UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 FORM 10-KSB (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006. [     ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________ Commission File No.  000-27487 US FARMS, INC.(Name of small business issuer in its charter)Nevada88-0350156(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)1635 Rosecrans Street, Suite D
San Diego, CA92106(Address of principal executive offices)(Zip Code)Issuers telephone number, including area code: (858) 488-7775Securities registered under Section 12(b) of the Exchange Act:NoneSecurities registered under Section 12(g) of the Exchange Act:Common stock, par value $0.001 per share(Title of class) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding twelve months (or 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 [  ] No [  X  ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form and no disclosure will be contained, to the best of 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.  [ X ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X] State issuers net revenues for its most recent fiscal year: $361,414. The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 28, 2007 was approximately $8,518,029 based upon the closing price of $0.42 reported for such date on The OTC Bulletin Board. ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS Not Applicable. APPLICABLE ONLY TO CORPORATE REGISTRANTS   State the number of shares outstanding of each of the Issuer's classes of common equity, as of the latest practicable date: As of March 28, 2007 there were 24,695,705 shares of the issuer's common stock issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE Not Applicable. Transitional Small Business Disclosure Format (Check one): Yes [   ] No [ X ]         2   TABLE OF CONTENTS PART IItem 1.Description of Business4Item 2.Description of Property11Item 3.Legal Proceedings11Item 4.Submission of Matter to a Vote of Security Matters11PART IIItem 5.Market for Common Equity and Related Stockholder Matters11Item 6.Managements Discussion and Analysis or Plan of Operation13Item 7.Financial Statements19Item 8.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure19Item 8A.Controls and Procedures19Item 8B.Other Information19PART IIIItem 9.Directors and Executive Officers of the Registrant20Item 10.Executive Compensation21Item 11.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters23Item 12.Certain Relationships and Related Transactions23Item 13.Exhibits23Item 14.Principal Accountant Fees and Services25Signatures26  3   PART I  ITEM 1. DESCRIPTION OF BUSINESS. Forward-Looking Statements Forward Looking Statements and Risk Factors Except for historical information contained herein, this annual report on Form 10-KSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, which involve certain risks and uncertainties.  Forward-looking statements are included with respect to, among other things, the company's current business plan and strategy and strategic operating plan. These forward-looking statements are identified by their use of such terms and phrases as "intends," "intend," "intended," "goal," "estimate," "estimates," "expects," "expect," "expected," "project," "projected," "projections," "plans," "anticipates," "anticipated," "should," "designed to," "foreseeable future," "believe," "believes" and "scheduled" and similar expressions. Our actual results or outcomes may differ materially from those anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For any forward-looking statements, we claim the protection of the safe harbor for forward-looking statements in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. There are a number of risks, uncertainties and important factors that might cause actual results to differ from any results expressed or implied by such forward looking statements. In addition to the risks, uncertainties and other factors discussed elsewhere in this Form 10-QKSB and (together with any changes thereto contained in the Company's Form 10-Q for the quarters ended September 30, 2006, June 30, 2006 and March 31, 2006 and in any subsequent quarterly reports on Form 10-Q), those contained in the Company's other filings with the Securities and Exchange Commission, and those set forth below. Factors which could cause actual results to differ materially from any forward-looking information contained herein include, but are not limited to, general economic trends and seasonality, including those specifically impacting the nursery business, general agricultural risks beyond our control including risks associated with disease and pests, including sudden oak death, adverse weather conditions, increases in prices for water, petroleum and raw materials, our substantial leverage and ability to service our debt, our ability to comply with the covenants contained in our debt facilities, competitive practices in the industry in which we compete, fluctuations in our operating costs, revenues and cash flows from operations, our dependence on a limited number of key customers, increases in transportation and fuel costs, and other factors. General US Farms, Inc. (formerly International Sports and Media Group, Inc. and San Diego Soccer Development Corporation), (the Company) was incorporated on December 12, 1995, under the laws of the state of Nevada under the name Roller Coaster, Inc.  The Company engaged in no operations prior to February 10, 2000. On February 10, 2000, the Company issued 52,844 shares  (post reverse split) of its common stock to the shareholders of San Diego Soccer Development Corporation, a California company (SDSDC) in exchange for all of the issued and outstanding shares of SDSDC.  Immediately following the acquisition of SDSDC, the Company changed its name to San Diego Soccer Development Corporation, and changed its state of domicile from California to Nevada. At the time of acquisition of SDSDC, the Company was completely inactive, with no operations, assets, or liabilities.  Additionally, the exchange of the Companys common stock for the common stock of SDSDC resulted in  4     the former shareholders of SDSDC obtaining control of the Company. Accordingly, SDSDC was treated as the continuing entity for accounting purposes, and the Company being the continuing entity for legal purposes.  The transaction was accounted for as a recapitalization of SDSDC, with no adjustment to the basis of SDSDCs assets acquired or liabilities assumed. SDSDC was incorporated on August 22, 1997 in the state of California, and was engaged for a time in the management and marketing of professional soccer teams, as well as the publication of a soccer magazine.  The majority of the Companys revenues have been generated from corporate sponsorships, ticket sales, and advertising. On December 19, 2003, shareholders of the Company elected to change the Companys corporate name to International Sports and Media Group, Inc. On July 14, 2006, shareholders of the Company elected to change the Companys corporate name to US Farms, Inc., to adequately reflect the Companys current business model.  The Company presently has five wholly owned subsidiaries: American Nursery Exchange, Inc., a California
corporation; American Aloe Vera Growers, Inc., a California corporation; California Management Solutions, Inc., a California corporation; California Produce Exchange, Inc., a California corporation; and Imperial Ethanol, Inc., a California corporation;  Management Changes During the year ending December 31, 2006, Lonn Paul resigned as Secretary and Director. Donald Hejmanowski and Darin Pines were appointed as new members of the board of directors of the Company. Key Personnel Our future financial success depends to a large degree upon the efforts of Mr. Yan Skwara, our President and Chairman of the Board of Directors.  Mr. Skwara has played a major role in developing and executing our business strategy.  The loss of Mr. Skwara could have an adverse effect on our business and our chances for profitable operations.  While we intend to employ additional management and marketing personnel in order to minimize the critical dependency upon any one person, there can be no assurance that we will be successful in attracting and retaining the persons needed.  If we do not succeed in retaining and motivating our current employees and attracting new high quality employees, our business could be adversely affected.  We do not maintain key man life insurance on the life of Mr. Skwara. Corporate Offices Our executive office is located at 1635 Rosecrans Street, Suite D, San Diego, CA 92106.  The telephone number to call for information is (858) 488-7775. Employees We presently employ one person, our President and Chief Executive Officer, Yan Skwara. All other relationships are in the form of independent contractors and consultants.  Insurance  We do not presently have a commercial general liability insurance policy. Although there have been no successful claims of this nature against the Company, there is no assurance that the company will prevail against any future claim. Successful claims could have a serious adverse effect upon our financial condition and its future viability. We will again seek to obtain general liability and product liability insurance at such time when our operations dictate. 5   We do maintain auto insurance coverage but no workman's compensation coverage.  We do not carry director and officer liability insurance, but we have agreed to indemnify our officers and directors against any personal liability incurred as a result of their association with the Company. This agreement has not been formalized in writing. We have been advised that in the opinion of the Securities and Exchange Commission indemnification for liabilities arising under the Securities Act of 1933 (the "Act") is against public policy as expressed in the Act, and is, therefore, unenforceable. If a claim for indemnification against such liabilities is asserted by one of our directors, officers, or controlling persons in connection with securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification is against public policy to court of appropriate jurisdiction. We will then be governed by the court's decision.  Intellectual  Property  We hold one trademark on the name "San Diego Flash." We will protect our current and future intellectual property through license agreements and trade and services marks on property owned by US Farms, Inc.  Research and Development Activities  In the last two fiscal years, we did not spend any funds on research and development activities.   Risk Factors Risks Relating to Our Business Need for ongoing financing. We will need additional capital to continue our operations.  We will endeavor to raise funds through the sale of securities. There can be no assurance that we will obtain sufficient capital on acceptable terms, if at all.  Failure to obtain such capital will have an adverse impact on our financial position and results of operations and ability to continue as a going concern.  Our operating and capital requirements during the next fiscal year and thereafter will vary based on a number of factors, including the level of sales and marketing activities for our services and products.  There can be no assurance that additional private or public finances, including debt or equity financing, will be available as needed, or, if available, on terms favorable to us.  Any additional equity financing may be dilutive to stockholders and such additional equity securities may have rights, preferences or privileges that are senior to those of our existing common stock. Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility.  Our failure to successfully obtain additional future funding may jeopardize our ability to continue our business and operations. If we raise additional funds by issuing equity securities, existing stockholders may experience a dilution in their ownership.  In addition, as a condition to giving additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. Our Financial Results May Be Affected by Factors Outside of Our Control Our future operating results may vary significantly from quarter to quarter due to a variety of factors, many of which are outside our control.  Our anticipated expense levels are based, in part, on our estimates of future revenues and may vary from our projections.  We may be unable to adjust spending rapidly enough to compensate for any unexpected revenues shortfall.  Accordingly, any significant shortfall in revenues in relation to our planned expenditures would materially adversely affect our business, operating results, and financial condition.  6    We cannot predict with certainty our revenues and operating results.  Further, we believe that period-to-period comparisons of our operating results are not necessarily a meaningful indication of future performance. Business concentration. While we consider our relationships with our customers to be satisfactory, given the concentration of our sales to a few key customers, our continued relationships may be subject to the policies and practices of the customers.  We continue to concentrate our efforts on expanding our customer base in order to reduce our reliance on our current customers. Inflation. In our opinion, inflation has not had a material effect on our financial condition or results of our operations. Trends, risks and uncertainties. We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise.  Investors should carefully consider all of such risk factors before making an investment decision with respect to our common stock. Cautionary factors that may affect future results. We provide the following cautionary discussion of risks, uncertainties and possible inaccurate assumptions relevant to our business and our products.  These are factors that we think could cause our actual results to differ materially from expected results.  Other factors besides those listed here could adversely affect us. Potential fluctuations in quarterly operating results. Our quarterly operating results may fluctuate significantly in the future as a result of a variety of factors, most of which are outside our control, including the demand for our services, seasonal trends in purchasing, the amount and timing of capital expenditures; price competition or pricing changes in the industry; technical difficulties or system downtime; general economic conditions, and economic conditions specific to our industry.  Our quarterly results may also be significantly impacted by the impact of the accounting treatment of acquisitions, financing transactions or other matters.  Particularly at our early stage of development, occurrences such as accounting treatment can have a material impact on the results for any quarter.  