**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 Washington,
        D.C. 20549
 
 **FORM
          10-KSB/A**
 
 **x
        ANNUAL REPORT UNDER
        SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**
  For
        the
        fiscal year ended December 31, 2006
 
 **o
        TRANSITION REPORT UNDER
        SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT**  **OF
        1934**
 
 *Commission
        File Number: 000-28195*
 **AGFEED
        INDUSTRIES, INC.**
 (Name
        of
        small business issuer in its charter)
 
 Nevada
              
              20-2597168State
                  or other jurisdiction of incorporation or organization
              
              I.R.S.
                  Employer Identification Number
 
 1095
        Qing
        Lan Avenue
 Economic
        and Technical Development Zone
 Nan
        Chang
        City, Jiangxi Province
 China,
        330013
 (Address
        of principal executive office)
 
 Issuer's
        telephone number: 86-0791-2189878
 
 Securities
        registered under Section 12(b) of the Exchange Act: None
 
 Securities
        registered under Section 12(g) of the Exchange Act: None
 
 Check
        whether the Issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the Registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90 days.) Yes x No o
 
 Check
        if
        there is no disclosure of delinquent filers in response to Item 405 of
        Regulation S-B is not contained in this form, and no disclosure will be
        contained, to the best of the Registrant's knowledge, in definitive proxy
        or
        information statements incorporated by reference in Part III of this Form
        10-KSB
        or any amendment to this Form 10-KSB. o
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act) Yes o No
x
 
 The
        Issuer's revenues for the year ending December 31, 2006 were
        $8,594,876.
 
 As
        of
        March 8, 2007 the number of shares outstanding of the Issuer's common stock
        was
        25,000,003.
 
 As
        of
        March 8, 2007 the aggregate number of shares held by non-affiliates was
        approximately17, 311,924.
 
 As
        of
        March 8, 2007 the aggregate market value of the Issuer's common stock held
        by
        non-affiliates was $84,482,189, based on the average high and low price of
        $4.88
        per share as of March 8, 2006.
  **DOCUMENTS
        INCORPORATED BY REFERENCE** None
   
  **FORM
        10-KSB**
  **FOR
        THE FISCAL YEAR ENDED DECEMBER 31, 2006**
 
 **INDEX**
 
 PageEXPLANATORY
                    NOTE
                3PART
                    I
                3ITEM
                    1. DESCRIPTION OF BUSINESS
                4ITEM
                    2. DESCRIPTION OF PROPERTY
                16ITEM
                    3. LEGAL PROCEEDINGS
                16ITEM
                    4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
                16PART
                    II
                17ITEM
                    5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
                    MATTERS AND
                    SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.
                17ITEM
                    6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
                    OPERATION
                17ITEM
                    7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                27ITEM
                    8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                    AND
                    FINANCIAL DISCLOSURE
                28ITEM
                    8A. CONTROLS AND PROCEDURES
                28ITEM
                    8B. OTHER INFORMATION
                28PART
                    III
                29ITEM
                    9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
                    COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
                29ITEM
                    10. EXECUTIVE COMPENSATION
                30ITEM
                    11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                    AND
                    RELATED STOCKHOLDER MATTERS
                31ITEM
                    12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
                32ITEM
                    13. EXHIBITS
                33ITEM
                    14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
                34FINANCIAL
                  STATEMENTS
                F-1
  2
  EXPLANATORY
          NOTE
 **We are
          amending this Annual Report on Form 10-KSB in its entirety to report
          certain segment reporting and other information and to include additional
          risk
          factors, which changes are being made to conform the information presented
          in
          this report to disclosures made in our Registration Statement on
          Form SB-2 that was declared effective by the Securities and Exchange
          Commission on October 25, 2007.**
 
 **PART
        I**
 
 
 
 *This
          Annual Report on Form 10-KSB/A, the exhibits hereto and the information
          incorporated by reference herein contain “forward looking statements” within the
          meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as
          amended (the “Exchange Act”), and such forward looking statements involve risks
          and uncertainties. When used in this report, the words “expects”, “anticipates”,
“estimates”, “believes”, “intends”, “may”, “will”, “should”, “plans”,
“predicts”, “potential”, “continue”, “feels”, “projects” and similar expressions
          are intended to identify forward looking statements. Such statements are
          subject
          to risks and uncertainties that could cause actual results to differ materially
          from those projected. These risks and uncertainties include those discussed
          in
“Management’s Discussion and Analysis of Financial Condition and Results of
          Operations”, “Risk Factors” or incorporated by reference herein. AgFeed
          Industries, Inc. undertakes no obligation to publicly release any revisions
          to
          these forward looking statements to reflect the occurrence of events or
          circumstances after the date this Report is filed with the Securities and
          Exchange Commission or to reflect the occurrence of unanticipated
          events.*
 
 
 3
   ITEM
        1.
        DESCRIPTION OF BUSINESS
 
 **Overview
        of Business**
  We
          were
          incorporated as Wallace Mountain Resources Corp. on March 30, 2005 in Nevada.
          Since October 31, 2006, our principal place of business has been based
          in the
          People’s Republic of China (‘PRC”). As the result of a merger into a
          wholly owned subsidiary, we changed our name  to AgFeed Industries,
          Inc. on November 17, 2006. Our headquarters are located at 1095 Qing Lan
          Avenue,
          Economic and Technical Development Zone, Nanchang City, Jiangxi Province,
          People's Republic of China 330013, Telephone: +86-0791-2189878. Our primary
          business is the research and development, manufacture, marketing and sale
          of
          fodder and blended feed for use in the domestic animal husbandry markets
          in the
          People’s Republic of China.
 
 **Business**
 We
        operate through three subsidiaries in the PRC.
 
 Nanchang
          Best Animal Husbandry Co., Ltd ("Nanchang Best,") was incorporated under
          the
          laws of the People's Republic of China on May 15, 1995, in Jiangxi Province.
          It
          is headquartered at 1095 Qinglan Avenue, Nanchang City, Jiangxi
          Province, People's Republic of China 330013. Nanchang Best is in the business
          of
          the research and development, manufacture, marketing and sale of fodder
          and
          blended feed for use in China's domestic animal husbandry
          markets.
 
 Shanghai
          Best Animal Husbandry Co., Ltd. ("Shanghai Best,") was incorporated under
          the
          laws of the People's Republic of China on July 23, 1999, in Shanghai and
          is
          headquartered at No. 158 Huiping Road, Jia Ding District,
          Shanghai, Peoples Republic of China 201802. Shanghai Best is also in the
          business of the manufacture, marketing and sale of fodder and blended feed
          for
          use in China's domestic animal husbandry markets.
 
 Guangxi
          Huijie Sci. & Tech. Feed Co., LTD., ("Guangxi Huijie") was incorporated
          under the laws of the People's Republic of China on August 2, 2004 and
          is
          headquarted at No. 5 Lianling Street, Nanning Industrial Park, Nanning,
          GuangXi
          Province, People's Republic of China 530221. Guangxi is engaged in the
          research
          and development, manufacture, marketing, distribution and sale of premix
          fodder
          blended feed and feed additives primarily for use in China’s domestic pork
          husbandry markets.
 
 **History**
  From
        incorporation to October 31, 2006, the business of the Company, as Wallace
        Mountain Resources Corp., consisted of 18 unit mineral claims known as
        the South Wallace Mountain Project having a total surface area of approximately
        946 acres. At that time the property was without known reserves and the proposed
        program was exploratory in nature. We paid a $3,000 retainer to the geologist
        to
        commence the Phase 1 exploration work on the claim.
 
 On
        October 31, 2006, the Company entered into and closed a share purchase agreement
        with Nanchang Best, and each of Nanchang Best's shareholders (the "Nanchang
        Purchase Agreement"). Pursuant to the Nanchang Purchase Agreement, the Company
        acquired all of the issued and outstanding capital stock of Nanchang Best
        from
        the Nanchang Best shareholders in exchange for 5,376,000 shares of common
        stock.
  Contemporaneously,
        on October 31, 2006, the Company entered into and closed a share purchase
        agreement with Shanghai Best, and each of Shanghai Best's shareholders (the
        "Shanghai Purchase Agreement"). Pursuant to the Shanghai Purchase Agreement,
        Wallace acquired all of the issued and outstanding capital stock of Shanghai
        Best from the Shanghai Best shareholders in exchange for 1,024,000 shares
        of
        common stock.
  Concurrently
        with the closing of the Nanchang Purchase Agreement and Shanghai Purchase
        Agreement (collectively the "Purchase Agreements" or the "Transaction" as
        the
        context may require) and as a condition thereof, the Company entered into
        an
        agreement with Robert Gelfand, its former President and Chief Financial Officer,
        pursuant to which Mr. Gelfand returned 2,600,000 shares of the Company’s common
        stock to the treasury for cancellation. Mr. Gelfand was not compensated in
        any
        way for the cancellation of his shares of the Company’s Common Stock. Upon
        completion of the foregoing transactions, the Company had an aggregate of
        8,000,000 shares of common stock issued and outstanding. The shares of common
        stock issued to the shareholders of Nanchang Best and Shanghai Best were
        issued
        in reliance upon the exemption from registration provided by Regulation S
        under
        the Securities Act of 1933, as amended.
  Subsequent
        to the acquisition of Nanchang Best and Shanghai Best on October 31, 2006,
        Robert Gelfand resigned as the sole officer of the Company. On November 17,
        2006, the Company declared a stock dividend of two additional shares of common
        stock for each share of common stock outstanding, and changed its name to
        AgFeed
        Industries, Inc.
 
 Nanchang
            Best and Shanghai Best share a common founder and Chief Executive Officer,
            Xiong
            Junhong. Nanchang Best shares the results of its research and development
            efforts with Shanghai Best. In addition, Nanchang Best provides general
            management and administrative services to Shanghai Best as well as human
            resources services at no expense. There are no written enforceable agreements
            documenting the provision of these services as Nanchang Best and Shanghai
            Best
            are each our wholly owned subsidiaries.
 On
              December 20, 2006, the Company entered into and closed a share purchase
              agreement with Guangxi Huijie Sci. & Tech. Feed Co, Ltd. , a company founded
              in the People’s Republic of China (“Guangxi Huijie”), and the shareholders of
              Guangxi Huijie pursuant to which AgFeed acquired all the outstanding
              shares of
              Guangxi Huijie for a total purchase price of eight million six hundred
              thousand
              Chinese Renminbi (8,600,000 RMB), equivalent to approximately U.S.
              $1,100,420
              based on exchange rates reported in the Wall Street Journal for December
              20,
              2006. We
              obtained the funds needed to complete this acquisition by borrowing
              8,600,000
              CNY from Sunrise Capital International, Inc.  Our obligation to repay this
              loan was documented by a promissory note dated December 20, 2006 in
              the
              principal amount of 8,600,000 CNY.  This loan accrued interest at the rate
              of seven percent per annum and all accrued interest and the principal
              amount of
              this loan was due and payable on June 20, 2007.  We were permitted to
              prepay this note without penalty and did so in March 2007.  Mr. Sheng Zhou,
              the brother of our corporate secretary and treasurer, Feng Zhou, is
              a director
              to Sunrise Capital International, Inc., which is owned by his sister-in-law,
              Ms.
              Chun Mei Chang.
 
 4
 
 **Products**
 
 Livestock
        producers may directly buy animal feed in finished form, referred to as
        "blended" feed, which already contains the concentrate and the foundational
        grains blended together, or, they may choose to buy the premix and then combine
        it with protein, corn, hay, wheat and other elements readily available in
        the
        market to make their own blended feed. Additive premix fodder provides the
        essential amino acids and binder necessary for proper absorption of protein
        by
        pigs. Feeding pigs a balanced diet is an essential part of the pork profit
        equation. Feed costs comprise 55-70% of a piggery's expenses; therefore the
        quality of feed and nutrition has a significant effect on piggery
        profits.
 
 The
        Companies are engaged in the manufacturing, distribution, marketing and sale
        of
        two main product lines: additive premix fodder for use in all stages of a
        pig's
        life, and blended feeds designed specifically for the infant stage of a pig's
        life. Nanchang Best and Guangxi Hijie also engage in the research and
        development of new products and improvement of existing formulas. Nanchang
        Best
        shares the results of such work with Shanghai Best. Shanghai Best also
        manufactures and markets premixed chicken feed. Nanchang Best and Guangxi
        Huijie
        produce substantially all of the Companies' sales of blended feed.
  In
          combination, the Companies' total feed output in 2006 was approximately
          20,344
          metric tons. Together they produced a combined 15,534 metric tons of premix
          fodder; Nanchang Best produced 7,948 metric tons of premix fodder, Shanghai
          Best
          5,714 metric tons and Guangxi Huijie 1,872 metric tons. Nanchang Best produced
          2,610 metric tons of blended feed and Guangxi Huijie 1,517 metric tons.
          Shanghai
          Best and Guangxi Huijie produced approximately 683 metric tons of other
          feed
          product.
 
 *Pork
        premix*
 According
          to the different growth stages of a pig, different additives are necessary
          to
          accelerate the growth of the animal and provide safe products for consumption.
          Premix additives are composed mainly of essential amino acids, vitamins,
          minerals, antibiotics and growth promoters. The
          Companies market 21 different brands of premix fodder that are priced from
          standard to premium to satisfy wide ranging customer demand. Within each
          brand
          there are 7 different mixes that correspond to the different stages of
          a pig's
          life cycle: newborn to 15 kg, 15-30 kg, 30-60 kg, market ready, over 60
          kg boar,
          mating/pregnant, and lactating. The Companies attempt to provide superior
          customer service by customizing the premix to the specific needs of each
          customer. Large scale pig farms are typically the biggest consumers of
          premix.
          The Companies employ veterinarians to work with these large pig farms to
          determine the optimal formulation of feed.
  Premix
          sales represent approximately 85% of annual revenues and carry a gross
          profit
          margin of approximately 40%. The willingness of the Companies to formulate
          customized premix fodder to meet customer specifications allows them to
          charge a
          premium for their products. The average price of premix is $570/metric
          ton.
          Based on an informal survey that we conducted with our clients, competitors
          charge $500/metric ton on average. The Companies are able to justify premium
          pricing due to their strong brand name recognition, hands-on after market
          support, and superior, more effective products developed as a result of
          a strong
          R&D program. In
          Shanghai City, Shanghai Best is a market leader in the lactating and
          pregnant sow market, according to management estimates. Large scale piggeries
          are willing to pay a premium for more effective products as they are concerned
          with producing healthy piglets, controlling disease and marketing profitable
          pork products.
  Guangxi
        Huijie has approximately a 6% market share of pre mix fodder category, in
        its
        home province of Guangxi.
  The
        Companies also provide extensive technical and veterinary support free of
        charge
        to their customers. Overall, the Companies maintain approximately one technical
        support person to every five sales persons while the competitors average
        one
        technician to every twelve sales persons.
 
 *Piglet
        blended feed*
 Nanchang
        Best and Guangxi Huijie produce piglet blended feed. It is designed to both
        nourish and protect newborns and is composed primarily of proteins, such
        as fish
        meal and soy bean (30%), and raw material grains, such as corn and chaff
        (roughly 65%). Local climate and environment also influence the formulation
        of
        the piglet blend.
 
 The
          Company sells blended feed for an average price of $420/metric ton. Blended
          feed
          contributes approximately 15% to its total revenues, and has gross margins
          of
          approximately 15%. As a result of government policies aimed at increasing
          the
          economic success of the agriculture industry as a whole and greater regulation
          requiring advanced technology to provide safeguards to the country's food
          supply, the smaller pig farms are being forced out of business or to merge
          with
          larger pig raising operations. The large operations increasingly purchase
          premix
          as opposed to blended feeds in order to realize significant cost savings
          by
          leveraging their economies of scale. For this reason the Company expects
          the
          blended feed business to diminish over time. This was also a factor in
          Shanghai Best's decision not to enter this market. However, we believe that
          our blended feed revenue will be replaced by selling more of the profitable
          premix products to the increasing number of large scale pig
          farms.
 
 *Chicken
        premix*
 We also
          produce three brands of premix for the poultry industry. Most of this production
          takes at the Shanghai Best production facility. It produces approximately
          500
          metric tons annually and it has a nominal impact on total revenues. While
          there
          are no current plans to expand the chicken feed product line, future expansion
          remains a possibility.
 
 **Market
        information**
 
 The
        feed
        industry in China, initially developed during the 1980s, was transformed
        by the
        issuance of the feed and feed additives regulations in the early 1990s. These
        regulations emphasized labeling standards for the different grades of product.
        These standards assisted in regulating the feed industry's expansion and
        aimed
        to eliminate substandard products and fraudulent labeling.
  5
  China's
          feed manufacturing industry is second only to the United States in volume.
          The
          feed industry grew to approximately 66 million tons in 1998, after growing
          at an
          annual rate of 15% from 1990 to 1998 and approximately 107 million tons
          in 2005
          and approximately 111 million tons in 2006. As incomes rise in China, annual
          meat consumption is expected to rise from the current 23 kg per person
          to 32 kg
          per person in the next five years. Developing countries average 24 kg per
          person
          annually while developed countries average 75 kg per person annually. It
          is
          estimated that 4 kg of feed grain are needed to produce 1 kg of pork, according
          to USDA Foreign Agricultural Services.
 
 The
        animal feed industry in China is highly competitive with many regional players
        and locally recognized brands. The company believes that the initial capital
        requirements with respect to entry into the industry are low and consequently
        there is a great deal of competition between many smaller companies. The
        animal
        feed sector for pork has three primary markets:




·additive
      premix fodder


· 
proteins


·  blended
      feed





We predominantly
        produce additive premix fodder ("premix") and blended feeds and do not presently
        compete in the protein market. A nutritionally complete feed includes three
        components: energy sources, such as course grains; protein sources such as
        fish
        and soy meals; and premix consisting of essential amino acids, vitamins,
        minerals, antibiotics and growth promoters. Premix and proteins together
        are often referred to in the industry as "concentrate." Premix fodders require
        greater technology to produce, and are often customized to each customer's
        specifications. As such, premix carries the highest selling price per metric
        ton
        of all feed components. Livestock producers may directly buy animal feed
        in
        finished form, referred to as "blended feed" or buy the component ingredients
        and mix the blend on their own generating 15-20% cost savings. Typically,
        large
        scale piggeries will purchase premix fodder, as they have the scale to mix
        their
        own blended feeds.




The
      hog
      feed manufacturing industry is concentrated in the Yangtze River Basin. In
      the
      past decade, feed mills have become more efficient, with new, high capacity
      mills replacing old, small, inefficient ones. As part of its effort to improve
      agricultural output and improve the economic vitality of China's rural
      industries, the government has adopted favorable tax policies for the industry,
      such as exemption from the value-added tax.





*Blended
      Feed Industry*


According
        to a recent China Animal Feed Industry Development Report, the blended feed
        market for pork was approximately $12 and $14 billion for 2004 and 2005,
        respectively. The largest player in the market has approximately a 7% market
        share, and forty companies share the top 33% of the market. From 2000 to
        2005,
        blended feed sales have grown at an average annual rate of 4.5%. From 2005
        to
        2006, blended feed sale growth was 4.6%.





*Premix
      Industry*


In
        2005,
        the premix market in China totaled $1.45 billion and contained over 2,500
        companies. From 2000 to 2005, premix industry sales grew at an average annual
        rate of 13.5%. There is no single dominant market participant, with the largest
        player in the market realizing only 1.2% market share. Of
        the
        various components that make up blended feed, the premix, while constituting
        the
        smallest proportion of the total blend at 4%, requires the most sophisticated
        formulas to produce. The research, development and technology necessary to
        produce premix makes it necessary for premix to carry a higher price per
        ton
        than blended feed.





**Sales
      and Marketing**





Since
        the
        founding of Nanchang Best and the subsequent founding of Shanghai Best, the
        companies have aggressively marketed and promoted the "Best" brand. Guangxi
        Huijie markets its products under the “Huijie” brand name. None of the Company’s
        operating subsidiaries currently owns any retail outlets. The Companies send
        their sales force and technicians to the pig farms to educate their clients
        on
        new product developments and improvements to existing products. The Companies
        conduct educational seminars in pig farming regions to explain the benefits
        of a
        balanced, nutritious diet for pigs in producing a healthy herd and educate
        the
        farmers to properly prepare and mix the various feed components. Although
        not
        unique among premix manufacturers, management believes its services in this
        area
        are superior to competitors due to its high ratio of technicians to sales
        people, which allows the sales team to develop a stronger relationship with
        its
        customers. As the Companies market and sell directly to pig farmers, they
        are
        able to collect and analyze data from the farmer which assists in preparation
        and design of new products. The Companies also attend agricultural conventions
        that take place in the market areas where they currently conduct business
        as
        well as in provinces that they expect to enter. The Companies also place
        advertisements and promotional pieces in agricultural trade
        journals.





