB		RMB

Balance at beginning of year		11,973		11,973		11,973
Additions		-		-		-
Written off		-		-		-

		11,973		11,973		11,973

Acquired intangible assets, net

Acquired intangible assets primarily consist of purchased technology rights and distribution network and are stated at cost less accumulated amortization. Amortization is calculated on a straight-line basis over the estimated useful lives of these assets and recorded in operating expenses. Amortization is calculated on a straight-line basis over the following estimated useful lives for the main acquired intangible assets:

Technology rights for licensed seeds	3-20 years
Distribution network	6-14 years
Trademark	Indefinite

Trademarks, which have indefinite lives are not amortized but are reviewed for impairment at least annually, at year end date, or earlier upon the occurrence of certain triggering events.

Equity investments

Equity method investment is accounted for using the equity method whereby they are initially recognized at cost and thereafter, their carrying amount are adjusted for the Company’s share of the post-acquisition change in the net assets of equity method investments less impairment losses, if any. The dividend received was accounted for as a reduction in equity investments.

Cost method investment is stated at cost less impairment loss, if any.

Valuation of long-lived asset

The Company reviews the carrying value of long-lived assets to be held and used, including other intangible assets subject to amortization, when events and circumstances warrants such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset and intangible assets. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets and intangible assets to be disposed are determined in a similar manner, except that fair market values are reduced for the cost to dispose.

F-14

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Revenue recognition

The Company derives its revenues primarily from the sale of various branded conventional seeds and branded seeds with biotechnology traits.

Revenue is recognized when pervasive evidence of an arrangement exists, products have been delivered, the price is fixed or determinable, collectability is reasonably assured and the right of return has expired. The Company generally determines the final selling price after a period the goods are delivered to the customers. Accordingly, the Company defers revenues recognition until the selling price has been finalized with the customers. The estimated amounts of revenues billed in excess of revenues recognized are recorded as deferred revenues.

Government subsidies

A government subsidy is not recognized until there is reasonable assurance that: (a) the enterprise will comply with the conditions attached to the grant; and (b) the grant will be received.

When the Company received the government subsidies but the conditions attached to the grants have not been fulfilled, such government subsidies are deferred and recorded under other payables and accrued expenses, and other long-term liability. The reclassification of short-term or long-term liabilities is depended on the management’s expectation of when the conditions attached to the grant can be fulfilled.

The Company received several financial supports from various levels of the government. At fiscal years ended 2015 and 2016, the Company received government subsidies of RMB7,076 and RMB10,368, respectively for R&D and others. Government subsidies recognized as other income in the statement of income for the years ended September 30, 2014, 2015 and 2016, were RMB2,764, RMB5,525 and RMB4,582, respectively.

Cost of revenues

Cost of revenues consists of expenses directly related to sales, including the purchase prices and development costs for seeds and, during the fiscal years ended September 30, 2014, 2015 and 2016, agricultural chemical products, depreciation and amortization, impairment of inventory, shipping and handling costs, salary and compensation, supplies, license fees, and rent.

Research and development costs

Research and development costs relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred.

Advertising costs

Advertising costs are expensed when incurred and included in selling and marketing expenses. For the years ended September 30, 2014, 2015 and 2016, advertising costs were RMB15,918, RMB5,655 and RMB6,919, respectively.

F-15

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Shipping and handling cost

The Company includes shipping and handling costs as either cost of goods sold or selling and administrative expenses depending on the nature of the expenses. Shipping and handling costs which relate to transportation of products to customers’ locations is charged to selling and marketing expenses and shipping and handling which relate to the transportation of goods to factories from suppliers and from one factory to another is charged to cost of revenues.

For the years ended September 30, 2014, 2015 and 2016, shipping and handling cost included in selling and marketing expenses were RMB9,561, RMB7,238, and RMB8,168 respectively.

Borrowing cost

Borrowing costs attributable directly to the acquisition, construction or production of qualifying assets which require a substantial period of time to be ready for their intended use or sale, are capitalized as part of the cost of those assets. Income earned on temporary investments of specific borrowings pending their expenditure on those assets is deducted from borrowing costs capitalized. All other borrowing costs are recognized in interest expenses in the statement of income and comprehensive income in the period in which they are incurred.

Allowance for doubtful account

The Company regularly monitors and assesses the risk of not collecting amounts owed to the Company by customers. This evaluation is based upon a variety of factors including: an analysis of amounts current and past due along with relevant history and facts particular to the customer. Based upon the results of this analysis, the Company records an allowance for doubtful accounts for this risk.

Income taxes

Deferred income taxes are recognized for the future tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements, net of operating loss carry forwards and credits. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant tax authorities.

The Company adopted FASB ASC 740-10. The Company’s policy on classification of all interest and penalties related to unrecognized tax benefits, if any, as a component of income tax provisions.

Foreign currency translation

The functional currency of the Company excluding Agritech and State Harvest is Renminbi. Monetary assets and liabilities denominated in currencies other than Renminbi are translated into Renminbi at the rates of exchange ruling at the balance sheet date. Transactions in currencies other than Renminbi are converted into Renminbi at the applicable rates of exchange prevailing the transactions occurred. Transaction gains and losses are recognized in the consolidated statements of income and comprehensive income.

The functional currency of Agritech and State Harvest are maintained in United State dollars. Assets and liabilities are translated at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates and revenues, expenses, gains and losses are translated using the average rate for the period. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive (loss)/income. The Company has chosen Renminbi as its reporting currency.

F-16

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Comprehensive income

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Comprehensive income for the years has been disclosed within the consolidated statements of income and comprehensive income for presentational purpose of the disclosure of comprehensive income attributable to Agritech and the non-controlling interests respectively.

Income per share

Basic income per share is computed by dividing net income by the weighted average number of common shares outstanding during the years. Diluted income per share gives effect to all dilutive potential common shares outstanding during the years. The weighted average number of common shares outstanding is adjusted to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. In computing the dilutive effect of potential common shares, the average stock price for the period is used in determining the number of treasury shares assumed to be purchased with the proceeds from the exercise of options.

Share-based compensation

The Company adopts FASB ASC 718-10. ASC 718-10 requires that share-based payment transactions with employees, such as share options, be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period, with a corresponding addition to equity. Under this method, compensation cost related to employee share options or similar equity instruments is measured at the grant date based on the fair value of the award and is recognized over the period during which an employee is required to provide service in exchange for the award, which generally is the vesting period.

Fair value measurement

The Company adopted FASB ASC 820-10, and which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. ASC 820-10 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information.

ASC 820-10 establishes a three-level valuation hierarchy of valuation techniques based on observable and unobservable inputs, which may be used to measure fair value and include the following:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement.

F-17

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Reclassification

For the year ended September 30, 2016, the Company recognized licensing, and conversion and testing services as revenue to align with the Company’s strategy to develop these businesses. Conversion and testing services income of RMB286 and RMB303 for the years ended September 30, 2014 and 2015, respectively, have been reclassified from other income to revenue to conform to current year presentations. There was no change to previously reported shareholders’ deficit or net loss.

