UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.  20549  FORM 10-KSB/A  xANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the fiscal year ended December 31, 2007   ̈TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  Commission file number 000-27487  US FARMS, INC. (Exact name of small business issuer as specified in its charter)  Nevada88-0350156(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)  1635 Rosecrans Street, Suite C San Diego, CA 92106 (Address of principal executive offices)  (858) 488-7775 (Issuers telephone number)  Securities 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)  Copies of Communications to: Stoecklein Law Group 4695 MacArthur Court, 11th Floor Newport Beach, CA  92660 (949) 798-5541 Fax (949) 258-5112  Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.   ̈  Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the last 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x       No  ̈    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/A or any amendment to this Form 10-KSB/A.   ̈  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   ̈      No x  Issuer’s revenues for the fiscal year ended December 31, 2007: $9,460,585.  As of April 14, 2008, the aggregate market value of the voting  and non-voting  common equity held by non-affiliates was $4,879,531, based on based upon the average bid and ask price of $0.12 reported for such date on The OTC Bulletin Board.  The number of shares of Common Stock, $0.001 par value, outstanding on April 14, 2008, was 44,848,733 shares.  Transitional Small Business Disclosure Format (check one):  Yes  ̈ No x        Explanatory Note: This amendment to the Company’s Form 10-KSB filed on April 15, 2008 for the year ended December 31, 2007 is being filed to correct typographical error on the date of the audit report from the Company’s independent registered public accounting firm.  All other items remain unchanged from the original filing.  TABLE OF CONTENTS  PART IItem 1.Description of Business5Item 2.Description of Property10Item 3.Legal Proceedings11Item 4.Submission of Matter to a Vote of Security Matters11PART IIItem 5.Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities11Item 6.Managements Discussion and Analysis of Financial Conditions and Results of Operations14Item 7.Financial Statements25Item 8.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure25Item 8A.Controls and Procedures25Item 8A. (T).Managements Report on Internal Control Over Financial Reporting.26Item 8B.Other Information27PART IIIItem 9.Directors, Executive Officers, Promoters and Control Persons and Corporate Governance; Compliance With Section 16(a) of the Exchange Act27Item 10.Executive Compensation30Item 11.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters31Item 12.Certain Relationships and Related Transactions and Director Independence32Item 13.Exhibits33Item 14.Principal Accountant Fees and Services35Signatures36   3    FORWARD-LOOKING STATEMENTS  Much of the discussion in this Item is forward looking as that term is used in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934.  Actual operations and results may materially differ from present plans and projections due to changes in economic conditions, new business opportunities, changed business conditions, and other developments.  Other factors that could cause results to differ materially are described in our filings with the Securities and Exchange Commission.  Forward-looking statements may include the words may, could, estimate, intend, continue, believe, expect or anticipate or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Except for the ongoing securities laws, we do not intend and undertake no obligation to update forward-looking statements after the dates they are made. You should, however, consult further disclosures we make in future filings of our Annual Report on Form 10-KSB, Quarterly Reports on Form 10-QSB and Current Reports on Form 8-K.  Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:  · our ability to successfully compete in the agricultural products industry; · unexpected natural disasters such as fires or earthquakes that may delay or impact operations and/or facilities located in Southern California; · actions and initiatives taken by both current and potential competitors; · our current deficiency in working capital; · inability to raise additional financing for working capital; · loss of customers or sales weakness; · deterioration in general or regional economic conditions; · the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain; · adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations; · inability to efficiently manage our operations; · inability to achieve future sales levels or other operating results; · the unavailability of funds for capital expenditures; · the ability of our management to implement our business strategy; · our ability to recruit and hire key employees; and · the other risks and uncertainties detailed in this report.  4   For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see Factors That May Affect Our Results of Operation in this document.  In this Form 10-KSB/A references to US Farms, the Company, we, us, and our refer to US FARMS, INC. and all of its wholly owned subsidiaries.  AVAILABLE INFORMATION  We file annual, quarterly and special reports and other information with the SEC that can be inspected and copied at the public reference facility maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549-0405. Information regarding the public reference facilities may be obtained from the SEC by telephoning 1-800-SEC-0330. The Companys filings are also available through the SECs Electronic Data Gathering Analysis and Retrieval System which is publicly available through the SECs website (www.sec.gov). Copies of such materials may also be obtained by mail from the public reference section of the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549-0405 at prescribed rates.  PART  I  ITEM 1. DESCRIPTION OF BUSINESS  (a) Business Development  US Farms, Inc. (US Farms) was originally incorporated on December 12, 1995, under the laws of the state of Nevada under the name Roller Coaster, Inc.  Since its incorporation, the Company has held multiple corporate names such as San Diego Soccer Development Corporation and International Sports and Media Group.  However, we did not engage in any operations prior to February 10, 2000.  In July of 2006, we obtained majority shareholders consent to change our corporate name to US Farms, Inc., which indicated our change in our business model and transition into the industry of agricultural business.  (b) Our Business  US Farms is a diversified commercial farming, nursery and brokerage company based in Southern California. Currently, the Companys principal operations are located in Southern California in the Imperial Valley, North County San Diego and Los Angeles.  Principal Products and Services  US Farms presently has eleven wholly-owned subsidiaries of which nine are currently operational at this point in time.  However, in order to simplify our operations and accurately describe our business segments we have divided operations into 4 reportable business segments (American Aloe Vera Growers, American Nursery Exchange, California Produce Exchange, and Imperial Ethanol).  We believe separating the business segments better aligns our operations with other food and agricultural companies as well as assists in the internal management reporting procedures and practices.  Through our subsidiaries we offer various agricultural products and services.