Historically,
        the Companies sold their products to distributors and large scale pig
        farms. Large scale farms generally refer to those with over 2,000 pigs and
        100
        sows annually, however it is not uncommon to have a single farm raise 20,000
        to
        30,000 pigs. The distributors sell to the smaller privately owned farms.
        Recent
        sales data of distributors indicates that they tend to be more sensitive
        to
        price increases than the large-scale piggeries, whereas the piggeries place
        more
        emphasis on customer service and other ancillary services provided by the
        Companies.


Starting
        in January 2007, we began to open independently owned and operated franchise
        chain stores. The franchise program allows us to cost effectively sell our
        products to the individual “mom and pop” farmer that may raise only a few hogs
        per year for personal consumption or for sale in the marketplace as an
        additional source of income. Some of the more successful franchise stores
        have
        reached sales levels of 3-4 metric tons per month. At February 28, 2007,
        we
        had 43 franchise chain stores open and operating under the AgFeed
        brand name. We began a small test program of the franchise concept in June
        2006
        and began to roll out the full franchise program in January 2007 and estimate
        that by year end 2007, 500 franchise stores will be in operation. Approximately
        70% of the franchise store operators were previously in the animal feed
        distribution business. The franchisees do not pay an initiation fee to become
        franchised distributors but do receive marketing and technical training from
        our
        staff. Each franchise operator signs an exclusive agreement with us, agrees
        to
        not sell any other brand of animal feed products and to decorate their store
        with approved AgFeed marketing materials and signage.


In
          addition, each franchise operator must also: (i) during a three month
          probationary period pass a screening process based on performance benchmarks,
          (ii) abide by our rules and receive ongoing training from our sales and
          technical staff, (iii) support the sales of new AgFeed products when launched
          in
          their territory, and (iv) remain within our guidelines for payment of products
          purchased from us.
 
 The
          franchisees receive discounted prices from the regular wholesale listed
          prices
          and have payment terms that are typically 15 days from the date of sale.
          These
          discounted prices earn the franchisee an increased gross profit margin
          of
          approximately 5-10%. They build a relationship with the small farmers that
          in
          many cases are illiterate and continue to do business as they have always
          done.
          As part of the franchise agreement they have a specified territory that
          entitles
          them to the exclusive right to sell AgFeed products to the small farm
          owners.
 6
 As
          of
          February 28, 2007, each of the Companies has the following
          customers:
 
 Local
                    Distributors
                Large
                    Scale Pig Farms
                Franchise
                    Chain Stores
                TotalNanchang
                    Best
                170
                190
                0
                360Shanghai
                    Best
                90
                210
                0
                300Guangxi
                    Huijie
                140
                185
                43
                368





**Suppliers**





The
      Companies do not have any long term supply contracts. For each raw material
      purchased, they maintain at least two suppliers who offer the same product.
      Management believes that any one of its suppliers could be easily replaced.
      Normally, purchases of raw materials are made on an "as needed" basis each
      month. Orders are managed by both the warehouse and purchasing manager together,
      who are familiar with the on-site inventory levels. China has more than 2,000
      raw material producers involved in supplying the animal feed
      industry.





**Research
      and Development**




To
      maintain a competitive advantage in the marketplace and keep pace with current
      developments, the Companies engage in continuous research and development.
      Nanchang Best and Guangxi Huijie conduct research and development. Historically,
      Nanchang Best has shared its R & D results with Shanghai Best. The Company
      sponsors research alliances with Jiangxi Agricultural University, South China
      Agricultural University, and Nanjing Agricultural University.




In
        addition to sponsoring national and provincial academic research projects
        at
        various academic institutions, Nanchang Best launched a fund called Best
        Fund
        contributing RMB 98,000 ($12,250) to sponsor 12 research projects at Jiangxi
        Agricultural University. Nanchang Best retains proprietary rights to any
        research findings from these projects.





**Intellectual
      property**





Management
      has registered the "Best" and Huijie trade name used on its products with the
      China Trademark Bureau and their goods are known in the provinces in which
      the
      Companies conduct business.




None
      of
      the Companies hold any patents or intend to apply for patents on proprietary
      technology or formulas. The formulas for the Companies' products are considered
      a trade secret and are protected as such.





**Government
      and Environmental Regulation**





Through
      the laws and regulations of the People's Republic of China and the provincial
      governments of Jiangxi Province, Guangxi Province and the Shanghai City
      government, the Company’s products and services are subject to material
      regulation by governmental agencies responsible for the agricultural and
      commerce industries.




As
      such,
      business and company registrations, production license, and all products are
      certified on a regular basis and must be in compliance with the laws and
      regulations of provincial and other local governments and industry
      agencies.




All
      of
      the Companies' production facilities have received production licenses as
      promulgated by the Ministry of Agriculture with Nanchang Best's license valid
      through February, 2009, Shanghai Best through February, 2010, and Guangxi Juijie
      through April, 2010.




All
      products have earned formal approval pursuant to the National Code of Feed
      and
      Feed Additives as dictated by National State Council of the PRC. Product
      approval includes qualified quality reports from the council's technology and
      supervision bureau prior to engaging in any production of marketing
      activities.




There
      is
      no material cost in obtaining and maintaining these licenses as it is illegal
      to
      do business without them. The issuance of the production licenses and product
      permits is seen as a cost of doing business and associated fees are minimal.
      If
      any production license(s) or product license(s) were lost, production would
      need
      to cease with a minimum time period of 30-45 days to issue a new license and
      the
      possibility of regulatory fines. The
      Companies are also subject to China's National Environmental Protection Law
      as
      well as a number of other national and local laws and regulations regarding
      pollutant discharge, air, water and noise pollution.




The
        central government, through the Ministry of Agriculture, issues production
        licenses. The Ministry of Agriculture dispatches officials at the local level
        to
        review staff qualifications, production facilities, quality control, and
        management departments for competency.




Nanchang
      Best's production permit was issued in 2004 (#3751) and is valid until
      2009.




Shanghai
      Best's production permit was issued in 2005 (#0216) and is valid until
      2010.




Guangxi
      Huijie’s production permit was issued in 2005 (#4146) and is valid until
      2010.





A
        production permit is mandatory for all entities involved in the manufacture
        of
        animal feed and feed components and is issued by the local provincial
        authorities. The provincial permit is issued for all products manufactured
        at
        each facility. Each facility has the necessary permits for all products provided
        at each of our operating facilities. These permits are valid for five
        years.




All
        products must earn a formal approval production number pursuant to Code of
        Premix and Additive, promulgated by China State Council, and qualified products
        reports from Technology and Supervision Bureau, prior to engaging in any
        production or marketing of feeds. These formal approval production numbers
        are
        also valid for five years from the date of issuance.





**Competition**




The
        premix market in China is particularly fragmented with many companies and
        locally recognized brands. The largest player in the premix industry commands
        only 1.2% of the national market and no one company has yet taken a sizable
        market lead in terms of service, brand, or technology. Nanchang
        Best leads the pork premix market in the Jiangxi Province with a 3.5% market
        share and also sells product in neighboring regions such as Hubei, Henan
        and
        Fujian. Nanchang Best faces price competition from Da Bei Nong in the
        large-scale farm market; however management believes its service is considered
        inferior to Nanchang Best's. Therefore Nanchang Best has been able to maintain
        its lead in sales.




7




Sales
        made by Nanchang Best and Shanghai Best in Fujian Province face strong
        competition in the large-scale piggery market from Fuj Minke Biology Company,
        which has well-known service, a flexible credit policy, and whose prices
        are
        competitive with, if not lower than, the prices at which Nanchang Best and
        Shanghai Best sell their products. While both Nanchang Best and Shanghai
        Best
        are working to further develop and strengthen their connections to large-scale
        farms, Fuj Minke does not pose a threat to their distributor sales
        piggeries.




Zheng
        Da,
        a Sino-Thai JV part of Charoen Pokphand, is one of the largest premix producers
        in Fujian province; however, based on informal discussions that we had had
        with
        our clients, its prices tend to be higher, and it focuses only on the
        distributor market.




In
      the
      Shanghai area, Xinnong leads the market in sales with 7,800 metric tons,
      competing directly with Shanghai Best on both pricing and service to large
      scale
      piggeries.




Based
      on
      our independent investigations, in the Shanghai area, Xinnong leads the market
      in sales with 7,800 metric tons, competing directly with Shanghai Best on both
      pricing and service to large scale piggeries.




Guangxi
      Huijie has approximately a 6% share of the overall feed market and competes
      directly with Guangxi Provimi. Guangxi Provimi sells the same products as
      Guangxi Huijie at similar price points, and is considered by the marketplace
      to
      offer the same quality as Guangxi Huijie. The Company management believes that
      Guangxi Provimi does not provide the same quality of after sale technical
      support to its customers.





**Employees**





Nanchang
      Best has approximately 125 employees, in the following departments: 8
      management, 3 general administration, 2 human resources, 26 production, 3 sales
      administration, 60 marketing, 1 purchasing, 6 finance, 12 technical services,
      4
      quality control.





Shanghai
      Best has approximately 88 employees in the following departments: 6 management,
      5 general administrative, 19 production, 3 sales administration, 39 marketing,
      1
      purchasing, 5 finance, 7 technical services, 3 quality control.





Guangxi
      Huijie has approximately 86 employees, in the following departments: 5
      management, 3 general administration, 6 human resources, 21production, 4 sales
      administration, 31marketing, 1 purchasing, 4 finance, 5 technical services,
      6
      quality control.





It
      is
      management's belief that it has a favorable working relationship with its
      employees. No collective bargaining agreements exist.





ITEM
      1A.
      RISK FACTORS


**RISK
          FACTORS**
 
 *You
          should carefully consider the risks described below before making an investment
          decision. The risks described below are not the only ones facing our company.
          Additional risks not presently known to us or that we currently believe
          are
          immaterial may also impair our business operations. Our business could
          be harmed
          by any of these risks. The trading price of our common stock could decline
          due
          to any of these risks and you may lose all or part of your investment.
          In
          assessing these risks, you should also refer to the other information
          contained in this annual report, including our consolidated financial
          statements and related notes.*
 
 **Risks
          Related to Our Business**
 
 **We
          cannot be certain that our product innovations and marketing successes
          will
          continue.**
 
 We
          believe that our past performance has been based on, and our future success
          will
          depend upon, in part, our ability to continue to improve our existing products
          through product innovation and to develop, market and produce new products.
          We
          cannot assure you that we will be successful in the introduction, marketing
          and
          production of any new products or product innovations, or that we will
          develop
          and introduce in a timely manner innovations to our existing products which
          satisfy customer needs or achieve market acceptance. Our failure to develop
          new
          products and introduce them successfully and in a timely manner could harm
          our
          ability to grow our business and could have a material adverse effect on
          our
          business, results of operations and financial condition.
 
 **Our
          success depends on our management team and other key personnel, the loss
          of any
          of whom could disrupt our business operations.**
 
 Our
          future success will depend in substantial part on the continued service
          of our
          senior management and founders. The loss of the services of one or more
          of our
          key personnel could impede implementation and execution of our business
          strategy
          and result in the failure to reach our goals. We do not carry key person
          life
          insurance in respect of any of our officers or employees. Our future success
          will also depend on the continued ability to attract, retain and motivate
          highly
          qualified personnel in many fields of our operations. The rapid growth
          of the
          economy in The People’s Republic of China has caused intense competition for
          qualified personnel. We cannot assure you that we will be able to retain
          our key
          personnel or that we will be able to attract, train or retain qualified
          personnel in the future.
  8
  **Our
          acquisition strategy involves a number of risks and we have a limited history
          of
          successful acquisitions. Even when an acquisition is completed, we may
          have
          integration issues that may not produce as positive results as management
          may
          have projected.**
  We
          have
          completed one acquisition since 2006 and intend to grow through the acquisition
          of additional companies.
  We
          are
          regularly engaged in acquisition discussions with a number of companies
          located
          in China and anticipate that one or more potential acquisition opportunities,
          including those that would be material, may become available in the near
          future.
          If and when appropriate acquisition opportunities become available, we
          intend to
          pursue them actively. Acquisitions involve a number of special risks, including:
  •
                
                failure
                    of the acquired business to achieve expected results;
  •
                
                diversion
                    of management’s attention;
  •
                
                failure
                    to retain key personnel of the acquired business;
  •
                
                additional
                    financing, if necessary and available, could increase leverage,
                    dilute
                    equity, or both;
  •
                
                the
                    potential negative effect on our financial statements from the
                    increase in
                    goodwill and other intangibles; and
  •
                
                the
                    high cost and expenses of completing acquisitions and risks associated
                    with unanticipated events or liabilities.
  These
          risks could have a material adverse effect on our business, results of
          operations and financial condition.
 
 We
          have
          faced, and expect to continue to face, increased competition for acquisition
          candidates, which may limit our number of opportunities to acquire companies
          and
          may lead to higher acquisition prices. We cannot assure you that we will
          be able
          to identify, acquire, or manage profitably additional businesses or to
          integrate
          successfully any acquired businesses into our existing business without
          substantial costs, delays or other operational or financial difficulties.
          In
          future acquisitions, we also could incur additional indebtedness or pay
          consideration in excess of fair value, which could have a material adverse
          effect on our business, results of operations and financial condition.
          In
          addition, we may inadvertently assume unknown liabilities in acquisitions
          that
          we complete. Assumption of unknown liabilities in acquisitions may harm
          our
          financial condition and operating results. Acquisitions may be structured
          in
          such a manner that would result in the assumption of unknown liabilities
          not
          disclosed by the seller or uncovered during pre-acquisition due diligence.
          These
          obligations and liabilities could harm our financial condition and operating
          results.
  **Rising
          energy prices could adversely affect our operating results.**
  In
          the
          last few years, energy prices have risen dramatically, which has resulted
          in
          increased fuel costs for our businesses and raw materials costs for our
          branded
          products. Rising energy prices could adversely affect demand for our products
          and increase our operating costs, both of which would reduce our sales
          and
          operating income.
 
 **We
          rely on independently owned wholesale distributors who do not exclusively
          offer
          our products to their customers.**
  The
          loss
          of, or significant adverse change in, our relationship with any of our
          key
          wholesale distributors could cause our net sales, income from operations
          and
          cash flow to decline. The loss of, or reduction in, orders from any significant
          customer, losses arising from customer disputes regarding shipments, fees,
          merchandise condition or related matters, or our inability to collect accounts
          receivable from any major customer could reduce our income from operations
          and
          cash flow.
  9
  **We
          may not be able to reach our revenue and net income targets due to unpredictable
          market conditions.**
  Our
          primary end user customers are commercial hog farms and individual farmers.
          Although hog prices in The People’s Republic of China have reached multi-year
          highs, we cannot predict how long such favorable environment may last or
          predict
          the buying behavior of our customers as they adjust to market conditions.
          Therefore, our market expectations and projections may exceed our actual
          financial performance.
 
 **We
          are a major purchaser of many commodities that we use for raw materials
          and
          packaging, and price changes for the commodities we depend on may adversely
          affect our profitability.**
 
 We
          enter
          into contracts for the purchase of raw materials at fixed prices, which
          are
          designed to protect us against raw material price increases during their
          term.
          However, when necessary, we attempt to recover our commodity cost increases
          by
          increasing prices, promoting a higher-margin product mix and creating additional
          operating efficiencies. Nevertheless, the raw materials used in our business
          are
          largely commodities that experience price fluctuations caused by external
          conditions and changes in governmental agricultural programs.
 
 We
          also
          use paper products, such as corrugated cardboard, aluminum products, films
          and
          plastics to package our products. Substantial increases in prices of packaging
          materials or higher prices of our raw materials could adversely affect
          our
          operating performance and financial results.
 
 Commodity
            price changes may result in unexpected increases in raw material and
            packaging
            costs, and we may be unable to increase our prices to offset these increased
            costs without suffering reduced volume, revenue and income. Any substantial
            fluctuation in the prices of raw materials, if not offset by increases
            in our
            sales prices, could adversely affect our profitability.
 **Outbreaks
          of livestock disease can adversely affect sales of our products.**
 
 Outbreaks
          of livestock diseases can significantly affect demand for our products.
          An
          outbreak of disease could result in governmental restrictions on the sale
          of
          livestock products to or from customers, or require our customers to destroy
          their flocks. This could result in the cancellation of orders by our customers
          and create adverse publicity that may have a material adverse effect on
          the
          agricultural products industry and our ability to market our products
          successfully.
  **Our
          products and processes can expose us to product liability
          claims.**
 
 Product
          liability claims or product recalls can adversely affect our business reputation
          and expose us to increased scrutiny by local, provincial, and central
          governmental regulators. The packaging, marketing and distribution of
          agricultural feed products entail an inherent risk of product liability
          and
          product recall and the resultant adverse publicity. We may be subject to
          significant liability if the consumption of any of our products causes
          injury,
          illness or death of livestock, other animals or humans. We could be required
          to
          recall certain of our products in the event of contamination or damage
          to the
          products. In addition to the risks of product liability or product recall
          due to
          deficiencies caused by our production or processing operations, we may
          encounter
          the same risks if any third party tampers with our products. We cannot
          assure
          you that we will not be required to perform product recalls, or that product
          liability claims will not be asserted against us, in the future. Any claims
          that
          may be made may create adverse publicity that would have a material adverse
          effect on our ability to market our products successfully or on our business,
          reputation, prospects, financial condition and results of operations. A
          successful product liability claim in excess of our insurance coverage
          could
          have a material adverse effect on us and could prevent us from obtaining
          adequate product liability insurance in the future on commercially reasonable
          terms.
 
 **We
          may not be able to obtain regulatory approvals for our
          products.**
 
 The
          manufacture and sale of agricultural products in The People’s Republic of China
          is regulated by The People’s Republic of China and the local provincial
          governments. Although our licenses and regulatory filings are current,
          the
          uncertain legal environment in The People’s Republic of China and its industry
          may be vulnerable to local government agencies or other parties who wish
          to
          renegotiate the terms and conditions of, or terminate their agreements
          or other
          understandings with us.
  10
 
 **We
          face significant competition in the sales of our agricultural feed
          products.**
 
 Competition
          in the agricultural feed industry, especially with companies with greater
          resources, may make us unable to compete successfully in these industries,
          which
          could adversely affect our business.
 
 In
          general, the competitive factors in the agricultural feed industry in The
          People’s Republic of China include:
 
 ·
                Price;
 
 ·
                Product
                    quality;
 
 ·
                Brand
                    identification;
 
 ·
                Breadth
                    of product line; and
 
 ·
                Customer
                    service.
 
 To
          the
          extent that our products and services do not exhibit these qualities, our
          ability to compete will be hindered.
 
 **Concerns
          with the safety and quality of agricultural feed products could cause customers
          to avoid our products.**
 
 We
          could
          be adversely affected if our customers and the ultimate consumers of our
          products lose confidence in the safety and quality of various feed products.
          Adverse publicity about these types of concerns, such as the recent publicity
          concerning the substance melamine, whether or not valid, may discourage
          our
          customers from buying our products or cause production and delivery disruptions.
          Any negative change in customer perceptions about the safety and quality
          of our
          products could adversely affect our business and financial
          condition.
 
 **If
          our feed products become adulterated or misbranded, we would need to recall
          those items and may experience product liability claims if consumers are
          injured
          as a result.**
 
 Animal
          feed products occasionally contain contaminants due to inherent defects
          in those
          products or improper storage or handling. Under adverse circumstances,
          animal
          feed manufacturers may need to recall some of their products if they become
          adulterated or misbranded and may also be liable if the consumption of
          any of
          their products causes injury.
 
 While
          we
          have never been required to recall any of our products and we maintain
          insurance
          that we believe is adequate to cover this type of loss, a widespread product
          recall could result in changes to one or more of our business processes,
          product
          shortages, a loss of customer confidence in our food or other adverse effects
          on
          our business.
 
 If
          we are
          required to defend against a product liability claim, whether or not we
          are
          found liable under the claim, we could incur substantial costs, our reputation
          could suffer and our customers might substantially reduce their existing
          or
          future orders from us.
 
 **We
          may not be able to adequately protect and maintain our intellectual property,
          trademark, and brand names.**
 
 Our
          success will depend on our ability to continue to develop and market fodder
          and
          blended feed products. We currently have not applied for patents for our
          products or formulas, as our management believes an application for such
          patents
          would result in public knowledge of our proprietary technology and formulas.
          As
          we do not have patent protection for this technology or formulae, we may
          not be
          able to protect our rights to this intellectual property, if our competitors
          discover or illegally obtain this technology or formulae. Our inability
          to
          protect our rights to this intellectual property may adversely affect our
          ability to prevent competitors from using our products and
          developments.
  11
 
 **Some
          of our significant customer and supplier contracts are
          short-term.**
 
 Some
          of
          our customers and suppliers operate through purchase orders or short-term
          contracts. Though we have long-term business relationships with many of
          our
          customers and suppliers and alternative sources of supply for key items,
          we
          cannot be sure that any of these customers or suppliers will continue to
          do
          business with us on the same basis. Additionally, although we try to renew
          these
          contracts as they expire, there can be no assurance that these customers
          or
          suppliers will renew these contracts on terms that are favorable to us,
          if at
          all. The termination of or modification to any number of these contracts
          may
          adversely affect our business and prospects, including our financial performance
          and results of operations.
 