Working capital deficit and management’s plan

The Company’s consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities during the normal course of operations. The Company incurred net losses of RMB10,140, RMB17,814 and RMB76,833 in the years ended September 30, 2014, 2015 and 2016, respectively. Working capital deficit was RMB90,381 and RMB136,399 as of September 30, 2015 and 2016, respectively. Accumulated deficit was RMB116,808 and RMB182,386 as of September 30, 2015 and 2016, respectively.

On September 26, 2016, the Company entered into an agreement to sell its proprietary China-based commercial corn seed production and distribution business and related assets and the office building in Beijing as further described in note 25. Based on the agreement, the management expects to receive RMB400,000 in the next 12 months which provide the additional cash needed to meet the Company’s obligation as they become due, fund its operations and will allow the development of its business in biotechnology trait and seed germplasm research and development. The transaction is required to obtain the shareholder approval . Based on the management’s assessment, the shareholders approval is more likely than not to be solicited.

As management believes it can secure financial resources to satisfy the Company’s current liabilities and the capital expenditure needs in the next 12 months,our consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

F-18

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Recently issued accounting pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This ASU will replace most existing revenue recognition guidance in the U.S. GAAP when it becomes effective.

The FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, in August 2015. The amendments in this update defer the effective date of ASU No. 2014-09. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

Further to ASU No. 2014-09 and ASU No. 2015-14, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), in March 2016, ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, in April 2016, and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, in May 2016, respectively. The amendments in ASU No. 2016-08 clarify the implementation guidance on principal versus agent considerations, including indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. ASU No. 2016-10 clarifies guideline related to identifying performance obligations and licensing implementation guidance contained in the new revenue recognition standard. The updates in ASU No. 2016-10 include targeted improvements based on input the FASB received from the Transition Resource Group for Revenue Recognition and other stakeholders. It seeks to proactively address areas in which diversity in practice potentially could arise, as well as to reduce the cost and complexity of applying certain aspects of the guidance both at implementation and on an ongoing basis. ASU No. 2016-12 addresses narrow-scope improvements to the guidance on collectability, non-cash consideration, and completed contracts at transition. Additionally, the amendments in this ASU provide a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. The effective date and transition requirements for ASU No. 2016-08, ASU No. 2016-10 and ASU No. 2016-12 are the same as ASU No. 2014-09. The Company is currently in the process of evaluating the impact of the adoption of ASU No. 2014-09, ASU No. 2016-08, ASU No. 2016-10 and ASU No. 2016-12 on its consolidated financial statements and related disclosures.

F-19

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Recently issued accounting pronouncements

In June 2014, the FASB issued ASU No. 2014-12, Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force). This ASU clarifies that entities should treat performance targets that can be met after the requisite service period of a share-based payment award as performance conditions that affect vesting. Therefore, an entity would not record compensation expense (measured as of the grant date without taking into account the effect of the performance target) related to an award for which transfer to the employee is contingent on the entity’s satisfaction of a performance target until it becomes probable that the performance target will be met. This ASU does not contain any new disclosure requirements. This ASU is effective for reporting periods beginning after December 15, 2015. Early adoption is permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements —Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This ASU provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. Currently, there is no guidance in the U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this ASU provide such guidance and should reduce diversity in the timing and content of footnote disclosures. The amendments in this ASU require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards.

Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is evaluating the effects, if any, that the adoption of the amendments in this ASU will have on the disclosure of the consolidated financial statements.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The amendments in this update affect reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. ASU No. 2015-02 is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently in the process of evaluating the impact of the adoption of ASU 2015-02 on the consolidated financial statements.

F-20

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Recently issued accounting pronouncements

In June 2015, the FASB issued ASU No. 2015-10, Technical Corrections and Improvements. The amendments in ASU No. 2015-10 cover a wide range of Topics in the ASC. The amendments in ASU No. 2015-10 represent changes to clarify the ASC, correct unintended application of guidance, or make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. Additionally, some of the amendments will make the ASC easier to understand and easier to apply by eliminating inconsistencies, providing needed clarifications, and improving the presentation of guidance in the ASC. Transition guidance varies based on the amendments in ASU No. 2015-10. The amendments in ASU No. 2015-10 that require transition guidance are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. All other amendments will be effective upon the issuance of ASU No. 2015-10. The Company is currently in the process of evaluating the impact of the adoption of ASU No. 2015-10 on the consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The amendments in this update require an entity to measure inventory within the scope of ASU No. 2015-11 (the amendments in ASU No. 2015-11 do not apply to inventory that is measured using last-in, first-out or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out or average cost) at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is uncharged for inventory measured using last-in, first-out or the retail inventory method. The amendments in ASU No. 2015-11 more closely align the measurement of inventory in U.S. GAAP with the measurement of inventory in International Financial Reporting Standards (“IFRS”). ASU No. 2015-11 is effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The amendments in ASU No. 2015-11 should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently in the process of evaluating the impact of the adoption of ASU No. 2015-11 on the consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. Topic 740, Income Taxes, requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. Deferred tax liabilities and assets are classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. Deferred tax liabilities and assets that are not related to an asset or liability for financial reporting are classified according to the expected reversal date of the temporary difference. To simplify the presentation of deferred income taxes, the amendments in ASU No. 2015-17 require that deferred income tax liabilities and assets be classified as noncurrent in a classified statement of financial position. For public business entities, the amendments in this update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company does not expect the adoption of ASU No. 2015-17 to have a material impact on its consolidated financial statements.

F-21

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Recently issued accounting pronouncements

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this update require all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). The amendments in this update also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition the amendments in this update eliminate the requirement for to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public entities. For public business entities, the amendments in ASU No. 2016-01 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Except for the early application guidance discussed in ASU No. 2016-01, early adoption of the amendments in this update is not permitted. The Company does not expect the adoption of ASU No. 2016-01 to have a material impact on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments in this update create Topic 842, Leases, and supersede the leases requirements in Topic 840, Leases. Topic 842 specifies the accounting for leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. The main difference between Topic 842 and Topic 840 is the recognition of lease assets and lease liabilities for those leases classified as operating leases under Topic 840. Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. The result of retaining a distinction between finance leases and operating leases is that under the lessee accounting model in Topic 842, the effect of leases in the statement of comprehensive income and the statement of cash flows is largely unchanged from previous GAAP. The amendments in ASU No. 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities. Early application of the amendments in ASU No. 2016-02 is permitted. The Company is currently in the process of evaluating the impact of the adoption of ASU No. 2016-02 on its consolidated financial statements.

In April 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions. The areas for simplification in ASU No. 2016-09 include the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this ASU will be effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU No. 2016-09 on its consolidated financial statements.

F-22

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Recently issued accounting pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Financial Instruments—Credit Losses (Topic 326) amends guideline on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available-for-sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. ASU No. 2016-13 affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this ASU will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of ASU No. 2016-13 on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of the adoption of ASU No. 2016-15 on its consolidated financial statements.