 Through American Aloe Vera Growers ("AAVG"), we grow aloe vera potted plants, aloe vera boxed produce and bulk aloe vera
leaves to brokers, wholesalers and directly to retailers.  American Nursery
Exchange ("ANE") grows and sells palms, jade, cycads and other potted plants to
grocery stores, garden centers, landscapers, home improvement centers and via
mail order.  California Produce Exchange ("CPE")
distributes a variety of bulk vegetables and fruits to brokers, distributors,
food converters and grocery stores.  5   AAVG  Our AAVG business segment incorporates our subsidiary, American Aloe Vera Growers, which is a domestic grower of aloe vera.  Aloe vera is a semi-tropical plant that has thick, tapered spiny leaves that grow from a short stalk near the ground.  Aloe vera cannot survive freezing temperatures and thereby making Southern California a great location to harvest this crop.  The biochemical products of aloe such as moisturizing and penetrating properties are well known, but it also thought to have analgesic properties that have not been clearly defined through controlled research and testing.  AAVG grows, packs and ships 3, 4 and 6 potted plants for houseplants.  Aloe leaves are picked, cleaned, packaged, and transported to market daily.  The products are most often available in health food retailers and grocery stores.  We also sell bulk leaves which are also picked, cleaned, packaged, and transported to processors.  This product is sold by the ton to customers in the nutraceutical and cosmetic industries for use in dietary supplements, gels, creams, and other personal care products.  ANE  Our business segment of ANE is a floriculture supplier of select ornamental shrubs, color plants, container grown plants, and exotic palms and cycads.  Our subsidiary of American Nursery Exchange, Inc. is the subsidiary located in this business segment.  Two of the main products sold under this subsidiary is jade and our exotic palms and cycads.  Jade are succulent plants that sometimes have pink or white flowers and are popular as house plants around the world.  Cycads are tropical or subtropical that has a restricted geographical range.  The plants become salable in 1 to 3 years and are a high-dollar and high-margin product.  CPE  The CPE business segment includes our wholly-owned subsidiaries of: California Produce Exchange, Inc., US Trading Group, Inc., Sammys Produce, Inc. and World Garlic and Spice, Inc.  Through this business segment we grow and distribute fresh produce such as asparagus, tomatoes, and garlic.  Fresh market asparagus is a high-value, labor intensive perennial vegetable crop, which is harvested primarily in January through June.  About 74% of asparagus produced in the United States is intended for fresh market uses and the remainder of the crop is frozen or canned.  The Company hand picks, packs, and ships fresh early season asparagus between the months of January through March.  Garlic falls into three broad product segments, fresh market, dehydrating and seed stock, with each differentiated by the way the crop is grown, handled, and used.   Nearly all commercial garlic production is grown under contract between grower and buyers while much of the commercial product is shipped to specific locations from which the garlic is either processed for dehydration or moved to fresh market retail sales.  Towards the end of 2007, the Company sourced and began distributing fresh garlic to grocery stores, food processors, and wholesalers.  Tomatoes are the second highest ranked fresh market vegetable behind lettuce.  Florida and California are the two top fresh-tomato producing states in the United States and can be grown in California during most seasons except the winter season.  Imports compliment the seasonal production differences within the United States thereby enabling fresh market tomatoes to be sold in grocery stores year-round.  The Company sources and distributes fresh market tomatoes to grocery stores, food processors, and wholesalers throughout Southern California.  The Company intends to expand its distribution through the entire Southwest United States.   6   Distribution Methods of the Products  AAVG  The potted aloe vera plants, product and bulk leaves are sold directly through regional retailers or brokered to other regional and national wholesalers and retailers throughout North America.  ANE  ANE markets and sells to independent or chain garden centers, home centers, mass merchants, drug and grocery chains, wholesalers, landscapers, and large end-users like hotels, office parks, and golf courses.  Sales are usually through a direct sales force.  Marketing is also done through trade shows, advertising, catalogs, and direct mail.  CPE  Some of the products under the CPE business segment are farmed under contract with the remainder of the products being purchased from growers and large distributors.  The produce is sold in bulk to supermarkets, restaurant suppliers, and food processors.  Competition and Market Overview  The United States agriculture industry is a diverse economic sector accounting for nearly one-fifth of the U.S. gross national product, employing close to one-fourth of the U.S. labor force and operates in a highly competitive global context. The following are select statistics for the market segments in which US Farms competes.  AVVG  Aloe has one of the highest levels of recognition for herbs among the public and has a wide range of applications.  Continuing research on aloes medicinal properties has raised consumer awareness but a large population is still unaware of aloes benefits as a neutraceutical or functional food.  Products containing aloe vera represent in excess of $110 billion in annual revenues globally with approximately $34 billion in the U.S. alone.  Industries utilizing aloe include those of pharmaceutical, cosmetics, dietary supplements, and cleaning products.  Competition for aloe products is competitive with small growers in Texas and Florida as the only domestic competition.  Currently, our subsidiary of AVVG is the largest California grower and we are positioning ourselves to be one of the larger domestic aloe vera growers.  ANE  The United States is the worlds largest producer and market for nursery and greenhouse crops.  Nursery and greenhouse crops represent the third most important sector in U.S. crop agriculture, ranking seventh among all commodities in cash receipts, and among the highest in net farm income.  California leads the industry in floriculture sales with $1 billion and the nursery business is comprised of approximately 60,000 primarily small and regionally based growers.  Domestic consumption reached $6.2  billion in 2005, representing a wholesale consumption of $56 of floriculture (flowering plants) per domestic household.  The fastest growing crop group was potted foliage plants for indoor or patio use, maintaining a 5% increase in 2005 and has averaged 5% increase since 2003.  7   Competition for ANEs nursery products is very competitive with their main competitors being Hines Horticulture, Inc., Nurserymens Exchange, Monrovia Nurseries, and Color Spot Nurseries.  Recent trends in the retail distribution channel, such as the expansion of large big box retailers emphasizing the lawn and garden category have increased consumer exposure.  However, the production of floral and nursery crops is increasingly capital-intensive.  This is a result of the mass-market sales in big discount stores and supermarkets as well as the switching of growers traditionally producing agricultural commodities to floriculture products.  ANE believes it does have a competitive position or niche in having products that are not as widely grown such as the exotic palms and cycads.  CPE  The competition for our products under this business segment is intense and local, regional and international in scope.  Competition for fresh produce in California wholesale market is fragmented and highly price sensitive.  The main competitors for this business segment are Melissas Inc. and Fridas, Inc. With that being said, U.S. markets for fresh fruits and vegetables have been transformed in the past decade. Consumers are purchasing more produce, more exotic varieties, and more convenient portions and packaging. The implications of consumer demand filter through the marketing chain.  The foodservice sector has also increased as buyers of fresh fruits and vegetables, although merchant wholesalers have somewhat declined.  Retail companies have grown larger with mass merchandisers becoming more active in food marketing.  In 2006, California fresh market asparagus production was $71 million which was down 12% from 2005 due to weather and a reduction in harvested acreage from the 2005 season.  Essentially all of the U.S. commercial production of asparagus occurs in California, Michigan, and Washington.  Globally, China is by far the largest producer of garlic, producing over 75 percent of world tonnage. The United States ranks fourth behind India and the Republic of Korea. In the United States, the majority of fresh and processing garlic production and acreage is concentrated in California. At the farm level, the U.S. garlic crop is valued at about $200 million.  Changes in relative market prices and stock levels can prompt some shifting of sales between the three segments of fresh-market, dehydrating, and seed stock.  In 2006, nearly 2 million tons of commercial fresh-market tomatoes were produced in the United States with production valued at $1.4 billion, the second highest ranked fresh market vegetable behind lettuce at $2.1 billion.  In 2006, nearly 10.7 million tons of processing tomatoes were produced in the United States with production valued at $758 million.  Seasonality  AVVG and ANE business segments have significant seasonality in both growing operations and demand with the first and fourth quarters of a given year being the more profitable.  The second and third quarters are expected to have significantly lower revenues.  Our CPE business segment has a large degree of seasonality in the growing seasons and procurement of our produce.  However, the overall demand for our produce does not have significant seasonal variation.   8    Sources and Availability of Raw Material and Principal Suppliers  Our CPE business segment purchases bulk tomatoes and garlic as well as other materials used in our agricultural operations either directly from farmers or indirectly from large brokers.  Typically our materials are purchased on the open market and we are not a party to any annual or long term contracts. On a consolidated basis, our top 5 vendors accounted for 57% of the Companys total purchase in 2007 with the top vendor, Expo Fresh, LLC accounting for 19%.  