 **Risks
          Related to Conducting Our Business in The People’s Republic of
          China**
 
 **We
          are subject to international economic and political risks over which we
          have
          little or no control and may be unable to alter our business practice in
          time to
          avoid the possibility of reduced revenues.**
 
 All
            of
            our business is conducted in The People’s Republic of China. Doing business
            outside the United States, particularly in The People’s Republic of China,
            subjects us to various risks, including changing economic and political
            conditions, major work stoppages, exchange controls, currency fluctuations,
            armed conflicts and unexpected changes in United States and foreign laws
            relating to tariffs, trade restrictions, transportation regulations,
            foreign
            investments and taxation. We have no control over most of these risks
            and may be
            unable to anticipate changes in international economic and political
            conditions
            and, therefore, unable to alter out business practice in time to avoid
            the
            possibility of reduced revenues.
 **The
          People’s Republic of China’s economic policies could affect our
          business.**
 
 Substantially
          all of our assets are located in The People’s Republic of China and
          substantially all of our revenue is derived from our operations in The
          People’s
          Republic of China. Accordingly, our results of operations and prospects
          are
          subject, to a significant extent, to the economic, political and legal
          developments in The People’s Republic of China.
  While
          The
          People’s Republic of China’s economy has experienced significant growth in the
          past twenty years, such growth has been uneven, both geographically and
          among
          various sectors of the economy. The Chinese government has implemented
          various
          measures to encourage economic growth and guide the allocation of resources.
          Some of these measures benefit the overall economy of The People’s Republic of
          China, but they may also have a negative effect on us. For example, operating
          results and financial condition may be adversely affected by the government
          control over capital investments or changes in tax regulations. The economy
          of
          The People’s Republic of China has been changing from a planned economy to a
          more market-oriented economy. In recent years the Chinese government has
          implemented measures emphasizing the utilization of market forces for economic
          reform and the reduction of state ownership of productive assets, and the
          establishment of corporate governance in business enterprises; however,
          a
          substantial portion of productive assets in The People’s Republic of China are
          still owned by the Chinese government. In addition, theChinese government continues to play a significant role in regulating industry
          development by imposing industrial policies. It also exercises significant
          control over The People’s Republic of China’s economic growth through the
          allocation of resources, the control of payment of foreign currency-denominated
          obligations, the setting of monetary policy and the provision of preferential
          treatment to particular industries or companies.
  
 **We
          may have difficulty establishing adequate management, legal and financial
          controls in The People’s Republic of China.**
 
 The
          People’s Republic of China historically has not adopted a Western style of
          management and financial reporting concepts and practices, as well as in
          modern
          banking, computer and other control systems. We may have difficulty in
          hiring
          and retaining a sufficient number of qualified employees to work in The
          People’s
          Republic of China. As a result of these factors, we may experience difficulty
          in
          establishing management, legal and financial controls, collecting financial
          data
          and preparing financial statements, books of account and corporate records
          and
          instituting business practices that meet Western
          standards.
  12
  **Our
          bank accounts are not insured or protected against
          loss.**
 
 We
          maintain our cash with various banks and trust companies located in The
          People’s Republic of China. Our cash accounts are not insured or otherwise
          protected. Should any bank or trust company holding our cash deposits become
          insolvent, or if we are otherwise unable to withdraw funds, we would lose
          the
          cash on deposit with that particular bank or trust company.
 
 **As
          we have limited business insurance coverage in The People’s Republic of China,
          any loss which we suffer may not be insured or may be insured to only a
          limited
          extent.**
 
 The
          insurance industry in The People’s Republic of China is still in an early state
          of development and insurance companies located in The People’s Republic of China
          offer limited business insurance products. In the event of damage or loss
          to our
          properties, our insurance may not provide as much coverage as if we were
          insured
          by insurance companies in the United States.
 
 **We
          may face judicial corruption in The People’s Republic of
          China.**
 
 Another
          obstacle to foreign investment in The People’s Republic of China is corruption.
          There is no assurance that we will be able to obtain recourse in any legal
          disputes with suppliers, customers or other parties with whom we conduct
          business, if desired, through The People’s Republic of China’s poorly developed
          and sometimes corrupt judicial systems.
 
 **We
          may face obstacles from the communist system in The People’s Republic of
          China.**
 
 Foreign
          companies conducting operations in The People’s Republic of China face
          significant political, economic and legal risks. The Communist regime in
          The
          People’s Republic of China, including a cumbersome bureaucracy, may hinder
          Western investment.
 
 **If
          relations between the United States and The People’s Republic of China worsen,
          investors may be unwilling to hold or buy our stock and our stock price
          may
          decrease.**
 
 At
          various times during recent years, the United States and The People’s Republic
          of China have had significant disagreements over political and economic
          issues.
          Controversies may arise in the future between these two countries. Any
          political
          or trade controversies between the United States and The People’s Republic of
          China, whether or not directly related to our business, could reduce the
          price
          of our common stock.
 
 **The
          government of The People’s Republic of China could change its policies toward
          private enterprise or even nationalize or expropriate private enterprises,
          which
          could result in the total loss of our and your investment.**
 
 Our
          business is subject to significant political and economic uncertainties
          and may
          be affected by political, economic and social developments in The People’s
          Republic of China. Over the past several years, the government of The People’s
          Republic of China has pursued economic reform policies including the
          encouragement of private economic activity and greater economic
          decentralization. The government of The People’s Republic of China may not
          continue to pursue these policies or may significantly alter them to our
          detriment from time to time with little, if any, prior
          notice.
 
 Changes
          in policies, laws and regulations or in their interpretation or the imposition
          of confiscatory taxation, restrictions on currency conversion, restrictions
          or
          prohibitions on dividend payments to stockholders, or devaluations of currency
          could cause a decline in the price of our common stock, should a market
          for our
          common stock ever develop. Nationalization or expropriation could even
          result in
          the total loss of your investment.
  13
 
 **The
          nature and application of many laws of The People’s Republic of China create an
          uncertain environment for business operations and they could have a negative
          effect on us.**
 
 The
          legal
          system in The People’s Republic of China is a civil law system. Unlike the
          common law system, the civil law system is based on written statutes in
          which
          decided legal cases have little value as precedents. In 1979, The People’s
          Republic of China began to promulgate a comprehensive system of laws and
          has
          since introduced many laws and regulations to provide general guidance
          on
          economic and business practices in The People’s Republic of China and to
          regulate foreign investment. Progress has been made in the promulgation
          of laws
          and regulations dealing with economic matters such as corporate organization
          and
          governance, foreign investment, commerce, taxation and trade. The promulgation
          of new laws, changes of existing laws and the abrogation of local regulations
          by
          national laws could cause a decline in the price of our common stock. In
          addition, as these laws, regulations and legal requirements are relatively
          recent, their interpretation and enforcement involve significant
          uncertainty.
 
 **Although
          we do not import goods into or export goods out of The People’s Republic of
          China, fluctuation of the Renminbi may indirectly affect our financial
          condition
          by affecting the volume of cross-border money flow.**
 
 Although
          we use the United States dollar for financial reporting purposes, all of
          the
          transactions effected by our operating subsidiaries are denominated in
          The
          People’s Republic of China’s Renminbi. The value of the Renminbi fluctuates and
          is subject to changes in The People’s Republic of China’s political and economic
          conditions. We do not currently engage in hedging activities to protect
          against
          foreign currency risks. Even if we chose to engage in such hedging activates,
          we
          may not be able to do so effectively. Future movements in the exchange
          rate of
          the Renminbi could adversely affect our financial condition as we may suffer
          financial losses when transferring money raised outside of China into the
          country or paying vendors for services performed outside of
          China.
  **The
          admission of The People’s Republic of China into the World Trade Organization
          could lead to increased foreign competition for
          us.**
   Domestic
          competition in the animal feed industry is largely fragmented and foreign
          competition is minimal. However, as a result of The People’s Republic of China
          becoming a member of the World Trade Organization (“WTO”), import restrictions
          on agricultural products are expected to be reduced. With the lowering
          of import
          restrictions and the WTO’s requirement for a reduction of import tariffs as
          condition of membership, such reduced import restrictions and tariffs may
          result
          in an increase of foreign products and could in turn lead to increased
          competition in the domestic agricultural market.
  
 **Risks
          Related to our Securities**
 
 **It
          will be extremely difficult to acquire jurisdiction and enforce liabilities
          against our officers, directors and assets based in The People’s Republic of
          China.**
 
 As
          our
          executive officers and several of our directors, including the chairman
          of our
          Board of Directors, are Chinese citizens, it may be difficult, if not
          impossible, to acquire jurisdiction over these persons in the event a lawsuit
          is
          initiated against us and/or our officers and directors by a stockholder
          or group
          of stockholders in the United States. Also, because our operating subsidiaries
          and assets are located in The People’s Republic of China, it may be extremely
          difficult or impossible for you to access those assets to enforce judgments
          rendered against us or our directors or executive offices by United States
          courts. In addition, the courts in The People’s Republic of China may not permit
          the enforcement of judgments arising out of United States federal and state
          corporate, securities or similar laws. Accordingly, United States investors
          may
          not be able to enforce judgments against us for violation of United States
          securities laws.
  14
  **Our
          common stock price is subject to significant volatility, which could result
          in
          substantial losses for investors.**
 
 During
          the two month period ended February 28, 2007, the high and low bid prices
          of our common stock on the Over-The-Counter Bulletin Board (“OTCBB”) were
          $4.70****per share and $1.98 per share,
          respectively. Prices for our shares are determined in the marketplace and
          may accordingly be influenced by many factors, including, but not limited
          to:
 
 ·
                the
                      depth and liquidity of the market for the
                      shares;
 
 ·
                quarter-to-quarter
                      variations in our operating
                      results;
 
 ·
                announcements
                    about our performance as well as the announcements of our competitors
                    about the performance of their
                    businesses;
 
 ·
                investors’
                    evaluations of our future prospects and the food industry
                    generally;
 
 ·
                changes
                    in earnings estimates by, or failure to meet the expectations
                    of,
                    securities analysts;
 
 ·
                our
                    dividend policy; and
 
 ·
                general
                    economic and market
                    conditions.
 
 In
          addition, the stock market often experiences significant price fluctuations
          that
          are unrelated to the operating performance of the specific companies whose
          stock
          is traded. These market fluctuations could adversely affect the trading
          price of
          our shares.
 
 The
          price
          at which investors purchase shares of our common stock may not be indicative
          of
          the price that will prevail in the trading market. Investors may be unable
          to
          sell their shares of common stock at or above their purchase price, which
          may
          result in substantial losses.
 
 **Shares
          of our common stock lack a significant trading
          market.**
  Shares
            of
            our common stock are not eligible for trading on any national or regional
            exchange. Our common stock is eligible for trading in the Over-the-Counter
            Market on the Over-the-Counter Bulletin Board pursuant to Rule 15c-211
            of the
            Securities Exchange Act of 1934. This Market tends to be highly illiquid.
            There
            can be no assurance that an active trading market in our common stock
            will
            develop, or if such a market develops, that it will be sustained. In
            addition,
            there is a greater chance for market volatility for securities that trade
            on the
            Over-the-Counter Bulletin Board as opposed to securities that trade on
            a
            national exchange or quotation system. This volatility may be caused
            by a
            variety of factors, including the lack of readily available quotations,
            the
            absence of consistent administrative supervision of “bid” and “ask” quotations
            and generally lower trading volume.
 
 **Future
          sales of shares of our common stock by our stockholders could cause our
          stock
          price to decline.**
 
 We
          cannot
          predict the effect, if any, that market sales of shares of our common stock
          or
          the availability of shares of common stock for sale will have on the market
          price prevailing from time to time. As of March 8, 2007, we had outstanding
          25,000,003 shares of common stock. As a result of this offering, an aggregate
          of
          3,026,753 of these shares and an additional 611,787 shares issuable upon
          the
          exercise of warrants will become eligible for resale into the public market.
          Sales of shares of our common stock in the public market covered under
          an
          effective registration statement, or the perception that those sales may
          occur,
          could cause the trading price of our common stock to decrease or to be
          lower
          than it might be in the absence of those sales or
          perceptions.
 
 **We
          may issue additional shares of our capital stock or debt securities to
          raise
          capital or complete acquisitions, which would reduce the equity interest
          of our
          stockholders.**
 
 Our
          certificate of incorporation authorizes the issuance of up to 75,000,000
          shares
          of common stock, par value $.001 per share. As of March 8, 2007, 25,000,003
          of
          these shares of common stock were issued and outstanding, 80,000 shares
          were
          reserved for issuance upon exercise of 80,000 issued and outstanding warrants.
          There are approximately 49,920,000 authorized and unissued shares of our
          common stock which have not been reserved and accordingly, are available
          for
          future issuance. Although we have not entered into any agreements as of
          the date
          of this offering to issue our unreserved shares of common stock, we may
          issue a
          substantial number of additional shares of our common stock to complete
          a
          business combination or to raise capital. The issuance of additional shares
          of
          our common stock:
  15
  ·
                may
                    significantly reduce the equity interest of investors in this
                    offering;
                    and
 
 ·
                may
                    adversely affect prevailing market prices for our common stock.
  **The
          elimination of monetary liability against our directors, officers and employees
          under Nevada law and the existence of indemnification rights to our directors,
          officers and employees may cause us to incur substantial expenditures and
          may
          discourage lawsuits against our directors, officers and
          employees.**
 
 Our
          articles of incorporation contain specific provisions that eliminate the
          liability of our directors for monetary damages to our company and shareholders,
          to the extent provided by Nevada law. We may also have or may create contractual
          indemnification obligations under our employment agreements with our officers.
          The foregoing indemnification obligations could result in our company incurring
          substantial expenditures to cover the cost of settlement or damage awards
          against directors and officers, which we may be unable to recoup. These
          provisions and resultant costs may also discourage our company from bringing
          a
          lawsuit against directors and officers for breaches of their fiduciary
          duties,
          and may similarly discourage the filing of derivative litigation by our
          shareholders against our directors and officers even though such actions,
          if
          successful, might otherwise benefit our company and
          shareholders.
 
 **Our
          management owns a significant amount of our common stock, giving them influence
          or control in corporate transactions and other matters, and their interests
          could differ from those of other stockholders.**
 
 Our
          principal executive officers and directors, own approximately 29% of our
          outstanding common stock. As a result, they are in a position to significantly
          influence the outcome of matters requiring a stockholder vote, including
          the
          election of directors, the adoption of any amendment to our articles of
          incorporation or bylaws, and the approval of significant corporate transactions.
          Their control may delay or prevent a change of control on terms favorable
          to our
          other stockholders and may adversely affect your voting and other stockholders
          rights.
 
 **Our
          articles of incorporation, our bylaws and provisions of Nevada law could
          make it
          more difficult for a third party to acquire us, even if doing so could
          be in our
          stockholders’ best interest.**
 
 Provisions
          of our articles of incorporation and bylaws could make it more difficult
          for a
          third party to acquire us, even if doing so might be in the best interest
          of our
          stockholders. It could be difficult for a potential bidder to acquire us
          because
          our articles of incorporation and bylaws contain provisions that may discourage
          takeover attempts. These provisions may limit stockholders’ ability to approve a
          transaction that stockholders may think is in their best interests. These
          provisions include a requirement that certain procedures must be followed
          before
          matters can be proposed for consideration at meetings of our
          stockholders.
 
 Provisions
          of Nevada’s business combinations statute also restrict certain business
          combinations with interested stockholders. We have elected not to be governed
          by
          these provisions in our amended and restated articles of incorporation.
          However,
          this election may not be effective unless we meet certain conditions under
          the
          Nevada statute.
 
 **Capital
          outflow policies in The People’s Republic of China may hamper our ability to
          declare and pay dividends to our shareholders.**
 
 The
          People’s Republic of China has adopted currency and capital transfer
          regulations. These regulations may require us to comply with complex regulations
          for the movement of capital. Although our management believes that we will
          be in
          compliance with these regulations, should these regulations or the
          interpretation of them by courts or regulatory agencies change, we may
          not be
          able to pay dividends to our shareholders outside of The People’s Republic of
          China. In addition, under current Chinese law, we must retain a reserve
          equal to
          10 percent of net income after taxes, not to exceed 50 percent of registered
          capital. Accordingly, this reserve will not be available to be distributed
          as
          dividends to our shareholders. We presently do not intend to pay dividends
          in
          the foreseeable future. Our management intends to follow a policy of retaining
          all of our earnings to finance the development and execution of our strategy
          and
          the expansion of our business.




ITEM
      2.
      DESCRIPTION OF PROPERTY





Nanchang
      Best is located in Chang Bei District Industrial Park, in Nanchang, Jiangxi
      province. It owns three buildings, one each for the office, manufacturing,
      and a
      worker dormitory. Nanchang Best has been granted the right to use the land
      in
      Nanchang by the Municipal Administration of state-owned land through December,
      2049.





Shanghai
      Best is located in the Nanxiang, Jia Ding district, Shanghai. It rents two
      workshop buildings and office space on which it conducts all manufacturing
      and
      business operations. The annual rent on the Shanghai property is approximately
      $33,000 and the lease runs through September, 2009.




Guangxi
      Huijie Co. is located in Coastal Industrial Park, Liangqin district, Nanning
      city, Guangxi province. Guangxu Huijie owns three buildings, an office building,
      production plant and a worker dormitory. The right to use the land was granted
      by Housing Bureau and Land Administrative Bureau of Langqin District, Nanning
      City through October, 2056.





ITEM
      3.
      LEGAL PROCEEDINGS





From time to time, we may become involved in various lawsuits and legal
      proceedings, which arise in the ordinary course of business. However, litigation
      is subject to inherent uncertainties, and an adverse result in these or other
      matters may arise from time to time that may harm our business. We are currently
      not aware of any such legal proceedings or claims that we believe will have,
      individually or in the aggregate, a material adverse affect on our business,
      financial condition or operating results.




ITEM
      4.
      SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.





None




16




**PART
      II**





ITEM
      5.
      MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
      BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.




On
        October 31, 2006, our common stock became eligible for quotation on the
        Over-the-Counter Bulletin Board under the symbol "AGFI.OB." The following
        table
        sets forth the high and low bid prices per share of our Common Stock for
        the periods indicated, which information was provided NASDAQ Trading and
        Market
        Services. Prior to October 31, 2006 the shares traded very infrequently and
        the
        actual price information is not readily available. The quotations set forth
        below reflect inter-dealer prices, without retail mark-up, markdown or
        commission and may not represent actual transactions.





**2006****High*******
            
            **Low*******1
                Quarter
            
            $
            N/A
            
            $
            N/A2
                Quarter
            
            
            N/A
            
            
            N/A3
                Quarter
            
            
            N/A
            
            
            N/A4
                Quarter
            
            
            3.00
            
            
            2.01





As
      of
      March 8, 2006, there were approximately 41 holders of record of our common
      stock.





**Dividends**





We
      have
      never paid any dividends on the Common Stock or the Preferred Stock. We
      currently anticipate that any future earnings will be retained for the
      development of our business and do not anticipate paying any dividends on the
      Common Stock or the Preferred Stock in the foreseeable future.





**Recent
      Issuances of Unregistered Securities**





Pursuant
      to the Share Purchase Agreements, the Company issued 6,400,000 shares of the
      common stock (the "Shares") to Shareholders of Nanchang Best and Shanghai Best
      in exchange for 100% of the common stock of Nanchang Best and Shanghai
      Best.




The
      issuance of the Shares was exempt from registration under the Securities Act
      pursuant to Section 4(2) and/or Regulation D thereof and Regulation
      S.





On
      February 28, 2007, in the initial closing of a private placement a total of
      one
      million units, each unit representing one share of our common stock and a three
      year common stock purchase warrant for .08 share were sold. Each unit is priced
      at $3.00 with $3,000,000 in total having been received. The stock purchase
      warrants have a term of three years and are exercisable for one share of common
      stock at an initial exercise price of $5.00. It is intended that the proceeds
      of
      the private placement will be used primarily for working capital.





ITEM
      6.
      MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION




**MANAGEMENT’S
        DISCUSSION AND ANALYSIS**





The
        following discussion and analysis should be read in conjunction with our
        financial statements, included herewith. This discussion should not be construed
        to imply that the results discussed herein will necessarily continue into
        the
        future, or that any conclusion reached herein will necessarily be indicative
        of
        actual operating results in the future. Such discussion represents only the
        best
        present assessment of our management.





**Overview**





We
        are
        incorporated under the laws of the state of Nevada. We engage in the business
        of
        the research and development, manufacture, marketing and sale of fodder and
        blended feed for use in China’s domestic animal husbandry markets. Our chief
        source of revenues is the sale of feed products for pigs, however, we do
        produce
        other feed products for chickens and cows. We sell our products in approximately
        ten provinces within the People’s Republic of China.





We
        currently conduct our business through the following three operating
        subsidiaries in China:


·
                  Nanchang
                      Best is located in the province of Jiangxi,·
                  Shanghai
                      Best is located in Shanghai City, and·
                  Guangxi
                      Huijie is located in the province of
                      Guangxi.