RELATED PARTY BALANCES AND TRANSACTIONS

(1)

Related party relationships

Name of related parties		Relationship
Jilin Jinong Hi-tech Development Shares Co., Ltd. (“Jinong”)		Being long-term investment of the Company (note 10)
Shijiazhuang Liyu Technology Development Co., Ltd. (“Liyu”)		Being an equity investment of the Company prior to July 10, 2014
Henan Agriculture University		Being the non-controlling interest of Beijing Origin
Beijing Shihui		Being owned by close family members of the Company’s Chairman
Neijiang Agriculture Institute		Being the non-controlling interest of Denong
Xinjiang Ginbo Seeds Center		Being the non-controlling interest of Xinjiang Origin

F-23

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

RELATED PARTY BALANCES AND TRANSACTIONS - Continued

(2)

Due to related parties

	September 30,
	2015		2016
		RMB		RMB

Henan Agriculture University		1,000		1,000
Beijing Shihui(note (i))		29,703		91,304
Xinjiang Ginbo Seeds Center(note (ii))		10,054		10,000
Companies controlled by the Company’s directors		1,511		1,585
Ex-shareholders of State Harvest		16		16

		42,284		103,905

Note (i): The balance as of September 30, 2016 represented the advance from Beijing Shihui for its seed sales.

Note (ii): Xinjiang Origin, the subsidiary of the Company, has received a cash advance of RMB10,000 from Xinjiang Ginbo Seeds Center during the year ended September 30, 2016, which is unsecured, interest-free and repayable on demand.

(3)

Transactions with related parties

(a)

Sales to

	Year ended September 30,
	2014		2015		2016
		RMB		RMB		RMB

Beijing Shihui		-		40,586		102,234

(b)

Technology usage fees charged by

	Year ended September 30,
	2014		2015		2016
	RMB		RMB		RMB

Henan Agriculture University		-		-		1,000
Liyu		4,838		-		-
Neijiang Agriculture Institute		500		-		-

		5,338		-		1,000

The above amounts related to technology usage fees paid to certain related party research centers for the exclusive right to use certain seed technologies.

F-24

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

RELATED PARTY BALANCES AND TRANSACTIONS - Continued

(3)

Transactions with related parties - continued

(c)

Dividend received from

	Year ended September 30,
	2014		2015		2016
		RMB		RMB		RMB

Liyu		3,000		-		-

(d)

Rental income received from

	Year ended September 30,
	2014		2015		2016
		RMB		RMB		RMB

Beijing Shihui		-		-		250

(e)

Assets acquire and sell to a related party

The Company acquired intangible assets of RMB1,968 from Beijing Shihui for the year ended September 30, 2015.

As further described in Note 25, on September 26, 2016, the Company entered into a Master Transaction Agreement to sell its proprietary China-based commercial corn seed production and distribution business for RMB400 million to Beijing Shihui.

ACCOUNTS RECEIVABLE

Accounts receivable consists of trade receivables resulting from sales of products during the normal course of business.

Allowance for doubtful account is as follows:

	Year ended September 30,
	2014			2015			2016
		RMB			RMB			RMB
Balance at beginning of year		12,110			5,881			4,845
Additions		15			-			242
Reversal of recovered debts		(627	)		(1,036	)		-
Derecognition upon disposal of a subsidiary		(5,617	)		-			-

Balance at end of year		5,881			4,845			5,087

F-25

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

ADVANCES TO SUPPLIERS

Advances to suppliers consist of the following:

	September 30,
	2015		2016
		RMB		RMB

Purchases of materials		4,767		315
Prepayments for advertisement		3,083		3,141
Prepayments for transportation fee		2		2
Prepayments for operating lease		204		-
Prepayments for testing fee		289		475
Utility deposit		476		86
Deposits for research and development fee		865		830
Prepayments for professional fee		-		328
Others		798		2,186

		10,484		7,363

Advances to suppliers mainly represent deposits paid but related materials and services have not been provided to the Company.

INVENTORIES

Inventories consist of the following:

	September 30,
	2015			2016
		RMB			RMB
Work in progress and supplies		420,655			385,790
Finished goods		65,080			39,426
Provision		(46,173	)		(57,130	)

		439,562			368,086

Inventory with net values of RMB27,323 and RMB36,436 have been pledged as collateral for bank loans as of September 30, 2015 and 2016.

As of September 30, 2015 and 2016, goods already delivered to customers but still recorded in finished goods, amounted to RMB6,198 and RMB3,681 respectively. As the Company does not recognize revenues until the selling prices of respective goods have been finalized with the customers, goods delivered to customers as mentioned above will only be recognized as cost of revenues when related revenues is recognized.

Provision for inventories is as below:

	Years ended September 30,
	2014			2015			2016
	RMB			RMB			RMB

Balance at beginning of year		52,301			53,587			46,173
Additions		21,984			10,965			20,502
Write-off		(20,698	)		(18,379	)		(9,545	)

Balance at end of year		53,587			46,173			57,130

F-26

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

OTHER CURRENT ASSETS

Other current assets consist of the following:

	September 30,
	2015		2016
	RMB		RMB

Advances to staff for business use		2,911		2,998
Deposits for rental		1,130		1,099
Others		752		656

		4,793		4,753

LAND USE RIGHTS, NET

Land use rights, net consist of the following:

	September 30,
	2015			2016
	RMB			RMB
Land use rights	38,576			38,575
Accumulated amortization		(6,854	)		(7,835	)

Land use rights, net		31,722			30,740

Land use rights with net values of RMB18,519 and RMB17,867 have been pledged as collateral for bank loans as of September 30, 2015 and 2016. Amortization expenses for the years ended September 30, 2014, 2015 and 2016 were RMB1,027, RMB978 and RMB981, respectively.

PLANT AND EQUIPMENT, NET

Plant and equipment, net consist of the following:

	September 30,
	2015			2016
	RMB			RMB

Plant and building		252,664			253,739
Machinery and equipment		163,013			170,485
Furniture and office equipment		12,955			12,914
Motor vehicles		9,963			9,285

Total		438,595			446,423
Accumulated depreciation		(118,064	)		(138,640	)
Construction in progress		4,374			5,966

Plant and equipment, net		324,905			313,749

Included in plant and building with net values of RMB197,627 and RMB192,928 have been pledged for bank loans as of September 30, 2015 and 2016.

The depreciation expenses for the years ended September 30, 2014, 2015 and 2016 were RMB21,832, RMB21,901, and RMB22,531, respectively.

Construction in progress mainly refers to the new office buildings, production lines and other production facilities under construction.

F-27

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

10.

LONG TERM INVESTMENTS

Equity investments consist of the following:

	September 30,
	2015		2016
		RMB		RMB

Cost method investment		18,721		18,721

In previous years, the Company owned 23% equity interest in Jinong and accounted for equity method investment. In 2012, one shareholder of Jinong increased its investment in Jinong’s shares, thereby the equity interests held by the Company were reduced to 17.94%and the Company is considered to no longer have a significant influence on Jinong. Therefore, the investment in Jinong was accounted for the cost method investment as of September 30, 2015 and 2016.

11.

ACQUIRED INTANGIBLE ASSETS, NET

Acquired intangible assets, net consist of the following:

	September 30,
	2015			2016
	RMB			RMB

Technology rights for licensed seeds		99,602			100,602
Distribution network		6,739			6,739
Others		7,584			7,834

		113,925			115,175
Accumulated amortization		(78,221	)		(85,931	)
Impairment provision		(4,314	)		(4,314	)

Acquired intangible assets, net		31,390			24,930

Amortization expenses for the years ended September 30, 2014, 2015 and 2016 were RMB5,665, RMB7,670 and RMB7,710, respectively. No impairment provision has been charged for the years ended September 30, 2014, 2015 and 2016.