Dependence on One or Few Major Customers  US Farms main customers on a revenue basis were food processors, supermarkets, and restaurant suppliers.  On a consolidated basis our top 10 customers accounted for 49% of our total revenue in 2007.  Intellectual Property  We regard the protection of copyrights, service marks, trademarks, trade dress and trade secrets as critical to our future success and will rely on a combination of copyright, trademark, service mark and trade secret laws and contractual restrictions to establish and protect our proprietary rights in products and services.We have not filed trademark applications for our brand and logos, which include our subsidiaries: American Nursery Exchange, California Management Solutions, California Produce Exchange, American Aloe Vera Growers, Imperial Ethanol, Sammys Produce, US Ag Transportation, US Produce, Texas Garlic & Spice, US Trading Group, and World Garlic & Spice.  However, we do anticipate filing for the trademarks of these names during the 2008 and consider the marks important to the marketing of our business.  Governmental Approval and Regulation  The California State Department of Food and Agriculture oversees the packing and processing of California produce and conducts tests for quality and packaging standards.  Various states have also instituted regulations providing differing levels of oversight with respect to weights and measures and quality standards.  As a result of our agricultural and food processing activities, we are subject to numerous environmental laws and regulations that govern the treatment, handling, storage, and disposal of materials and waste as well as the remediation of contaminated properties.  We seek to comply at all times with such laws and regulations and to obtain all necessary permits and licenses.  We believe our facilities and practices are sufficient to maintain compliance with applicable governmental laws, regulations, permits and licenses.  Nevertheless, there is no guarantee that we will be able to comply with all future laws and regulations or requirements for necessary permits and licenses.  Our failure to comply with applicable laws and regulations or obtain any necessary permits and licenses could subject us to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions.  In the event, any of these items occurred, our operations could be materially and adversely affected.  Research and Development  US Farms incurred approximately $60,000 and $10,000 in research and development costs during the years ended December 31, 2007 and 2006, respectively.  These expenses related to feasibility studies prepared regarding the building of an ethanol facility in the Imperial Valley of California for our wholly-owned subsidiary, Imperial Ethanol, Inc.  9     Costs and Effects of Compliance with Environmental Laws  We are subject to various environmental protection and occupational health and safety laws and regulations in the State of California. Our operations may emit or release certain substances, which may be regulated or limited by applicable laws and regulations. In addition, we handle and dispose of materials and wastes classified as hazardous or toxic by one or more regulatory agencies in our business. Handling hazardous or toxic materials and wastes is often subject to regulations and we incur costs to comply with health, safety and environmental regulations applicable to those activities. Compliance with environmental laws and regulations did not materially affect our capital expenditures or earnings in 2007, and, based on current laws and regulations, we do not expect that they will do so in 2008.  Personnel  As of December 31, 2007, we had approximately 37 employees.  Of those employees, 2 were officers, approximately 20 are salaried employees, and approximately 15 are hourly employees.  All of our employees are located in California and there are no organized labor agreements or union agreements between us and our employees.   We believe that our relations with our employees are good.  As we continue to expand and in the event we are able to achieve capital funding, we may experience increased growth as well as a significant change in the number of employees.  Additionally, we believe the use of third-party service providers may enhance our ability to contain general and administrative expenses.  ITEM 2. DESCRIPTION OF PROPERTY  Corporate  Our corporate headquarters are located in San Diego, California, whereby we lease approximately 900 square feet for approximately $1,550 a month.  The Company entered into a three year lease that expires in May,2010.  In May 2007, the Company entered into a master lease agreement for trucks and trailers for its US Ag Transportation, Inc. subsidiary at $3,000 per month.  American Nursery Exchange  In June 2006, the Company entered into a one year lease agreement for a 5 acre nursery/greenhouse facility for its ANE potted plants in Valley Center, California at $4,500 per month.  This agreement is currently operating on a month to month basis at a monthly rate of $4,500  In February  2007, the Company entered into a five year lease agreement for 13.5 acres of nursery land for its ANE palms, cycads and jade plants  in Rainbow, California at $1,200 per month for its first year with annual increases up to $1,500 per month by the final year of the lease.  In March 2007, the Company entered into a one year lease agreement for a 1,440 square foot office trailer in Rainbow, California at $700 per month.  This space provides accounting and other support services to the Company and its subsidiaries.  The agreement is currently operating on a month to month basis.  In October, 2007, the Company executed a five year lease for five acres in Fallbrook, California, which will be dedicated to jade production and distribution.  The Company agreed to pay $900 a month for the first year and with annual rental increases up to $1,100 per month on the last year of the lease   10   American Aloe Vera Growers  In May 2007, the Company renewed a one year lease agreement for 70 acres of farm land for its aloe vera crop in Calipatria, California at $1,750 per month.  The Company anticipates a renewal lease will be executed.  California Produce Exchange  In April 2007, the Company entered into a verbal month-to-month agreement for a warehouse in Vista, California, for $4,500 a month.  This facility supports produce distribution for our Sammys Produce subsidiary.  In May 2007, the Company entered into a one year lease agreement for 140 acres of farm land for our winter asparagus crop in Calipatria, California at $3,500 per month.  The Company does not intend to renew this lease.  In October 2007, the Companys subsidiary, CPE executed a sublease with U.S.A. Garlic & Spices, Inc. (USA Garlic).  USA Garlic executed a lease, (Master Lease) dated October 16, 2006 for approximately 14,500 square feet of cooler, dry storage, and office space within a larger facility in Los Angeles, California.  The term of the Master Lease was for five years and CPE has agreed to sublease for the remaining term of the Master Lease, which will expire on October 31, 2011.  Additionally, CPE paid USA Garlic $30,000 as a security deposit, which will be returned after the conditions specified in the Master Lease are satisfied at the expiration of the lease.  USA Garlic agreed to pay $16,000 a month as well as any additional cost over $60,000, which the landlord agreed to cover, to update the refrigeration on the leased premises.  CPE has agreed to pay the same monthly rental terms to USA Garlic as described in the Master Lease.  A guaranty was also executed on the Master Lease by Mr. Shadfar, who previously served as the Vice President of Marketing for CPE.  ITEM 3. LEGAL PROCEEDINGS  On February 13, 2008, a lawsuit was filed by Donald Kurth claiming breach of contract and recovery of damages on account stated against American Nursery Exchange, a subsidiary of the Company.  The complaint was filed in the Superior Court of California and the complaint alleges material breach of contract for the sale of goods and for non-payment of a promissory note to Kurth Nurseries, Inc.  On March 11, 2008, Romona Button, holder of a Convertible Debenture, filed an Application For and Notice of Default in the Superior Court of Arizona. The $500,000 Convertible Debenture was issued on October 07, 2004 and bears 5% interest per annum repayable in cash or shares of the Company at the option of the note holder.  This Debenture has been in default since September 2006.  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  We did not submit any matters to a vote of our security holders during the fiscal year ended December 31, 2007. PART II ITEM  5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS     11   (a)Market Information  The Companys Common Stock is traded on the Over-The-Counter Bulletin Board (OTC:BB) under the symbol USFI.  Our common stock has traded infrequently on the OTC:BB, which severely limits our ability to locate accurate high and low bid prices for each quarter within the last two fiscal years.  The following table sets forth the trading history of our common stock on the Bulletin Board for each quarter of the years ended December 31, 2007 and 2006, as reported by Dow Jones Interactive. The quotations reflect inter-dealer prices without retail mark-up, markdown or commission and may not represent actual transactions.  Quarter EndingQuarterly HighQuarterly LowQuarterly Close3/31/20060.340.260.316/30/20060.400.320.399/30/20060.480.400.4512/31/20060.500.450.493/31/20070.460.430.466/30/20070.670.610.649/30/20070.620.550.6012/31/20070.480.440.47     (b)Holders of Common Stock  As of December 31, 2007 there were approximately 996 shareholders of record of US Farms 39,580,035 outstanding shares of common stock.  (c)  Dividends  The Company has never paid a cash dividend on its common stock.  We intend to follow a policy of retaining earnings, if any, to finance the growth of the business and do not anticipate paying any cash dividends in the foreseeable future. Payment
of dividends is at the discretion of the Board of Directors and will depend on
our profitability and financial condition, capital requirements, statutory and