We
        operate each subsidiary independently with regard to manufacturing and marketing
        and sales efforts. We do have some sharing of sales referrals and leads amongst
        the subsidiaries, but they do not compete against each other for new sales.
        Most
        of our research and development occurs at Nanchang and Guangxi, and each
        shares
        their efforts with the other and Shanghai. In addition, many of the
        administrative duties are performed by Nanchang for Shanghai, and we are
        attempting to study the feasibility of centralizing more administrative
        functions.





We
        are
        targeting growth through three main channels: (i) organic growth through
        increasing sales at each of our current operating subsidiaries, (ii) the
        distribution of our products through **** approximately 43
        new franchise chain stores (as of February 28, 2007), and (iii) an aggressive
        acquisition program to increase the number of provinces in China in which
        we do
        business.





Our
        revenues increased 12.9% in 2006 as compared to 2005 and our net income
        increased 110% in 2006 as compared to 2005. The increases we experienced
        in 2006 are the result of our organic growth at each operating subsidiary.
        Since we acquired Nanchang Best and Shanghai Best in October 2006, we have
        effectively marketed our products through a team based approach, sharing
        sales
        leads and referrals. We also developed the new Airubao Series of product
        at
        Nanchang Best and introduced the product in our three current
        subsidiaries.





Since
        January 2007, we established approximately 43 franchise chain stores
        to complement our existing distribution channels. We will continue to market
        our
        products to the operators of large swine farms and large distributors. We
        will
        now rely on the franchisees to market and sell our products to the smaller
        swine
        farms. Even though the number of small swine farms in China is declining,
        we did
        not want to lose revenues by forgoing sales to this market segment. We
        determined that the best and most efficient use of our resources is to
        concentrate on the larger customers and allow the franchisees to sell to
        the
        smaller farmers.





In
        order
        to provide excellent customer service and differentiate ourselves from our
        competition, at our customer’s request, we supply to them customized
        formulations of our products. In any given month, the cost of the various
        additives used in these customized formulations fluctuates, which can result
        in
        temporary increases in unit cost of goods sold. We believe even though this
        may
        have an effect on our short term profits, we take the long term view that
        it
        increases customer loyalty and builds the AgFeed brand.




17





We
        also
        continue to aggressively search for acquisition targets in our industry,
        throughout China. The growth in sales and net revenues we experienced in
        the
        first half of fiscal 2007 compared to the first half of 2006 was due in part
        to
        our acquisition of Guangxi Huijie late in December 2006.





**Critical
        Accounting Policies**





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





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





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





***Allowance
        For Doubtful Accounts***


The
        Company continually monitors customer payments and maintains a reserve for
        estimated losses resulting from its customers’ inability to make required
        payments. In determining the reserve, the Company evaluates the collectibility
        of its accounts receivable based upon a variety of factors. In cases where
        the
        Company becomes aware of circumstances that may impair a specific customer’s
        ability to meet its financial obligations, the Company records a specific
        allowance against amounts due. For all other customers, the Company recognizes
        allowances for doubtful accounts based on its historical write-off experience
        in
        conjunction with the length of time the receivables are past due, customer
        creditworthiness, geographic risk and the current business environment. Actual
        future losses from uncollectible accounts may differ from the Company’s
        estimates.





***Inventories***


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


18





***Long-Lived
        Assets***


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





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





REVENUE
        RECOGNITION: Our revenue recognition policies are in compliance with Staff
        accounting bulletin (SAB) 104. Revenue is recognized when services are rendered
        to customers when a formal arrangement exists, the price is fixed or
        determinable, the delivery is completed, no other significant obligations
        exist
        and collectibility is reasonably assured. Payments received before all of
        the
        relevant criteria for revenue recognition are satisfied are recorded as unearned
        revenue. We are not subject to VAT withholdings. We give volume rebates to
        certain customers based on volume achieved. We accrue sales rebates based
        on
        actual sales volume. Sales rebates for the year ended December 31, 2005 and
        2006
        and the six months ended June 30, 2006 and 2007 were $ 74,046 and $258,503
        and
        $5,048 and $174,415 respectively. Sales returns for the six months ended
        June
        30, 2006 and 2007 were $32,931 and $45,447 respectively.





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





Sales
        returns and allowances have historically been insignificant. Accordingly,
        estimating returns is not critical. However, if circumstances change, returns
        and allowance may impact the company’s earnings.





**Recent
        Accounting Pronouncements**




The
        Company gives volume rebates to certain customers based on volume
        achieved.  Sales rebates are accrued based on actual sales
        volume. Sales rebetes for the year ended December 31, 2005 and 2006 were
        $74,046 and $258,503, respectively. The Company does not offer any of its
        customers the unconditional right to return purchased products. Customers
        are only permitted to return defective products. In addition, the Company
        does not provide any price protection or similar rights to its
        customers.




There
        are
        no differences in the Company's arrangements with its different types of
        customers. Accordingly, the Company does not have different revenue
        recognition policies for different types of customers.




The
        Company offers credit terms ranging from 30 to 90 days for most
        customers. From some large customers, the Company may extend these terms
        beyond 90 days.


19


Fair
        Value Measurements





In
        September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which
        establishes a framework for measuring fair value, and expands disclosures
        about
        fair value measurements required under the accounting pronouncements, but
        does
        not change existing guidance as to whether or not an instrument is carried
        at
        fair value. Additionally, it establishes a fair value hierarchy that prioritizes
        the information used to develop those assumptions. SFAS No. 157 is effective
        for
        financial statements issued for fiscal years beginning after November 15,
        2007,
        and interim periods within those fiscal years. Earlier application is
        encouraged, provided that the reporting entity has not yet issued financial
        statements for the fiscal year, including financial statements for an interim
        period within the fiscal year. The Company is currently evaluating the impact,
        if any, that SFAS No. 157 will have on its consolidated financial
        statements.




Employers’
        Accounting for Defined Benefit Pension and Other Postretirement Plans, an
        Amendment of FASB Statements No. 87, 88, 106, and 132R




In
        September 2006, the FASB, issued SFAS, No. 158, “Employers’ Accounting for
        Defined Benefit Pension and Other Postretirement Plans, an Amendment of FASB
        Statements No. 87, 88, 106, and 132R,” which requires employers to recognize the
        underfunded or overfunded status of a defined benefit postretirement plan
        as an
        asset or liability in its statement of financial position and to recognize
        changes in the funded status in the year in which the changes occur through
        accumulated other comprehensive income. Additionally, SFAS No. 158 requires
        employers to measure the funded status of a plan as of the date of its year-end
        statement of financial position. The new reporting requirements and related
        new
        footnote disclosure rules of SFAS No. 158 are effective for fiscal years
        ending
        after December 15, 2006. We adopted the provisions of SFAS No. 158 for the
        year
        end 2006, and the effect of recognizing the funded status in accumulated
        other
        comprehensive income was not significant. The new measurement date requirement
        applies for fiscal years ending after December 15, 2008.





Fair
        Value Option for Financial Assets and Financial Liabilities





In
        February of 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
        Assets and Financial Liabilities—Including an amendment of FASB Statement No.
        115.” The statement permits entities to choose to measure many financial
        instruments and certain other items at fair value. The objective is to improve
        financial reporting by providing entities with the opportunity to mitigate
        volatility in reported earnings caused by measuring related assets and
        liabilities differently without having to apply complex hedge accounting
        provisions. The statement is effective as of the beginning of an entity’s first
        fiscal year that begins after November 15, 2007. We are analyzing the potential
        accounting treatment.





Other-Than-Temporary
        Impairment





FASB
        Staff Position on FAS No. 115-1 and FAS No. 124-1 (“the FSP”), “The Meaning of
        Other-Than-Temporary Impairment and Its Application to Certain Investments,” was
        issued in November 2005 and addresses the determination of when an investment
        is
        considered impaired, whether the impairment on an investment is
        other-than-temporary and how to measure an impairment loss. The FSP also
        addresses accounting considerations subsequent to the recognition of
        other-than-temporary impairments on a debt security, and requires certain
        disclosures about unrealized losses that have not been recognized as
        other-than-temporary impairments. The FSP replaces the impairment guidance
        on
        Emerging Issues Task Force (EITF) Issue No. 03-1 with references to
        existing authoritative literature concerning other-than-temporary
        determinations. Under the FSP, losses arising from impairment deemed to be
        other-than-temporary, must be recognized in earnings at an amount equal to
        the
        entire difference between the securities cost and its fair value at the
        financial statement date, without considering partial recoveries subsequent
        to
        that date. The FSP also required that an investor recognize other-than-temporary
        impairment losses when a decision to sell a security has been made and the
        investor does not expect the fair value of the security to fully recover
        prior
        to the expected time of sale. The FSP is effective for reporting periods
        beginning after December 15, 2005. The adoption of this statement will not
        have
        a material impact on our consolidated financial statements.


20


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




Considering
        the Effects of Prior Year Misstatements in Current Year Financial
        Statements





In
        September 2006, the Securities and Exchange Commission issued Staff Accounting
        Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when
        Quantifying Misstatements in Current Year Financial Statements,” (“SAB
        108”),which provides interpretive guidance on the consideration of the effects
        of prior year misstatements in quantifying current year misstatements for
        the
        purpose of a materiality assessment. The Company adopted SAB 108 in the fourth
        quarter of 2006 with no impact on its consolidated financial
        statements.






21




*Year
        Ended December 31, 2006 compared to Year Ended December 31,
        2005*





2006
                  2005
                  $
                      Change
                  %
                      ChangeRevenues
                  $8,594,876
                  $7,611,845
                  $983,031
                  12.9%Cost
                      of Sales
                  5,446,332
                  5,339,067
                  107,265
                  2.0%Gross
                      Profits
                  3,148,544
                  2,272,778
                  875,766
                  38.5%Selling,
                      General and AdministrativeExpenses
                  2,114,650
                  1,392,007
                  722,643
                  51.9%Net
                      Income
                  1,175,280
                  560,706
                  614,574
                  110.0%
  Revenues.
        The increase in revenues was due to an increase in the volume of all feed
        products sold by us. While we expect sales of blended feed through our Nanchang
        Best and Guangxi Huijie subsidiaries to increase in volume, we anticipate
        that
        premix will become the principal segment of total sales volume in the future.
        During the year ended December 31, 2006, the increase in revenues is primarily
        driven by an increase in volume of the products sold. Our prices on a whole
        remained relatively flat, a 3% decrease in the average price of premix and
        a
        0.4% increase in the average price of blended feed sold. Even though the
        average
        price of other feeds decreased 63.6%, the volume of other feeds is approximately
        only 3.2% of the total volume sold during the period. We did experience a
        2%
        total increase in the cost of goods sold while we had 17.3% increase in the
        number of metric tons we sold which enables us to keep our pricing relatively
        flat.





Overall,
        Nanchang provided approximately 61% and Shanghai provided 39% of our total
        revenues for the year ended December 31, 2006 compared to the year ended
        December 31, 2005, Nanchang providing 64% and Shanghai 36% of our total
        revenues.





Nanchang
        and Shanghai contributed approximately 63% and 37% respectively of our total
        volume during the year ended December 31, 2006. During the year ended December
        31, 2005 Nanchang and Shanghai provided 64% and 36% of our total
        volume.





Nanchang’s
        revenues increased approximately 8.8% during the year ended December 31,
        2006
        compared to the same period in 2005. Shanghai’s revenues increased approximately
        21.7% during the year ended December 31, 2006 compared to the same period
        in
        2005.




22




Metric
        Tons Sold Year Ended December 31, 2006 Compared to Year Ended December 31,
        2005





Feed
                      Type
                  2006
                  2005
                  Difference
                  %
                      changePremix
                  13,325
                  12,178
                  1,147
                  9.4Blended
                  2,572
                  1,724
                  848
                  49Other
                  534
                  111
                  423
                  381Total
                  16,431
                  14,013
                  2,418
                  17.3
  Average
        Price per Metric Ton sold for the Year Ended December 31, 2006 Compared to
        Year
        End December 31, 2005





Feed
                    Type
                2006
                2005
                Difference
                %
                    changePremix
                574
                592
                (18)
                (3)Blended
                453
                451
                2
                .4Other
                791
                2,173
                (1,382)
                (63.6)


Cost
        of
        Good Sold. The cost of sales in the period ended December 31, 2006 was
        $5,446,332, an increase of $107,265 or 2.0% compared to $5,339,067 for the
        same
        period ended December 31, 2005. On a unit basis, we experienced approximately
        a
        10% decrease per metric ton in the cost of goods sold for premix and blended
        feeds.





Nanchang
        experienced a 4.2% increase in cost of goods sold during the year ended December
        31, 2006 compared to the same period in 2005. Shanghai experienced a 0.5%
        increase in cost of goods sold during the year ended December 31, 2006 compared
        to the same period in 2005.





Gross
        Profit. Gross margins improved to 36.6% in 2006 from 29.9% for 2005. The
        increase in gross margin was due to a strategic shift to focus on the sale
        of
        higher margin products, particularly premix. The increase in gross margin
        is
        attributable to the decrease in the unit cost of goods sold during the year
        ended December 31, 2006 as compared to the same period a year
        ago.


23




The
        gross
        profit for Nanchang for the year ended December 31, 2006 compared to the
        year
        ended December 31, 2005 increased approximately 18.9%. Gross margins at Nanchang
        for the year ended December 31, 2006 was approximately 34% compared to
        approximately 32% for the year ended December 31, 2005. The gross profit
        for
        Shanghai for the year ended December 31, 2006 compared to the year ended
        December 31, 2005 increased approximately 79.2%. Gross margins at Shanghai
        for
        the year ended December 31, 2006 was approximately 40% compared to approximately
        27% for the year ended December 31, 2005.




Selling,
        General and Administrative Expenses. Our general and administrative expense
        increased by 98%. We incurred significant expenses associated with the share
        purchase agreements with Nanchang Best, and Shanghai Best. General and
        administrative expense includes the overhead expenses of our office (rent,
        management and staff salaries, general insurance, marketing, accounting and
        legal). Selling expenses for the period increased by 32% and is due to the
        approximately 13% increase in revenues and the costs associated with entering
        markets in neighboring provinces.





Net
        Income. Our net income increased due to an approximately 17% increase in
        income
        from operations and non operating income of $41,000 for the twelve months
        ended
        December 31, 2006, compared to a non operating loss of $47,655 during the
        twelve
        months ended December 31, 2005. In addition, due to an investment in us by
        a
        British Virgin Island investor, we received favorable tax status and are
        exempt
        from income tax in 2006, and a portion of taxes that were due for 2005. As
        such
        we received a tax credit of $100,386 for the twelve months ended December
        31,
        2006.





**Off-Balance
        Sheet Arrangements**





There
        were no off-balance sheet arrangements during the year ended December 31,
        2006
        that have, or are reasonably likely to have, a current or future effect on
        our
        financial condition, revenues or expenses, results of operations, liquidity,
        capital expenditures or capital resources that is material to our
        interests.





**Liquidity
        and Capital Resources**





At
        December 31, 2006, we had $1,204,100 cash and cash equivalents on hand. We
        completed a private placement offering of our securities in which we
        received aggregate gross proceeds of $3,000,000 from the sale of an aggregate
        of 1,000,000 units to one accredited investor. Each unit was priced at
        $3.00 and represented one share of our common stock and a warrant to purchase
        8%
        of one share of common stock. Accordingly, we issued an aggregate
        of 1,000,000 shares of our common stock and warrants to purchase an
        aggregate of 80,000 shares of our common stock to the one accredited
        investor who participated in this offering.  In connection with the private
        placement, fees of 8% of the securities placed were paid in cash and a number
        of
        common stock purchase warrants equal to 8% of the units placed were paid
        to
        participating dealers and a finder. Accordingly, we paid $240,000 and issued
        warrants to purchase 80,000 shares of our common stock to the participating
        dealers and a finder. All stock purchase warrants have a three year term
        and
        have an initial exercise price of $5.00.





24





As
        of
        December 31, 2006, we had a short term bank loan related to the acquisition
        of
        Guangxi Huijie that was scheduled to mature on June 20, 2007.




We
        used
        $1,131,000 of the net proceeds from these private placement offerings to
        repay
        the short term bank loan we had in connection with our acquisition Guangxi
        Huijie.





There
        was
        one short term bank loan to Nanchang of $576,630, with an interest rate of
        7.02%
        per annum payable monthly. This loan matures on May 17, 2007, and is
        collateralized by our office building, workshop, employee dorms, and use
        right
        of land. There is also a short term bank loan to Guangxi Huijie in the
        principal amount of $115,326 that matures on December 4, 2007, accrues
        interest at the rate of 6.12% per annum and is collateralized by
        our machinery and equipment.





During
        the year ended December 31, 2006, $520,284 was provided by our operating
        activities. This provision of cash was primarily due to net income of
        $1,175,280, a decrease of $47,323 of other receivables, an increase in other
        payables of $34,645, an increase in accrued expenses of $90,545 and an increase
        in accrued payroll of $20,965, offset primarily by an increase in accounts
        receivable of $312,364, an increase of inventory of $113,084, a decrease
        in
        accounts payable of $101,564, a decrease of due to related party of $182,812
        and
        a decrease in tax and welfare payable of $151,976.





During
        the year ended December 31, 2006, we used $993,958 in investing activities.
        We
        used $1,100,420 to pay for an acquisition and $107,460 to acquire property
        and
        equipment, offset by $213,922 of cash that we acquired in our acquisition.


25





During
          the year ended December 31, 2006, financing activities provided $1,514,398.
          We
          received $1,664,855 from the proceeds of a note payable and a $300,000
          contribution from a stockholder to assist us to pay for merger costs. These
          amounts were offset by repayment of advances from shareholders in the amounts
          of
          $24,783 and an advance paid to a related party in the amount of
          $425,674.




Our
        principal demands for liquidity are to increase capacity, raw materials
        purchase, sales distribution, and the possible acquisition of new subsidiaries
        or joint ventures in our industry as opportunities present themselves, as
        well
        as general corporate purposes. We estimate that we will require approximately
        $6,200,000 to maintain our current operations and achieve these goals in
        2007,
        which include a potential joint venture outside of China, completion of the
        acquisition for which we have made a deposit of $620,000 and an additional
        acquisition that we are presently budgeting. We will also require an additional
        $3,000,000 that we are budgeting for a potential acquisition in 2008. We
        anticipate that the amount of cash we have on hand as of the date of this
        report
        as well as the cash that we will generate from operations will satisfy these
        requirements.




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





The
        majority of the Company’s revenues and expenses were denominated primarily in
        Renminbi (“RMB”), the currency of the People’s Republic of China. There is no
        assurance that exchange rates between the RMB and the U.S. Dollar will remain
        stable. The Company does not engage in currency hedging. Inflation has not
        had a
        material impact on the Company’s business.




26




ITEM
      7.
      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




Our
      consolidated financial statements as of and for the years ended December 31,
      2006  and December 31, 2005 are included herein at pages F-1 through
      F-24.





27




ITEM
      8.
      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE





November
      24, 2006, the Company dismissed DeJoya Griffith & Company, LLC as its
      principal independent public accountant, and engaged Goldman & Parks LLP as
      its new principal independent accountant. This decision was approved by the
      Board of Directors of the Company. DeJoya Griffith & Company, LLC audited
      the Company’s financial statements from March 30, 2005 (inception) through March
      31, 2006.





During
      our most recent fiscal year and the interim period ended November 24, 2006,
      there have been no disagreements or reportable events with DeJoya Griffith
&
Company, LLC on any matter of accounting principles, or practices, financial
      statement disclosure or auditing scope or procedure, which disagreements if
      not
      resolved to the satisfaction of DeJoya Griffith & Company, LLC would have
      caused them to make reference thereto in their reports on the financial
      statements for such year. DeJoya Griffith & Company, LLC ‘s report on the
      Company’s financial statements for the most recent fiscal year did not contain
      an adverse opinion or disclaimer of opinion, and was not modified as to
      uncertainty, audit scope, or accounting principles.





During
      the our most recent fiscal year and the interim period ended November 24, 2006,
      the Company did not consult with DeJoya Griffith & Company, LLC regarding
      any matters or reportable events described in Items 304 (a)(2)(i) and (ii)
      of
      Regulation S-B.





ITEM
      8A.
      CONTROLS AND PROCEDURES





**Evaluation
      of Disclosure Controls**





We
      maintain controls and procedures designed to ensure that we are able to collect
      the information that is required to be disclosed in the reports it files with
      the SEC, and to process, summarize and disclose this information within the
      time
      period specified in the rules of the SEC. Our Chief Executive and Chief
      Financial Officers are responsible for establishing, maintaining and enhancing
      these procedures. They are also responsible, as required by the rules
      established by the SEC, for the evaluation of the effectiveness of these
      procedures.





Based
        on
        our management’s evaluation (with participation of our principal executive
        officer and principal financial officer), as of the December 31, 2006, our
        principal executive officer and principal financial officer have concluded
        that
        our disclosure controls and procedures are effective.