Amortization expense on these intangible assets for each of the next five years is as follows:

Year ending September 30,				RMB

2017				5,629
2018				5,312
2019				3,608
2020				2,179
2021				1,980

Total				18,708

The Company enters into technology transfer and usage agreements with strategic partners and pays up-front fees for the exclusive rights to certain seed technologies. Technology rights are amortized over an average usage period of 5 years and are charged to general and administrative expenses.

F-28

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

12.

OTHER ASSETS

Other assets consist of the following:

	September 30,
	2015		2016
		RMB		RMB

Prepaid lease		2,796		2,368
Deposits for purchase of plant and equipment		233		-
Others		50		42

		3,079		2,410

13.

BORROWINGS

	September 30,
	2015		2016
		RMB		RMB

Short-term borrowings		220,000		190,000

Current portion of long-term borrowings		24,000		27,057

Long-term borrowings		40,972		20,000

Fiscal year 2016:

As of September 30, 2016, short-term borrowings were comprised of secured and unsecured bank loans of RMB125,000 and RMB65,000, respectively. A secured bank loan of RMB60,000 with an interest rate of 4.57% per annum, is represented by the bank borrowing under Beijing Origin, which was secured by a land use right of RMB2,300 (note 8) and plant and equipment of RMB31,733 (note 9).

A secured bank loan of RMB15,000 with an interest rate of 5.87% per annum, is represented by the bank borrowing under Zhengzhou Branch, which was secured by land use right of RMB3,111(note 8), plant and equipment of RMB9,501 (note 9) and two guarantee contracts. Another secured bank loan of RMB50,000 with an interest rate of 5.71% per annum, is represented by the bank borrowing under Linze Origin, which was secured by inventory of RMB36,436 (note 6), and plant and equipment of RMB7,510 (note 9).

Unsecured short-term loans of RMB30,000 are represented by the bank borrowings with an interest rate range from 5.00% to 5.22%per annum under Beijing Origin. These loans were guaranteed by Chairman of the Company. While, the rest of unsecured short-term loans of RMB35,000 under Linze Origin were guaranteed by Chairman of the Company and Beijing Origin. The interest rates of these loans were ranged from 4.57% per annum.

As of September 30, 2016, long-term borrowings were comprised of secured and unsecured bank loans of RMB4,023 and RMB43,034, respectively. A secured bank loan of RMB4,023 is represented by the bank borrowing under Xinjiang Origin, which was secured by a land use right of RMB12,456(note 8) and plant and equipment of RMB144,184 (note 9) and a guarantee contract. The interest rate was 4.99% per annum.

Unsecured long-term bank loans of RMB23,000, with an interest rate from 5.23% to 6.18% per annum, are represented by the bank borrowings under Beijing Origin and Xinjiang Origin, which were guaranteed by the Chairman of the Company, Beijing Origin and Xinjiang AiBiHu Agricultural Industrial Commercial Enterprise, which is an affiliate of Xinjiang Production and Construction Corps 5th Division (“XPCC 5th Division”).While the rest of unsecured long-term bank loans of RMB20,034, with an interest rate of 2.38% per annum, was supported by fixed deposit of RMB21,181 and Standby letter of Credit.

F-29

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

13.

BORROWINGS - continued

Fiscal year 2015:

As of September 30, 2015, short-term borrowings were comprised of secured and unsecured bank loans of RMB105,000 and RMB115,000, respectively. A secured bank loan of RMB60,000 with an interest rate of 5.88% per annum, is represented by the bank borrowing under Beijing Origin, which was secured by a land use right of RMB2,361 (note 8) and plant and equipment of RMB32,692 (note 9).

A secured bank loan of RMB15,000 with an interest rate of 6.885% per annum, is represented by the bank borrowing under Zhengzhou Branch, which was secured by land use right of RMB3,203 (note 8), plant and equipment of RMB10,241 (note 9) and two guarantee contracts. Another secured bank loan of RMB30,000 with an interest rate of 5.936% per annum, is represented by the bank borrowing under Linze Origin, which was secured by inventory of RMB27,323 and two guarantee contracts.

Unsecured short-term bank loans of RMB30,000 are represented by the bank borrowings with an interest rate of 5.1% to 6.42% per annum under Beijing Origin. These loans were guaranteed by Chairman of the Company. While, the rest of unsecured short-term bank loans amounting to RMB85,000 under Linze Origin were guaranteed by Chairman of the Company and Beijing Origin. The interest rates of these loans were ranged from 4.85% to 6.068% per annum.

As of September 30, 2015, long-term borrowings were comprised of secured and unsecured bank loans of RMB14,523 and RMB50,449, respectively. A secured bank loan of RMB14,523 is represented by the bank borrowing under Xinjiang Origin, which was secured by a land use right of RMB12,955 (note 8) and plant and equipment of RMB154,694 (note 9) and a guarantee contract. The annual interest rate was 6.72%.

Unsecured long-term bank loans of RMB36,500, with an interest rate from 7.04% to 7.8% per annum, are represented by the bank borrowings under Beijing Origin and Xinjiang Origin, which were guaranteed by the Chairman of the Company, Beijing Origin and Xinjiang AiBiHu Agricultural Industrial Commercial Enterprise, which is an affiliate of Xinjiang Production and Construction Corps 5th Division (“XPCC 5th Division”).While, the rest of unsecured long-term bank loans of RMB13,949, with an interest rate of 2.3832% per annum, was supported by fixed deposit of RMB20,280 and Standby letter of Credit.

The current portion of the loan amounted to RMB24,000, which will be due within one year, is presented as “current portion of long-term borrowing” on the consolidated balance sheet as of September 30, 2015.

14.

OTHER PAYABLES AND ACCRUED EXPENSES

Other payables and accrued expenses consist of:

	September 30,
	2015		2016
	RMB		RMB
Payable for purchase of plant and equipment		1,262		1,355
Payable for purchase of land use rights		620		620
Payable for purchase of construction-in-progress		12,776		8,850
Professional fee payable		1,500		9,154
Salaries and bonus payable		10,869		10,699
Accrued interest		1,813		1,813
Other taxes payable		731		658
Deposits from growers		969		355
Deposits from others		2,035		7,684
Payable for labor union, housing fund and education expenses		738		785
Deferred government subsidies		9,575		6,172
Others		7,410		5,243
		50,298		53,388

F-30

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

15.

OTHER LONG-TERM LIABILITY

During the fiscal year 2011, the Company received government subsidies from the local PRC government for plant and equipment projects of RMB14.00 million and land use right of RMB10.90 million; in fiscal year 2015, the Company received government subsidies from the local PRC government for equipment projects of RMB2.62 million. In fiscal year 2016, the Company received government subsidies from the local PRC government for equipment projects of RMB8.63 million (US$0.82 million). The non-current portion of such government subsidies are recorded as long-term liability for, which will be amortized over the estimated useful lives related to the plant and equipment and land use right.

16.