Due to the foregoing factors, among others, it is likely that our operating results will fall below our expectations or those of investors in some future quarter. Lack of independent directors. We cannot guarantee that our board of directors will have a majority of independent directors in the future.  In the absence of a majority of independent directors, our executive officers, could establish policies and enter into transactions without independent review and approval thereof.  This could present the potential for a conflict of interest between us and our stockholders generally and the controlling officers, stockholders or directors. Limitation of liability and indemnification of officers and directors. Our officers and directors are required to exercise good faith and high integrity in our management affairs.  Our articles of incorporation provide, however, that our officers and directors shall have no liability to our stockholders for losses sustained or liabilities incurred which arise from any transaction in their respective managerial capacities unless they violated their duty of loyalty, did not act in good faith, engaged in intentional misconduct or knowingly violated the law, approved an improper dividend or stock repurchase, or derived an improper benefit from the transaction.  Our articles and bylaws also provide for the indemnification by us of the officers and directors against any losses or liabilities they may incur as a result of the manner in which they operate our business or conduct the internal affairs, provided that in connection with these activities they act in good faith and in a manner that they reasonably believe to be in, or not opposed to, our best interests, and their conduct does not constitute gross negligence, misconduct or breach of fiduciary obligations. 7  Management of potential growth. We may experience rapid growth which will place a significant strain on our managerial, operational, and financial systems resources.  To accommodate our current size and manage growth, we must continue to implement and improve our financial strength and our operational systems, and expand, train and manage our sales and distribution base.  There is no guarantee that we will be able to effectively manage the expansion of our operations, or that our facilities, systems, procedures or controls will be adequate to support our expanded operations.  Our inability to effectively manage our future growth would have a material adverse effect on us. Quantitative and qualitative disclosure about market risk. We believe that we do not have any material exposure to interest or commodity risks.  Our financial results are quantified in U.S. dollars and a majority of our obligations and expenditures with respect to our operations are incurred in U.S. dollars.  Although we do not believe we currently have any materially significant market risks relating to our operations resulting from foreign exchange rates, if we enter into financing or other business arrangements denominated in currency other than the U.S. dollars, variations in the exchange rate may give rise to foreign exchange gains or losses that may be significant. We currently have no material long-term debt obligations denominated in currency other than U.S. dollars.  We do not use financial instruments for trading purposes and we are not a party to any leverage derivatives. We are not likely to succeed unless we can overcome the many obstacles we face. As an investor, you should be aware of the difficulties, delays and expenses we encounter, many of which are beyond our control, including unanticipated market trends, employment costs, and administrative expenses.  We cannot assure our investors that our proposed business plans as described in this report will materialize or prove successful, or that we will ever be able to finalize development of our products or services or operate profitably.  If we cannot operate profitably, you could lose your entire investment.  As a result of the nature of our business, initially we expect to sustain substantial operating expenses without generating significant revenues. Our auditors have stated we may not be able to stay in business. Our auditors have issued a going concern opinion, which means that there is doubt that we can continue as an ongoing business for the next 12 months.  Unless we can raise additional capital, we may not be able to achieve our objectives and may have to suspend or cease operations.  See Managements Discussion and Analysis of Financial Condition and Results of Operations. Our acquisition strategy involves a number of risks. We intend to pursue growth through the opportunistic acquisition of companies or assets that will enable us to expand our service lines to provide more cost-effective customer solutions.  We routinely review potential acquisitions.  This strategy involves certain risks, including difficulties in the integration of operations and systems, the diversion of our managements attention from other business concerns, and the potential loss of key employees of acquired companies.  We may not be able to successfully acquire, and/or integrate acquired businesses into our operations. Risks Relating to Our Stock We need to raise additional capital.  If we are unable to raise necessary additional capital, our business may fail or our operating results and our stock price may be materially adversely affected. 8   Due to the lack of revenue and expenses, we need to secure adequate funding.  If we are unable to obtain adequate funding, we may not be able to successfully develop and market our products and services and our business will most likely fail.  We do not have commitments for additional financing.  To secure additional financing, we may need to borrow money or sell more securities, which may reduce the value of our outstanding securities.  Under these circumstances, we may be unable to secure additional financing on favorable terms or at all. Selling additional stock, either privately or publicly, would dilute the equity interests of our stockholders.  If we were able to borrow money, we will have to pay interest and may also have to agree to restrictions that limit our operating flexibility.  If we are unable to obtain adequate financing, we will have to curtail business operations which would have a material negative effect on operating results and most likely result in a lower stock price. Our common stock has experienced in the past, and is expected to experience in the future, significant price and volume volatility, which substantially increases the risk that you may not be able to sell your shares at or above the price that you pay for the shares. Because of the limited trading market for our common stock, and because of the possible price volatility, you may not be able to sell your shares of common stock when you desire to do so.  During 2005 and 2006, our common stock was sold and purchased at prices that ranged from a high of $.50 to a low of $0.005 per share.  The inability to sell your shares in a rapidly declining market may substantially increase your risk of loss because of such illiquidity because the price for our common stock may suffer greater declines due to its price volatility. The price of our common stock that will prevail in the market may be higher or lower than the price you pay.  Certain factors, some of which are beyond our control, that may cause our share price to fluctuate significantly include, but are not limited to, the following: · Variations in our quarterly operating results; · The development of a market in general for our products and services; · Changes in market valuations of similar companies; · Announcement by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; · Loss of a major customer or failure to complete significant transactions; · Additions or departures of key personnel; and · Fluctuations in stock market price and volume. Additionally, in recent years the stock market in general, and the OTC Bulletin Board and technology stocks in particular, have experienced extreme price and volume fluctuations.  In some cases, these fluctuations are unrelated or disproportionate to the operating performance of the underlying company.  These market and industry factors may materially and adversely affect our stock price, regardless of our operating performance. Over the past few months, there have been periods of significant increases in trading volume of our common stock during which the price of our stock has both increased and decreased.  The historical trading of our common stock is not necessarily an indicator of how it will trade in the future and our trading price as of the date of this report does not necessarily portend what the trading price of our common stock might be in the future. In the past, class action litigation has often been brought against companies following periods of volatility in the market price of the common stock of those companies.  If we become involved in this type of litigation in the future, it could result in substantial costs and diversion of management attention and resources, which could have a further negative effect on your investment in our stock. 9   Our directors have the right to authorize the issuance of preferred stock and additional shares of our common stock. Our directors, within the limitations and restrictions contained in our articles of incorporation and without further action by our stockholders, have the authority to issue shares of preferred stock from time to time in one or more series and to fix the number of shares and the relative rights, conversion rights, voting rights, and terms of redemption, liquidation preferences and any other preferences, special rights and qualifications of any such series.  We have no intention of issuing preferred stock at the present time.  Any issuance of preferred stock could adversely affect the rights of holders of our common stock. Should we issue additional shares of our common stock at a later time, each investors ownership interest in US Farms, Inc. would be proportionally reduced.  No investor will have any preemptive right to acquire additional shares of our common stock, or any of our other securities. Our common stock is subject to the penny stock rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock. The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a penny stock, for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions.  Inasmuch as that the current bid and ask price of common stock is less than $5.00 per share, our shares are classified as penny stock under the rules of the SEC.  For any transaction involving a penny stock, unless exempt, the rules require: · That a broker or dealer approve a persons account for transactions in penny stocks; and · The broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a persons account for transactions in penny stocks, the broker or dealer must: · Obtain financial information and investment experience objectives of the person; and · Make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form: · Sets forth the basis on which the broker or dealer made the suitability determination; and · That the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the penny stock rules.  This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions.  Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. 10   ITEM 2. DESCRIPTION OF PROPERTY.  The Company owns no real property.  We lease office space at 1635 Rosecrans Suite D, San Diego, CA 92106, on a month to month basis at a rate of US $775.00 per month. ITEM 3. LEGAL PROCEEDINGS. The Company is not a party to any pending legal proceedings.  However, the Company owes approximately $67,000 to five persons who obtained judgments against the Company that remain unsatisfied.   ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. An annual meeting of shareholders of US Farms, Inc. was held on July 14, 2006.  Proxies for the meeting were solicited pursuant to Regulation 14A. The following three matters were voted upon, and approved, by the shareholders: 1) To amend Article I of the Articles of Incorporation to read as follows: The name of this corporation is US Farms, Inc., and 2) To elect to the Board of Directors three (3) directors, Yan Skwara, Donald Hejmanowski, and Darin Pines to serve until the next Annual Meeting of Stockholders of the Company or until their successors are elected and qualify, subject to their prior death, resignation or removal; and 3) To ratify the appointment of E. Randall Gruber, CPA as the Companys independent public accountant. PART II  ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS PURCHASES OF EQUITY SECURITIES Market Information Until December 26, 2005, our common stock was quoted on the NASDAQ OTC Bulletin Board. The Companys shares were delisted from the NASDAQ OTC Bulletin Board as of the opening of trading on December 27, 2005 due to failing to file required reports with the Securities Exchange Commission.  The Companys common stock continued to be available for trading under the ticker symbol USFI on the Nasdaq Pink Sheets.  Upon completion of the filings, the company reapplied for a listing on the OTCBB and was approved for trading effective July 17, 2006. Below is the range of high and low bid information for the Companys common stock for each quarter within the last two fiscal years. The source of this information is IDD Information Services. The quotations reflect inter-dealer prices without retail mark-up, mark-down or commission and may not represent actual transactions. Quarter EndingsQuarterly HighQuarterly LowQuarterly Close3/31/20050.030.010.016/30/20050.010.0090.019/30/20050.0070.0050.00612/31/20050.120.0580.0763/31/20060.340.260.316/30/20060.400.320.399/30/20060.480.400.4512/31/20060.500.450.49 11   Holders There were 946 holders of record of the Companys common stock on December 31, 2006. Recent Sales of Unregistered Securities In November and December 2006, the registrant sold 447,500 shares of its common stock to 27 persons for gross proceeds of $89,500.  This transaction was exempt from registration under the Securities Act of 1933, based upon Section 4(2) for transactions by the issuer not involving any public offering.  The shares were sold directly by the Registrant without an underwriter.  There was no general solicitation, no advertisement and resale restrictions were imposed by placing a Rule 144 legend on the stock certificates. Based upon the established relationship between the investors and the issuer's officer and director, the issuer concluded that each investor was either an accredited investor or that each investor had such knowledge and experience in business and financial matters that he was capable of evaluating the merits and risks of the prospective investment and that the amount of the investment for each person was reasonable in relation to the investor's net worth because it did not exceed 10% of the investor's net worth.  