**Changes
      in Internal Controls**





We
      maintain a system of internal controls designed to provide reasonable assurance
      that transactions are executed in accordance with management's general or
      specific authorization; transactions are recorded as necessary to permit
      preparation of financial statements in conformity with Generally Accepted
      Accounting Principles (GAAP) and maintain accountability for assets. Access
      to
      assets is permitted only in accordance with management's general or specific
      authorization.





There
        were no changes in our internal controls during the year ended December 31,
        2006
        that has materially affected, or is reasonably likely to materially affect,
        our
        internal controls.





ITEM
      8B.
      OTHER INFORMATION




None.




28




**PART
      III**





ITEM
      9.
      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
      SECTION 16(a) OF THE EXCHANGE ACT.





Below
      are
      the names and certain information regarding our executive officers and
      directors:





**Name**
              **Age**
              **Position**Xiong
                  Junhong
              36
              Chief
                  Executive Officer, President, DirectorYan
                  Liang Fan
              53
              Chief
                  Financial OfficerZhou
                  Feng
              38
              Corporate
                  SecretaryLi
                  Songyan
              40
              Director,
                  Chairman of the Board





Officers
      are elected annually by the Board of Directors, at our annual meeting, to hold
      such office until an officer’s successor has been duly appointed and qualified,
      unless an officer sooner dies, resigns or is removed by the Board.





**Background
      of Executive Officers and Directors**


Junhong
            Xiong, 37, has served as our President since May 2007 and our Chief Executive
            Officer and Vice Chairman since November 2006. Mr. Xiong also has served
            as
            Chief Executive Officer of Nanchang Best since its founding in 1995.
            Prior to
            that, Mr. Xiong worked for Guangzhou Huashi Animal Nutritionals Company
            as a
            sales representative, sales manager, and head of marketing from 1993
            to 1995 He
            was a technician at the Chongming Progressing Farm Company in Shanghai
            from 1992
            to 1993. Mr. Xiong graduated from Animal Husbandry & Veterinary College in
            Jiangxi Agricultural University and received a Bachelors Degree in
            1992.
  Liangfan
            Yan, 54, has served as our Chief Financial Officer since November 2006.
            Mr. Yan
            also served as Chief Executive Officer of Nanchang Best from October
            2005 to
            November 2006. Prior to that, Mr. Yan served as a financial consultant
            to
            Nanchang Best from November 2003 to October 2005. Mr. Yan was the senior
            manager
            of Chengdu Accounting Firm from 2002 to 2003. From 1996 to 2001 he was
            the
            section chief of the Audit Inspection Department of the New Hope Group.
            Mr. Yan
            holds the certification of CPA in China and graduated from Correspondence
            College of Economics of Beijing in 1989.
 
 Feng
            Zhou, 39, **** has
            served as our Secretary from November 2006 and our Treasurer since May
            2007. As
            one of its original founders, Mr. Zhou has served as the Vice President
            of
            Finance of Nanchang Best since 1995. Prior to that, Mr. Zhou was a sales
            representative at Guangzhou Huashi Industry from 1993 to 1995. He worked
            for
            Shanghai Daying Industry as a technician from 1992 to 1993. Mr. Zhou
            graduated
            from Jiangxi Agricultural University with a degree in Animal Feed in
            1992. He
            obtained his EMBA from Tsinghua University in 2004.
 
 Songyang
            Li, PhD, 41, has served as Chairman of our Board of Directors since December
            2006. Dr. Li served as Chairman of the Boards of Nanchang Best and Shanghai
            Best
            from July 2004 to December 2006. As one of the original founders of Nanchang
            Best, Mr. Li served as the Manager of the Technical Research and Development
            Department of Nanchang Best from 1995 to July 2004. Prior to that, he
            worked as
            the Technical Manager in Guangxi Peter Hand Premix Feed Company, a Chinese
            subsidiary of global animal nutrition conglomerate Provimi S.A. from
            1991 to
            1994. He received his Ph.D. in Animal Nutrition from Nanjing Agricultural
            University in 2004.




**Board
      of Directors**





Our
      Directors are elected by the vote of a plurality in interest of the holders
      of
      our voting stock and hold office for a term of one year and until a successor
      has been elected and qualified.





A
      majority of the authorized number of directors constitutes a quorum of the
      Board
      for the transaction of business. The directors must be present at the meeting
      to
      constitute a quorum. However, any action required or permitted to be taken
      by
      the Board may be taken without a meeting if all members of the Board
      individually or collectively consent in writing to the action.





Directors
      may receive compensation for their services and reimbursement for their expenses
      as shall be determined from time to time by the Board.





**Compliance
      with Section 16(a) of the Securities Exchange Act of 1934**





Section
      16(a) of the Securities Exchange Act of 1934 requires the Company's directors
      and executive officers, and persons who own more then 10 percent of the
      Company's Common Stock, to file with the SEC the initial reports of ownership
      and reports of changes in ownership of common stock. Officers, directors and
      greater than 10 percent stockholders are required by SEC regulation to furnish
      the Company with copies of all Section 16(a) forms they file. Based solely
      upon
      our review of the copies of the forms we have received, we believe that all
      such
      reporting persons complied on a timely basis with all filing requirements
      applicable to them with respect to transactions during our fiscal year ended
      December 31, 2006.




29




ITEM
      10. EXECUTIVE COMPENSATION





The
      following table sets forth all compensation paid in respect of our Chief
      Executive Officer and those individuals who received compensation in excess
      of
      $100,000 per year (collectively, the "Named Executive Officers") for our last
      three completed fiscal years.




SUMMARY
      COMPENSATION TABLE




**Long
                Term Compensation****Annual
                Compensation**
            
            **Awards**
            **Payouts**Name
                And
              Principal
              Position
            
            Year
            Salary
              ($)
            Bonus
              ($)
            Other
              Annual
              Compensation
              ($)
            
            Restricted
              Stock
              Compensation
              ($)
            Securities
              Under-
              Lying
              Options/
              SARs
                (#)
            LTIP
              Payouts
              ($)
            All Other
              Compensation
              ($)Xiong
                Junhong, Chief Executive Officer, President, and Director
            
            2006
              2005
              2004
            9,000
              4,000
              4,000
            -0-
              -0-
              -0-
            -0-
              -0-
              -0-
            
            N/A
              N/A
              N/A
            N/A
              N/A
              N/A
            N/A
              N/A
              N/A
            N/A
              N/A
              N/ARobert
                Gelfand, Former President
            
            2006
              2005
            -0-
              -0-
            -0-
              -0-
            -0-
              -0-
            
            N/A
              N/A
            N/A
              N/A
            N/A
              N/A
            N/A
              N/A





**Equity
      Compensation Plan Information**





There
      has
      been no common stock authorized for issuance with respect to any equity
      compensation plan as of the fiscal year ended December 31, 2006.




**Employment
      Agreements**





We
      currently have no employment agreements with any of our executive officers,
      nor
      any compensatory plans or arrangements resulting from the resignation,
      retirement or any other termination of any of our executive officers, from
      a
      change-in-control, or from a change in any executive officer's responsibilities
      following a change-in-control.




**Option
      Grants During 2006 Fiscal Year**




None.





**Aggregated
      Option Exercises During 2006 Fiscal Year and Fiscal Year-End Option
      Values**





None.




30




ITEM
      11.
      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS





The
      following table sets forth certain information, as of March 8, 2007 with respect
      to the beneficial ownership of the outstanding common stock by (i) any holder
      of
      more than five (5%) percent; (ii) each of our executive officers and directors;
      and (iii) our directors and executive officers as a group. Except as otherwise
      indicated, each of the stockholders listed below has sole voting and investment
      power over the shares beneficially owned.




Name
                of Beneficial Owner (1)
            
            Number
                of
              Shares
              Beneficially
              Owned
            
            Percentage
                of
              Shares
              Beneficially
              Owned
                (2)Xiong
                Junhong
            
            
            4,036,074
            
            
            16.14
            %Zhou
                Feng
            
            
            1,885,674
            
            
            7.54
            %Xiong
                Zhengru
            
            
            1,885,674
            
            
            7.54
            %Zheng
                Yunlin
            
            
            1,885,674
            
            
            7.54
            %Li
                Songyan
            
            
            1,766,328
            
            
            7.07
            %Yan
                Liangfan
            
            
            0
            
            
            0
            %Leader
                Industrial Development, Ltd.
            
            
            2,228,541
            
            
            8.91
            %All
                officers and directors as a group (7 persons)
            
            
            7,688,076
            
            
            30.75
            %





(1)
      Except as otherwise indicated, the address of each beneficial owner is c/o
      Nanchang Best Animal Husbandry Co., Ltd., 1095 Qing Lan Avenue, Economic and
      Technical Development Area, Nan Chang City, Jiangxi Province, China
      330013.





(2)
      The
      address of Zheng Yunlin is Room 408, Dong Keyuan East Area, Building 4, Jiangxi
      Agricultural University, Economic and Technical Development Area, Nan Chang
      City, Jiangxi Province, China 330045.





(3)
      Zhou
      Sheng (neither an officer or director of registrant) has the voting and
      dispositive rights over the shares held by Leader Industrial Development, Ltd.
      The address of Zhou Sheng and Leader Industrial Development, Ltd. is Unit 2309,
      South Tower, World Trade Centre, Huanshi Road East, Guangzhou, China
      510095.





No
      Director, executive officer, affiliate or any owner of record or beneficial
      owner of more than 5% of any class of voting securities of the Company is a
      party adverse to the Company or has a material interest adverse to the
      Company.




31




**Securities
      Authorized for Issuance Under Equity Compensation Plans**




During
      the year ended December 31, 2006,the Company did not have any equity
      compensation plans in effect.





EQUITY
      COMPENSATION PLAN INFORMATION





Plan
                category
            
            **Number
                of securities**
              **to
                be issued upon**
              **exercise
                of**
              **outstanding
                options,**
              **warrants
                and rights**
            
            **Weighted
                average**
              **exercise
                price of**
              **outstanding
                options,**
              **warrants
                and rights**
            
            **Number
                of securities**
              **remaining
                available for future issuance under equity compensation plans (excluding
                securities reflected in column (a)****(a)**
            
            **(b)**
            
            **(c)****Equity
                compensation plans approved by security holders**
            
            -0-
            
            N/A
            
            -0-**Equity
                compensation plans not approved by security
                holders**
            
            -0-
            
            N/A
            
            -0-**Total**
            
            -0-
            
            N/A
            
            -0-





ITEM
      12.
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


**TRANSACTIONS
            WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL
            PERSONS**
 
 During
            September and October, 2006, Leader Industrial Development, Corp., a
            company
            controlled by Mr. Sheng Zhou, provided $300,000 to Nanchang Best to pay
            legal and accounting fees and other costs related to our share exchange
            transactions that occurred in October 2006. In exchange for this financing,
            1,756,800 shares of Nanchang Best’s common stock were issued to Leader
            Industrial Development, Corp. These shares were converted into 4,193,355
            shares
            of our common stock (post split) in the share exchange transaction. In
            April
            2007, Leader Industrial transferred shares of our common stock to Good
            Energy
            Enterprise Ltd. The principal owner of Good Energy Enterprise Ltd. is
            Mr. Chang
            Jiansheng, the brother-in-law of Mr. Sheng Zhou. Mr. Sheng Zhou is the
            brother
            of our corporate secretary and treasurer, Mr. Feng Zhou.
 
 In
            December 2006, Sunrise Capital International loaned us approximately
            $1,146,667
            for use in our purchase of Guangxi Huijie. This loan accrued interest
            at a rate
            of 7% per annum. Mr. Sheng Zhou is a director of Sunrise Capital International,
            which is owned by his sister-in-law, Ms. Chun Mei Chang. We repaid this
            loan in
            full in March 2007.
 
 During
            the years ended December 31, 2006 and 2005 and the three months ended
            March 31,
            2007, we had sales to related parties aggregating approximately $170,000,
            $82,000 and $77,054, respectively. These sales were of raw materials
            and
            finished feed goods for resale. Mr. Junhong Xiong, our chief executive
            officer,
            owns a majority interest in the five companies we sold products to during
            2006
            and 2007. As of March 31, 2007, these other entities had a balance due
            to us in
            the amount of $93,187 for products that we sold to them. The following
            chart
            provides the amount due from each entity and the percentage ownership
            of Mr.
            Xiong in each entity.
  Name
                      of Business Entity
                  
                  Amount
                      due
                    to
                      AgFeed
                  
                  Percentage
                    ownership
                    of
                    Mr.
                      XiongBeijing
                      Best Animal Husbandry Co., Ltd.
                  
                  $
                  21,728
                  
                  
                  51
                  %Nanchang
                      Tiandiren Tech. Development Co., Ltd.
                  
                  
                  37
                  
                  
                  73
                  %Xiamen
                      Best Animal Husbandry Co., Ltd
                  
                  
                  5,338
                  
                  
                  52
                  %Guangzhou
                      Best Animal Husbandry Co., Ltd.
                  
                  
                  20,670
                  
                  
                  78.5
                  %Jiujiang
                      Best Hog Farm
                  
                  
                  45,414
                  
                  
                  87
                  %Total
                      Amount Due
                  
                  $
                  93,187
 
 During
            the second quarter of 2007, Mr. Junhong Xiong sold all of his ownership
            interest
            in the above companies to unaffiliated companies that supply products
            to us.
            Subsequent to these sale transactions, we have not had sales to related
            parties.
 
 During
            the years ended December 31, 2006 and 2005 and the three months ended
            March 31,
            2007, we made purchases of raw materials and finished feed goods for
            resale from
            Nanchang Tiandiren Tech. Development Co., Ltd. aggregating approximately
            $700,
            $1,800 and $9,284, respectively.
 
 Prior
            to
            consummation of the share exchange transactions in October 2006, three
            managers
            of Guangxi Huijie provided personal funds from time to time to fund its
            business
            in the aggregate amount of approximately $755,000. Advances to and from
            related
            parties and shareholders were non-interest bearing and were payable or
            receivable on demand. At December 31, 2006, there were advances from
            related
            parties and shareholders of approximately $738,000. By the end of March
            2007,
            these amounts were all repaid to these individuals. We no longer accept
            advances
            from our executive officers, directors or other related
            parties.
 
 
 At
            December 31, 2006, there were advances to related parties of approximately
            $924,517. These advances were all made by Nanchang Best and Shanghai
            Best prior
            to October 31, 2006, the closing date of our share exchange transactions.
            Mr.
            Junhong Xiong owns a majority interest in the five companies we have
            advanced
            funds to during 2006.
 
 Name
                      of Business Entity
                  
                  Amount
                      due
                    to
                      AgFeed
                    at
                      December
                    31,
                      2006
                  
                  Percentage
                    ownership
                    of
                    Mr.
                      XiongBeijing
                      Best Animal Husbandry Co., Ltd.
                  
                  $
                  39,752
                  
                  
                  51
                  %Nanchang
                      Tiandiren Tech. Development Co., Ltd.
                  
                  
                  107,629
                  
                  
                  73
                  %Jiangxi
                      Best Animal Anti-Disease Co., Ltd
                  
                  
                  37,251
                  
                  
                  52
                  %Guangzhou
                      Best Animal Husbandry Co., Ltd.
                  
                  
                  68,687
                  
                  
                  78.5
                  %Jiujiang
                      Best Hog Farm
                  
                  
                  671,198
                  
                  
                  87
                  %Total
                      Amount Due
                  
                  $
                  924,517
 
 By
            the
            end of March 2007, these amounts were all repaid to us. We no longer
            make loans
            or advances to executive officers, directors or other related
            parties.


32




ITEM
      13.
      EXHIBITS


3.1
                  Articles
                      of Incorporation (1)3.2
                  By-Laws
                      (1)4
                  Specimen
                      common stock certificate10.1
                  Share
                      Purchase Agreement dated October 31, 2006 among Registrant,
                      Nanchang Best
                      Animal Husbandry Co., Ltd. and the shareholders of Nanchang
                      Best Animal
                      Husbandry Co., Ltd. (2)10.2
                  Share
                      Purchase Agreement dated October 31, 2006 among Registrant,
                      Shanghai Best
                      Animal Husbandry Co., Ltd. and the shareholders of Shanghai
                      Best Animal
                      Husbandry Co., Ltd. (2)10.3
                  Share
                      Purchase Agreement dated December 20, 2006 among Registrant,
                      Guangxi
                      Huijie Sci. & Tech. Feed Co., Ltd. and the shareholders of Guangxi
                      Huijie Sci. & Tech. Feed Co., Ltd. (3)21
                  Subsidiaries31.1
                  Certification
                      of Principal Executive Officer pursuant to Rule 13a-14 and
                      Rule 15d-14(a),
                      promulgated under the Securities and Exchange Act of 1934,
                      as
                      amended.31.2
                  Certification
                      of Principal Financial Officer pursuant to Rule 13a-14 and
                      Rule 15d-14(a),
                      promulgated under the Securities and Exchange Act of 1934,
                      as
                      amended.32.1
                  Certification
                      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                      Section 906 of
                      the Sarbanes- Oxley Act of 2002 (Chief Executive
                      Officer).32.2
                  Certification
                      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                      Section 906 of
                      the Sarbanes- Oxley Act of 2002 (Chief Financial
                      Officer).
 ______
 
 (1)
            Filed
                with the Company’s Registration Statement on Form SB-2 on July 18, 2005
                and incorporated herein by reference. 
 (2)
            Filed
                with the Company’s Current Report on Form 8-K on November 6, 2006 and
                incorporated herein by reference. 
 (3)
            Filed
                with the Company’s Current Report on Form 8-K on December 26, 2006 and
                incorporated herein by reference.




33




ITEM
      14.
      PRINCIPAL ACCOUNTANT FEES AND SERVICES





Audit
      Fees. The aggregate fees billed by our auditors, for professional services
      rendered for the audit of our annual financial statements for the year ended
      December 31, 2006, and for the reviews of the financial statements included
      in
      our Quarterly Reports on Form 10-QSB during the fiscal year were $199,000.
      Prior
      to November 24, 2006 our Fiscal year ended March 31. The aggregate fees billed
      by our auditors, for professional services rendered for the audit of our annual
      financial statements for the fiscal year ended March 31, 2006, and for the
      reviews of the financial statements included in our Quarterly Reports on Form
      10-QSB during the fiscal year were $5,825





Audit
      Related Fees. We incurred fees to auditors of $0, for audit related fees during
      the fiscal year ended December 31, 2006, and for the fiscal year ended March
      31,
      2006 audit related fees were $0.





Tax
      Fees.
      We incurred no fees to auditors for tax compliance, tax advice and tax
      compliance services during the fiscal year ended December 31, 2006 and the
      fiscal year ended March 31, 2006


34


Our
          Consolidated Financial Statements as of and for the years ended December
          31,
          2006 and December 31, 2005 are included herein at pages F-1 through
          F-24.
 
 **AgFeed
        Industries, Inc. and Subsidiaries**
 **Consolidated
        Financial Statements**
 **Years
        Ended December 31, 2006 and 2005**
 **Contents**Page**Report
                    of Independent Registered Public Accounting Firm**
                F-1**Financial
                    Statements:**Consolidated
                    Balance Sheet as of December 31, 2006
                F-2Consolidated
                    Statements of Income and Other Comprehensive Incomefor
                    the years ended December 31, 2006 and 2005
                F-3Consolidated
                    Statement of Stockholders' Equityfor
                    the years ended December 31, 2006 and 2005
                F-4Consolidated
                    Statements of Cash Flowsfor
                    the years ended December 31, 2006 and 2005
                F-5Notes
                    to Consolidated Financial Statements
                F-6
                    to F-24
  35


Report
          of
          Independent Registered Public Accounting Firm
  
 Board
          of
          Directors and Stockholders of AgFeed
          Industries, Inc.
 
 We
          have
          audited the accompanying consolidated balance sheet of AgFeed Industries,
          Inc.
          (a Nevada corporation) and subsidiaries as of December 31, 2006, and the
          related
          consolidated statements of income and other comprehensive income, stockholders’
equity, and cash flows for each of the two years in the period ended December
          31, 2006. These consolidated financial statements are the responsibility
          of the
          Company’s management. Our responsibility is to express an opinion on these
          consolidated 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
          consolidated 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. An audit also includes assessing
          the
          accounting principles used and significant estimates made by management,
          as well
          as evaluating the overall consolidated 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 AgFeed
          Industries, Inc. and Subsidiaries as of December 31, 2006, and the consolidated
          results of their operations and their consolidated cash flows for each
          of the
          two years in the period ended December 31, 2006, in conformity with U.S.
          generally accepted accounting principles.
 