SHARE OPTION PLANS

On November 8, 2005, the Company adopted the 2005 Performance Equity Plan (the “2005 Plan”) which allows the Company to offer a variety of incentive awards to employees to acquire up to 1,500,000 ordinary shares under the 2005 Plan. On April 22, 2010, the Company adopted the 2009 Performance Equity Plan (the “2009 Plan”) and is authorized to issue equity based awards for up to 1,500,000 ordinary shares to the Company’s employees and senior managements. On December 22, 2014 the Company adopted the 2014 Performance Equity Plan, under which we are able to issue equity awards with the right to acquire up to 5,000,000 ordinary shares to our directors, officers, employees, individual consultants and advisors. The main purpose of the plan is to provide an existing structure and renewable benefit plan for senior management and directors and others providing services to the company. In addition to current equity awards to the directors and officers, we plan to expand our equity awards to a broader range of employees in order to align our employee incentives towards the stock performance. The main purpose of the two plans is to provide an existing structure and renewable benefit plan for senior management and directors, employees and consultants.

Under the terms of the 2005 Plan on January 4, 2010 the Company granted its employees options to purchase 125,000 ordinary shares at the price of US$12.23 (“Tranche 5”).Under the terms of the 2009 Plan, on January 3, 2011, the Company granted its employees options to purchase 120,000 ordinary shares at the price of US$10.84 (“Tranche 6”); and on January 3, 2012, the Company granted its employees options to purchase 365,000 ordinary shares at the price of US$2.55 (“Tranche 7”), and on January 2, 2013, the Company granted its employees options to purchase 360,000 ordinary shares at the price of US$1.44 (“Tranche 8”) Subject to the modifications discussed below, and on January 2, 2014, the Company granted its employees options to purchase 350,000 ordinary shares at the price of US$1.27 (“Tranche 9”).

Under the terms of the 2014 Plan, on January 2, 2015 the Company granted its employees options to purchase 195,000 ordinary shares at the price of US$1.48 (“Tranche 10”), on January 4, 2016 the Company granted its employees options to purchase 185,000 ordinary shares at the price of US$1.38 (“Tranche 11”), on April 19, 2016 the Company granted its employees options to purchase 600,000 ordinary shares at the price of US$2.05 (“Tranche 12”), on May 16, 2016 the Company granted its employees options to purchase 200,000 ordinary shares at the price of US$1.65 (“Tranche 13”),on August 3, 2016 the Company granted its employees options to purchase 200,000 ordinary shares at the price of US$2.0 (“Tranche 14”),

All the options have an expiration date that is 5 to 10 years from the date of grant and vest immediately or over a period of 1 to 5 years. 1,175,000 and 1,060,000 options under the 2009 Plan, and 195,000 and 1,380,000 options under the 2014 Plan were outstanding as of September 30, 2015 and 2016, respectively.

After the adjusted awards, all the option awards have an exercise price of USD 1.27 to USD 12.23 and expire 5 to 10 years from the date of grant and vest immediately or over a period of 1 to 5 years.

On December 22, 2014 and January 2, 2016, the compensation committee of the Board of Directors approved the substitution of restricted stock for outstanding grants under Tranche 5& 6 that no longer offer the kind of incentive opportunity originally sought for valued employees given the fall in the market price of the ordinary shares during recent years. The revised terms of the stock options were accounted for as a modification in accordance with ASC 718-20.For the purpose of determining the amount of any incremental share-based compensation cost that may have resulted from the modification of the exercise prices, the Company compared the fair value of modified awards and that of the original awards, determined that RMB616 and RMB542 (US$83) of the modifications required the recognition of additional share-based payment expense, respectively.

F-31

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

16.

SHARE OPTION PLANS - Continued

For the options outstanding at September 30, 2015 and 2016, the weighted average remaining contractual lives are 2.4 and 5.1 years, respectively.

The Company recorded share-based compensation expense of RMB1,324, RMB1,612 and RMB8,796 for the years ended September 30, 2014, 2015 and 2016 respectively. As of September 30, 2015 and 2016, there were RMB238 and RMB2,676 of total unrecognized compensation expense related to non-vested share-based compensation arrangement under the 2014 Plan. The unrecognized compensation expense is expected to be recognized over a weighted-average period of 0.52 year.

A summary of the share option activity under the 2005, 2009 and 2014 Plans is as follows:

	Tranche 5			Tranche 6			Tranche 7			Tranche 8			Tranche 9			Tranche 10		Tranche 11		Tranche 12		Tranche 13		Tranche 14

Grant date	January 3 2010			January 3 , 2011			January 3, 2012			January 2, 2013			January 2, 2014			January 2, 2015		January 4, 2016		April 19, 2016		May 16, 2016		August 3, 2016

Options outstanding as of October 1, 2014		120,000			115,000			365,000			360,000			350,000			-		-		-		-		-
Number of options granted		-			-			-			-			-			195,000		-		-		-		-
Options cancelled/expired		(120,000	)		-			(5,000	)		(5,000	)		(5,000	)		-		-		-		-		-

Options outstanding as of September 30, 2015		-			115,000			360,000			355,000			345,000			195,000		-		-		-		-
Number of options granted		-			-			-			-								185,000		600,000		200,000		200,000
Options cancelled/expired		-			(115,000	)		-			-			-			-		-		-		-		-
Outstanding as of September 30, 2016		-			-			360,000			355,000			345,000			195,000		185,000		600,000		200,000		200,000

Options vested and exercisable
At September 30, 2015		-			115,000			360,000			355,000			345,000			195,000		-		-		-		-

At September 30, 2016		-			-			360,000			355,000			345,000			195,000		185,000		600,000		200,000		200,000

Weighted average fair value at the grant date (USD)		7.20			6.08			1.45			0.76			0.65			0.75		0.90		1.54		1.24		1.44

The fair value of each option granted is estimated on the date of grant using the Black-Scholes Option Pricing Model:

	Tranche 5			Tranche 6			Tranche 7			Tranche 8			Tranche 9			Tranche 10			Tranche 11			Tranche 12			Tranche 13			Tranche 14

Exercise price (US$)		12.23			10.84			2.55			1.44			1.27			1.48			1.38			2.05			1.65			2.00
Average risk-free interest rate		1.66	%		1.03	%		0.40	%		0.37	%		0.76	%		1.07	%		1.73	%		1.79	%		1.75	%		1.55	%
Expected option life (year)		3			3			3			3			3			3			5			10			10			10
Volatility rate		92.81	%		88.03	%		90.30	%		81.98	%		79.20	%		79.67	%		80.72	%		69.27	%		69.92	%		65.37	%
Dividend yield		-			-			-			-			-			-			-			-			-			-

The aggregate intrinsic value as of September 30, 2015 and 2016 is USD nil and USD1,476, respectively.

F-32

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

17.

TREASURYSTOCK

During the year ended September 30, 2007, the Company repurchased 498,851 common stock of the Company with a total cost of RMB29,377 under the approval of the Board of Directors. In February 2013, the board of directors approved a share repurchase program for open market and negotiated transactions for a 12 month period in the amount of USD5 million, under which 611,386 and 167,385 shares with a total cost of RMB6,286 and RMB1,782 were bought in the NASDAQ market during the year ended September 30, 2013 and 2014, respectively, in compliance with U.S. securities laws. The Company recorded the entire purchase price of the treasury stock as a reduction of equity.

18.

INCOME TAXES

Agritech and its subsidiary, State Harvest are incorporated in the British Virgin Islands and are exempted from the income tax under the laws of the British Virgin Islands. State Harvest’s subsidiary and State Harvest’s variable interest entity, Beijing Origin and its majority owned subsidiaries (together, the “PRC entities”) were incorporated in the PRC and governed by the PRC laws.