contractual restrictions, future prospects and other factors deemed relevant.  (d) Securities Authorized for Issuance under Equity Compensation Plans  We currently do not maintain any equity compensation plans.    Recent Sales of Unregistered Securities  Private Placements  The following table summarizes the shares sold pursuant to the private placement during the three months ended December 31, 2007 at a share price of $0.40 per share.  We believe the issuance of the shares described below were exempt from registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2) and/or Regulation D, Rule 506.  The shares were issued directly by us and did not involve a public offering or general solicitation.  The recipients of the shares were afforded an opportunity for effective access to our files and records that contained the relevant information needed to make their investment decision, including our financial statements and 34 Act reports.  We reasonably believed that the recipients, immediately prior to granting the shares, had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investment.  The recipients had the opportunity to speak with our management on several occasions prior to their investment decision.  12     Date RangeNumber of Shares SoldNumber of InvestorsGross ProceedsSales Commissions10/01/07- 12/31/07422,50019$169,000$0  Services  During the three months ended December 31, 2007, we issued a total of 356,000 shares of our common stock in exchange for consulting services rendered and to be rendered to the Company.  NameNumber of SharesValuePer Share ValueType of ServicesJohn Brosky25,000$10,750$0.43ConsultingAlan Klitenic25,000$130,000$0.48ConsultingDon Hejmanowski100,000$49,000$0.49Director compensationYan Skwara100,000$49,000$0.49Director compensationDarin Pines100,000$49,000$0.49Director compensationRichard Hon6,000$3,000$0.50Consulting  Promissory Notes  During the three months ended December 31, 2007, we issued 40,983 shares of our common stock to the following persons who held convertible promissory notes for a total of approximately $16,393.  NameDollar Amount ConvertedNumber of SharesDate of ConversionCRI Lighting$6,39315,98310/9/2007Alan Klitenic$10,00025,00010/22/2007  We believe that the issuance of shares was exempt from registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2). The shares were issued directly by us and did not involve a public offering or general solicitation. The recipients of the shares were afforded an opportunity for effective access to files and records of our company that contained the relevant information needed to make their investment decision, including our financial statements and 34 Act reports. We reasonably believed that the recipients, who are our consultants, employees, officers and/or directors, immediately prior to receiving the shares, had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investment. The recipients had the opportunity to speak with our management on several occasions prior to their investment decision.  Subsequent Issuances  Subsequent to the year ended December 31, 2007, we issued a total of 1,522,000 shares of our common stock to 23 accredited individuals for $159,700 in cash received.   13    Subsequent to the year ended December 31, 2007, we issued a total of 2,346,698 shares of our common stock to 36 individuals for $487,676 in services rendered.  Subsequent to the year ended December 31, 2007, we issued a total of 1,000,000 shares of our common stock to 1 individual for debt reduction of $100,000 ($0.10 per share) and 100,000 shares of our common stock to 1 individual for debt reduction of $15,000 ($0.15 per share).  We believe that the issuance of shares was exempt from registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2) and/or Regulation D, Rule 506. The shares were issued directly by us and did not involve a public offering or general solicitation. The recipients of the shares were afforded an opportunity for effective access to files and records of our company that contained the relevant information needed to make their investment decision, including our financial statements and 34 Act reports. We reasonably believed that the recipients, who are our consultants, employees, officers and/or directors, immediately prior to receiving the shares, had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investment. The recipients had the opportunity to speak with our management on several occasions prior to their investment decision.  Subsequent Issuances of Securities Registered Pursuant to Form S-8  The following list shows the shares issued from a Registration Statement on Form S-8 filed on April 4, 2008.  Person Issued toNumber of SharesValue of SharesStoecklein Law Group300,000$51,000  Issuer Purchases of Equity Securities  We did not repurchase any of our securities during the year ended December 31, 2007.  ITEM 6 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONIDITION AND RESULTS OF OPERATIONS  You should read the following discussion and analysis of our financial condition and results of operations together with Selected Consolidated Financial Data and our consolidated financial statements and notes thereto that appear elsewhere in this Annual Report.  OVERVIEW AND OUTLOOK  US Farms, Inc. is a diversified commercial Farming, Nursery and Brokerage company based in Southern California.  The Companys principal operations are located in Southern California in the Imperial Valley, North County San Diego and Los Angeles.  US Farms, Inc. grows, markets and distributes horticultural products through a number of wholly owned subsidiaries which include: American Nursery Exchange, Inc. (ANE); California Management Solutions, Inc. (CMS); California Produce Exchange, Inc. (CPE); American Aloe Vera Growers, Inc. (AAVG); Imperial Ethanol, Inc. (IE); Sammys Produce, Inc. (SPI); US Ag Transportation, Inc (USAT); US Produce, Inc. (USPI); Texas Garlic & Spice, Inc. (TGS); US Trading Group, Inc. (USTG); and World Garlic & Spice, Inc. (WGS).   14  CURRENT
OPERATIONS  In order to simplify our operations and accurately describe our business we have divided operations into 4 reportable business segments (American Aloe Vera Growers, American Nursery Exchange, California Produce Exchange, and Imperial Ethanol) which are described below in greater detail.  We believe separating the business segments better aligns our operations with other food and agricultural companies as well as assists in the internal management reporting procedures and practices.  California Produce Exchange (CPE) - grows and distributes produce such as asparagus, tomatoes and garlic, through retail and wholesale distribution channels in the continental United States.  CPE produce is sold in supermarkets, restaurant suppliers and food processors. This business segment includes the wholly owned subsidiaries of CPE, USTG, SPI and WGS. American Nursery Exchange (ANE)  is a floriculture supplier of select ornamental shrubs, color plants, container grown plants, and exotic palms and cycads. Live foliage and trees are sold through wholesale distribution to landscapers, nurseries, supermarkets, and large retailers, and through direct mail covering North America. This segment includes the wholly owned subsidiary ANE.  American Aloe Vera Growers (AAVG)  is a domestic grower of aloe vera. The Company grows, packs and ships aloe vera plants, produce and bulk leaves through wholesale and retail channels throughout North America. AAVG products are sold in supermarkets, garden and home improvement centers, landscapers and retail outlets. This segment includes the wholly owned subsidiary AAVG.  Subsidiaries that are not included in these segments provide support and corporate services to the operating segments or are currently not operational.  Results of Operations for the years ended December 31, 2007 and 2006  US Farms, Inc. entered the farming and agricultural industry in the second quarter of 2006 and experienced revenues from its agricultural operations in the third quarter of 2006 through is AAVG business segment.  During 2007, the Company expanded operations through the acquisition of a nursery which was the foundation of the ANE business segment.  The expansion was also a result of the startup of the CPE business segment with the formation of Sammys Produce, Inc. and World Garlic and Spice, Inc. Therefore, the numbers for 2006 and 2007 are not directly comparable, as the Company was in the formative stage in 2006 versus a growth stage in 2007. Revenue  Sales of products and related costs of products sold are recognized when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price is fixed or determinable and (iv) collectability is reasonably assured. These terms are typically met upon shipment of product to the customer. Service revenue, including freight, storage and distribution charges are recorded when services are performed and sales of the related products are delivered.  The following table summarizes the Revenue by Operating Segment for the years ended December 31, 2007 and 2006:  For the Year EndedDecember 31,Increase/(Decrease)Revenue by Operating Segment20072006$%California Produce Exchange$    8,628,922$            -$8,628,922-- American Aloe Vera Growers677,840361,414316,42688%American Nursery Exchange126,409-126,409--Other27,414-27,414--Total$    9,460,585$    361,414$9,099,1712,518%   15    Revenues for the year ended December 31, 2007, when compared to 2006, increased by $9,099,171, or 2,518%, due primarily to the revenues generated from the California Produce Exchange segment.  As can be seen from the table below, tomatoes, which we began selling in April 2007, accounted for $6,526,779, or 69.0%, of consolidated revenues.  The winter asparagus harvest which ran from January through March 2007 accounted for $1,495,506, or 15.8% of consolidated revenues.  Palms and cycad sales which began in March of 2007 totaled $126,409, or 1.3 % of consolidated sales.  Aloe vera, which includes potted aloe plants, bulk leaf and produce totaled $677,840, or 7.2% of consolidated revenues, which was an increase $316,426 or 87.6% over the previous year. In contrast, during the year ended December 31, 2006, aloe vera under our AAVG business segment had been our only revenue producing product.  For the Year EndedDecember 31,Revenue by Product Category2007
$2007_