 Goldman
          & Parks LLP
 Certified
          Public Accountants
 Tarzana,
          California
 March
          7,
          2007
  F-1
  **AGFEED
          INDUSTRIES, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
          BALANCE SHEET**
 **AS
          OF DECEMBER 31, 2006**
  **December
                    31,****2006****ASSETS****CURRENT
                    ASSETS:**Cash
                    & cash equivalents
                
                $
                1,204,100Accounts
                    receivable, net of allowance for doubtful accounts of $49,845
                
                
                1,796,085Advances
                    to suppliers
                
                
                77,649Other
                    receivable
                
                
                203,051Stock
                    subscription receivable
                
                
                226,083Due
                    from related parties
                
                
                87,018Advances
                    to related parties
                
                
                924,806Inventory
                
                
                802,822Prepaid
                    expense
                
                
                11,885Other
                    current assets
                
                
                2,253Total
                    current assets
                
                
                5,335,752**PROPERTY
                    AND EQUIPMENT, net**
                
                
                1,390,611**INTANGIBLE
                    ASSETS**
                
                
                539,468**TOTAL
                    ASSETS**
                
                $
                7,265,831**LIABILITIES
                    AND STOCKHOLDERS' EQUITY****CURRENT
                    LIABILITIES:**Accounts
                    payable
                
                $
                809,583Other
                    payables
                
                
                56,911Unearned
                    revenue
                
                
                81,541Accrued
                    expenses
                
                
                92,739Accrued
                    payroll
                
                
                37,216Short
                    term loans
                
                
                1,793,960Advance
                    from related party
                
                
                737,846Tax
                    and welfare payable
                
                
                280,208Total
                    current liabilities
                
                
                3,890,004**STOCKHOLDERS'
                    EQUITY:**Common
                    stock, $0.001 per share; 75,000,000 shares authorized; 24,000,000
                    shares
                    issued and outstanding
                
                
                24,000Additional
                    paid-in capital
                
                
                1,299,379Other
                    comprehensive income
                
                
                116,846Statutory
                    reserve
                
                
                271,115Retained
                    earnings
                
                
                1,664,487Total
                    stockholders' equity
                
                
                3,375,827**TOTAL
                    LIABILITIES AND STOCKHOLDERS' EQUITY**
                
                $
                7,265,831
  The
          accompanying notes are an integral part of these consolidated financial
          statements
  F-2
  **AGFEED
          INDUSTRIES, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
          STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME**
 **FOR
          THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 
 **Years
                    Ended December 31,****2006**
                
                **2005****Net
                    Revenue**
                
                $
                8,594,876
                
                $
                7,611,845**Cost
                    of Revenue**
                
                
                5,446,332
                
                
                5,339,067**Gross
                    profit**
                
                
                3,148,544
                
                
                2,272,778Operating
                    expensesSelling
                    expenses
                
                
                1,287,110
                
                
                974,332General
                    and administrative expenses
                
                
                827,540
                
                
                417,675Total
                    operating expenses
                
                
                2,114,650
                
                
                1,392,007**Income
                    from operations**
                
                
                1,033,894
                
                
                880,771Non-operating
                    income (expense):Other
                    income (expense)
                
                
                35,681
                
                
                (27,695
                )Interest
                    income
                
                
                28,851
                
                
                -Interest
                    expense
                
                
                (23,532
                )
                
                (19,960
                )Total
                    non-operating income (expense)
                
                
                41,000
                
                
                (47,655
                )Income
                    before income tax
                
                
                1,074,894
                
                
                833,116Income
                    tax
                
                
                (100,386
                )
                
                272,410**Net
                    income**
                
                $
                1,175,280
                
                $
                560,706Other
                    comprehensive incomeForeign
                    currency translation gain
                
                
                84,382
                
                
                32,457**Comprehensive
                    Income**
                
                $
                1,259,662
                
                $
                593,163**Weighted
                    average shares outstanding :**Basic
                
                
                17,911,296
                
                
                15,006,720Diluted
                
                
                17,911,296
                
                
                15,006,720**Earnings
                    per share:**Basic
                
                $
                0.07
                
                $
                0.04Diluted
                
                $
                0.07
                
                $
                0.04
  The
          accompanying notes are an integral part of these consolidated financial
          statements
  F-3
  **AGFEED
          INDUSTRIES, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
          STATEMENT OF STOCKHOLDERS' EQUITY**
 **FOR
          THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
  **Additional**
                
                
                
                **Other**
                
                
                
                
                
                **Total****Common
                    Stock**
                
                **Paid
                    in**
                
                **Subscription**
                
                **Comprehensive**
                
                **Statutory**
                
                **Retained**
                
                **Stockholders'****Shares**
                
                **Amount**
                
                **Capital**
                
                **Receivable**
                
                **Income**
                
                **Reserve**
                
                **Earnings**
                
                **Equity****Balance
                    January 1, 2005**
                
                
                15,006,720
                
                $
                15,007
                
                $
                722,527
                
                $
                (157,712
                )
                $
                7
                
                $
                33,955
                
                $
                165,661
                
                $
                779,445Cumulative
                    translation adjustment
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                32,457
                
                
                
                
                
                
                
                
                32,457Net
                      income for the year ended December 31, 2005
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                560,706
                
                
                560,706Reduction
                    in subscription receivable
                
                
                
                
                
                
                
                
                
                
                
                157,712
                
                
                
                
                
                
                
                
                -
                
                
                157,712Transfer
                    to statutory reserve
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                84,106
                
                
                (84,106
                )
                
                -**Balance
                    December 31, 2005**
                
                
                15,006,720
                
                
                15,007
                
                
                722,527
                
                
                -
                
                
                32,464
                
                
                118,061
                
                
                642,261
                
                
                1,530,320Common
                    stock subscribed
                
                
                4,193,280
                
                
                4,193
                
                
                221,890
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                226,083Recapitalization
                    on reverse acquisition
                
                
                4,800,000
                
                
                4,800
                
                
                54,962
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                59,762Capital
                    contribution by stockholders
                
                
                
                
                
                
                
                
                300,000
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                300,000Change
                    in foreign currency translation gain
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                84,382
                
                
                
                
                
                
                
                
                84,382Net
                    income for the year ended December 31, 2006
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,175,280
                
                
                1,175,280Transfer
                    to statutory reserve
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                153,054
                
                
                (153,054
                )
                
                -**Balance
                    December 31, 2006**
                
                
                24,000,000
                
                $
                24,000
                
                $
                1,299,379
                
                
                -
                
                $
                116,846
                
                $
                271,115
                
                $
                1,664,487
                
                $
                3,375,827
  The
          accompanying notes are an integral part of these consolidated financial
          statements
  F-4
  **AGFEED
          INDUSTRIES, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
          STATEMENT OF CASH FLOWS**
 **FOR
          THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
  **Years
                    Ended December 31,****2006**
                
                **2005****CASH
                    FLOWS FROM OPERATING ACTIVITIES:**Net
                    income
                
                $
                1,175,280
                
                $
                560,706Adjustments
                    to reconcile net income to net cash provided in operating
                    activities:Depreciation
                
                
                100,469
                
                
                79,465Loss
                    on disposal of property and equipment
                
                
                -
                
                
                30,112Amortization
                
                
                5,228
                
                
                4,018(Increase)
                    / decrease in assets:Accounts
                    receivable
                
                
                (312,364
                )
                
                (628,686
                )Other
                    receivable
                
                
                47,323
                
                
                (37,016
                )Inventory
                
                
                (113,084
                )
                
                177,012Due
                    from related party
                
                
                (46,550
                )
                
                (50,962
                )Advances
                    to suppliers
                
                
                (28,340
                )
                
                (16,985
                )Prepaid
                    expense
                
                
                1,725
                
                
                (3,430
                )Other
                    assets
                
                
                (2,205
                )Increase
                    / (decrease) in current liabilities:Accounts
                    payable
                
                
                (101,564
                )
                
                203,235Unearned
                    revenue
                
                
                (17,001
                )
                
                81,284Other
                    payables
                
                
                34,645
                
                
                (45,818
                )Due
                    to related party
                
                
                (182,812
                )
                
                9,889Accrued
                    expenses
                
                
                90,545
                
                
                24,769Accrued
                    payroll
                
                
                20,965Tax
                    and welfare payable
                
                
                (151,976
                )
                
                239,193Net
                    cash provided by operating activities
                
                
                520,284
                
                
                626,786**CASH
                    FLOWS FROM INVESTING ACTIVITIES**Issuance
                    of loan receivable
                
                
                -
                
                
                4,272Cash
                    acquired with acquisitions
                
                
                213,922
                
                
                -Acquisition
                    of property and equipment
                
                
                (107,460
                )
                
                (125,434
                )Acquisition
                    of intangible assets
                
                
                -
                
                
                (8,920
                )Cash
                    paid for purchase of subsidiary
                
                
                (1,100,420
                )
                
                -Net
                    cash used in investing activities
                
                
                (993,958
                )
                
                (130,082
                )**CASH
                    FLOWS FROM FINANCING ACTIVITIES:**Advances
                    from shareholders
                
                
                (24,783
                )
                
                61,023Repayment
                    to shareholders
                
                
                -
                
                
                (97,637
                )Advances
                    from related parties
                
                
                -
                
                
                68,423Repayment
                    to related parties
                
                
                -
                
                
                (4,959
                )Advance
                    to related parties
                
                
                (425,674
                )
                
                (788,825
                )Collection
                    from related parties
                
                
                -
                
                
                393,112Proceeds
                    from notes payable
                
                
                1,664,855
                
                
                -Payment
                    on note payable
                
                
                -
                
                
                (433,065
                )Contribution
                    by stockholders to pay for merger expenses
                
                
                300,000
                
                
                -Collection
                    on subscription receivable
                
                
                -
                
                
                157,712Net
                    cash provided by (used in) financing activities
                
                
                1,514,398
                
                
                (644,216
                )Effect
                    of exchange rate changes on cash and cash equivalents
                
                
                26,970
                
                
                18,517**NET
                    INCREASE (DECREASE) IN CASH & CASH
                    EQUIVALENTS**
                
                
                1,067,694
                
                
                (128,995
                )**CASH
                    & CASH EQUIVALENTS, BEGINNING BALANCE**
                
                
                136,406
                
                
                265,401**CASH
                    & CASH EQUIVALENTS, ENDING BALANCE**
                
                $
                1,204,100
                
                $
                136,406**SUPPLEMENTAL
                    DISCLOSURE OF CASH FLOW INFORMATION:**Interest
                    paid
                
                $
                30,213
                
                $
                21,238Income
                    taxes paid
                
                $
                73,339
                
                $
                30,213
  The
          accompanying notes are an integral part of these consolidated financial
          statements
  F-5
  **Note
          1 - Organization and Basis of Presentation**
 
 Organization
          and Line of Business
  AgFeed
          Industries, Inc. formerly known as Wallace Mountain Resources Corp., a
          Nevada
          corporation, (hereinafter referred to as the “Company” or “AgFeed”) was
          incorporated in the State of Nevada on March 30, 2005.
 
 On
          October 31, 2006, the Company entered into and closed a share purchase
          agreement
          with Nanchang Best Animal Husbandry Co., Ltd., a corporation formed under
          the
          laws of the People’s Republic of China (“Nanchang Best”), and each of Nanchang
          Best’s shareholders (the “Nanchang Purchase Agreement”). Pursuant to the
          Nanchang Purchase Agreement, the Company acquired all of the issued and
          outstanding capital stock of Nanchang Best from the Nanchang Best shareholders
          in exchange for 16,128,000 shares of common stock.
 
 Contemporaneously,
          on October 31, 2006, the Company entered into and closed a share purchase
          agreement with Shanghai Best Animal Husbandry Co., Ltd., a corporation
          formed
          under the laws of the People’s Republic of China (“Shanghai Best”), and each of
          Shanghai Best’s shareholders (the “Shanghai Purchase Agreement”). Pursuant to
          the Shanghai Purchase Agreement, the Company acquired all of the issued
          and
          outstanding capital stock of Shanghai Best from the Shanghai Best shareholders
          in exchange for 3,072,000 shares of common stock.
 
 The
          exchanges of shares with Nanchang Best and Shanghai Best were accounted
          for as
          reverse acquisition under the purchase method of accounting since the
          stockholders of Nanchang Best and Shanghai Best obtained control of the
          Company. On
          November 17, 2006, Wallace Mountain Resources Corp. changed its name to
          AgFeed
          Industries, Inc. Accordingly,
          the merger of Nanchang Best and Shanghai Best into the Company were recorded
          as
          a recapitalization of Nanchang Best and Shanghai Best, with the Nanchang
          Best
          and Shanghai Best being treated as the continuing entities. Nanchang Best
          and
          Shanghai Best had common shareholders and common management. The historical
          financial statements presented are the combined financial statements of
          both
          Nanchang Best and Shanghai Best. The share exchange agreement has been
          treated
          as a recapitalization and not as a business combination; therefore, no
          pro forma
          information is disclosed. At the date of this transaction, the net assets
          of the
          legal acquirer were $59,762.
 
 As
          a
          result of the reverse merger transactions described above the historical
          financial statements presented are those of Nanchang Best and Shanghai
          Best, the
          operating entities.
 
 On
          December 20, 2006, the Company entered into and closed a share purchase
          agreement with Guangxi Huijie Sci. & Tech. Feed Co, Ltd., a company formed
          pursuant to the laws of the People’s Republic of China (“Guangxi Huijie”), and
          the shareholders of Guangxi Huijie pursuant to which the Company acquired
          all
          the outstanding shares of Guangxi Huijie for a total purchase price of
          eight
          million six hundred thousand Chinese Renminbi (8,600,000 CNY), equivalent
          to
          approximately U.S. $1,100,420 based on exchange rates reported in the Wall
          Street Journal for December 20, 2006.
  F-6
  The
          Company obtained the funds for the acquisition of the Guangxi Huijie shares
          by
          borrowing 8,600,000 CNY from Sunrise Capital International, Inc. The proceeds
          of
          the loan from Sunrise Capital International, Inc. were paid directly to
          the
          selling shareholders of Guangxi Huijie as consideration and as provided
          by the
          share purchase agreement. The Company’s repayment obligation is evidenced by a
          promissory note bearing interest at the rate of seven percent per annum
          (7%) and
          maturing in six months. The Company, at its option, may extend the maturity
          of
          the note an additional six months upon notice to the lender. The Company
          may
          also prepay the note at any time without penalty.
 
 The
          Company is engaged in the research & development, manufacture, marketing,
          distribution and sale of premix fodder blended feed and feed additives
          primarily
          for use in China’s domestic pork husbandry market. The Company operates a
          production plants in Nanchang City, Shanghai City and Nanning City and
          sells to
          distributors and large-scale swine farms.
 
 Stock
          Splits
 
 On
          November 17, 2006, the Company declared a stock dividend of two additional
          shares of common stock for each share of common stock outstanding (effectively
          a
          three for one stock split). All share information for common shares has
          been
          retroactively restated for this stock split.
 
 Basis
          of
          Presentation
 
 The
          accompanying consolidated financial statements include the accounts of
          AgFeed
          Industries, Inc., and its 100% wholly-owned subsidiaries Nanchang Best
          and
          Shanghai Best (for all periods presented) and
          Guangxi Huijie (from the date of acquisition - for
          convenience of reporting the acquisition for accounting purposes, December
          31,
          2006 has been designated as the acquisition date. Net income for the 11
          days
          from December 20, 2006 to December 31, 2006 was approximately
          $31,000).  All
          significant inter-company accounts and transactions have been eliminated
          in
          consolidation.
 
 The
          accompanying consolidated financial statements have been prepared in conformity
          with accounting principles generally accepted in the United States of America.
          The Company’s functional currency is the Chinese Yuan Renminbi (CNY); however
          the accompanying consolidated financial statements have been translated
          and
          presented in United States Dollars ($).
 
 Foreign
          Currency Translation
 
 As
          of
          December 31, 2006 and 2005, the accounts of the Company were maintained,
          and
          their consolidated financial statements were expressed in the Chinese Yuan
          Renminbi (CNY). Such consolidated financial statements were translated
          into U.S.
          Dollars (USD) in accordance with Statement of Financial Accounts Standards
          (“SFAS”) No. 52, “Foreign Currency Translation,” with the CNY as the functional
          currency. According to the Statement, all assets and liabilities were translated
          at the exchange rate on the balance sheet date, stockholder’s equity are
          translated at the historical rates and statement of operations items are
          translated at the weighted average exchange rate for the year. The resulting
          translation adjustments are reported under other comprehensive income in
          accordance with SFAS No. 130, “Reporting Comprehensive
          Income”.
  F-7
  **Note
          2 - Summary of Significant Accounting Policies**
 
 Use
          of
          Estimates
 
 The
          preparation of financial statements in conformity with United States generally
          accepted accounting principles requires management to make estimates and
          assumptions that affect the reported amounts of assets and liabilities
          and
          disclosure of contingent assets and liabilities at the date of the financial
          statements and the reported amounts of revenues and expenses during the
          reporting period. Actual results could differ from those
          estimates.
 
 Reclassification
 
 Certain
          prior period amounts have been reclassified to conform to the year ended
          December 31, 2006 presentation.
 
 Cash
          and Cash Equivalents
 
 Cash
          and
          cash equivalents include cash in hand and cash in time deposits, certificates
          of
          deposit and all highly liquid debt instruments with original maturities
          of three
          months or less.
 
 Accounts
          Receivable
 
 The
          Company maintains reserves for potential credit losses on accounts receivable.
          Management reviews the composition of accounts receivable and analyzes
          historical bad debts, customer concentrations, customer credit worthiness,
          current economic trends and changes in customer payment patterns to evaluate
          the
          adequacy of these reserves. The Company monitors collectibility based on
          a
          variety of factors such as payment history, pattern of current payment,
          a
          customer’s credit standing and other economic factors. Based on its evaluation
          of collectibiity, management is of the opinion that accounts receivables
          are
          consistent with the credit terms. The allowance for doubtful debts amounted
          to
          $49,845 as of December 31, 2006.
 
 Stock
          Subscription Receivable
 
 At
          December 31, 2006, the Company had a stock subscription receivable in the
          amount
          of $226,083 related to an investment by a British Virgin Island (BVI) company.
          The amount was collected in January 2007 and has been presented as a current
          asset in the accompanying consolidated balance sheet.
 
 Advances
          to Suppliers
 
 The
          Company makes advances to certain vendors for purchase of its material.
          The
          advances to suppliers are interest free and unsecured. At December 31,
          2006, the
          Company had advances to suppliers in the amount of $77,649.
  F-8
  Inventories
 
 Inventory
          is stated at the lower of cost, as determined by weighted-average method,
          or
          market. Management compares the cost of inventories with the market value,
          and
          allowance is made for writing down the inventories to their market value,
          if
          lower.
 
 Property
          & Equipment
 
 Property
          and equipment are stated at cost. Expenditures for maintenance and repairs
          are
          charged to earnings as incurred; additions, renewals and betterments are
          capitalized. When property and equipment are retired or otherwise disposed
          of,
          the related cost and accumulated depreciation are removed from the respective
          accounts, and any gain or loss is included in operations. Depreciation
          of
          property and equipment is provided using the straight-line method for
          substantially all assets with estimated lives as follows:
 
 Office
                    equipment
                5
                    yearsOperating
                    equipment
                10
                    yearsVehicles
                5
                    yearsBuildings
                20
                    years
 
 The
          following are the details of the property and equipment at December 31,
          2006:
 
 Office
                    equipment
                
                $
                65,412Operating
                    equipment
                
                
                493,011Vehicles
                
                
                235,207Buildings
                
                
                926,162Total
                
                
                1,719,792Less
                    accumulated depreciation
                
                
                (329,181
                )$
                1,390,611
 
 Depreciation
          expense for the years ended December 31, 2006 and 2005 was $100,469 and
          $79,465,
          respectively.
 
 Long-Lived
          Assets
 
 Effective
          January 1, 2002, the Company adopted Statement of Financial Accounting
          Standards
          No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS
          144”), which addresses financial accounting and reporting for the impairment
          or
          disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the
          Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
          Of,”
and the accounting and reporting provisions of APB Opinion No. 30, “Reporting
          the Results of Operations for a Disposal of a Segment of a Business.” The
          Company periodically evaluates the carrying value of long-lived assets
          to be
          held and used in accordance with SFAS 144. SFAS 144 requires impairment
          losses
          to be recorded on long-lived assets used in operations when indicators
          of
          impairment are present and the undiscounted cash flows estimated to be
          generated
          by those assets are less than the assets’ carrying amounts. In that event, a
          loss is recognized based on the amount by which the carrying amount exceeds
          the
          fair market value of the long-lived assets. Loss on long-lived assets to
          be
          disposed of is determined in a similar manner, except that fair market
          values
          are reduced for the cost of disposal. Based on its review, the Company
          believes
          that, as of December 31, 2006 there were no significant impairments of
          its
          long-lived assets.
  F-9
  Intangible
          Assets
 
 Intangible
          assets consist of the right to use land and computer software. Net
          intangible assets at December 31, 2006 are as follows:
 
 Right
                    to use land
                
                $
                551,012Computer
                    software
                
                
                11,196Total
                
                
                562,208Less
                    Accumulated amortization
                
                
                (22,740
                )Intangibles,
                    net
                
                $
                539,468
 
 Per
          the
          People’s Republic of China’s governmental regulations, the Government owns all
          land. The Company leases land per a real estate contract with the government
          of
          the People’s Republic of China for a period from November 2006 through October
          2056. The Company obtained possession of the land in July of 2005. Accordingly,
          the Company is amortizing the cost of the right to use land from that
          date.
 