The applicable tax rate of the PRC Enterprise Income Tax (“EIT”) was changed from 33% to 25% on January 1, 2008, according to the Corporate Income Tax Law. The preferential tax rate previously enjoyed by the PRC entities is gradually transitioned to the new standard rate of 25% over a five-year transitional period. In addition, article 28 of the new tax law stated that the income tax rate of a “high technology” company (high-tech status) is to remain at 15%.

Preferential tax treatment of Beijing Origin as “high technology” company (High-tech Status) from October 28, 2011 to October 27, 2017 has been granted by the relevant tax authorities. Beijing Origin is entitled to a preferential tax rate of 15% which is subject to annual review. As a result of these preferential tax treatments, the reduced tax rates applicable to Beijing Origin Seed Limited for 2014, 2015 and 2016 are 15%.Xinjiang Origin is entitled to a preferential tax of 2 years exemption and 3 years of half EIT from January 1, 2012 to December 31, 2016 in accordance with Cai Shui [2011] No. 53 and Cai Shui [2011] No. 60 issued by the PRC State Administration of Taxation and Xin Cai Fa Shui [2011] No. 51 issued by the Xinjiang Local Taxation Bureau. Xinjiang Origin is currently in the status of ‘halfEIT’ for the year ended September 30, 2016.Linze Origin is entitled to a preferential tax rate of 15% from January 1, 2016 and December 31, 2016 in accordance with Cai Shui [2011] No. 58 issued by the PRC Ministry of Finance, General Administration of Customs and the State Administration of Taxation which is subject to annual review. Linze Origin is currently in the status of a preferential tax rate of 15% for the year ended September 30, 2016.

Had all the above tax holidays and concessions not been available, the tax charges would have been lower by RMB(750), RMB(1,149) and RMB(3,822), and the basic net loss per share would have been lower (higher) by RMB(0.01), RMB(0.13) and RMB0.17 for the years ended September 30, 2014, 2015 and 2016, respectively. The diluted net loss per share for the years ended September 30, 2014, 2015 and 2016 would have been lower (higher) by RMB(0.01), RMB(0.13) and RMB0.17, respectively.

The Company’s liability for income taxes includes the liability for unrecognized tax benefits, interest and penalties which relate to tax years still subject to review by taxing authorities. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. Until September 30, 2016, the management considered that the Company had no uncertain tax positions affected its consolidated financial position. The Company’s uncertain tax positions are related to tax years that remain subject to examination by the relevant tax authorities and the major one is the China tax authority. The open tax years for examinations in China are 5 years.

F-33

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

18.

INCOME TAXES - Continued

The provision for income taxes expenses consists of the following:

	Year ended September 30,
	2014			2015		2016
	RMB			RMB		RMB

Current		677			1,295		1,436
Deferred		-			-		-
Reversal of contingent tax liability		(39,060	)		-		-

		(38,383	)		1,295		1,436

The principal components of the deferred income tax assets are as follows:

	September 30,
	2015			2016
	RMB			RMB
Non-current deferred tax assets:
Net operating loss carry forward		26,547			25,964
Impairment on inventory		9,420			11,213
Others		9,292			9,734

Non-current deferred income tax assets		45,259			46,911
Valuation allowances		(45,259	)		(46,911	)

Net non-current deferred income tax assets		-			-

The Company did not have any significant temporary differences relating to deferred tax liabilities as of September 30, 2015 and 2016.

A significant portion of the deferred tax assets recognized relates to net operating loss and credit carry forwards. The Company operates through the PRC entities and the valuation allowance is considered on each individual basis.

The net operating loss attributable to those PRC entities can only be carried forward for a maximum period of five years. Tax losses of non-PRC entities can be carried forward indefinitely. The expiration period of unused tax losses is as follows:

	Year ended September 30,
	2015		2016
	RMB		RMB
Calendar year ending,
2015		10,278		-
2016		49,532		40,099
2017		21,254		21,254
2018		5,290		5,290
2019		35,477		24,931
2020		-		24,154

		121,831		115,728

F-34

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

18.

INCOME TAXES - Continued

Reconciliation between total income tax expenses and the amount computed by applying the statutory income tax rate to income before taxes is as follows:

	Year ended September 30,
	2014			2015			2016
	%			%			%

Statutory rate		25			25			25
Effect of preferential tax treatment		(2	)		(7	)		(5	)
Effect of different tax jurisdiction		(3	)		(7	)		(6	)
Permanent book-tax difference		9			11			(3	)
Change in valuation allowance		(2	)		10			(7	)
Utilization of tax loss previously not recognized		-			-			-
Under/(Over) provision in prior year		(29	)		(40	)		(6	)
Reversal of contingent tax liability		90			-			-

Effective income tax rate		88			(8	)		(2	)

Reversal of contingent tax liability for year ended September 30, 2014

In previous years, the Company assessed the contingent tax liability that might arise from the share exchange transaction with Chardan and considered such contingent tax liabilities as more-likely-than-not. As of September 30, 2013, a contingent tax liability of RMB39,060 including late payment penalty and interest was included in the income tax payable in the accompanying consolidated balance sheet. The Company did not expect to incur tax liabilities at the higher end of the range which were estimated to be in the range RMB39,060 to RMB64,218, based on the information previously available.

In 2009, the Company reviewed the contingent tax position. On September 23, 2010, the Company filed a revised 2005 tax return (the “Revised Return”) to the United States Internal Revenue Service (the “IRS”), to modify and supplement the previously filed tax return regarding this tax liability. The timeline for the IRS to question on the tax return and assess additional tax due is generally three years.

For the period from the filing date of the Revised Return (i.e., September 23, 2010) to September 30, 2014, the IRS did not enquire of the Company or Chardan to clarify the redomestication transaction reflected in the Revised Return. The Company believes that Chardan paid all necessary and required U.S. federal income tax arising out of the Chardan redomestication. The Company also believes that the time limit for the IRS to assess any additional income tax expired at September 23, 2013,by reason of the expiration of the statute of limitations. The management considered not practical to complete a detail independent reassessment in order to obtain sufficient evidence to support a potential change of tax position in a short period of time, given that no additional evidence is obtained during the year ended September 30, 2013, the Company considered to retain the contingent tax liability in the balance sheet as of September 30, 2013. During the year ended September 30, 2014, the Company has completed an independent review to assess the tax position as of September 30, 2014 and concluded that the three years statute of limitations has expired. As a result, the Company concludes that there is no justification to continue to make a reserve in its accounts for the contingent tax liability of RMB39,060 in relation to the share exchange transaction. Accordingly, the contingent tax liability of RMB39,060 has been derecognized and recorded as a tax benefit in the statement of income and comprehensive income for the year ended September 30, 2014 due to the cessation of contingent taxable status.

F-35

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

19.

LOSS PER SHARE

The following table sets forth the computation of basic and diluted loss per share for the years indicated:

	Year ended September 30,
	2014			2015			2016
	RMB			RMB			RMB
Net loss (numerator), basic and diluted		(9,527	)		(13,808	)		(65,578	)

Shares (denominator):
Common stock outstanding		22,743,853			22,813,541			22,873,541
Weighted average common stock outstanding used in computing basic and diluted income per share		22,743,853			22,794,791			22,858,541

Net loss per share-basic and diluted		(0.42	)		(0.61	)		(2.87	)

For the year ended September 30, 2014, 2015 and 2016, the effect of the outstanding options was anti-dilutive.