Between December 14, 2006 and March 26, 2007, the Registrant sold 4,186,000 shares of its common stock and Warrants to purchase 4,186,000 shares of common stock to 68 persons for gross proceeds of $1,046,500.  The Warrants allow the holder to purchase a share of common stock at $.50 per share until November 28, 2009.  The Registrant can redeem the Warrants at $.10 per Warrant.  This transaction was exempt from registration under the Securities Act of 1933, based upon Section 4(2) for transactions by the issuer not involving any public offering and Rule 506 of Regulation D.  The shares were sold on behalf of the Registrant by Westcap Securities Inc. (the Placement Agent).  There was no general solicitation, no advertisement and resale restrictions were imposed by placing a Rule 144 legend on the certificates.  The offering was limited to accredited investors.  The Placement Agent received a 10% commission, 3% non-accountable expense allowance and 2% due diligence fee from the gross offering proceeds.  Further, the Placement Agent will receive 10% of the proceeds from the exercise of the Warrants and a consulting fee payable in common stock equal to 10% of gross offering proceeds.  Between December 14, 2006 and March 30, 2007, the Registrant sold 1,278,000 shares of its common stock and Warrants to purchase 1,278,000 shares of common stock to 19 persons for gross proceeds of $319,500.  The Warrants allow the holder to purchase a share of common stock at $.50 per share until November 28, 2009.  The Registrant can redeem the Warrants at $.10 per Warrant.  This transaction was exempt from registration under the Securities Act of 1933, based upon Section 4(2) for transactions by the issuer not involving any public offering and Rule 506 of Regulation D.  The shares were sold directly by the Registrant without an underwriter.  There was no general solicitation, no advertisement and resale restrictions were imposed by placing a Rule 144 legend on the stock certificates. Based upon the established relationship between the investors and the issuer's officer and director, the issuer concluded that each investor was either an accredited investor or that each investor had such knowledge and experience in business and financial matters that he was capable of evaluating the merits and risks of the prospective investment and that the amount of the investment for each person was reasonable in relation to the investor's net worth because it did not exceed 10% of the investor's net worth.  Between December 28, 2006 and February 9, 2007, the Registrant issued 2,172,500 shares of its common stock to 5 persons in connection with the May 30, 2006 Asset Purchase Agreement between the Registrant and Phrixus Holdings, Inc.  The Registrant valued the shares at $.25 per share or $543,125.  This transaction was exempt from registration under the Securities Act of 1933, based upon Section 4(2) for transactions by the issuer not involving any public offering.  There was no general solicitation, no advertisement and resale restrictions were imposed by placing a Rule 144 legend on the certificates.  Based upon the relationship between the investors and the issuer's officers and directors, the issuer concluded that each investor was either an accredited investor or that each investor had such knowledge and experience in business and financial matters that he was capable of evaluating the merits and risks of the prospective investment and that the amount of the investment for each person was reasonable in relation to the investor's net worth because it did not exceed 10% of the investor's net worth.  The shares were sold directly by the Registrant without an underwriter.  Between November 2006 and February 2007, the Registrant issued 1,812,200 shares of its common stock to 13 persons valued at $.25 per share or $453,050 in exchange for consulting services rendered and to be rendered to the Registrant.  825,000 shares were issued to the Registrants officer and directors, Yan Skwara (500,000), Donald Hejmanowski (175,000), and Darin Pines (150,000).  195,200 shares of common stock were issued to Westcap Securities, Inc. as consulting fees.  The transactions between the Registrant and the consultants were exempt from registration under the Securities Act of 1933, based upon Section 4(2) for transactions by the issuer not involving any public offering.  There was no general solicitation, no advertisement and resale restrictions were imposed by placing a Rule 144 legend on the certificates.  Based upon the relationship between the investors and the issuer's officers and directors, the issuer concluded that each investor was either an accredited investor or that each investor had such knowledge and experience in business and financial matters that he was capable of evaluating the merits and risks of the prospective investment and that the amount of the investment for each person was reasonable in relation to the investor's net worth.  The shares were sold directly by the Registrant without an underwriter.  Between November 28, 2006 and January 29, 2007, the Registrant issued 482,258 shares of its common stock to 9 persons who held convertible promissory notes for $109,298.  The transactions between the Registrant and the consultants were exempt from registration under the Securities Act of 1933, based upon Section 4(2) for transactions by the issuer not involving any public offering.  12  Dividends We do not  currently  pay any  dividends on our common  stock,  and we currently intend to  retain  any  future  earnings  for use in our  business.  Any future determination as to the payment of dividends on our common stock will be at the discretion of our Board of Directors. On May 23, 2005 the Company announced a spin-off of Pan American Relations, a privately owned subsidiary of the Company. One share of Pan American Relations was issued for every one hundred shares of USFI common stock held by shareholders of record as of June 6, 2005. The spin-off of Pan American Relations created a stock dividend granted to investors who owned common stock of the Company of record as of June 6, 2005. The distribution date for the dividend was June 30, 2005. Securities Authorized for Issuance Under Equity Compensation Plans Stock Option Plan On March 21, 2005, we adopted the 2005 Non-Qualified Stock & Stock Option Plan for issuance of common stock and options to employees and consultants of the company, and registered 2000,000 (post reverse split) shares underlying the Stock Plan on S-8 Registration Statement on March 25, 2005.  All 200,000 shares have been issued out of this plan. On August 1, 2005, we adopted the August 2005 Non-Qualified Stock and Stock Option Plan for issuance of common stock and options to employees and consultants of the company, and registered 1,030,000 (post reverse split) shares underlying the Stock Plan of S-8 Registration Statement on August 15, 2005. All 1,030,000shares have been issued out of this plan.  ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. Managements Plan of Operation US Farms, Inc. is a diversified commercial farming and nursery company. The company grows, markets and distributes horticultural products through a number of subsidiaries. The horticultural products are sold through supermarkets, home centers, retail merchandisers, garden centers, re-wholesalers, and landscapers throughout the United States and Canada. Through internal growth and strategic acquisitions the company is expanding its market share in its nursery and specialty produce businesses. Currently the company has subsidiaries which provide a full range of products including Aloe Vera, Cactus, Succulents, Jade, Rare and Exotic Palm Trees and Cycads along with produce products that include Aloe Vera, Asparagus, Tomatoes and Wheat grass. In 2007 the company plans to add over 100 specialty niche produce items to it offerings. On May 30, 2006, the Company entered into an Asset Purchase Agreement with American Aloe Nurseries, a dba of Phrixus Holdings, Inc. (Phrixus), a private corporation, to acquire  Aloe Vera plants (Fructus Industrialis), nursery inventory consisting of Potted Aloe Vera Pup plants (in containers out of ground) and equipment used in the nursery/farm business. At December 31, 2006, the transaction had not closed.  The Company and Phrixus are working to resolve certain accounting issues before a closing can occur.  Alternatively, the transaction may be modified to achieve the Companys business objectives. On July 31, 2006, the Company entered into an Asparagus Growing Agreement with Phrixus Holdings, Inc. (Phrixus), to provide services including (i) farming acreage (ii) management and supervision (iii) responsibility to verify no toxic chemicals exist (iv) guarantee in the product of asparagus (v) provide log on the chemicals applied (vi) serve as operator under the regulations promulgated by the California Department of Food and Agriculture Commissioners Office. In consideration of Phrixus services performed, the Company will pay a fee of $500 per acre plus all growing cost (the complete Asparagus Growing Agreement was attached as Exhibit 10.2 to the Companys Current Report on Form 8-K filed on August 14, 2006). 13   The Company presently has five wholly owned subsidiaries: American Nursery Exchange, Inc., American Aloe Vera Growers, Inc., California Management Solutions, Inc., California Produce Exchange, Inc., and Imperial Ethanol, Inc. American Aloe Vera Growers, Inc.American Aloe Vera Growers is one of the largest growers and suppliers of domestic Aloe Vera. We grow, pack, and ship Aloe Vera Plants, Aloe Vera Produce, and Bulk Aloe Vera Leaves to many brokers, re-wholesalers and direct to many major retailers threw out the United States and Canada. Our facilities are dedicated to Aloe Vera production, which has enabled us to be the leader in Aloe Vera in North America.American Nursery Exchange, Inc.American Nursery Exchange is in the business of supplying horticulture products to the grocery, garden center and home improvement industries on a national level. The company has leased its first facility located in North County San Diego, California, a 100,000 sq. ft. green house facility along with a 10,000 sq. ft. warehouse which will be used for growing as well as staging orders for its customers.California Management Solutions, Inc.  California Management Solutions (CMS) is in the business of providing management solutions to the agriculture space.  CMS is focused currently on commercial nursery management and intents to move into farm management in the future. During the next twelve months the Companys plan of operation is to raise approximately $5,000,000 of which the Company intends to invest in its farming and nursery operations, which includes acquiring plant inventory, hiring consultants/employees and for marketing purposes. There is no material plans for raising such funds or assurance that the Company will be able to do so.  California Produce Exchange, Inc.California Produce Exchange is in the business of growing and supplying produce to our customers worldwide. The company works with a dedicated team of worldwide growers, packers, processors and shippers. California Produce Exchange is committed to consistently providing safe, high-quality fresh fruit, and vegetables, while protecting the environment in which its products are grown. California Produce Exchange is currently one of the largest; if not the largest grower of domestic grown Asparagus from January thru the end of March.  Imperial Ethanol, Inc.  US Farms established a wholly owned subsidiary dedicated to establishing a leading ethanol processing facility located in Imperial County, Ca. The wholly owned subsidiary has been named Imperial Ethanol, Inc. and has been registered fully with the State of California.  US Farms management has initiated the due diligence process on the Ethanol industry and has received favorable results from a feasibility study conducted on its proposed dry-mill fuel ethanol production facility in Southern California. The report was conducted by BBI International, a Salida, Colorado based independent Biofuels service firm. The study found that the proposed facility in the Imperial Valley located in Southern California combines the advantages of a large local ethanol market with an ethanol selling price above the national average with the opportunity to sell distillers grains into a local cattle feed market. 14  The company plans to initially construct a 50 million gallon per year (MGY) ethanol facility with capabilities of expanding to double the production or 100 million gallons a year and plans to utilize its resources and contacts in the agriculture sector to begin building its energy sector holdings. Results of Operations Twelve Months Ended December 31, 2006 compared to the Twelve Months Ended December 31, 2005. During the fourth quarter of 2005, the Company eliminated all of its previous operations refocusing its efforts in the agricultural sector. From a financial statement perspective, all 2005 revenues and expenses are included in discontinued operations as disclosed in Note 8 of the financial statements. Revenue Revenue for the 12 months ended December 31, 2006 was $361,414, compared with no revenues during 2005.  These revenues were generated from the newly formed American Aloe Nurseries, Inc. and American Aloe Vera Growers, Inc. subsidiaries resulting from the Asset Purchase Agreement with American Aloe Nurseries, a dba of Phrixus Holdings, Inc. (Phrixus) on May 30, 2006. Gross Profit Gross profit for the 12 months ended December 31, 2006 was $36,141, compared with $0 for 2005. This increase was due to the margins generated by from the newly formed American Aloe Nurseries, Inc. and American Aloe Vera Growers, Inc. subsidiaries. Consulting Expenses Consulting expenses for the 12 months ended December 31, 2006 was $3,385,856, compared with $0 for 2005.  The majority of these expenses consisted of non-recurring legal, accounting and business development costs associated with the change in business focus. General and Administrative Expenses General and administrative expenses (G&A) for the 12 months ended December 31, 2006 were $1,098,136 for the 12 months ended December 31, 2006, compared to $0 for the 12 months ended December 31, 2005. We do not expect G&A expenses to increase substantially in the coming 12 months.  