 The
          right
          to use land is amortized over a period of 50 years and the computer software
          is
          amortized over three years.
 
 Amortization
          expense for the Company’s intangible assets for the years ended December 31,
          2006 and 2005 was $5,228 and $4,018, respectively.
 
 Fair
          Value of Financial Instruments
 
 Statement
          of financial accounting standard No. 107, Disclosures about fair value
          of
          financial instruments, requires that the Company disclose estimated fair
          values
          of financial instruments. The carrying amounts reported in the statements
          of
          financial position for current assets and current liabilities qualifying
          as
          financial instruments are a reasonable estimate of fair value.
 
 Revenue
          Recognition
  The
          Company’s revenue recognition policies are in compliance with Staff accounting
          bulletin (SAB) 104. Revenue is recognized when services are rendered to
          customers when a formal arrangement exists, the price is fixed or determinable,
          the delivery is completed, no other significant obligations of the Company
          exist
          and collectibility is reasonably assured. The Company determines that delivery
          has occurred when the customer picks up the product and when the product
          is
          shipped FOB. Payments received before all of the relevant criteria for
          revenue
          recognition are satisfied are recorded as unearned revenue. The Company
          is not
          subject to VAT withholdings.
  F-10
  The
          Company gives volume rebates to certain customers based on volume achieved.
          Sales rebates are accrued based on actual sales volume. Sales rebates for
          the
          year ended December 31, 2005 and 2006 were $74,046 and $258,503,
          respectively. The Company does not offer any of its customers the unconditional
          right to return purchased products. Customers are only permitted to return
          defective products. In addition, the Company does not provide any price
          protection or similar rights to its customers.
 
 There
          are
          no differences in the Company’s arrangements with its different types of
          customers. Accordingly, the Company does not have different revenue recognition
          policies for different types of customers.
 
 The
          Company offers credit terms ranging from 30 to 90 days for most customers.
          From
          some larger customers, the Company may extend these terms beyond 90 days.
  Sales
          returns and allowances have historically been insignificant. Accordingly,
          estimating returns is not critical. However, if circumstances change, returns
          and allowance may impact the Company’s earnings.
  Sales
          returns for the year ended December 31, 2005 and 2006 were $63,521 and
          $65,792,
          respectively.
 
 Advertising
          Costs
 
 The
          Company expenses the cost of advertising as incurred or, as appropriate,
          the
          first time the advertising takes place. Advertising costs for the years
          ended
          December 31, 2006 and 2005 were $5,995 and $18,776, respectively.
 
 Stock-Based
          Compensation
 
 The
          Company accounts for its stock-based compensation in accordance with SFAS
          No.
          123R, “Share-Based Payment, an Amendment of FASB Statement No. 123.” The Company
          recognizes in the statement of operations the grant-date fair value of
          stock
          options and other equity-based compensation issued to employees and
          non-employees. No
          options have been granted for the year ended December 31, 2006 or in prior
          years.
 
 Income
          Taxes
 
 The
          Company utilizes SFAS No. 109, “Accounting for Income Taxes,” which requires the
          recognition of deferred tax assets and liabilities for the expected future
          tax
          consequences of events that have been included in the financial statements
          or
          tax returns. Under this method, deferred income taxes are recognized for
          the tax
          consequences in future years of differences between the tax bases of assets
          and
          liabilities and their financial reporting amounts at each period end based
          on
          enacted tax laws and statutory tax rates applicable to the periods in which
          the
          differences are expected to affect taxable income. Valuation allowances
          are
          established, when necessary, to reduce deferred tax assets to the amount
          expected to be realized.
 
 F-11
 
 Foreign
          Currency Transactions and Comprehensive Income
 
 Accounting
          principles generally require that recognized revenue, expenses, gains and
          losses
          be included in net income. Certain statements, however, require entities
          to
          report specific changes in assets and liabilities, such as gain or loss
          on
          foreign currency translation, as a separate component of the equity section
          of
          the balance sheet. Such items, along with net income, are components of
          comprehensive income. The functional currency of the Company is Chinese
          Renminbi. The unit of Renminbi is in Yuan. Translation gains of $116,846
          at
          December 31, 2006 are classified as an item of other comprehensive income
          in the
          stockholders’ equity section of the consolidated balance sheet. During the years
          ended December 31, 2006 and 2005, other comprehensive income in the consolidated
          statements of income and other comprehensive income included translation
          gains
          of $84,382 and $32,457, respectively.
 
 Basic
          and Diluted Earnings Per Share
 
 Earnings
          per share is calculated in accordance with the Statement of financial accounting
          standards No. 128 (SFAS No. 128), “Earnings per share”. SFAS No. 128 superseded
          Accounting Principles Board Opinion No.15 (APB 15). Net earnings per share
          for
          all periods presented has been restated to reflect the adoption of SFAS
          No. 128.
          Basic net earnings per share is based upon the weighted average number
          of common
          shares outstanding. Diluted net earnings per share is based on the assumption
          that all dilutive convertible shares and stock options were converted or
          exercised. Dilution is computed by applying the treasury stock method.
          Under
          this method, options and warrants are assumed to be exercised at the beginning
          of the period (or at the time of issuance, if later), and as if funds obtained
          thereby were used to purchase common stock at the average market price
          during
          the period. There were no option, warrants or dilutive securities outstanding
          during the years ended December 31, 2006 and 2005; therefore, the basic
          and
          diluted earnings per shares for both the years ended December 31, 2006
          and 2005
          are the same.
 
 Statement
          of Cash Flows
 
 In
          accordance with Statement of Financial Accounting Standards No. 95, “Statement
          of Cash Flows,” cash flows from the Company’s operations are calculated based
          upon the local currencies. As a result, amounts related to assets and
          liabilities reported on the statement of cash flows will not necessarily
          agree
          with changes in the corresponding balances on the balance sheet.
 
 Cash
          from
          financing activities excludes the affect of common stock subscribed and
          subscription receivable for $226,083.
 
 Segment
          Reporting
 
 Statement
          of Financial Accounting Standards No. 131 (“SFAS 131”), “Disclosure About
          Segments of an Enterprise and Related Information” requires use of the
“management approach” model for segment reporting. The management approach model
          is based on the way a company’s management organizes segments within the company
          for making operating decisions and assessing performance. The Company has
          determined that it has three reportable segments (See Note
          10).
  F-12
  Recent
          Pronouncements
 
 Accounting
          Changes and Error Corrections
 
 In
          May
          2005, the FASB issued Statement No. 154, “Accounting Changes and Error
          Corrections,” which provides guidance on the accounting for and reporting of
          accounting changes and error corrections. It establishes, unless impracticable,
          retrospective application as the required method for reporting a change
          in
          accounting principle in the absence of explicit transition requirements
          specific
          to the newly adopted accounting principle. The reporting of a correction
          of an
          error by restating previously issued financial statements is also addressed
          by
          this statement. This statement became effective, on a prospective basis,
          for
          fiscal years beginning after December 15, 2005. The implementation of this
          statement has not had a material affect on the Company’s consolidated financial
          statements.
 
 Accounting
          for Certain Hybrid Financial Instruments - an amendment of FASB Statements
          No.
          133 and 140
 
 In
          February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid
          Financial Instruments - an amendment of FASB No. 133 and 140,” which is
          effective for fiscal years beginning after September 15, 2006. The statement
          was
          issued to clarify the application of SFAS No. 133 to beneficial interests
          in
          securitized financial assets and to improve the consistency of accounting
          for
          similar financial instruments, regardless of the form of the
          instruments. ** This
          statement is effective for the first fiscal year beginning after September
          30,
          2006. The Company does not expect implementation of the Statement in 2007
          to
          have a material effect on its consolidated financial statements.
 
 Accounting
          for Servicing of Financial Assets
 
 In
          March
          2006, FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets -
          an amendment to FASB Statement No. 140.” The new standard requires recognition
          of servicing assets in connection with any obligation to service a financial
          asset arising from 1) a servicing contract entered into as part of a transfer
          of
          assets meeting the requirements for sale accounting, 2) the transfer of
          assets
          to a special purpose entity in a guaranteed mortgage securitization where
          the
          transferor retains a controlling interest in the securitized asset, or
          3) an
          acquisition or assumption of obligations to service financial assets not
          related
          to the servicer or its consolidated affiliates. The servicing assets and
          liabilities must be measured at fair value initially, if practicable, and
          the
          assets or liabilities must either be amortized or recorded at fair value
          at each
          reporting date. The statement allows a one-time reclassification for entities
          with servicing rights and subsequently requires separate presentation of
          servicing assets and liabilities at fair value in the statement of financial
          position. This statement is effective for the first fiscal year beginning
          after
          September 15, 2006, with earlier adoption permitted. The Company does not
          expect
          this implementation to have a material effect on our consolidated financial
          statements.
  F-13
  Fair
          Value Measurements
 
 In
          September 2006, FASB issued SFAS No. 157, *“* Fair
          Value Measurements, *”* which ** establishes
          a framework for measuring fair value, and expands disclosures about fair
          value
          measurements required under the accounting pronouncements, but does not
          change
          existing guidance as to whether or not an instrument is carried at fair
          value.
          Additionally, it establishes a fair value hierarchy that prioritizes the
          information used to develop those assumptions. SFAS No. 157 is effective
          for
          financial statements issued for fiscal years beginning after November 15,
          2007,
          and interim periods within those fiscal years. Earlier application is
          encouraged, provided that the reporting entity has not yet issued financial
          statements for fiscal year, including financial statements for an interim
          period
          within the fiscal year. The Company is currently evaluating the impact,
          if any,
          that SFAS No. 157 will have on its consolidated financial statements.
 
 Employers’
          Accounting for Defined Benefit Pension and Other Postretirement Plans,
          an
          Amendment of FASB Statements No. 87, 88, 106, and 132R
 
 In
          September 2006, the FASB, issued SFAS, No. 158, “Employers’ Accounting for
          Defined Benefit Pension and Other Postretirement Plans, an Amendment of
          FASB
          Statements No. 87, 88, 106, and 132R,” which requires employers to recognize the
          underfunded or overfunded status of a defined benefit postretirement plan
          as an
          asset or liability in its statement of financial position and to recognize
          changes in the funded status in the year in which the changes occur through
          accumulated other comprehensive income. Additionally, SFAS No. 158 requires
          employers to measure the funded status of a plan as of the date of its
          year-end
          statement of financial position. The new reporting requirements and related
          new
          footnote disclosure rules of SFAS No. 158 are effective for fiscal years
          ending
          after December 15, 2006. We adopted the provisions of SFAS No. 158 for
          the year
          end 2006, and the effect of recognizing the funded status in accumulated
          other
          comprehensive income was not significant. The new measurement date requirement
          applies for fiscal years ending after December 15, 2008.
 
 Other-Than-Temporary
          Impairment
 
 FASB
          Staff Position on FAS No. 115-1 and FAS No. 124-1 (“the FSP”), “The Meaning of
          Other-Than-Temporary Impairment and Its Application to Certain Investments,” was
          issued in November 2005 and addresses the determination of when an investment
          is
          considered impaired, whether the impairment on an investment is
          other-than-temporary and how to measure an impairment loss. The FSP also
          addresses accounting considerations subsequent to the recognition of
          other-than-temporary impairments on a debt security, and requires certain
          disclosures about unrealized losses that have not been recognized as
          other-than-temporary impairments. The FSP replaces the impairment guidance
          on
          Emerging Issues Task Force (EITF) Issue No. 03-1 with references to
          existing authoritative literature concerning other-than-temporary
          determinations. Under the FSP, losses arising from impairment deemed to
          be
          other-than-temporary, must be recognized in earnings at an amount equal
          to the
          entire difference between the securities cost and its fair value at the
          financial statement date, without considering partial recoveries subsequent
          to
          that date. The FSP also required that an investor recognize other-than-temporary
          impairment losses when a decision to sell a security has been made and
          the
          investor does not expect the fair value of the security to fully recover
          prior
          to the expected time of sale. The FSP is effective for reporting periods
          beginning after December 15, 2005. The adoption of this statement will
          not have
          a material impact on our consolidated financial statements.
  F-14
  FASB
          Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an
          interpretation of FASB Statement No.109.”
 
 Interpretation
          48 prescribes a recognition threshold and a measurement attribute for the
          financial statement recognition and measurement of a tax position taken
          or
          expected to be taken in a tax return. Benefits from tax positions should
          be
          recognized in the financial statements only when it is more likely than
          not that
          the tax position will be sustained upon examination by the appropriate
          taxing
          authority that would have full knowledge of all relevant information. The
          amount
          of tax benefits to be recognized for a tax position that meets the
          more-likely-than-not recognition threshold is measured as the largest amount
          of
          benefit that is greater than fifty percent likely of being realized upon
          ultimate settlement. Tax benefits relating to tax positions that previously
          failed to meet the more-likely-than-not recognition threshold should be
          recognized in the first subsequent financial reporting period in which
          that
          threshold is met or certain other events have occurred. Previously recognized
          tax benefits relating to tax positions that no longer meet the
          more-likely-than-not recognition threshold should be derecognized in the
          first
          subsequent financial reporting period in which that threshold is no longer
          met.
          Interpretation 48 also provides guidance on the accounting for and disclosure
          of
          tax reserves for unrecognized tax benefits, interest and penalties and
          accounting in interim periods. Interpretation 48 is effective for fiscal
          years
          beginning after December 15, 2006. The change in net assets as a result
          of
          applying this pronouncement will be a change in accounting principle with
          the
          cumulative effect of the change required to be treated as an adjustment
          to the
          opening balance of retained earnings on January 1, 2007, except in certain
          cases
          involving uncertainties relating to income taxes in purchase business
          combinations. In such instances, the impact of the adoption of Interpretation
          48
          will result in an adjustment to goodwill. While the Company analysis of
          the
          impact of adopting Interpretation 48 is not yet complete, it do not currently
          anticipate it will have a material impact on the Company’s consolidated
          financial statements.
 
 Considering
          the Effects of Prior Year Misstatements in Current Year Financial
          Statements
 
 In
          September 2006, the Securities and Exchange Commission issued Staff Accounting
          Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when
          Quantifying Misstatements in Current Year Financial Statements,” (“SAB
          108”),which provides interpretive guidance on the consideration of the effects
          of prior year misstatements in quantifying current year misstatements for
          the
          purpose of a materiality assessment. The Company adopted SAB 108 in the
          fourth
          quarter of 2006 with no impact on its consolidated financial statements.
  F-15
  **Note
          3 - Notes Payable**
 
 Notes
          payable at December 31, 2006 were as follows:
 
 Short-term
                    bank loan; interest rate of 7.02% payable monthly. The term of
                    the loan is
                    from May 18, 2006 to May 17, 2007. This loan is collateralized
                    by the
                    Company’s office building, workshop, employee dorms and use right of
                    land.
                $
                576,630Short-term
                    bank loan; interest rate of 6.12% at December 31, 2006. The term
                    of the
                    loan is from December 5, 2006 to December 4, 2007, has an interest
                    rate
                    between 5.58% and 6.125%, and is payable monthly. This loan is
                    collateralized by the Company’s machinery and equipment.
                
                115,326Short-term
                    bank loan related to the acquisition of Guangxi Huijie. The term
                    of the
                    loan is from December 20, 2006 to June 20, 2007 with an interest
                    rate of
                    7%. The Company has the ability to extend the maturity of the
                    note an
                    additional six months upon notice to the lender. The Company
                    may also
                    prepay the note at any time without penalty.
                
                1,102,004$
                1,793,960
 
 **Note
          4 - Employee Welfare Plan**
 
 The
          Company has established its own employee welfare plan in accordance with
          Chinese
          law and regulations. The Company makes annual contributions of 14% of all
          employees’ salaries to employee welfare plan. The total expense for the above
          plan was $62,431 and $30,474 for the years ended December 31, 2006 and
          2005,
          respectively. The Company has recorded welfare payable of $81,897 at December
          31, 2006 which is included in tax and welfare payable in the accompanying
          consolidated balance sheet.
 
 **Note
          5 - Statutory Common Welfare Fund**
 As
          stipulated by the Company Law of the People’s Republic of China (PRC), net
          income after taxation can only be distributed as dividends after appropriation
          has been made for the following:
 
 i.
                Making
                    up cumulative prior years’ losses, if any;
  F-16
  ii.
                Allocations
                    to the “Statutory surplus reserve” of at least 10% of income after tax, as
                    determined under PRC accounting rules and regulations, until
                    the fund
                    amounts to 50% of the Company’s registered capital;
 
 iii.
                Allocations
                    of 5-10% of income after tax, as determined under PRC accounting
                    rules and
                    regulations, to the Company’s “Statutory common welfare fund”, which is
                    established for the purpose of providing employee facilities
                    and other
                    collective benefits to the Company’s employees; and
 
 iv.
                Allocations
                    to the discretionary surplus reserve, if approved in the stockholders’
                    general meeting.
 
 Pursuant
          to the new Corporate Law effective on January 1, 2006, there is now only
          one
“Statutory surplus reserve” requirement. The reserve is 10 percent of income
          after tax, not to exceed 50 percent of registered capital.
 
 Pursuant
          to the “Circular of the Ministry of Finance (MOF) on the Issue of Corporate
          Financial Management after the Corporate Law Enforced” (No.67 [2006]), effective
          on April 1, 2006, issued by the MOF, the companies will transfer the balance
          of
          SCWF as of December. 31, 2005 to Statutory Surplus Reserve. Any deficit
          in the
          SCWF will be charged in turn to Statutory Surplus Reserve, additional paid-in
          capital and undistributed profit of previous years. If a deficit still
          remains,
          it should be transferred to retained earnings and be reduced to zero by
          a
          transfer from after tax profit of following years. At December 31, 2006,
          the
          Company did not have a deficit in the SCWF
 
 The
          Company has appropriated $153,054 and $84,106 as reserve for the statutory
          surplus reserve and welfare fund for the years ended December 31, 2006
          and 2005,
          respectively.
  ****Note
          6 -****Earnings
          Per Share****
  
 Earnings
          per share for the years ended December 31, 2006 and 2005 were determined
          by
          dividing net income for the periods by the weighted average number of both
          basic
          and diluted shares of common stock and common stock equivalents outstanding.
          At
          December 31, 2006 and 2005, there were no dilutive
          securities.
 
 **Note
          7 - Related Party Transactions**
 
 During
          the year ended December 31, 2006, certain stockholders contributed $300,000
          to
          the Company to pay for certain merger costs.
 
 Due
          to
          related parties and due from related parties represent amounts payable
          and
          receivable from related arising from purchases and sales
          transactions.
 
 Advances
          to and from related parties and shareholders are non interest bearing and
          are
          payable or receivable on demand.
  F-17
  Sales
          to
          related parties amounted to $170,069 and $82,050 for the years ended
          December 1, 2006 and 2005, respectively.
 
 Due
          from
          related parties amounted to $87,018 as of December 31, 2006.
 
 Purchases
          from related parties amounted to $708 and $1,757 for the years ended
          December 31, 006 and 2005, respectively.
 
 Advance
          to related parties amounted to $924,806 as of December 31,
          2006.
 
 Advance
          from related parties and shareholders amounted to $737,846 as of December
          31,
          2006.
 
 The
          parties are related through one common shareholder who is a majority shareholder
          in all the related entities.
 
 **Note
          8 - Taxes**
  
 Local
          PRC
          Income Tax
 
 Pursuant
          to the tax laws of China, general enterprises are subject to income tax
          at an
          effective rate of 33%. A
          reconciliation of tax at United States federal statutory rate to provision
          for
          income tax recorded in the financial statements is as
          follows:
 
 For
                    the YearsEnded
                    December 31,2006
                
                2005Tax
                    provision (credit) at statutory rate
                
                
                34
                %
                
                34
                %Foreign
                    tax rate difference
                
                
                (1
                %)
                
                (1
                %)US
                    NOL for which no benefit isRealized
                
                
                (2
                %)
                
                -Effect
                    of tax holiday and waiver of current and prior year’s tax
                    liability
                
                
                (40
                %)
                
                -(9
                %)
                
                33
                %
 
 In
          July
          2006, as a result of an investment by a foreign investor in one of the
          Company’s
          subsidiaries, the Company became a Sino-Foreign Joint Venture. Pursuant
          to the
          Chinese income tax law, the Company became fully exempt from income tax
          for a
          period of two years from July 14, 2006 to July 14, 2008, followed by a
          reduced
          tax rate of 15% for the next three years. Concurrent with the exemption,
          the tax
          authorities waived approximately CNY 3,400,000 ($425,429) in taxes due.
 
 The
          effect of the change of tax status has been accounted for in accordance
          with
          SFAS No. 109, par. 28, which states that the effect of a change in tax
          status is
          computed as of the date of change and is included in the tax provision
          for
          continuing operations. Management believes that the local tax authorities
          would
          not have waived past taxes had it not been for the change in the Company’s tax
          status.
  F-18
  If
          the
          Company had not been exempt from paying income taxes due to the Sino-Foreign
          Joint Venture described above ,
          income
          tax expense for the year ended December 31, 2006 would have been approximately
          $325,000 and earnings per share would have been reduced to
          $0.04.
 