20.

EMPLOYEE BENEFIT PLAN AND PROFIT APPROPRIATION

Full time employees of the PRC entities participate in a government mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require the Company to accrue for these benefits based on certain percentages of the employees’ salaries. The total provisions for such employee benefits were RMB16,212,RMB13,873 and RMB12,576 for the years ended September 30, 2014, 2015 and 2016, respectively.

Pursuant to the laws applicable to the PRC, domestic PRC entities must make appropriations from after-tax profit to non-distributable reserves funds including: (i) the statutory surplus reserve and; (ii) the statutory public welfare fund. Subject to the limits of 50% of the entity’s registered capital, the statutory surplus reserve fund requires annual appropriations of 10% of after-tax profit (as determined under accounting principles generally accepted in the PRC (“PRC GAAP”) at each year-end). The Company’s wholly foreign owned subsidiary, BioTech, however subject to the law applicable to foreign invested enterprises in the PRC, was required annual appropriation of the general reserve fund, no less than 10% of after-tax profit (as determined under PRC GAAP at each year-end). These reserve funds can only be used for specific purposes of enterprise expansion and staff welfare and are not distributable as cash dividends. No appropriation has been made for the years ended September 30, 2014, 2015 and 2016. There was no after-tax profit recorded in the PRC statutory accounts for 2015 and 2016. On the other hand, the amount set aside as of September 30, 2015 and 2016 were RMB24,789 and RMB24,789.

F-36

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

21.

COMMITMENTS AND CONTINGENCIES

(a)

Capital commitments

As of September 30, 2015 and 2016, capital commitments for the purchase of long-term assets are as follows:

	September 30,
	2015		2016
	RMB		RMB

Equipment		4,877		4,172
Intangible assets		-		1,000

		4,877		5,172

(b)

Operating lease

The Company leased certain land use rights for seed development and office premises under non-cancellable leases. Rental expenses under operating leases for the years ended September 30, 2014, 2015 and 2016 were RMB3,185, RMB2,990 and RMB4,598 respectively.

As of September 30, 2016, the Company was obligated under operating leases requiring minimum rental as follows:

	RMB
Year ending September 30,

2017		1,642
2018		654
2019		470
2020		457
Thereafter		3,468

		6,691

22.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and borrowings are reasonable estimates of their fair value. All the financial instruments are for trade purposes. No level 2 or 3 fair value assessment has been made.

F-37

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

23.

SEGMENT AND GEOGRAPHIC INFORMATION

From June 2015, the Company announced that it has successfully transitioned from a traditional seed company to a biotechnology seed company and is now organized into two business lines: agri-biotech and product development and production and distribution of hybrid seeds. The Company’s reportable segments are strategic business units that require different technology and marketing strategies and offer different products and services. The primary income (loss) measure used for assessing segment performance and making operating decisions is income (loss) from operations (i.e., earnings before non-operating income (expenses), interest and income taxes). The Company’s chief operating decision maker, the Chief Executive Officer, receives and reviews the results of the operations of each separate segment, assesses and manages their performance and makes decisions based on the measures of revenues, cost of revenues, gross profit, operating expenses, net and income (loss) from operations. Other than the information provided below, the Company’s chief operating decision maker does not use any other measures by segments.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices. Following a change in the identification of the Company’s reportable segments as aforementioned, the Company has also presented the corresponding items of segment information for the years ended September 30, 2015 and 2016 for comparative purposes.

Net revenues, income (loss) from operations and total assets of the Company’s reportable segments are as follows:

	Year ended September 30,
	2014			2015			2016
	RMB			RMB			RMB
Segment net revenues
Production and distribution of hybrid seeds		414,891			376,250			334,769
Agri-biotech and product development		3,536			3,560			3,495
Segment total net revenues		418,427			379,810			338,264
Inter-segment sales eliminations		(3,250	)		(3,257	)		(3,013	)
Reconciliation to consolidated revenues		415,177			376,553			335,251

Segment operating income(loss)
Production and distribution of hybrid seeds		10,691			38,709			263
Agri-biotech and product development		(24,328	)		(26,501	)		(31,205	)
Total segment operating income(loss)		(13,637	)		12,208			(30,942	)
Less: Unallocated corporate operating expenses, net		10,842			10,868			30,366
Reconciliation to consolidated income (loss) from operations		(24,479	)		1,340			(61,308	)

	September 30,
	2015			2016
		RMB			RMB
Segment identifiable assets:
Production and distribution of hybrid seeds		916,088			803,420
Agri-biotech and product development		187,223			189,446
Segment total identifiable assets		1,103,311			992,866
Receivables elimination		(117,482	)		(112,240	)
Reconciliation to consolidated total assets		985,829			880,626

F-38

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

23.

SEGMENT AND GEOGRAPHIC INFORMATION - Continued

Supplemental disclosures of segment information:

	Year ended September 30,
	2014		2015		2016
	RMB		RMB		RMB
Segment depreciation and amortization
Production and distribution of hybrid seeds		27,567		29,668		30,365
Agri-biotech and product development		957		879		857
Reconciliation to consolidated depreciation and amortization		28,524		30,547		31,222

Segment capital expenditure to long-lived assets
Production and distribution of hybrid seeds		22,615		20,531		16,964
Agri-biotech and product development		-		-		-
Reconciliation to consolidated expenditure on the purchase of plant and equipment, land use rights and intangible assets		22,615		20,531		16,964

As we primarily generate our revenues from customers in the PRC, and all of our sales and all of our identifiable assets are located in the PRC, no geographical segments are presented.

24.

OPERATING RISK

Concentrations of credit risk

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains its cash and cash equivalents with high-quality institutions. Generally these deposits may be redeemed upon demand and therefore bear minimal risk.

Interest risk

The interest rates and terms of repayment of bank and other borrowings ranged from 2.38% to 6.18%, which are fixed at the inception of the borrowings. Other financial assets and liabilities do not have material interest rate risk.

Liquidity risk

We believe our working capital is sufficient to meet our present requirements. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. In the long-term, we intend to rely primarily on cash flow from operations and additional borrowings from banks to meet our anticipated cash needs. If our anticipated cash flow is insufficient to meet our requirements, we may also seek to sell additional equity, debt or equity-linked securities.

Country risk

The Company has significant investments in the PRC. The operating results of the Company may be adversely affected by changes in the political and social conditions in the PRC and by changes in Chinese government policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods taxation, among other things. There can be no assurance; however, those changes in political and other conditions will not result in any adverse impact.

F-39

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

25.