We intend to focus on operating efficiencies, increasing revenues, and ensuring profitability during this period. Loss from Discontinued Operations The Loss from Discontinued Operations for the 12 months ended December 31, 2006 was $0 for the 12 months ended December 31, 2006, compared to $1,395,389 for the 12 months ended December 31, 2005. During the fourth quarter of 2005, the Company eliminated all of its previous operations refocusing its efforts in the agricultural sector. Net Loss During the 12 months ended December 31, 2006, the Company incurred a loss of $4,471,910, an increase of $3,076,521 from $1,395,389 in 2005.  During the 12 months ended December 31, 2006, we used net cash in operating activities of $600,103, $8,000 net cash was used by investing activities, and net cash provided by financing activities was $610,571. Liquidity and Capital Resources 15  Cash Position For Fiscal Year Ended December 31, 2006 compared to December 31, 2005 As of December 31, 2006, the Company had negative working capital of $2,930,622. From inception through December 31, 2006, the Company had recorded an accumulated deficit of $17,441,594. As of December 31, 2005, the Company had negative working capital of $2,618,112. From inception through December 31, 2005, the Company had recorded an accumulated deficit of $12,969,684. At December 31, 2006 and 2005, our auditors expressed a formal auditors opinion that our financial position raised substantial doubt about our ability to continue as a going concern. We incurred net losses of $4,471,910 and $1,395,389 for the fiscal years ended December 31, 2006 and 2005. We used cash in operations totaling ($600,103) and ($448,364) for the fiscal years ending December 31, 2006 and 2005, respectively. During the twelve-month period ended December 31, 2006, operating expenses were $4,485,325 as compared to $1,265,829 for the same period in 2005.  The increase is primarily attributable to a $3,118,779 increase in consulting fees in 2006.  The Company anticipates due to the asset purchase with Phrixus Holdings, Inc. that we will incur smaller losses in the near future if we are able to expand our business and the marketing of our products and services.  The losses will be created to the extent of the excess of technology development and marketing expenses over the income from operations.  Our operating losses as shown may be perceived as alarming and possibly indicate a downward spiral leading to the demise of the company; however, from management's point of view, there is a bright side to the operating losses which have accumulated to approximately $17,000,000 are tapering off.  The positive side of this net operating loss will allow us to accumulate cash without paying taxes in the foreseeable future. Liquidity Resources Our future funding requirements will depend on numerous factors, some of which are beyond our control. These factors include our ability to fully implement our business plan and, once we do, to operate profitably, our ability to recruit and train management and personnel for a different business interests, and our ability to compete with other, better capitalized and more established competitors who offer alternative or similar products and services to those of the Company. Our broad, overall, higher growth business strategy, requires significant development and capital expenditures. We will incur a substantial portion of these expenditures before we generate significantly higher sales. Combined with operating expenses, these capital expenditures will result in a negative cash flow until we can establish an adequate revenue-generating customer base. We expect losses through 2005, and we can give no assurance that we will achieve or sustain any positive cash flow or profitability thereafter. We anticipate that we will need to raise additional capital. The amount of capital we may need to raise is dependent upon many factors. For example, the need for additional capital will be greater if (i) we do not enter into agreements with customers on the terms we anticipate; (ii) our net operating deficit increases because we incur significant unanticipated expenses; or (iii) we incur additional costs to meet changed or unanticipated market, regulatory, or technical conditions. If these or other events occur, there is no assurance that we could raise additional capital on favorable terms, on a timely basis or at all. If additional capital is not raised, it could have a significant negative effect on our business operations and financial condition, possibly causing us to take immediate cost reduction or other actions, including, but not limited to, cessation of our business operations. Our ability to execute a public or private offering or otherwise obtain funds is subject to numerous factors beyond our control, including, without limitation, a receptive securities market and appropriate governmental clearances. No assurances can be given that we will be profitable, or that any additional public or private offering will occur, that we will be successful in obtaining additional funds from any source or be successful in implementing an acceptable exit strategy on behalf of our investors. Moreover, additional funds, if obtainable at all, may not be available on terms acceptable to us when such funds are needed or may be on terms which are significantly adverse to our current shareholders. The unavailability of funds when needed would have a material adverse effect on us. 16  Critical Accounting Policies  The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.  We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances.  Future events, however, may differ markedly from our current expectations and assumptions.  While there are a number of significant accounting policies affecting our consolidated financial statements, we believe the following critical accounting policy involve the most complex, difficult and subjective estimates and judgments. Stock-Based Compensation In December 2002, the FASB issued SFAS No. 148 - Accounting for Stock-Based Compensation - Transition and Disclosure.  This statement amends SFAS No. 123 - Accounting for Stock-Based Compensation, providing alternative methods of voluntarily transitioning to the fair market value based method of accounting for stock based employee compensation.  SFAS 148 also requires disclosure of the method used to account for stock-based employee compensation and the effect of the method in both the annual and interim financial statements.  The provisions of this statement related to transition methods are effective for fiscal years ending after December 15, 2002, while provisions related to disclosure requirements are effective in financial reports for interim periods beginning after December 31, 2002. We elected to continue to account for stock-based compensation plans using the intrinsic value-based method of accounting prescribed by APB No. 25, Accounting for Stock Issued to Employees, and related interpretations.  Under the provisions of APB No. 25, compensation expense is measured at the grant date for the difference between the fair value of the stock and the exercise price. Recent Accounting Pronouncements SFAS No. 123 -- In December 2004, FASB issued a revision to SFAS 123 Share-Based Payment. This Statement is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. This Statement supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. This Statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entitys equity instruments or that may be settled by the issuance of those equity instruments. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. This Statement does not change the accounting guidance for share-based payment transactions with parties other than employees provided in Statement 123 as originally issued and EITF Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. This Statement does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, Employers Accounting for Employee Stock Ownership Plans. The adoption of this revision did not have a material impact on the Companys financial statements.  SFAS No. 153 -- In December 2004, FASB issued SFAS 153 Exchanges of Nonmonetary Assetsan amendment of APB Opinion No. 29.  The guidance in APB Opinion No. 29, Accounting for Nonmonetary Transactions, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. This Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The adoption of SFAS 153 did not have any impact on the Companys financial statements.  SFAS No. 152 -- In December 2004, FASB issued SFAS 152 Accounting for Real Estate Time-Sharing Transactionsan amendment of FASB Statements No. 66 and 67. This Statement amends FASB Statement No. 66, Accounting for Sales of Real Estate, to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing Transactions. This Statement also amends FASB Statement No. 67, Accounting for Costs and Initial  17   Rental Operations of Real Estate Projects, to state that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-2. This Statement is effective for financial statements for fiscal years beginning after June 15, 2005. The Company does not believe adoption of SFAS 152 will have any impact on the Companys financial statements.  SFAS No. 151 -- In November 2004, the FASB issued SFAS 151 Inventory Costsan amendment of ARB No. 43. This Statement amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage).  Paragraph 5 of ARB 43, Chapter 4, previously stated that . . . under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and re-handling costs may be so abnormal as to require treatment as current period charges. . . .  This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of so abnormal.  In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of this Statement shall be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company does not believe adoption of SFAS 151 will have any impact on the Companys financial statements.  SFAS No. 150 -- In May 2003, the FASB issued SFAS 150, Accounting for Certain Financial Instruments with characteristics of both Liabilities and Equity.  This new statement changes the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity or classifications between liabilities and equity in a section that has been know as mezzanine capital.  It requires that those certain instruments be classified as liabilities in balance sheets.  Most of the guidance in SFAS 150 is effective for all financial instruments entered into or modified after M\ay 31, 2003.  The adoption of SFAS 150 did not have any impact on the Companys financial statements.  SFAS No. 149 -- In April 2003, the FASB issued SFAS 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities.  SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS 133, Accounting for Derivative Instruments and Hedging Activities.  This Statement is effective for contracts entered into or modified after June 30, 2003, with certain exceptions, and for hedging relationships designated after June 30, 2003, with certain exceptions.  The adoption of SFAS 149 did not have any effect on the Companys financial statements.  SFAS No. 46 -- In January 2003, the FASB issued Interpretation 46, Consolidation of Variable Interest Entities (FIN 46), which addresses consolidation by business enterprises of variable interest entities.  FIN 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain entities in which equity investors do not have the Characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.  FIN 46 applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date.  It applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003.  The Company has not identified and does not expect to identify any variable interest entities that must be consolidated.  FASB Interpretation No. 45--  Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others  an Interpretation of FASB Statements No. 5, 57 and 107.  The initial recognition and initial measurement provisions of this Interpretation are to be applied prospectively to guarantees issued or modified after December 31, 2002.  The disclosure requirements in the Interpretation were effective for financial statements of interim or annual periods ending after December 15, 2002.  The adoption of FASB Interpretation No. 45 did not have a material effect on the financial statements of the Company.  During the year ended December 31, 2004, the Company adopted the following Emerging Issues Task Force Consensuses:  EITF Issue No. 00-21 Revenue Arrangements with Multiple Deliverables, EITF Issue No. 01 8  Determining Whether an Arrangement Contains a Lease, EITF Issue No. 02-3 Issues Related to Accounting for Contracts Involved in Energy Trading and Risk Management Activities, EITF Issue No. 02-9 Accounting by a Reseller for Certain Consideration Received from a Vendor, EITF Issue No. 02-17,  Recognition of Customer Relationship Intangible Assets Acquired in a Business Combination,  EITF Issue No. 02-18 Accounting for Subsequent Investments in an Investee after Suspension of Equity Method Loss Recognition, EITF Issue No. 03-1, The Meaning of Other Than Temporary and its Application to Certain Instruments, EITF Issue No. 03-5, Applicability of AICPA Statement of Position 9702, Software Revenue Recognition to Non-Software Deliverables in an Arrangement Containing More Than Incidental Software, EITF Issue No. 03-7, Accounting for the Settlement of the Equity Settled Portion of a Convertible Debt Instrument That Permits or Requires the Conversion Spread to be Settled in Stock, EITF Issue No. 03-10, Application of EITF Issue No. 02-16 by Resellers to Sales Incentives Offered to Consumers by Manufacturers.  These newly issued accounting pronouncements had no effect on the Companys current financial statements and did not impact the Company.  18   Off-Balance Sheet