%Tomatoes$         6,526,77969.0%Asparagus1,495,50615.8%Aloe Vera677,8407.2%Garlic606,6376.4%Palms & Cycads126,4091.3%Other27,4140.3%Total$         9,460,585100.0%  Gross Margin  The following table summarizes the gross profit by each operating business segment for the years ended December 31, 2007 and 2006:  For the Year EndedDecember 31,Increase/(Decrease)Gross Profit by Operating Segment20072006$%California Produce Exchange$    595,496$                -$ 595,496--American Aloe Vera Growers141,07536,141104,934290%American Nursery Exchange41,955-41,955--Other(6,825)-(6,825)--Total$    771,701$     36,141$ 735,5602035%  Gross Profit by Operating Segment %California Produce Exchange7%--American Aloe Vera Growers21%10%American Nursery Exchange33%--Other(25%)--Total8%10%   16   The majority of our gross profit increase of $735,560 was due to produce sales from the newly formed CPE business segment as well as having a full years activity of the AAVG business segment.  As previously mentioned for the year ended December 31, 2006, we did not have products of tomatoes, asparagus, garlic, palms and cycads so the gross profit received was from our aloe vera products.    The following table summarizes the gross profit by product category for the year ended December 31, 2007.  For the Year EndedDecember 31,Gross Profit by Product Category2007_$2007_GP %Tomatoes$        136,3812.1%Asparagus477,68431.9%Aloe Vera141,07520.8%Garlic(18,569)-3.1%Palms & Cycads41,95533.2%Other(6,825)-24.9%Total$        771,7018.2%  Gross profit as a percentage of net sales decreased from 10.0% to 8.2% for years ended December 31, 2006 and 2007, respectively. This decrease is attributable to the sales mix change between the periods and the fact that the majority of the Companys business segments were not operational in 2006. Operating Expenses  The following table summarizes the operating expenses for the years ended December 31, 2007 and 2006:  For the Year EndedDecember 31,Increase/(Decrease)Operating Expenses by Category20072006$%Sales, General and Administrative$     3,034,486$     1,176,252$     1,858,234158%Stock Compensation Expense2,690,9613,307,740(616,779)(19%)Bad Debt Reserve Expense150,000-150,000--Depreciation and Amortization53,5441,33352,2113,917%Total Operating Expenses$     5,928,991$     4,485,325$     1,443,66632%  Total operating expenses were $5,928,991 for the year ended December 31, 2007 versus $4,485,325 from 2006, which is an increase of $1,443,666 or 32%.  The majority of this increase, or $1,858,234, was in the sales, general and administrative category due to the Companys expansion into the agricultural business and the addition of sales and corporate staff and consulting services that support current and future operations. Offsetting this increase in sales, general and administrative expense increase was a reduction in our stock compensation expense, of $616,779.  During the year ended December 1, 2007, the Company paid its consultants and employees less though stock issuances and more directly in cash.  In 2007, the Company reserved $150,000 for uncollectible accounts receivable primarily relating to the California Produce Exchange Segment. Depreciation and amortization expense increased $52,211 due to the Companys purchases of machinery equipment, vehicles, a shade house and the aloe crop to support current and future operations.  17   Other Income and Expense  The following table summarizes the Other Income (Expense) by category for the years ended December 31, 2007 and 2006:  For the Year EndedDecember 31,Increase/(Decrease)Other Income (Expenses)20072006$%Gain on Extinguishment of Debt$                 -$        98,256$        (98,256)(100%)Derivative Expense(662,088)-(662,088)--Interest Expense(135,949)(120,982)(14,967)12%Total$      (798,037)$     (22,726)$      (775,311)3,412%  Other expenses for the year ended December 31, 2007, when compared to 2006, increased $775,311, due primarily to the derivative expense of $662,088 associated with the issuance of warrants, which is described in more detail in footnotes to the financial statements.  Additionally, the Company had a gain on extinguishment of debt in 2006 totaling $98,245 which was a non-recurring event. Net Loss  The net loss for the year ended December 31, 2007 was $5,955,327, versus a net loss of $4,471,910 for year ended December 31, 2006, which was an increase of $1,484,417 or 33.2%.  The increase in net loss is primarily attributable to US Farms becoming operational in its new line of business in the agricultural industry.  Management expects that operating losses may continue as it continues to expand in this industry. Liquidity and Capital Resources The following table summarizes total current assets, liabilities and working capital at December 31, 2007 compared to December 31, 2006.  December 31,Increase/(Decrease)Working Capital Analysis20072006$%Current Assets2,718,66581,826$      2,636,83997%Current Liabilities5,256,3893,012,4482,243,94143%Working Capital Surplus (Deficit)$    (2,537,724)$   2,930,622)$         392,89815%  As of December 31, 2007, the Company had total cash and current assets of $2,718,665, and current liabilities of $5,256,389 resulting in a working capital deficit of $2,537,724.  The Companys available sources for generating cash for working capital is through the issuance of common stock and notes payable and, eventually, through the development of profitable operations.  Our future capital requirements will depend on many factors, including the expansion of our business in the agriculture industry; increased sales in our business segments; the cost and availability of third-party financing for development; addition of new revenue sources; and administrative and legal expenses.  During the end of 2006 through December 31, 2007, we conducted a private placement of equity units that consisted of one share of common stock and one warrant at a price of $0.25 per unit.  During 2007 we raised approximately $4,092,049 from the sale of 15,816,750 shares of restricted common stock.   18    As of December 31, 2007, the Company had convertible and other third party debt obligations in default, excluding related accrued interest, totaling $858,852.  Of those in default was convertible debenture of $500,000, bearing 5% interest per annum repayable in cash or shares of the Company at the option of the note holder.  Additionally, there were multiple unsecured convertible notes of $146,000, bearing various annual interest rates repayable in cash or restricted common shares of the Company at the option of the note holders.  There was also a non-convertible note payable of $42,500, bearing 10% interest per annum.  On March 31, 2008, a lawsuit was served to the Company for non-payment of a promissory note to Kurth Nurseries, Inc.  This suit was filed February 20, 2008 in a Superior Court in California.  The amount due on this note is $170,352.  There is no assurance that we will be able to raise any additional funds through the issuance of convertible debentures, equity issuances or that any funds made available will be adequate for us to continue as a going concern.  Management is presently negotiating with the various debt holders of the Company to restructure the amounts and terms of repayment. Management believes that there is a reasonable likelihood that a significant portion of our debts can be settled through such negotiation; however, there is no assurance that these efforts will be successful.  If we are not able to restructure the debt obligations, there is doubt that the Company can continue as a going concern.  Further, if we are not able to generate positive cash flow from operations, or unable to secure adequate funding under acceptable terms, there is substantial doubt that the Company can continue as a going concern.  We anticipate that we will incur operating losses in the next twelve months. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development.  Such risks for us include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks, we must, among other things, expand our customer base, implement and successfully execute our business and marketing strategy, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations  Critical Accounting Estimates  Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we re-evaluate all of our estimates, including those related to the areas of customer and grower receivables, inventories, useful lives of property, plant and equipment, promotional allowances, income taxes, retirement benefits, and commitments and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may materially differ from these estimates under different assumptions or conditions as additional information becomes available in future periods.  Allowance for accounts receivable. We provide an allowance for estimated uncollectible accounts receivable balances based on historical experience and the aging of the related accounts receivable. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.   19    Inventory. The Company values its inventory under the average method costing under the lower of cost or market method. Inventory consisted of finished goods and raw materials.  Revenue recognition. Sales of products and related costs of products sold are recognized when persuasive evidence of an arrangement exists, shipment has been made, title passes, the price is fixed or determinable and collectibility is reasonably assured.  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 un-depreciated 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.  Advertising and Promotion.  We follow the policy of charging the costs of advertising and promotion expenses as incurred.  Going Concern  The accompanying financial statements have been prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  The Company has incurred operating losses from inception and has generated an accumulated deficit of $23,396,921 as of December 31, 2007.  In addition, the Company was in default on certain of its promissory notes and other debt obligations on December 31, 2007.  These factors create uncertainty about the Companys ability to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.  If the Company is unable to obtain adequate capital it could be forced to cease operations.  The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.  Off-Balance Sheet Arrangements  We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors.  Impact of Recently Issued Accounting Pronouncements  In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (FAS 141(R)). This Statement provides greater consistency in the accounting and financial reporting of business combinations. It requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in the transaction, establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed, and requires the acquirer to disclose the nature and financial effect of the business combination. FAS 141(R) is effective for fiscal years beginning after December 15, 2008. We will adopt FAS 141(R) no later than the first quarter of fiscal 2010 and are currently assessing the impact the adoption will have on our financial position and results of operations.  In December 2007, the FASB issued SFAS No. 160. Noncontrolling Interests in Consolidated Financial Statements (FAS 160). This Statement amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. FAS 160 is effective for fiscal years beginning after December 15, 2008. We will adopt FAS 160 no later than the first quarter of fiscal 2010 and are currently assessing the impact the adoption will have on our financial position and results of operations.   