AGREEMENT TO SELL COMMERICAL SEED BUSINESS

On September 26, 2016, the Company entered into a Master Transaction Agreement to sell its seed production and distribution business to Beijing Shihui, a related party. The overall transaction will be conducted in two steps. The first step will be the sale of the equity held by Beijing Origin of each of the Denong, Changchun Origin and Linze Origin companies, and the second step will be the sale of a company holding the assets of Beijing Origin’s branch in Zhengzhou (“Zhengzhou Branch”) and the office building in Beijing, PRC. Beijing Origin will also orchestrate with the parties that own minor percentages of Changchun Origin, not now owned by Beijing Origin, to purchase their ownership equity amounts so that the Buyer acquires from Beijing Origin all of the equity of Changchun Origin in the first step of the transaction. The second step requires Beijing Origin to effect a restructuring to form a company to own the current office building located in Beijing, PRC and certain other assets (together the “Zhengzhou Branch Assets”), which company will be sold to the Buyer so as to transfer the building and assets to the Buyer. By separate agreement the Buyer will enter into license arrangements to pay Beijing Origin a royalty for the present and future seed portfolio and a technology access fee for the research and development effort that Beijing Origin will provide going forward in the areas of product discovery and development, hybrid registration, trait integration and intellectual property protection.

At the first closing, the Buyer will pay to Beijing Origin RMB200 million, for the 98.58% equity ownership interest in Denong, 100% equity ownership interest in Changchun Origin and 100% equity ownership interest in Linze Origin (together the “VIE Subsidiaries”). The first closing is conditioned (among other things) on Beijing Origin acquiring the current minority percentage ownership of Changchun Origin that is held by the Company’s Chairman, so as to deliver to the Buyer 100% of the equity ownership of Changchun Origin. The minority interest of Denong will continue to be held by two third parties and will not be sold to the Buyer. At the second closing, the Buyer will pay to Beijing Origin RMB190 million and the RMB10 million deposits, which has been received in September 2016, will be used to settle for the 100% ownership interest in an entity formed by Beijing Origin as part of its reorganization to hold the Zhengzhou Branch Assets. The total consideration to be paid to Beijing Origin will be RMB400 million.

The Buyer will assume the outstanding liabilities of the VIE Subsidiaries and the Zhengzhou Branch Assets, except for certain outstanding bank loans. The current bank loans aggregating RMB100 million will be transferred to Beijing Origin, subject to the approval and agreement of the bank lenders. If the bank loans cannot be transferred, then the purchase price will be reduced for the outstanding amount due, but any guarantees provided by the Company’s Chairman, Dr. Han Gengchen(“Dr. Han”) will be terminated without liability to Beijing Origin or Dr. Han.

Beijing Origin has agreed to use its reasonable best efforts (i) to complete the restructuring of the Company so as to be able to complete the second closing, to acquire the portion of Changchun Origin that it does not own, and to transfer certain assets, the assets of Beijing Origin’s branch in Linze, to Linze Origin. Additionally, all intercompany accounts between Beijing Origin and its retained affiliates, on the one hand, and the VIE Subsidiaries, on the other hand, regardless of any due dates, existing prior to the first closing will be paid in full before or at the first closing. The Buyer and Beijing Origin will negotiate separate license agreements regarding the Buyer’s continued use of the trademarks and trade names owned by Beijing Origin and licensing designated seeds developed by Beijing Origin or Beijing Biotechnology. Origin Agritech and Beijing Origin are jointly responsible for all transfer, documentary, sales, use, stamp, recording, value added, registration, conveying taxes and fees in connection with the sale of the various types of assets to Buyer.

Beijing Origin has agreed that for ten years after the closing, without the written consent of the Buyer, it and its affiliated entities will not directly conduct any business in the distribution of crop seeds in the PRC, except for the distribution of crop seeds in Xinjiang province by Xinjiang Origin. This limitation will not prohibit Origin, Beijing Origin or BioTech from conducting the businesses of crop seed licensing, transgenic materials licensing, transgenic traits licensing or other activities related to its intellectual property in the PRC. This non-competition provision will terminate if more than 50% of the equity interest or assets of the Company are acquired by an independent third party during the restrictive period.

To be able to complete the transaction, the transaction will need to be approved by shareholders.

F-40

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

26.

CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

The condensed financial statements of Origin Agritech Limited (the “parent company”) have been prepared in accordance with accounting principles generally accepted in the United States of America. Under the PRC laws and regulations, the Company’s PRC subsidiaries are restricted in their ability to transfer certain of their net assets to the parent company in the form of dividend payments, loans or advances. The amounts restricted include paid-in capital, capital surplus and statutory reserves, as determined pursuant to PRC generally accepted accounting principles, totaling RMB109,651 and RMB109,651 as of September 30, 2015 and 2016, respectively.

The following represents condensed unconsolidated financial information of the parent company only:

CONDENSED BALANCE SHEET

	September 30
	2015		2016		2016
	RMB		RMB		US$
ASSETS
Current assets
Cash and cash equivalents		341		581		87
Other receivables		3		3		-
Prepaid expenses		481		-		-
Due from inter-companies		125,815		129,811		19,439
Total current assets		126,640		130,395		19,526
Investment in unconsolidated subsidiaries		130,013		71,512		10,709
Total assets		256,653		201,907		30,235

LIABILITIES AND EQUITY
Current liabilities
Due to related parties		1,511		1,586		237
Total current liabilities		1,511		1,586		237
Long-term borrowings		13,948		20,033		3,000
Total liabilities		15,459		21,619		3,237
Total stockholders’ equity		241,194		180,288		26,998
Total liabilities and stockholders’ equity		256,653		201,907		30,235

F-41

ORIGIN AGRITECH LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2014, 2015 AND 2016

(In thousands, except number of share, per share data and unless otherwise stated)

26.

CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY- Continued

CONDENSED STATEMENT OF INCOME AND COMPREHENSIVE INCOME

	Year ended September 30,
	2014			2015			2016			2016
	RMB			RMB			RMB			US$

Revenues		286			303			204			31
Cost of revenues		-			-			-			-
Operating expenses
General and administrative		(5,025	)		(4,335	)		(16,035	)		(2,401	)
Loss from operations		(4,739	)		(4,032	)		(15,831	)		(2,370	)
Equity in earnings loss of unconsolidated subsidiaries		(43,579	)		(9,223	)		(49,009	)		(7,339	)
Interest expense		(268	)		(553	)		(738	)		(111	)
Loss before income taxes		(48,586	)		(13,808	)		(65,578	)		(9,820	)
Income tax (expense) benefits
Income tax expense		-			-			-			-
Reversal of contingent tax liability		39,059			-			-			-
Income tax benefits		39,059			-			-			-

Net loss		(9,527	)		(13,808	)		(65,578	)		(9,820	)
Other comprehensive loss
Foreign currency translation difference		(56	)		(2,607	)		(4,124	)		(618	)
Total comprehensive loss		(9,583	)		(16,415	)		(69,702	)		(10,438	)

CONDENSED STATEMENT OF CASH FLOWS

	Year ended September 30,
	2014			2015			2016			2016
	RMB			RMB			RMB			US$

Net cash used in operating activities		(3,288	)		(7,242	)		(20,009	)		(2,996	)
Net cash provided by (used in) financing activities		(452	)		3,255			14,881			2,228
Net increase in cash and cash equivalents		(3,740	)		(3,987	)		(5,128	)		(768	)
Cash and cash equivalents, beginning of year		4,332			671			341			51
Effect of exchange rate changes on cash and cash equivalents		79			3,657			5,368			804
Cash and cash equivalents, end of year		671			341			581			87

BASIS OF PRESENTATION

The condensed financial information has been prepared using the same accounting policies as set out in the Company’s consolidated financial statements except that the parent company has used equity method to account for its investments in subsidiaries.

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