Arrangements We do not have any off-balance sheet arrangements.  ITEM 7. FINANCIAL STATEMENTS. See the financial statements annexed to this report. ITEM8. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None  ITEM 8A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures. Based on an evaluation under the supervision and with the participation of the our management as of a date within 90 days of the filing date of this Annual Report on Form 10-KSB, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, are effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Changes in Internal Controls. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. There were no significant deficiencies or material weaknesses, and therefore there were no corrective actions taken. However, the design of any system of controls is based in part upon certain assumptions about the likelihood of future events and there is no certainty that any design will succeed in achieving its stated goal under all potential future considerations, regardless of how remote. ITEM 8B. OTHER INFORMATION. None. 19  PART III  ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. Our directors and executive officers are as follows: NameAgePositionYan Skwara42President, Chief Financial Officer and Chairman of the Board of DirectorsDonald Hejmanowski47Director(1)Darin Pines39Director(2)  (1) Appointed April 5, 2006 (2) Appointed May 5, 2006  The business experience of the persons listed above is as follows: Yan K. Skwara has been employed with the company since its inception as the founder of US Farms, Inc. Mr. Skwara is currently employed full-time with the Company and serves as Chief Executive Officer, President and Chairman of the Board of Directors and brings his 18 years experience in investment banking arena to the company. Mr. Skwara maintains a significant background in the Investment Banking and Corporate Communications arena. Donald Hejmanowski has over 25 years of experience in the financial markets. In 1980, he began a career in the brokerage community, going on to serve in various positions in the investment world, including stockbroker, branch manager, vice president of trading operations and as a principal of a firm. In 1990, Mr. Hejmanowski left the brokerage community to work directly for public companies, and with private companies seeking to go public. His work has included corporate capital structure, mergers and acquisitions. Mr. Hejmanowski has served on the board of directors of 3dShopping.com, an American Stock Exchange listed company, and four companies listed on the Over-the-Counter Bulletin Board: from January 2001 to February 2002, Mr. Hejmanowski served on the board of NuTek, Inc.; from February 2001 to November 2001, he served on the board of NetCommerce, Inc. and from December 2001 to May 2003, he served on the board of Photonics, Inc. He has also served on the compensation committee and audit committee for 3dShopping.com. Currently, Mr. Hejmanowski serves as a director of LitFunding Corp.  Mr. Hejmanowski has also served as an officer or director of five start-up private entities. In 1981, he earned his Bachelor of Science degree in finance and a Bachelor of Arts degree in economics from Eastern Illinois University.  Darin Pines has served as vice president of operations for American Aloe Nurseries since August 2002. Mr. Pines has over 14 years combined experience in farm and nursery operations.  Mr. Pines began his career in 1992 with his familys Nursery business. In 1992 he joined the Carlsbad Floral Exchange Inc. where he was responsible for managing their various nursery facilities, as well as managing business development activities including responsibility for customer development and retention. At American Aloe Nurseries, Mr. Pines is responsible for all day-to-day operations, including nursery and farming operations and business and channel development activities. Since joining American Aloe Nurseries, Mr. Pines has been instrumental in the acquisition of both the farm and nursery properties, the strategic restoration of the nursery, development and planting of the Imperial Valley farm, and establishing the Companys proprietary farming techniques which have provided superior quality and yield.  Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers, and persons who beneficially own more than ten percent of a registered class of our equity securities, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Common Stock and the other equity securities of the Company. Officers, directors, and persons who beneficially own more than ten percent of a registered class of our equities are required by the regulations of the Commission to furnish
US Farms, Inc. with copies of all Section 16(a) forms they file. To our knowledge, based solely on review of the copies of such reports furnished to us, during the fiscal year ended December 31, 2005, our officers, directors, and greater than ten percent beneficial owners complied with all Section 16(a) filing requirements applicable to them.  20   Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that no Forms 5 were required for such persons, US Farms, Inc. believes that its executive officers, directors and ten percent (10%) shareholders complied with all Section 16(a) filing requirements applicable to them through the year ended December 31, 2006.   Code of Ethics The Company has adopted a Code of Ethics that applies to our officers and persons performing similar functions. The Companys Code of Ethics was filed as an exhibit to our 2004 annual report. Audit Committee The primary responsibility of the Audit Committee is to oversee the Company's financial reporting process on behalf of the Company's Board of Directors and report the result of its activities to the Board.  Such responsibilities shall include but not be limited to the selection, and if necessary the replacement of, the Company's independent auditors; the review and discussion with such independent auditors and the Company's internal audit department  (i) the overall scope and plans for the audit, (ii) the adequacy and effectiveness of the accounting and financial controls, including the Company's system to monitor and manage business risks, and legal and ethical programs, and (iii) the results of the annual audit, including the financial statements to be included  in  the  Company's  annual  report  on Form 10-KSB.  ITEM 10. EXECUTIVE COMPENSATION. Summary of Cash and Certain Other Compensation Summary Compensation Table The following table provides certain summary information concerning the compensation earned by the named executive officers for the years ended December 31, 2006, December 31, 2005 and December 31, 2004 for services rendered in all capacities to US Farms, Inc.: 21   Name and Principal PositionYearAnnual CompensationLong Term CompensationAll Other Compensation ($)Salary ($)Bonus ($)Other Annual Compensation ($)AwardsPayoutsRestricted Stock Award(s) ($)Securities Underlying Options/SARs (#)LTIP Payouts ($)Yan K. Skwara, President and Chief Financial Officer2004$130,000----500,000
(1)------2005$133,000----200,000
  (1)------2006$153,000----2,000,000------Gordon F. Lee, Former Chief Executive Officer2005$184,000------------ (1)               Post reverse split  Employment Agreements  On March 22, 2006, we entered into an Employment Agreement with Yan K. Skwara, Chief Executive Officer and President.  Pursuant to the Employment Agreement, Mr. Skwara will serve as President and Chief Financial Officer for an employment term through March 22, 2009. Mr. Skwara is entitled to an annual base salary of $153,000 and an initial bonus of 2,000,000 (two million) restricted shares of the Companys common stock.  The employment agreement also grants Mr. Skwara an incentive in the form of non-qualified stock options to purchase common stock of the Company based on consolidated revenues generated by the Company. Mr. Skwara is also Chairman of the Board of Directors of the Company. On October 5, 2004, we entered into an Employment Agreement with Gordon F. Lee, our then Chief Executive Officer, whereby we will compensate Mr. Lee with $360,000 per annum, payable in cash or common stock and a signing bonus of 10,000,000 shares of common stock from our stock plan. This agreement was terminated in October 2005. On April 5, 2006, the Company entered into an agreement with Donald Hejmanowski, whereby Mr. Hejmanowski would serve on the Companys Board of Directors for a twelve-month term, subject to renewal upon agreement of the parties. During the term of this agreement, the Company will compensate Mr. Hejmanowski with 250,000 restricted common shares of the Companys common stock. Mr. Hejmanowski will also be reimbursed for pre-approved expenses incurred on behalf of the Company including, but not limited to, travel expenses incurred to attend Board meetings.  On May 4, 2006, the Company entered into an agreement with Darin Pines, whereby Mr. Pines would serve on the Companys Board of Directors for a twelve-month term, subject to renewal upon agreement of parties.  During the term of this agreement, the Company will compensate Mr. Pines with 250,000 shares of restricted common shares of the Companys common stock. Mr. Pines will also be reimbursed for pre-approved expenses incurred on behalf of the Company including, but not limited to travel expenses incurred to attend Board meetings.  22  Confidentiality Agreements None. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED MATTERS. The following table sets forth, as of March 27, 2007, the beneficial ownership of the Company's Common Stock (i) by any person or group known by the Company to beneficially own more than 5% of the outstanding Common Stock, (ii) by each Director and executive officer and (iii) by all Directors and executive officers as a group. Unless otherwise indicated, the holders of the shares shown in the table have sole voting and investment power with respect to such shares. The address of all individuals for whom an address is not otherwise indicated is c/o 1635 Rosecrans Street, Suite D, San Diego, CA 92106.  Name and AddressNumber of Shares Beneficially OwnedClassPercentage of ClassYan K. Skwara
Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors3,260,972Common13%Donald Hejmanowski
Director525,000Common2%Darin Pines
Director400,000Common2%All directors and executive officers (3 persons)4,185,972
  Common17% The above table is based upon information derived from our stock records. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, it believes that each of the shareholders named in this table has sole or shared voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based upon 24,466,994 shares of common stock outstanding as of March 28, 2007.  Item 12. Certain Relationships and Related Transactions. The Companys officers and directors are subject to the doctrine of corporate opportunities only insofar as it applies to business opportunities in which the Company has indicated an interest, either through its proposed business plan or by way of an express statement of interest contained in the Companys minutes. If directors are presented with business opportunities that may conflict with business interests identified by the Company, such opportunities must be promptly disclosed to the Board of Directors and made available to the Company. In the event the Board shall reject an opportunity that was presented to it and only in that event, any of the Companys officers and directors may avail themselves of such an opportunity. Every effort will be made to resolve any conflicts that may arise in favor of the Company. There can be no assurance, however, that these efforts will be successful.  Item 13. Exhibits. EXHIBIT NUMBERDESCRIPTIONLOCATION3.1Articles of IncorporationIncorporated by Reference to Form 10-KSB filed May 27, 20033.2By-Laws and Amended By-LawsIncorporated by Reference to Form 10-KSB filed May 27, 2003 23   3.3Articles of Incorporation of SDSDCIncorporated by Reference Form 10-SB filed October 29, 19993.4Bylaws of SDSDCIncorporated by Reference to Form 10-SB filed October 29, 19993.5Amendment to Articles of IncorporationIncorporated by reference to Form 10-KSB filed April 13, 20043.6Amendment to Articles of IncorporationIncorporated by reference to Form 10-KSB filed April 15, 20054.1Certificate of Designations for Series A Preferred StockIncorporated by Reference to Form 10-QSB filed November 19, 20034.2Certificate of Designations for Series B Preferred Stock, as amendedIncorporated by Reference to Form 10-KSB filed April 13, 20044.3Form of Common Stock CertificateIncorporated by Reference to Form 10-SB/A filed October 22, 199910.12004 Non-Qualified Stock & Stock Option PlanIncorporated by Reference to Form S-8 filed December 12, 2004 (File No. 333-120073)10.2Employment Agreement with Gordon F. LeeIncorporated by Reference to Form S-8 filed December 12, 2004 (File No. 333-120073)10.3Employment Agreement with Yan SkwaraIncorporated by Reference to Form S-8 filed December 12, 2004 (File No. 333-120073)10.4Purchase and Sale Agreement with TSV MediaIncorporated by Reference to Form 8-K filed January 28, 200510.5Joint Venture Agreement with American IDCIncorporated by Reference to Form 10-KSB filed April 15, 200510.62005 Non-Qualified Stock & Stock Option PlanIncorporated by Reference to Form S-8  filed March 25, 200510.7Licensing Agreement with Paris Saint Germain (PSG) of FranceIncorporated by reference to Form 10-QSB date September 23, 2005 and incorporated herewith10.8Agreement and Plan of Reorganization and Corporation Separation between the Company and Pan American RelationsFiled as an exhibit to the Form 8-K date June 6, 2005 and incorporated herewith10.9Employment Agreement with Yan SkwaraIncorporated by Reference to Form 8-K filed March 31, 200610.10Director Agreement with Donald HejmanowskiIncorporated by Reference to Form 8-K filed April 11, 200610.11Director Agreement with Darin PinesIncorporated by Reference to Form 8-K filed May 5, 200614Code of EthicsIncorporated by reference to Form 10-KSB filed April 15, 200521.1Subsidiaries of
  the IssuerFiled herewith 31.1Certification of Principal Executive OfficerFiled herewith31.2Certification of Chief Financial OfficerFiled herewith32.1Section 1350 CertificationsFiled herewith  24  Item 14. Principal Accountant Fees and Services. Audit Fees The aggregate fees billed by the Company's auditors for the professional services rendered in connection with the audit of the Company's annual financial statements and reviews of the financial statements included in the Company's Forms 10-QSBs for fiscal 2006 and 2005 were approximately $15,000 and  $14,398, respectively. Audit-Related Fees None. All Other Fees None. Policy On Audit Committee Pre-Approval Of Audit And Permissible Non-Audit Services Of Independent Auditors The primary responsibility of the Audit Committee is to oversee the Company's financial reporting process on behalf of the Company's Board of Directors and report the result of its activities to the Board.  Such responsibilities shall include but not be limited to the selection, and if necessary the replacement of, the Company's independent auditors; the review and discussion with such independent auditors and the Company's internal audit department  (i) the overall scope and plans for the audit, (ii) the adequacy and effectiveness of the accounting and financial controls, including the Company's system to monitor and manage business risks, and legal and ethical programs, and (iii) the results of the annual audit, including the financial statements to be included  in  the  Company's  annual  report  on Form 10-KSB.     25    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.  US Farms, Inc.