20   In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which permits entities to choose to measure at fair value eligible financial instruments and certain other items that are not currently required to be measured at fair value. The standard requires that unrealized gains and losses on items for which the fair value option has been elected be reported in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We will adopt SFAS No. 159 no later than the first quarter of fiscal 2009. We are currently assessing the impact the adoption of SFAS No. 159 will have on our financial position and results of operations.  Factors That May Affect Our Results of Operations  Risks Related to Our Business  If we are unable to obtain additional funding, our business operations will be harmed and if we do obtain additional financing our then existing stockholders may suffer substantial dilution.  We will require additional funds to expand our operations.  We anticipate that we will require up to approximately $5,000,000 to fund our continued operations for the next twelve months, depending on revenue from operations.  Additional capital will be required to effectively support the operations and to otherwise implement our overall business strategy.  There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all.  The inability to obtain additional capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations.  If we are unable to obtain additional financing, we will likely be required to curtail our marketing and development plans and possibly cease our operations.  Any additional equity financing may involve substantial dilution to our then existing stockholders.  An inability to access capital readily or on terms favorable to us could impair our ability to fund operations and could jeopardize our financial condition.  Access to funds is essential to our agricultural business.  In the future we may need to incur debt or issue equity in order to fund our working capital requirements, as well as to make acquisitions and other investments.  Our access to funding sources could be hindered by many factors.  Those factors that are specific to our anticipated line of business include the fact that our operations and products are regulated in the areas of food safety and protection of human health and the environment.  We have limited operating history in the agricultural products industry and there can be no assurance that we will be successful in this industry.  Our proposed operations are subject to all of the risks inherent in the establishment of a new business, including insufficient capital, unforeseen problems, and expenses and complications encountered with the early phases of operations in a business. Moreover, our lack of an operating history in the agricultural products industry makes it impossible to predict whether or not we will operate profitably in the industry. While we have brought on management that is familiar with this industry, there can be no assurances that we will be able to locate, hire and retain the necessary personnel to initiate, manage and operate this line of business, develop and implement necessary systems, obtain contracts and obtain financing as contemplated in our business strategy.   21    If a catastrophe were to strike our facilities in Southern California, we may be unable to operate our business competitively.  Our facilities in Southern California may be affected by catastrophes such as fires, earthquakes, or sustained interruptions in electrical service.  Earthquakes and fires are of particular significance to us because our facilities are located in earthquake and fire prone areas of Southern California.  Some of our facilities were located a short distance from the wildfires of 2007 in Southern California that destroyed many homes and businesses.  In the event any of our existing facilities, products, or equipment are affected by man-made or natural disasters, we may be unable to process our customers requests and deliveries in a timely manner and cause us to incur additional expenses.  Additionally, we may be unable to operate our business in a commercially competitive manner.  We and our growers are subject to the risks that are inherent in farming.  Our results of operations may be adversely affected by numerous factors over which we have little or no control and that are inherent in farming, including reductions in the market prices for our products, adverse weather and growing conditions, pest and disease problems, and new government regulations regarding farming and the marketing of agricultural products.  We may not be able to retain our key personnel or hire the personnel we need to sustain and grow our business.  We face intense competition for qualified employees from businesses in the agricultural products industry.  Our performance is highly dependent upon our ability to attract, retain, and motivate highly skilled, talented employees.  These professionals are regularly recruited by other firms and may choose to change firms, in which case their clients may choose to move their clients and assets.  Given our relatively small size compared to some of our anticipated competitors, the performance of our business may be more adversely affected than our competitors would be if we lose well-performing employees and are unable to attract new ones.  We may incur material losses and costs as a result of product liability claims that may be brought against up or any product recalls that we may have to make.  The sale of food products for human consumption involves the risk of injury to consumers.  Such hazards could result from: tampering by unauthorized third parties; product contamination, such as e-coli, salmonella, or spoilage; the presence of substances, chemicals, and other agents; or residues introduced during the growing, storage, handling or transportation phases.  There can be no assurance that the product liability insurance held by the Company will be adequate to cover any loss or exposure for product liability, or that such insurance will continue to be available on acceptable terms.  Any product liability claim not fully covered by insurance, as well as any adverse publicity from a product liability claim or product recall, could have a material adverse effect on the financial condition or results of operations of the Company.  Additionally, adverse publicity allegations, regardless if the allegations are true, of food quality, illness, or other health concerns may negatively affect our ability to distribute some of our products.  The acquisition of other businesses could pose risks to our operating income.  We intend to review acquisition prospects that would complement our business. While we are not currently a party to any agreement with respect to any acquisitions, we may acquire other businesses in the future. Future acquisitions by us could result in accounting charges, potentially dilutive issuances of equity securities, and increased debt and contingent liabilities, any of which could have a material adverse effect on our business and the market price of our common stock. Acquisitions entail numerous risks, including the assimilation of the acquired operations, diversion of managements attention to other business concerns, risks of entering markets in which we have limited prior experience, and the potential loss of key employees of acquired organizations. We may be unable to successfully integrate businesses or the personnel of any business that might be acquired in the future, and our failure to do so could have a material adverse effect on our business and on the market price of our common stock.  22   Our ability to competitively serve our customers is a function of reliable and low cost transportation. Disruption of the supply of these services and/or significant increases in the cost of these services could impact our operating income.  We use multiple forms of transportation to bring our products to market. They include ocean, truck, and air-cargo. Disruption to the timely supply of these services or dramatic increases in the cost of these services for any reason including availability of fuel for such services, labor disputes, or governmental restrictions limiting specific forms of transportation could have an adverse effect on our ability to serve our customers and consumers and could have an adverse effect on our financial performance.  Risks Relating to Our Common Stock  If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board, which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.  Companies trading on the OTC Bulletin Board, such as us, must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board.  More specifically, FINRA has enacted Rule 6530, which determines eligibility of issuers quoted on the OTC Bulletin Board by requiring an issuer to be current in its filings with the Commission.  Pursuant to Rule 6530(e), if we file our reports late with the Commission three times in a two-year period or our securities are removed from the OTC Bulletin Board for failure to timely file twice in a two-year period then we will be ineligible for quotation on the OTC Bulletin Board.  The OTC Bulletin Board website does not indicate the Company being late in its reports to the Commission through the period ended December 31, 2007.  If we do not meet the obligations of this rule, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.  The value of our common stock may be adversely affected by market volatility.  The trading price of our common stock fluctuates and may be influenced by many factors, including:  · Our operating and financial performance and prospects; · The depth and liquidity of the market for our common stock; · Investor perception of us and the industry and markets in which we operate; · Our inclusion in, or removal from, any equity market indices; · Changes in earnings estimates or buy/sell recommendations by analysts; and · General financial, domestic, international, economic and other market conditions;   23   Because our common stock is deemed a low-priced Penny stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.  Since our common stock is a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be more difficult for investors to liquidate their investment even if and when a market develops for the common stock.  Until the trading price of the common stock rises above $5.00 per share, if ever, trading in the common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to:  · Deliver to the customer, and obtain a written receipt for, a disclosure document; · Disclose certain price information about the stock; · Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer; · Send monthly statements to customers with market and price information about the penny stock; and · In some circumstances, approve the purchasers account under certain standards and deliver written statements to the customer with information specified in the rules.  Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.  Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.  Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, 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 and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of US Farms; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of US Farms are being made only in accordance with authorizations of management and directors of US Farms, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of US Farms assets that could have a material effect on the financial statements. We have a limited number of personnel that are required to perform various roles and duties. Furthermore, we have one individual, our CEO, who is responsible for monitoring and ensuring compliance with our internal control procedures. As a result, our internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision.  24    FINRA sales practice requirements may also limit a stockholder's ability to buy and sell our stock.  In addition to the penny stock rules described above, the Financial Industry Regulatory Authority (FINRA) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.  ITEM 7. FINANCIAL STATEMENTS  See Index to Financial Statements and Financial Statement Schedules appearing on page F-1 through F-18 of this Form 10-K.  ITEM 8. CHANGES IN DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE  US Farms has not had any changes or disagreements with its independent auditors on accounting or financial disclosures.  Item 8A. CONTROLS AND PROCEDURES  Our Chief Executive Officer and Principal Financial Officer, Mr. Yan Skwara, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this annual report.  Based on the evaluation, Mr. Skwara concluded that our disclosure controls and procedures are not effective, for the reasons discussed below, in timely alerting him to material information relating to us (including our consolidated subsidiaries) required to be included in our periodic SEC filings.  Item 8A(T). MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING  Managements Report on Internal Control Over Financial Reporting  Our management is responsible for establishing and maintaining adequate internal control over our financial reporting and for the assessment of the effectiveness of internal control over financial reporting.  Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of the financial statements in accordance with generally accepted accounting principles.  Our internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles and the receipts and expenditures of company assets are made and in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.  25    Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of a change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  In connection with the preparation of our annual financial statement, our management has undertaken an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2007, based on the criteria set forth in the Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Based upon the evaluation, management concluded that our internal control over financial reporting was not effective as of December 31, 2007.  Our principal executive officer and principal financial officer concluded that we have material weaknesses in our internal control over financial reporting for the following reasons:  · Certain control procedures were unable to be verified due to performance of the procedure not being sufficiently documented.  As an example, some procedures requiring review of certain reports could not be verified due to there being no written notation on the report by the reviewer.  Because we were unable to verify these procedures, we conclude that as of December 31, 2007 there were control deficiencies related to the preparation and review of our interim and annual consolidated financial statements, in particular with respect to certain account reconciliations, journal entries and spreadsheets, and the authorization of sales transactions and customer billing rates.  · Certain of our personnel had access to various financial application programs and data that was beyond the requirements of their individual job responsibilities.  · We did not maintain a level of personnel sufficient to execute certain computing controls over our information technology structure.  · We did not maintain adequate segregation of duties within certain areas impacting our financial reporting.  While these control deficiencies did not result in any audit adjustments to our 2007 interim or annual consolidated financial statements, it could result in a material misstatement to our interim or consolidated financial statements that would not be prevented or detected, and therefore we have determined that these control deficiencies constitutes a material weakness.  To the extent reasonably possible given our resources, we will seek the advice of outside consultants and utilize internal resources to implement additional internal controls to address the above identified material weaknesses.  We are taking steps to implement additional review and approval procedures applicable to our financial reporting process, and are in the planning phase of creating and implementing new information technology policies and procedures related to controls over information technology operations, security and change management.  Through these steps, we believe that we are addressing the deficiencies that affected our internal control over financial reporting as of December 31, 2007.  Because the remedial actions require upgrading certain of our information technology systems, relying extensively on manual review and approval processes, and possibly hiring of additional personnel, we may not be able to conclude that these material weaknesses have been remedied until these controls have been successfully operation for some period of time.  26   This annual report does not include an attestation report of the companys independent registered public accounting firm regarding internal control over financial reporting.  Managements report was not subject to attestation by the companys independent registered public accounting firm pursuant to the temporary rules of the Securities and Exchange Commission that permit the company to provide only managements report in this annual report.  Changes in Internal Control Over Financial Reporting  There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 8B. OTHER INFORMATION Not applicable. ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT The following table sets forth the names and positions of US Farms executive officers and directors.  NameAgePositionYan Skwara43Founder, President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board of DirectorsDonald Hejmanowski48Director(1)Darin Pines40Chief Operating Officer and Director(2) (1) Appointed April 5, 2006 (2) Appointed May 5, 2006 as a Director and September 6, 2007 as the Chief Operating Officer  Yan Skwara, Founder, President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors - In 1997, Mr. Skwara founded US Farms and has served as the Chief Executive Officer, Principal Financial Officer and Chairman of the Board of Directors since then. Mr. Skwara has over 10 years experience managing early stage private and public companies. Mr. Skwara is responsible for overseeing the acquisition of companies and inventories while managing the internal growth of the company. He has also assisted in raising capital and the hiring of experienced management for the Company. Mr. Skwara attended California State University, Los Angeles and played professional soccer in Europe and the U.S. from 1983 to 1989.  Darin Pines, Chief Operating Officer and Director  has served on US Farms Board of Directors since May 5, 2006 and was appointed Chief Operating Officer on September 6, 2007.Mr. Pines has more than 18 years of experience in agricultural operations. In 1992, as a second generation farmer, Mr. Pines joined the management team of his family's nursery business where he was responsible for managing various nursery facilities, overseeing business development opportunities and creating and coordinating customer service policies and administration.  Mr. Pines also has an expertise in the growing of aloe vera plants.  Additionally, Mr. Pines is a long term member and participant of the San Diego Flower and Plant Association and the Produce Marketers Association. As the Chief Operating Officer of the Company, Mr. Pines will have full responsibility for all day-to-day operations, including nursery and farming operations, sales, growth, land acquisition and resource allocation, land use and productivity, subsidiary administration, and business development. Since joining the Companys Board of Directors in May of 2006, 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 has enhanced the quality and yield of its products.  27   Donald Hejmanowski, Director Mr. 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.  The Board of Directors has analyzed the independence of each director and has concluded that none of the directors are considered independent  directors in accordance with the director independence standards of the American Stock Exchange.  Election of Directors and Officers.  Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and qualified. Officers are appointed to serve until the meeting of the Board of Directors following the next annual meeting of stockholders and until their successors have been elected and qualified.  Involvement in Certain Legal Proceedings  No Executive Officer or Director of the Corporation has been the subject of any Order, Judgment, or Decree of any Court of competent jurisdiction, or any regulatory agency permanently or temporarily enjoining, barring suspending or otherwise limiting him/her from acting as an investment advisor, underwriter, broker or dealer in the securities industry, or as an affiliated person, director or employee of an investment company, bank, savings and loan association, or insurance company or from engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or sale of any securities.  No Executive Officer or Director of the Corporation has been convicted in any criminal proceeding (excluding traffic violations) or is the subject of a criminal proceeding which is currently pending.   28    No current Executive Officer or Director of the Corporation is the subject of any pending legal proceedings.  