 **Note
          9 - Acquisition of** **Guangxi
          Huijie Sci. & Tech. Feed Co, Ltd**
 
 On
          December 20, 2006, the Company completed its acquisition of Guangxi
          Huijie .
          The
          Company acquired 100% of Guangxi Huijie’s issued and outstanding shares of
          common stock for $1,100,420 which was paid in cash. Guangxi Huijie is engaged
          in
          the research & development, manufacture, marketing, distribution and sale of
          premix fodder blended feed and feed additives primarily for use in China’s
          domestic pork husbandry market. Guangxi Huijie operates a production plants
          in
          Nanning City and sells to distributors and large-scale swine farms. The
          Company
          acquired Guangxi Huijie as part of its strategic growth plan.
 
 The
          operating results of Guangxi Huijie are included in the accompanying
          consolidated statements of operations from the acquisition date. For convenience
          of reporting the acquisition for accounting purposes, December 31, 2006
          has been
          designated as the acquisition date. Net income for the 11 days from December
          20,
          2006 to December 31, 2006 was approximately $31,000.
 
 The
          following table summarizes the fair values of the assets acquired and
          liabilities assumed at the date of acquisition. The
          fair
          value of the net assets acquired exceeded the total consideration for the
          acquisition by approximately $315,000. The excess (negative goodwill) was
          allocated on a pro rata basis to long-lived assets.
  Cash
                
                $
                151,990Accounts
                    receivable
                
                
                473,976Other
                    receivables
                
                
                166,741Inventory
                
                
                290,184Other
                    current assets
                
                
                57,809Property
                    and equipment
                
                
                614,510Intangible
                    assets
                
                
                464,246Accounts
                    payable
                
                
                (218,131
                )Notes
                    payable
                
                
                (115,326
                )Advances
                    from related party
                
                
                (737,827
                )Other
                    current liabilities
                
                
                (47,752
                )Purchase
                    price
                
                $
                1,100,420
 
 The
          intangible assets, which is principally land rights, is being amortized
          over 50
          years.
  F-19
  The
          pro
          forma financial information that the consolidated operations of the Company
          as
          if the Guangxi Huijie acquisition had occurred as of the beginning of the
          periods presented is presented below.
 **For
            the year ended December 31, 2006**
 **As Reported****by
                      the**
                  
                  **Guangxi****Company**
                  
                  **Huijie**
                  
                  **Adjustments**
                  
                  **Pro
                      forma**Net
                      Revenue
                  
                  $
                  8,594,876
                  
                  $
                  2,574,836
                  
                  $
                  -
                  
                  $
                  11,169,712Cost
                      of Revenue
                  
                  
                  5,446,332
                  
                  
                  1,794,033
                  
                  
                  -
                  
                  
                  7,240,365Gross
                      Profit
                  
                  
                  3,148,544
                  
                  
                  780,803
                  
                  
                  -
                  
                  
                  3,929,347Operating
                      expenses:Selling
                      expenses
                  
                  
                  1,287,110
                  
                  
                  167,393
                  
                  
                  -
                  
                  
                  1,454,503General
                      and administrative expenses
                  
                  
                  827,540
                  
                  
                  110,953
                  
                  
                  5,425
                  a.
                  
                  943,918Total
                      operating expenses
                  
                  
                  2,114,650
                  
                  
                  278,346
                  
                  
                  5,425
                  
                  
                  2,398,421Income
                      from operations
                  
                  
                  1,033,894
                  
                  
                  502,457
                  
                  
                  (5,425
                  )
                  
                  1,530,926Non-operating
                      income (expense):Other
                      income (expense)
                  
                  
                  35,681
                  
                  
                  2,657Interest
                      income
                  
                  
                  28,851
                  
                  
                  265
                  
                  
                  -
                  
                  
                  29,116Interest
                      expense
                  
                  
                  (23,532
                  )
                  
                  (6,684
                  )
                  
                  (77,691
                  )b.
                  
                  (107,907
                  )Total
                      non-operating income (expense)
                  
                  
                  41,000
                  
                  
                  (3,762
                  )
                  
                  (77,691
                  )
                  
                  (78,791
                  )Income
                      before income tax
                  
                  
                  1,074,894
                  
                  
                  498,695
                  
                  
                  (83,116
                  )
                  
                  1,452,135Income
                      tax
                  
                  
                  (100,386
                  )
                  
                  39,138
                  
                  
                  -
                  
                  
                  (61,248
                  )Net
                      income
                  
                  $
                  1,175,280
                  
                  $
                  459,557
                  
                  $
                  (83,116
                  )
                  $
                  1,513,383Earnings
                      per share
                  
                  $
                  0.07
                  
                  
                  
                  
                  
                  
                  
                  $
                  0.08Weighted
                      average shares outstanding
                  
                  
                  17,911,296
                  
                  
                  
                  
                  
                  
                  
                  
                  17,911,296
 
 a.
                to
                    record additional amortization for the increase in basis of the
                    land use
                    rights as a result of the purchase.b.
                to
                    record interest expense on the acquisition
                    note.
 
 F-20
  **For
            the year ended December 31, 2005**
  **As
                    Reported****by
                    the**
                
                **Guangxi****Company**
                
                **Huijie**
                
                **Adjustments**
                
                **Pro
                    forma**Net
                    Revenue
                
                $
                7,611,845
                
                $
                439,880
                
                $
                -
                
                $
                8,051,725Cost
                    of Revenue
                
                
                5,339,067
                
                
                370,812
                
                
                -
                
                
                5,709,879Gross
                    Profit
                
                
                2,272,778
                
                
                69,068
                
                
                -
                
                
                2,341,846Operating
                    expenses:Selling
                    expenses
                
                
                974,332
                
                
                59,829
                
                
                -
                
                
                1,034,161General
                    and administrative expenses
                
                
                417,675
                
                
                70,152
                
                
                5,425c.
                
                
                493,252Total
                    operating expenses
                
                
                1,392,007
                
                
                129,981
                
                
                5,425
                
                
                1,527,413Income
                    from operations
                
                
                880,771
                
                
                (60,913
                )
                
                (5,425
                )
                
                814,433Non-operating
                    income (expense):Other
                    income (expense)
                
                
                (27,695
                )
                
                -Interest
                    income
                
                
                -
                
                
                -
                
                
                -
                
                
                -Interest
                    expense
                
                
                (19,960
                )
                
                (2,351
                )
                
                (77,691)
                    c.
                
                
                (100,002
                )Total
                    non-operating income (expense)
                
                
                (47,655
                )
                
                (2,351
                )
                
                (77,691
                )
                
                (100,002
                )Income
                    before income tax
                
                
                833,116
                
                
                (63,264
                )
                
                (83,116
                )
                
                714,431Income
                    tax
                
                
                272,410
                
                
                -
                
                
                -
                
                
                272,410Net
                    income
                
                $
                560,706
                
                $
                (63,264
                )
                $
                (83,116
                )
                $
                442,021Earnings
                    per share
                
                $
                0.04
                
                
                
                
                
                
                
                $
                0.03Weighted
                    average shares outstanding
                
                
                15,006,720
                
                
                
                
                
                
                
                
                15,006,720
  c.
                to
                    record additional amortization for the increase in basis of the
                    land use
                    rights as a result of the purchase.d.
                to
                    record interest expense on the acquisition
                    note.
 
 F-21
  **Note
          10 - Segment Information**
 
 The
          Company's predominant business is the research & development, manufacture,
          marketing, distribution, and sale of premix fodder blended feed and feed
          additives primarily for use in China's domestic pork husbandry market.
          The
          Company is organized into three wholly owned subsidiaries: Shanghai Best
          Animal
          Husbandry Co., LTD. ("Shanghai"), Nanchang Best Animal Husbandry Co., LTD.
          ("Nanchang"), and Guangxi Huijie Sci. & Tech. Feed Co.,
          LTD.("Guangxi").
 
 Shanghai
          is located in the Nanxiang, Jia Ding district, Shanghai and sells its products
          to approximately 360 customers, consisting of 170 local distributors and
          190
          large scale pig farms. Nanchang is located in Chang Bei District Industrial
          Park, in Nanchang, Jiangxi province and sells its products to approximately
          300
          customers, consisting of 90 local distributors and 210 large scale pig
          farms.
          Guangxi is located in Coastal Industrial Park, Liangquin district, Nanning
          city,
          Guangxi Province and sells its products to approximately 325 customers,
          consisting of 140 local distributors and 185 large scale pig farms.
 
 The
          following tables summarize segment information for the years ended December
          31:
  **2006**
                
                **2005****Revenues
                    from unrelated entities**Shanghai
                
                $
                3,180,407
                
                $
                2,770,107Guangxi
                
                
                -
                
                
                -Nanchang
                
                
                5,414,469
                
                
                4,841,7388,594,876
                
                
                7,611,845**Intersegment
                    revenues**Shanghai
                
                
                182,564
                
                
                -Guangxi
                
                
                -
                
                
                -Nanchang
                
                
                708
                
                
                -183,272
                
                
                -**Total
                    Revenues**Shanghai
                
                
                3,362,971
                
                
                2,770,107Guangxi
                
                
                -
                
                
                -Nanchang
                
                
                5,415,177
                
                
                4,841,738Less
                    Intersegment revenues
                
                
                (183,272
                )
                
                -8,594,876
                
                
                7,611,845**Income
                    from operations**Shanghai
                
                
                516,364
                
                
                123,765Guangxi
                
                
                -
                
                
                -Nanchang
                
                
                846,243
                
                
                757,006Holding
                    Company
                
                
                (328,713
                )
                
                -1,033,894
                
                
                880,771**Interest
                    income**Shanghai
                
                
                262
                
                
                -Guangxi
                
                
                -
                
                
                -Nanchang
                
                
                28,589
                
                
                -Holding
                    Company
                
                
                -
                
                
                -28,851
                
                
                -**Interest
                    Expense**Shanghai
                
                
                -
                
                
                2,143Guangxi
                
                
                -
                
                
                -Nanchang
                
                
                23,532
                
                
                17,817Holding
                    Company
                
                
                -
                
                
                -23,532
                
                
                19,960**Income
                    tax expense (benefit)**Shanghai
                
                
                (171,370
                )
                
                (40,622
                )Guangxi
                
                
                -
                
                
                -Nanchang
                
                
                271,756
                
                
                (231,788
                )100,386
                
                
                (272,410
                )**Net
                    Income**Shanghai
                
                
                358,671
                
                
                90,106Guangxi
                
                
                -
                
                
                -Nanchang
                
                
                1,145,322
                
                
                470,600Holding
                    Company
                
                
                (328,713
                )
                
                -1,175,280
                
                
                560,706**Provision
                    for depreciation**Shanghai
                
                
                74,347
                
                
                11,322Guangxi
                
                
                -
                
                
                -Nanchang
                
                
                26,122
                
                
                68,143100,469
                
                
                79,465**Capital
                    Expenditures**Shanghai
                
                
                40,907
                
                
                32,383Guangxi
                
                
                -
                
                
                -Nanchang
                
                
                66,553
                
                
                101,971107,460
                
                
                134,354**Total
                    Assets**Shanghai
                
                
                1,504,142Guangxi
                
                
                2,219,456Nanchang
                
                
                3,521,509Holding
                    Company
                
                
                20,7247,265,831
 
 **Note
          11 - Subsequent Event**
 
 On
          February 6, 2007, the Board of Directors approved the sale of 2,750,000
          units in
          a private placement offering. Each unit consisted of one share of common
          stock
          and a warrant to purchase 8% of one share of common stock. The warrants
          expire
          in three years and are have an exercise price of $5.00 per share. On February
          28, 2007, the Company received the minimum required placement of $3,000,000
          USD
          of units of its securities consisting of shares of common stock and stock
          purchase warrants (8% warrant coverage) in a private placement exempt from
          registration under the Securities Act. A total of 1,000,000 units, each
          unit
          representing one share of the Company’s common stock and a three year common
          stock purchase warrant, were sold through the end of business February
          28, 2007.
          Accordingly, the Company issued 1,000,000 shares of its common stock and
          warrants to purchase 80,000 shares of its common stock at this closing.
          Each
          unit is priced at $3.00 with $3,000,000 in total having been received.
          Fees of
          (i) 8% of the securities placed payable in cash, and (ii) a number of common
          stock purchase warrants equal to 8% of the number of units placed were
          paid to
          participating selected dealers. The stock purchase warrants have a term
          of three
          years and are exercisable for one share of common stock at an initial exercise
          price of $5.00. The securities offered in the private placement have not
          been
          registered under the Securities Act, or any state securities laws, and
          unless so
          registered, may not be sold in the United States except pursuant to an
          exemption
          from, or in a transaction not subject to, the registration requirements
          of the
          Securities Act and applicable state securities laws.
  
 **Note
          12 - Subsequent Event (Unaudited)**
 
 On
          April
          29, 2007, the Company completed a final closing of a private placement
          offering
          of units pursuant to which it sold an aggregate of 2,276,753 units (which
          includes the 1,000,000 units mentioned in Note 10) at an offering price
          of $3.00
          per unit for aggregate gross proceeds of $6,830,259. Each unit consisted
          of one
          share of common stock and a warrant to purchase 8% of one share of common
          stock.
          Accordingly, the Company issued an aggregate of 2,276,753 shares of its
          common
          stock and warrants to purchase 182,146 shares of its common stock to the
          37
          accredited investors who participated in this offering. The warrants are
          exercisable for a period of three years at an exercise price of $5.00 per
          share.
          In addition, the Company compensated two participating selected dealers
          and one
          finder that assisted us in the sale of securities in this private placement
          offering by (i) paying them cash equal to 8% of the gross proceeds from
          the sale
          of units placed totaling $546,421 plus (ii) issuing them warrants to purchase
          an
          aggregate of 182,141 shares of our common stock, representing 8% of the
          units
          placed.
  F-22
  The
          securities offered in the private placement have not been registered under
          the
          Securities Act, or any state securities laws, and unless so registered,
          may not
          be sold in the United States except pursuant to an exemption from, or in
          a
          transaction not subject to, the registration requirements of the Securities
          Act
          and applicable state securities laws.
 
 The
          value
          of the 364,287 warrants mentioned above of $664,717 was determined using
          the
          Black-Scholes pricing model with the following assumptions: discount rate
          -
          5.0%; dividend yield - 0%; expected volatility - 50% and term of 3 years.
          The
          recording of the value of these warrants had no impact in the financial
          statements as the entry was to debit and credit additional paid in capital
          for
          the value of the warrants.
 
 On
          June 22, 2007, the Company completed a private placement offering of units
          pursuant to which it sold an aggregate of 750,000 units at an offering
          price of
          $4.00 per unit for aggregate gross proceeds of $3,000,000. Each unit consisted
          of one share of common stock and a warrant to purchase 25% of one share
          of
          common stock. Accordingly, the Company issued 750,000 shares of its common
          stock
          and warrants to purchase 187,500 shares of its common stock to the one
          accredited investor who participated in this offering. The warrants are
          exercisable for a period of three years at an exercise price of $5.60 per
          share.
          In addition, the Company compensated Four Tong Investments, Ltd. for assisting
          it in the sale of securities in this private placement offering by (i)
          paying
          them $240,000, plus (ii) issuing them warrants to purchase 60,000 shares
          of its
          common stock on the same terms and conditions as the warrants granted in
          the
          offering.
 
 The
          value
          of the 247,500 warrants mentioned above of $546,511 was determined using
          the
          Black-Scholes pricing model with the following assumptions: discount rate
          -
          5.0%; dividend yield - 0%; expected volatility - 50% and term of 3 years.
          The
          recording of the value of these warrants had no impact in the financial
          statements as the entry was to debit and credit additional paid in capital
          for
          the value of the warrants.
 
 In
          connection with each private placement offering that the Company completed
          in
          2007, the Company entered into a registration rights agreement with each
          of the
          investors pursuant to which it agreed to register the resale of the shares
          of
          common stock and the shares of common stock issuable upon exercise of the
          warrants issued in each offering for an offering.
 
 If:            
          (i)   a resale registration statement is not filed on or prior to
          the date that is 60 days after the final closing of the respective private
          placement offering;
 
 (ii)
            the Company fails to file with the Securities and Exchange Commission
          (the “SEC”) a request for acceleration in accordance with Rule 461 promulgated
          under the Securities Act, within five trading days of the date that the
          Company is notified (orally or in writing, whichever is earlier) by the
          SEC that
          a Registration Statement will not be “reviewed,” or is not subject to further
          review;
 
 (iii)
            prior to the date when such registration statement is first
          declared effective by the SEC, the Company fails to file a pre-effective
          amendment and otherwise respond in writing to comments made by the SEC
          in
          respect of such registration statement within 15 trading days after
          the receipt of comments by or notice from the SEC that such amendment is
          required in order for a registration statement to be declared
          effective;
  F-23
  (iv)
            a registration statement filed or required to be filed in
          satisfaction of these rights is not declared effective by the SEC on or
          before
          the date that is 180 days after the final closing of the respective
          private placement offering as a result of the failure of the Company to
          meet its
          obligations with respect to such filing as provided for in the registration
          rights agreements, or
 
 (v)
            after a registration statement is first declared effective by
          the SEC, it ceases for any reason to remain continuously effective as to
          the registrable securities held by an investor, or
          the investor is not permitted to utilize the prospectus therein to
          resell such registrable securities, for in any such case 15
          consecutive trading days but no more than an aggregate of 25 trading days
          during
          any 12-month period (which need not be consecutive trading days) (any such
          failure or breach being referred to as an “Event,” and for purposes of clause
          (i) or (iv) the date on which such Event occurs, or for purposes of clause
          (ii)
          the date on which such 5 trading day period is exceeded, or for purposes
          of
          clause (iii) the date which such 15 trading day period is exceeded, or
          for
          purposes of clause (v) the date on which such 15- or 25-day period, as
          applicable, is exceeded being referred to as an “Event Date”),
          then:
 
 - on
          the first Event Date to occur, the Company is obligated pay
          to each investor in the private placement offerings whose obligations
          have been breached an amount in cash equal to 2.0% of the aggregate purchase
          price paid by such Investor for any Registrable Securities then held by
          such
          Investor; and
 
 - on
          each anniversary of such Event Date (if the applicable Event, or any subsequent
          Event, shall not have been cured by such date) until all Event(s) are cured,
          the
          Company shall pay to such Investor an amount in cash equal to 2.0% of the
          aggregate purchase price paid by such Investor pursuant to the Subscription
          Agreement for any Registrable Securities then held by such Investor. While
          there is no cap on the amount of such liquidated damages that the Company
          may be
          required to pay to the investors, these liquidated damages are the sole
          remedy
          available to an investor for any breach of the registration agreements,
          provided
          that, the investors may seek injunctive relief, including specific performance
          of their rights under the registration rights agreements.
  If
          the
          Company fails to pay any liquidated damages in full within seven days after
          the
          date payable, then the Company is obligated to pay interest
          thereon at a rate of 15% per annum (or such lesser maximum amount that
          is
          permitted to be paid by applicable law) to the Investor, accruing daily
          from the
          date such liquidated damages are due until such amounts, plus all such
          interest
          thereon, are paid in full. The liquidated damages pursuant to the terms
          hereof
          shall apply on a daily pro-rata basis for any portion of a year prior to
          the
          cure of an Event.
  The
          Company previously made a $620,000 good faith deposit with an agricultural
          feed
          company located in China that it was in negotiations to acquire. As a result
          of
          the Company’s due diligence investigation of this company, it has decided not to
          pursue this acquisition at this time and have signed a termination consent
          with
          this Company. The deposit is fully refundable and the company expects to
          receive
          a full refund of the $620,000 on or before November 15, 2007.
 
 F-24




SIGNATURES





In
        accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
        this report to be signed on its behalf by the undersigned, thereunto duly
        authorized on November 27, 2007.




AgFeed
                Industries, Inc.By:
            /s/Xiong
              JunhongXiong
                Junhong
              Chief
                Executive Officer (Principal Executive Officer)By:
            /s/
              Yan Liang FanYan
                Liang Fan
              Chief
                Financial Officer
              (Principal
                Financial and Accounting Officer)




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.




SIGNATURE
              
              TITLE
              
              DATE/s/
                Li Songyan
              
              Director,
                  Chairman of the Board
              
              November 27,
                  2007Li
                  Songyan/s/
                Xiong Junhong
              
              Director,
                  Chief Executive Officer, President
              
              November 27,
                  2007Xiong
                  Junhong/s/Yan
                  Liang Fan
              
              Chief
                  Financial Officer
              
              November 27,
                  2007Yan
                  Liang Fan/s/
Lixiang
                Zhang
              
              Director
              
              November
                  27, 2007Lixiang
                Zhang/s/Fredric
                W.
                Rittereiser
              
              Director
              
              November 27,
                  2007Fredric
                W. Rittereiser/s/
Arnold
                Staloff
              
              Director
              
              November 27,
                  2007Arnold
                Staloff




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