By: /s/ Yan K. Skwara
Yan K. Skwara
President, CFO and Chairman of the
      Board of Directors
     Dated: April 2, 2007   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.  SIGNATURETITLEDATE/s/Yan K. SkwaraYan K. SkwaraChairman of the Board of DirectorsApril 2, 2007/s/Donald HejmanowskiDonald HejmanowskiDirectorApril 2, 2007/s/Darin PinesDarin PinesDirectorApril 2, 2007     26     Exhibit 21.1  Subsidiaries of the Issuer  American Nursery Exchange, Inc., a California corporation American Aloe Vera Growers, Inc., a California corporation California Management Solutions, Inc., a California corporation California Produce Exchange, Inc., a California corporation Imperial Ethanol, Inc., a California corporation        EXHIBIT 31.1  US Farms, Inc. a Nevada Corporation SECTION 302 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER I, Yan Skwara, President (Principal Executive Officer) certify that: (1)   I have reviewed this annual report on Form 10-KSB of US Farms, Inc.;  (2)  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;  (3)  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;  (4)  The registrant's other certifying officer(s) and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:  (a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its unconsolidated investments, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c)  Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)  Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and  (5)  The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):  (a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 2, 2007 /s/ Yan Skwara Yan Skwara President (Principal Executive Officer)    EXHIBIT 31.2  US Farms, Inc. a Nevada Corporation SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER  I, Yan Skwara, certify that:  (1)   I have reviewed this annual report on Form 10-KSB of US Farms, Inc.;  (2)  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;  (3)  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;  (4)  The registrant's other certifying officer(s) and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:  (a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its unconsolidated investments, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c)  Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)  Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and  (5)  The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):  (a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.  Date: April 2, 2007 /s/Yan Skwara Yan Skwara Chief Financial Officer    Exhibit 32.1  CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002   Pursuant to Section 906 of the Corporate Fraud Accountability Act of 2002 (18 U.S.C. Section 1350, as adopted), Yan Skwara, President (Principal Executive Officer) of US Farms, Inc.(the "Company"), hereby certifies that, to the best of his knowledge:  1. the Annual Report on Form 10-KSB of the Company for the fiscal year ended December 31, 2006 (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and  2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.  Dated: April 2, 2007/s/ Yan Skwara
Yan Skwara
President (Principal Executive Officer)    Exhibit 32.2  CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002  Pursuant to Section 906 of the Corporate Fraud Accountability Act of 2002 (18 U.S.C. Section 1350, as adopted), Yan Skwara, Chief Financial Officer of US Farms, Inc. (the "Company"), hereby certifies that, to the best of his knowledge:  1. the Annual Report on Form 10-KSB of the Company for the fiscal year ended December 31, 2006 (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and  2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.  Dated: April 2, 2007/s/ Yan Skwara
Yan Skwara
Chief Financial Officer       US FARMS, INC.  CONSOLIDATED FINANCIAL STATEMENTS   December 31, 2006               REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  To the Board of Directors and Stockholders US Farms Inc. and Subsidiaries  We have audited the accompanying Balance Sheets of US Farms Inc. and Subsidiaries, as of December 31, 2006 and 2005, and the related statements of operations, Stockholders Equity (deficit), and Cash Flows for the periods then ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based upon our audits. We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.  In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of US Farms Inc. and Subsidiaries as of December 31, 2006 and 2005, and the results of its operations and its cash in conformity with accounting principles generally accepted in the United States of America.  The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred material losses, has a negative current ratio, and Stockholders Equity. These matters raise substantial doubt about the Companys ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount ands classification of liabilities that may result should the Company be unable to continue as a going concern.   Gruber & Company LLC Gruber & Company LLC Lake St. Louis Missouri-March 30, 2007      F-2   US FARMS, INC. BALANCE SHEETS  December 31,
  December 31,2006
  
  2005ASSETSCURRENT ASSETSCash$2,468$-Accounts Receivable
  73,358
  -Securities available for sale
  6,000
  10,000Total Current Assets
  81,826
  10,000Fixed Assets-net
  6,667
  -Other Assets
  750
  750TOTAL ASSETS
  89,243
  10,750LIABILITIES AND STOCKHOLDERS' DEFICITCURRENT LIABILITIESBank Overdraft$-$133Accounts Payable
  774,941
  507,191Accrued Expenses
  572,407
  514,409Accrued Interest Payable
  567,719
  361,498Convertible Bond
  500,000
  500,000Convertible Promissory Notes
  367,779
  491,879Notes Payable
  229,602
  253,002Total Current Liabilities
  3,012,448
  2,628,112Total Liabilities
  3,012,448
  2,628,112STOCKHOLDERS' DEFICITSeries B Preferred Stock: 1,000,000 shares
authorized at $0.001 par value 88,500 issuedand outstanding
  89
  89Common Stock, 150,000,000 shares par
value $0.001 17,685,613 and 3,621,152
  17,686
  3,621Additional Paid in Capital
  14,514,894
  10,358,892Other Comprehensive Loss
  (14,000)
  (10,000)Treasury Stock, at cost
  (280)
  (280)Accumulated Deficit
  (17,441,594)
  (12,969,684)Total Stockholders' Deficit
  (  2,923,205)
  (2,617,362)TOTAL LIABILITIES AND STOCKHOLDERS EQUITY$
  89,243$
  10,750 The accompanying notes are an integral part of these consolidated financial statements.  F-3  US FARMS, INC.Statements of OperationsFor the year 
ended December 31,20062005Sales$                       361,414$                            -Cost of Sales325,273-Gross Profit36,141-EXPENSES-Consulting3,385,856-General and administrative1,098,136-Depreciation and amortization1,333-Total Expenses4,485,325-Loss From Operations(4,449,184)-OTHER INCOME (EXPENSE)-Gain on Settlement of Debt98,256-Loss on extinguishment of debtInterest expense(120,982)--Total Other Income (Expense)(22,726)-Loss from continuing operations(4,471,910)-DISCONTINUED OPERATIONS
(NOTE 8)Loss from discontinued operations-(1,395,389)Net loss(4,471,910)(1,395,389)Loss per share from continuing operations$                       (.33)$                      (0.58)Loss per share from discontinued operationsTotal loss per share$                             -$                             -Weighted average number of shares outstanding13,567,8072,410,380 The accompanying notes are an integral part of these consolidated financial statements.  F-4


US FARMS, INC.
Consolidated Statements of Stockholders Equity (Deficit)AdditionalPreferred Stock
  Common Stock
  Paid-In
  Subscriptions
  Treasury
  AccumulatedShares
  Par Value
  Shares
  Par Value
  Capital
  Payable
  Stock
  DeficitBalance, December 31, 200488,500
  $                89
  1,539,837
  $        1,540
  $    8,986,268
  $          3,000
  $       (280)
  $  (11,574,295)Common stock issued for cash-
  -
  188,572
  188
  48,712
  -
  -
  -Common stock issued for subscription payable-
  -
  3,000
  3
  2,997
  (3,000)
  -
  -Common stock issued in conversion of promissory notes-
  -
  287,506
  288
  255,712
  -
  -
  -Common stock issued for services rendered and accrued salary-
  -
  1,582,237
  1,582
  1,017,723
  -
  -
  -Common stock issued in stock swap-
  -
  20,000
  20
  19,980
  -
  -
  -Spinoff of subsidiary-
  -
  -
  -
  27,500
  -
  -
  -Net loss for the year ended December 31, 2005
  
  
  
  
  
  
  (1,395,389)Balance, December 31, 200588,500
  $              89
  3,621,152
  $        3,621
  $   10,358,892
  $                 -
  $       (280)
  $  (12,969,684)  The accompanying notes are an integral part of these consolidated financial statements.  F-5   US FARMS, INC.
Consolidated Statements of Stockholders Equity (Deficit)(continued)AdditionalPreferred Stock
  Common Stock
  Paid-In
  Subscriptions
  Treasury
  AccumulatedShares
  Par Value
  Shares
  Par Value
  Capital
  Payable
  Stock
  DeficitBalance, December 31, 200588,500
  $              89
  3,621,152
  $        3,621
  $   10,358,892
  $                 -
  $       (280)
  $  (12,969,684)Common stock issued for cash-
  -
  3,423,052
  3,423
  699,021
  -
  -
  -Common stock issued for services-
  -
  9,871,581
  9,872
  3,297,568
  -
  -
  -Common stock issued in conversion of promissory notes-
  -
  769,828
  770
  159,413
  -
  -
  -Net loss for the year ended December 31, 2006
  
  
  
  
  
  
  (4,471,910)Balance, December 31, 200688,500
  $                89
  17,685,613
  $        17,686
  $    14,514,894
  $                 -
  $       (280)
  $    (17,441,594) F-6


US FARMS, INC.Statements of Cash FlowsFor the year Ended December 31,For the year ended December 31,20062005CASH FLOWS FROM OPERATING ACTIVITIES:Net loss$       (4,471,910)$         (1,395,389)Adjustments to reconcile net loss to net cashused by operating activities:Depreciation and amortization1,3339,080Impairment expense-113,642Stock issued for services3,307,740759,973Net (Gain) loss on settlement of debt98,256(9,500)Decrease (Increase) in accounts receivable/other assets(67,358)(98,150)Increase (decrease) in accrued expenses57,998(1,911)Increase in accounts payable267,61795,872Increase in interest payable206,22178,019Net Cash Used by Operating Activities(600,103)(448,364)CASH FLOWS FROM INVESTING ACTIVITIESPurchase of Fixed Assets(8,000)-Net Cash Used by Investing Activities(8,000)-CASH FLOWS FROM FINANCING ACTIVITIESIncrease (decrease) in bank overdraft-53Stock issued for Debt Reduction160,182-Increase in notes payable-407,400Decrease in stock subscription payable-(3,000)Reduction on Debt(252,055)(8,000)Common stock issued for cash702,44451,900Net Cash Provided by Financing Activities610,571448,353NET INCREASE (DECREASE)  IN CASH2,468(11)CASH AT BEGINNING OF PERIOD-11CASH AT END OF PERIOD$          2,468$                       -  The accompanying notes are an integral part of these consolidated financial statements.  F-7  US FARMS, INC.Statements of Cash Flows (Continued)For theYear EndedDecember 31,20062005SUPPLEMENT CASH FLOW INFORMATIONCASH PAID FOR:Interest$                     -$                     -Income taxes$                     -$                     -NON-CASH FINANCING ACTIVITIESCommon stock issued for conversion of promissory notes$          60,182$         256,000Common stock issued for settlement of accrued salary$                   -$         259,332Common stock issued for services$     3,307,740$         759,973Stock issued for securities available for sale$                   -$           20,000  The accompanying notes are an integral part of these consolidated financial statements.  F-8   US FARMS, INC. Notes to the Consolidated Financial Statements December 31, 2006 and 2005  NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  a. Organization  US Farms, Inc. (formerly International Sports and Media Group, Inc. and San Diego Soccer Development Corporation), (the Company) was incorporated on December 12, 1995, under the laws of the state of Nevada under the name Roller Coaster, Inc.  The Company engaged in no operations prior to February 10, 2000.  On February 10, 2000, the Company issued 52,844 shares  (post reverse split) of its previously un-issued common stock to the shareholders of San Diego Soccer Development Corporation, a California company (SDSDC) in exchange for all of the issued and outstanding shares of SDSDC.  Immediately following the acquisition of SDSDC, the Company changed its name to San Diego Soccer Development Corporation, and changed its state of domicile from California to Nevada.  At the time of acquisition of SDSDC, the Company was completely inactive, with no operations, assets, or liabilities.  Additionally, the exchange of the Companys common stock for the common stock of SDSDC resulted in the former shareholders of SDSDC obtaining control of the Company. Accordingly, SDSDC was treated as the continuing entity for accounting purposes, and the Company being the continuing entity for legal purposes.  The transaction was accounted for as a recapitalization of SDSDC, with no adjustment to the basis of SDSDCs assets acquired or liabilities assumed.  SDSDC was incorporated on August 22, 1997 in the state of California, and was engaged for a time in the management and marketing of professional soccer teams, as well as the publication of a soccer magazine.  The majority of the Companys revenues have been generated from corporate sponsorships, ticket sales, and advertising.  On December 19, 2003, shareholders of the Company elected to change the Companys corporate name to International Sports and Media Group, Inc., to adequately reflect the Companys current business model.  On July 14, 2006, shareholders of the Company elected to change the Companys corporate name to US Farms, Inc., to adequately reflect the Companys current business model.  On July 17, 2006, the Company formed five wholly owned subsidiaries: American Nursery Exchange, Inc., American Aloe Vera Growers, Inc., California Management Solutions, Inc., California Produce Exchange, Inc., and Imperial Ethanol, Inc. These subsidiaries grow and sell the various farm products the Company is now producing.  b. Going Concern  The Company has been unable to generate sufficient operating revenues and has incurred material losses of over 17,000,000.  The Company has implemented a new business plan to operate as a provider of naturally grown farm products and vegetables. However, the Company is dependent upon future sales and sale of securities to provide sufficient working capital. There is no assurance that the Company will be able to obtain funding through the sale of additional securities or that such funding, if available, will be obtained on terms favorable to or affordable by the Company.  F-9   The accompanying financial statements have been prepared assuming the Company will continue as a going concern. These financial statements do not include any adjustments that might result from this uncertainty.  c. Principles of Consolidation  The consolidated financial statements include the accounts of the Company and its five wholly owned subsidiaries who commenced operations July 15, 2006. All significant inter company accounts and transactions have been eliminated.  d. Accounting Methods  The Companys financial statements are prepared using the accrual method of accounting.  The Company has elected a December 31 year-end.  e. Basic Loss Per Share  The computation of basic loss per share of common stock is based on the weighted average number of shares outstanding during the period.  For the Year Ended  December 31,20062005Loss (numerator)$   (4,471,910)$     (1,395,389)Shares (denominator)13,567,8072,410,380Per share amount$              (.33)$              (0.58)  f. Property and Equipment  Property and equipment is recorded at cost.  Major additions and improvements are capitalized.  The cost and related accumulated depreciation of equipment retired or sold are removed from the accounts and any differences between the undepreciated amount and the proceeds from the sale are recorded as a gain or loss on sale of equipment.  Depreciation is computed using the straight-line method over the estimated useful life of the assets.  g. Income Taxes  Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.  Net deferred tax assets consist of the following components as of December 31, 2006 and 2005: 20062005Deferred tax assetsNOL Carryover$    6,700,000$       2,285,500Depreciation-(5,300)Accrued expenses-175,800Deferred tax liabilities-- Valuation allowance(6,700,000)(2,456,000)Net deferred tax asset$                      -$                      -  F-10   g. Income Taxes (Continued)  The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates of 39% to pretax income from continuing operations for the years ended December 31, 2006 and 2005 due to the following:  20062005Book income$    (1,833,300)$        (544,200)Penalties & Interest--Accrued Expenses-(81,970)Depreciation-(1,990)Other-350Stock for Services/Options Expense-340,710Valuation allowance-287,100$   (1,833,300)$        (544,200)  At December 31, 2006, the
Company had net operating loss carry forwards of approximately $17,000,000,
which may be offset against future taxable income from the year 2006 through
2020.  No tax benefit has been reported in the December 31, 2006 financial
statements since the potential tax benefit is offset by a valuation allowance of
the same amount.  Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations.  Should a change in ownership occur, net operating loss carry forwards may be limited as to use in the future.   h. Estimates  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.  i. Advertising and Promotion  The Company follows the policy of charging the costs of advertising and promotion to expense as incurred.  Advertising and promotion expense for the years ended December 31, 2006 and 2005 totaled $25,114 and $33,386 respectively.  j. Revenue Recognition  Prior to the discontinuation of operations on December 31, 2005 (See Note 8), the Company's revenue was created primarily from consulting services. Currently revenue is recognized upon shipment to the customer of farm products.  k. Recent Accounting Pronouncements  In November 2004, the FASB issued SFAS No. 151 "Inventory Costs, an amendment of ARB No. 43, Chapter 4. The amendments made by Statement 151 clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current-period charges and require the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. The guidance is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after November 23, 2004. The Company has evaluated the impact of the adoption of SFAS 151, and does not believe the impact will be significant to the Company's overall results of operations or financial position.  F-11   In December 2004, the FASB issued SFAS No.152, "Accounting for Real Estate Time-Sharing Transactions--an amendment of FASB Statements No. 66 and 67" ("SFAS 152) The amendments made by Statement 152 This Statement amends FASB Statement No. 66, Accounting for Sales of Real Estate, to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing Transactions. This Statement also amends FASB Statement No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, to state that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-2. This Statement is effective for financial statements for fiscal years beginning after June 15, 2005. The Company has evaluated the impact of the adoption of SFAS 152, and does not believe the impact will be significant to the Company's overall results of operations or financial position.  In December 2004, the FASB issued SFAS No.153, "Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions."The amendments made by Statement 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have commercial substance. Previously, Opinion 29 required that the accounting for an exchange of a productive asset for a similar productive asset or an equivalent interest in the same or similar productive asset should be based on the recorded amount of the asset relinquished. Opinion 29 provided an exception to its basic measurement principle (fair value) for exchanges of similar productive assets. The Board believes that exception required that some nonmonetary exchanges, although commercially substantive, be recorded on a carryover basis. By focusing the exception on exchanges that lack commercial substance, the Board believes this Statement produces financial reporting that more faithfully represents the economics of the transactions. The Statement is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in fiscal periods beginning after the date of issuance. The provisions of this Statement shall be applied prospectively. The Company has evaluated the impact of the adoption of SFAS 153, and does not believe the impact will be significant to the Company's overall results of operations or financial position.  In December 2004, the FASB issued SFAS No.123 (revised 2004), "Share-Based Payment". Statement 123(R) will provide investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. Statement 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. Statement 123(R) replaces FASB Statement No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. Statement 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. However, that Statement permitted entities the option of continuing to apply the guidance in Opinion 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair-value-based method been used. Public entities (other than those filing as small business issuers) will be required to apply Statement 123(R) as of the first interim or annual reporting period that begins after June 15, 2005. The Company adopted Statement 123(R) in December of 2005. F-12   In December 2004, the Financial Accounting Standards Board issued two FASB Staff Positions - FSP FAS 109-1, Application of FASB Statement 109 "Accounting for Income Taxes" to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004, and FSP FAS 109-2 Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004. Neither of these affected the Company as it does not participate in the related activities.  In March 2005, the SEC released Staff Accounting Bulletin No. 107, Share-Based Payment (SAB 107), which provides interpretive guidance related to the interaction between SFAS 123(R) and certain SEC rules and regulations. It also provides the SEC staffs views regarding valuation of share-based payment arrangements. In April 2005, the SEC amended the compliance dates for SFAS 123(R), to allow companies to implement the standard at the beginning of their next fiscal year, instead of the next reporting period beginning after June 15, 2005. Management is currently evaluating the impact SAB 107 will have on our consolidated financial statements.  In March 2005, the FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (FIN 47). FIN 47 provides guidance relating to the identification of and financial reporting for legal obligations to perform an asset retirement activity. The Interpretation requires recognition of a liability for the fair value of a conditional asset retirement obligation when incurred if the liabilitys fair value can be reasonably estimated. FIN 47 also defines when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. The provision is effective no later than the end of fiscal years ending after December 15, 2005. The Company will adopt FIN 47 beginning the first quarter of fiscal year 2006 and does not believe the adoption will have a material impact on its consolidated financial position or results of operations or cash flows.  In May 2005, the FASB issued FASB Statement No. 154, Accounting Changes and Error Corrections. This new standard replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and represents another step in the FASBs goal to converge its standards with those issued by the IASB. Among other changes, Statement 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. Statement 154 also provides that (1) a change in method of depreciating or amortizing a long-lived non-financial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a restatement. The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005. The Company has evaluated the impact of the adoption of Statement 154 and does not believe the impact will be significant to the Company's overall results of operations or financial position.  In February of 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, which is intended to simplify the accounting and improve the financial reporting of certain hybrid financial instruments (i.e., derivatives embedded in other financial instruments). The statement amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilitiesa replacement of FASB Statement No. 125. SFAS No. 155 is effective for all financial instruments issued or acquired after the beginning of an entity's first fiscal year that begins after September 15, 2006. The Company is currently evaluating the impact SFAS No. 155 will have on its consolidated financial statements, if any.  The implementation of the provisions of these pronouncements are not expected to have a significant effect on the Companys consolidated financial statement presentation.  F-13  NOTE 2 - PROPERTY AND EQUIPMENT  Property and equipment consists of the following:  December 31,
2006Vehicles8,000Accumulated depreciation1,333Net property and equipment6,667  During the years ended December 31, 2006 and 2005, the Company recorded depreciation expense of $1,333 and $322 respectively.  NOTE 3 - RELATED PARTY TRANSACTIONS  a. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.  On July 28, 2005, the Board of Directors accepted the resignation of Gordon F. Lee as Chairman of the Board and Yan K. Skwara as President. The Board of Directors then appointed Manolo Cevalos as President of the Company and appointed Yan K. Skwara as acting Chairman of the Board. Gordon Lee continued to serve as company CEO and a director of the company.  On October 18, 2005, Manolo Cevallos resigned his position of President of the Company.  On October 27, 2005, Gordon Lee was terminated as Chief Executive Officer of the Company.  On October 27, 2005, the Board of Directors appointed Yan Skwara as  President.  b. Securities to be offered to employees in employee benefits plan   On March 25, 2005, the Company registered 200,000 shares (post reverse split) for the 2005 Non-Qualified Stock and Stock Option Plan. The Securities registered were distributed as followed:   2005 Non-Qualified Stock and Stock Option Plan: Gordon F. Lee received 50,000 shares (post reverse split) and Yan Skwara received 50,000 shares (post reverse split).  On August 15, 2005, the Company registered 950,000 shares (post reverse split) for the August 2005 Non-Qualified Stock and Stock Option Plan. The Securities registered were distributed as followed:   August 2005 Non-Qualified Stock and Stock Option Plan: Gordon F. Lee received 357,143 shares (post reverse split) and Yan Skwara received 579,759 shares (post reverse split).  c. Stock Dividend  On May 23, 2005, the Company announced a spin-off of Pan American Relations (PAR) a privately owned subsidiary of the Company. One share of PAR was issued for every one hundred shares of ISME common stock held by shareholders of record as of June 6, 2005. The spin-off of PAR created a stock dividend granted to investors who owned common stock of the Company of record of June 30, 2005. The distribution date of the dividend was June 30, 2005.  F-14   NOTE 4 - NOTES PAYABLE  Notes payable consist of the following:  December 31,2006Note payable to an unaffiliated company, interest at 10% per annum, principal and interest due December 31, 2000, unsecured.$32,000Note payable to an unaffiliated company, interest at 11% per annum, principal and interest due on July 30, 2004, unsecured.29,302Note payable to an unaffiliated company, interest at 17% per annum, principal and interest due on demand, unsecured.10,500Note payable to an unaffiliated company, interest at 10% per annum, principal and interest due on demand, unsecured.157,800Total Notes Payable229,602Less: Current Portion229,602Long-Term Notes Payable$-The aggregate principal maturities of notes payable are as follows:Year Ended December 31,Amount2006229,602   F-15   NOTE 5 - CONVERTIBLE PROMISSORY NOTES  Convertible promissory notes consist of the following: December  31, 2006Notes payable to various unrelated parties, bearing$25,000interest at 20% per annum, principal and interest dueSeptember 30, 2001, convertible into common stockat $1.00 per share at the option of the holder, currently in defaultNotes payable to various unrelated parties, bearing19,500interest at 10% per annum, principal and interest dueon July 31, 2001, convertible into common stock at$1.00 per share at the option of the holder, currently in defaultNotes payable to various unrelated parties, bearing8,900interest at 8% per annum, principal and interest dueon July 1, 2000, convertible into common stock at$1.00 per share at the option of the holder, currently in defaultNotes payable to various unrelated parties, bearing87,600interest at 8% per annum, principal and interest dueon December 31, 1999, convertible into common stockat $1.00 per share at the option of the holder, currently in defaultNotes payable to various unrelated parties, bearing3,000interest at 8% per annum, principal and interest dueon 12/31/2000, convertible into common stock at$1.00 per share at the option of the holder, currently in defaultNote payable to an individual, interest at 10% per annum, principal and interest due on July 30, 2004, unsecured5,000Notes payable to various unrelated parties, bearing interest at 10% per annum, principal and interest due on various dates (all six month terms), convertible into common stock at 50% of market price on date of  conversion, at the option of the holder, currently in default.218,779Total convertible promissory notes367,779Less: Current Portion367,779Long-term Convertible Promissory Notes$-   F-16   NOTE 6  ACCRUED EXPENSES  As of December 31, 2006, accrued expenses consisted of the following:  Accrued payroll$72,506Accrued payroll tax277,945Accrued penalties and interest158,199Other accrued expenses63,757572,407  NOTE 7 - STOCKHOLDERS EQUITY (DEFICIT)  a. Common Stock  On December 1, 2005, the company completed a reverse split of their stock by a 100 to 1 ratio. Along with the occurrence of this reverse split Gordon Lee was terminated from his duties as officer of the Company and Manolo Cevallos resigned. Currently Yan Skwara is the companys only officer and also serves as Chairman of the Board and President.  During 2005, the Company issued 186,572 shares (post reverse split) of common stock for cash at $0.001 to $0.20 per share, 3,000 shares (post reverse split) for $3,000 stock subscription payable, 287,506 shares in conversion of approximately $256,000 in convertible promissory notes, 20,000 shares (post reverse split) in stock swap and 1,582,237 shares (post reverse split) as consideration for approximately $1,019,000 in services rendered.  During the year ended December 31, 2006, the Company issued 3,423,052 restricted shares for cash, 769,828 shares for debt, and 9,871,581 for services and asset acquisition.  b. Preferred Stock  The Companys Board of Directors have created and authorized the issuance of up to 1,000,000 shares of Series B preferred stock, at $0.001 par value.  The Board further resolved to create the preferred stock such that in the event of liquidation, the Series B Holders would be entitled to convert their respective shares, at any time, into three shares of the Companys common stock.  In addition, the holders of the Series B preferred stock are entitled to receive non-cumulative dividends in preference to any dividend on the common stock at the rate of 6% per annum. As of December 31, 2006, the Company had 88,500 shares of Series B issued and outstanding.  F-17   NOTE 8  -      DISCONTINUED OPERATIONS  As of June 30, 2005, the Company declared a dividend by spinning off its wholly owned subsidiary, Pan American Relations. The following is a presentation of those discontinued operations net of zero tax effect.  For the Three Months EndedFor the Six Months EndedJune 30,June 30,2005200420052004Total Revenues$             -$        8,000$                -$           11,700Total Expenses17,8143,27025,1896,935Income (Loss) From Operations(17,814)4,730(25,189)4,765Total Other Income4,152-4,152-NET INCOME (LOSS)$ (13,662)$        4,730$        (21,037)$             4,765  During the fourth quarter of 2005, the Company eliminated all of its previous operations. The following is a summary of the profit and loss from discontinued operations resulting from the elimination of all operations:  For the Years Ended December 31,20052004REVENUESConsulting Revenue$                  14,785$                  22,825Total Revenues14,78522,825 EXPENSESConsulting876,030600,560Impairment expense113,642-General and administrative267,077897,482Depreciation and amortization9,080123,287Total Expenses1,265,8291,621,329Loss From Operations(1,251,044)(1,598,504)OTHER INCOME (EXPENSE)Gain on Settlement of Debt59,500-Loss on extinguishment of debt(50,000)(80,982)Interest expense(132,808)(221,319)Total Other Income (Expense)(123,308)(302,301)Net loss Before discontinued operations$             (1,374,352)$             (1,900,805)Discontinued operations$                  (21,037)$                              -Net loss$             (1,395,389)$             (1,900,805)Basic loss per share$                      (0.58)$                      (2.96)Weighted average number of shares outstanding2,410,380641,498  F-18   NOTE 9 - COMMITMENTS AND CONTINGENCIES  During 2006, the Company entered into an office lease in San Diego, California, which is renewable on a month to month basis.  The Company has no long-term obligation relating to its office lease.  In December 2004, collection attorneys for a former law firm of the Company contacted the Company regarding an unpaid balance of $22,774 for legal services. The Company has worked out a payment plan of $250 per month. As of December 31, 2006 the amount owed is $4,665.  The Company has a judgment from one of its note holders in the amount of $6,000.  The outcome of this suit cannot presently be determined; however, a negative outcome is not considered likely to impact the operations of the Company owing to the small amount.   The Company also has a judgment filed against it by AAone Litho in San Diego Superior Court for services rendered in the amount of $15,522.80, including interest and related costs at December 31, 2006. The outcome of this judgment cannot presently be determined; however, a negative outcome is not considered likely to impact the operations of the Company owing to the small amount.  The Company also has a judgment filed against it by Fox Sports World for services rendered in the amount of $11,000. The outcome of this judgment cannot presently be determined; however, a negative outcome is not considered likely to impact the operations of the Company owing to the small amount.  During the third quarter of 2005, a judgment was filed in San Diego Superior Court in the amount of $33,747.36, including interest and related costs by McCullough and Associates, the company's former counsel.  In July 2006 the Company entered into several leases for farm property. Terms indicate a twelve month term at $10,825 per month.  The Company also entered into an agreement with a third party to grow asparagus for a monthly amount of $500 plus all direct expenses. The company derives revenue upon the harvest of this crop.  F-19   NOTE 10- SIGNIFICANT EVENTS  On December 1, 2005 the company completed a reverse split of their common stock by a 100 to 1 ratio.  On May 17, 2005, the board of directors resolved to spin-off its privately-held subsidiary, Pan American Relations, Inc., a California corporation in the form of a stock dividend payable in a ratio of 1 share for each 100 shares of the company then outstanding. The record date for the distribution was June 6, 2005. The distribution date for this dividend was June 30, 2005.  On June 6, 2005, International Sports and Media Group, Inc. entered into a LLC Purchase Agreement with American IDC Corp. for the purchase of 10% of Smart SMS Mexico, LLC, a Nevada limited liability company and subsidiary of American IDC. The consideration for the interest was 250,000 shares (post reverse split) of restricted common stock and $100,000 cash.  At December 31, 2005, this asset was impaired and written down to zero.  The Company is now focusing on growing Aloe Barbadensis Miller, which is the only recognized medicine plant. Because of the Company believes hearty Aloe Vera plants and leaves are in high demand. Baby Aloe Vera plants are potted in 3, 4 and 6 inch houseplants. Premium hand selected leaf is used exclusively for produce. Quality leaf will be used for Aloe Vera Juice and Aloe Vera Gel. Standard leaf will be used for cosmetics and over the counter medicines.  The company believes it has opportunities to create a leading position with Aloe Vera in the

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nited States. This is due to the unmatched quality of aloe product in southern California, and geographic position of available farms and nurseries in the area and the high level experience of the Companys management and consulting team. Aloe is grown in three areas including southern California, south Texas and parts of Florida.  On May 30, 2006 the company entered into an Asset purchase agreement with a private



corporation to acquire plants, inventory and equipment for a convertible note of 4.5 million, payable with stock of 3.5 million and cash over time of 1 million. As of the audit date, this transaction has not closed.   NOTE 11  CONVERTIBLE BONDS  At December 31, 2006 the company had $500,000 of unsecured convertible bonds outstanding. The bonds are accruing interest at 5% per year and are convertible into shares of the Companys common stock at the option of the bondholder at any time before maturity. The bonds matured on September 30, 2005 and are subject to renewal for periods of twelve months at the option of the bondholder, as of December 31, 2006 the Company has not renewed these bonds.  F-20