Audit Committee and Financial Expert  We do not have an Audit Committee.  Our directors perform some of the same functions of an Audit Committee, such as: recommending a firm of independent certified public accountants to audit the annual financial statements; reviewing the independent auditors independence, the financial statements and their audit report; and reviewing management's administration of the system of internal accounting controls.  The Company does not currently have a written audit committee charter or similar document.  Section 16(a) Beneficial Ownership Reporting Compliance  Section 16(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act), requires our executive officers and directors, and persons who beneficially own more than ten percent of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater-than-ten-percent beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.  Based upon a review of the copies of such forms furnished to us and written representations from our executive officers and directors, we believe that as of December 31, 2007, they were all current in their filings.  Code of Ethics  A code of ethics relates to written standards that are reasonably designed to deter wrongdoing and to promote:  (1) Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (2) Full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the Commission and in other public communications made by an issuer; (3) Compliance with applicable governmental laws, rules and regulations; (4) The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and (5) Accountability for adherence to the code.  US Farms adopted a corporate code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions, which was filed as an exhibit 14 to its 2004 10-KSB.  Nominating Committee  We do not have a Nominating Committee or Nominating Committee Charter.  Our Board of Directors performs some of the functions associated with a Nominating Committee.  We have elected not to have a Nominating Committee in that we are a small operating company with limited operations and resources.   29   ITEM 10. EXECUTIVE COMPENSATION  Executive Compensation The following table provides certain summary information concerning the compensation earned by the named executive officers for the year ended December 31, 2007, for services rendered in all capacities to US Farms, Inc.:  Name & Principal PositionYearSalary ($)Bonus ($)Stock Awards ($)Option Awards ($)Non-Equity Incentive Plan Compensation ($)Nonqualified Deferred Compensation Earnings ($)All Other Compensation ($)Total ($)Yan K. Skwara, President and Chief Financial Officer2007$153,000-$245,000 (1)----$398,000Darin Pines,
Chief Operating Officer (2)2007$39,000------$39,000 (1) Amount represents the estimated total fair market value of stock granted to Mr. Skwara pursuant to SFAS 123R, as discussed in Note 3 to our audited financial statements for the year ended December 31, 2007.  Additionally, Mr. Skwara received stock compensation for serving as a director, which is shown in the Director Compensation below. (2) Mr. Pines was appointed as the Companys Chief Operating Officer on September 6, 2007.  Employment Agreements  On March 22, 2006, US Farms entered into an Employment Agreement with Yan K. Skwara, its 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 a one-time signing bonus of 2,000,000 (two million) restricted shares of the Companys common stock.  Additionally, the employment agreement also allows periodic bonus compensation at the discretion of the Companys Board of Directors.  The employment agreement also grants Mr. Skwara an incentive in the form of non-qualified stock options to purchase common stock of the Company with the approval by the Board of Directors.  Change in Control Arrangements  US Farms has no compensatory plans or arrangements which relate to the resignation, retirement or any other termination of an executive officer or key employee with the Company, a change in control of the Company or a change in such executive officer's or key employee's responsibilities following a change in control. Director Compensation  The following table provides compensation summary concerning the compensation earned by the named directors for the year ended December 31, 2007   30    DIRECTOR COMPENSATIONNameFees Earned or Paid in CashStock AwardsOption AwardsNon-Equity Incentive Plan CompensationNon-Qualified Deferred Compensation EarningsAll Other CompensationTotalYan Skwara-100,000----$49,000Donald Hejmanowski-275,000----$134,750Darin Pines-250,000----$122,500  The Company originally entered into one year agreements with its two directors, Mr. Donald Hejmanowski and Mr. Pines in 2006.  Pursuant to the agreement, each director was to receive 250,000 restricted shares of the Companys common stock and would be reimbursed for pre-approved expenses incurred on behalf of the Company, including but not limited to, travel expenses incurred to attend Board meetings.  The agreements expired in May of 2007; however, both Mr. Hejmanowski and Mr. Pines remain as directors.  In November 2007, the Company authorized the issuance of 100,000 (a total of 300,000) shares to each member of the board of directors.  ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.  The following table sets forth, as of April 4, 2008 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.  Name and Address (1)Number of Shares Beneficially OwnedClassPercentage of Class (2)Yan K. Skwara
Chief Executive Officer, Principal Financial Officer and Chairman of the Board of Directors3,760,972Common8.3%Donald Hejmanowski
Director875,000Common1.3%Darin Pines
Chief Operating Officer and Director750,000Common1.0%All directors and executive officers (3 persons)4,185,972Common10.6%   (1) Unless noted otherwise, the address for all persons listed is c/o the Company at 1635 Rosecrans Street, Suite C, San Diego, CA 92106. (2) Percentages based on 44,548,733 shares of common stock issued and outstanding as of April 4, 2008.  31    This 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, the Company believes that each of the stockholders named in this table has sole or shared voting and investment power with respect to the shares indicated as beneficially owned. The number of shares and percentages of class beneficially owned by the entities above is determined under rules promulgated by the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individuals has sole or shared voting power or investment power and also any shares as to which the individual has the right to acquire within 60 days through the exercise of any stock option or other right. The inclusion herein of such shares, however, does not constitute an admission that the named stockholder is a direct or indirect beneficial owner of such shares. Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power (or shares such power with his or her spouse) with respect to all shares of capital stock listed as owned by such person or entity.  ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.  We sell bulk aloe leaf to US Aloe, Inc, an entity that Yan Skwara, our Chief Executive Officer, is also the founder, chief executive officer and chairman of the board of directors.  During 2007, the bulk leaf sales totaled $38,000 from the American Aloe Vera Growers, Inc. subsidiary resulting in gross margins of approximately $8,000. As of December 31, 2007, the receivable due from this entity totaled $35,200.  US Farms 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  Incorporated by referenceExhibitExhibit DescriptionFiled herewithFormPeriod endingExhibitFiling date3(i)aArticles of Incorporation10-SB3.310/29/993(i)bAmendment to Articles of Incorporation10-KSB12/31/023.105/27/033(i)(c)Amendment to Articles of Incorporation10-KSB12/31/033.504/13/043(i)(d)Amendment to Articles of Incorporation10-KSB12/31/043.604/14/05  32      3(i)(e)Amendment to Articles of Incorporation8-K3.707/17/063(ii)aBylaws of SDSDC10-SB3.410/29/993(ii)bBylaws and Amended Bylaws10-KSB12/31/023.205/27/034.4Securities Purchase Agreement8-K4.406/12/074.5Subscription Agreement8-K4.506/12/074.6Securities Purchase Agreement with Westcap as the Placement Agent8-K4.606/12/074.7Subscription Agreement in conjunction with Westcap offering8-K4.706/12/0710.11Employment Agreement with Iradjemr Shadfar10-QSB06/30/0710.118/20/0714Code of Ethics10-KSB12/31/04144/15/0721Subsidiaries of the registrant10-KSB12/31/2007214/15/200831Certification of Yan K. Skwara, Chief Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley ActX32Certification of Yan K. Skwara, Chief Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley ActX99.1Press release announcing the appointment of Darin Pines as Chief Operating Officer10-KSB12/31/200799.14/15/200899.2Press release announcing the signing of a Four Year Sub-lease Agreement for 20,000 Square Foot Produce Warehouse Facility Located in Los Angeles10-KSB12/31/200799.24/15/200899.3Press release announcing the signing of a Five-Year Lease Agreement for Five Acre Nursery Facility in Fallbrook, California10-KSB12/31/200799.34/15/200899.4Press release Providing Update in Regards to Recent Southern California Firestorm10-KSB12/31/200799.44/15/200899.5Press release Announcing that the Company formalizes Membership with San Diego Farm Bureau10-KSB12/31/200799.54/15/2008  33     99.6Press release Announcing that the Company consummates Membership with Imperial Valley Farm Bureau10-KSB12/31/200799.64/15/200899.7Press release Announcing the Upcoming Interview With CEO Yan Skwara on WallSt.net10-KSB12/31/200799.74/15/200899.8Press release Announcing Third Quarter 2007 Financial Results10-KSB12/31/200799.84/15/200899.9Press release Announcing the Company Expects Excellent Winter Harvest of Asparagrus10-KSB12/31/200799.94/15/200899.10Press release Announcing that CEO Yan Skwara is Featured in Interview on EquityGroups.com10-KSB12/31/200799.104/15/200899.11Press release Announcing Record Sales for 200710-KSB12/31/200799.114/15/200899.12Press release Announcing the Showcasing at World Money Show in Orlando, Florida10-KSB12/31/200799.124/15/200899.13Press release Announcing Smallcap RappTM to Feature FTS Group, Inc. and US Farms, Inc.10-KSB12/31/200799.134/15/200899.14Press release Announcing the Company will be Present at Bluechip Capital Investment Forum10-KSB12/31/200799.144/15/200899.15Press release Announcing the Company Retains OTC Financial Network for Investor Relations Campaign10-KSB12/31/200799.154/15/200899.16Press release Announcing the OTC Financial Network Issues Corporate Facts Report on US Farms, Inc.10-KSB12/31/200799.164/15/200899.17Press release Announcing the Company will Participate in Bluechip Capital National Teleconference Forum10-KSB12/31/200799.174/15/200899.18Press release Announcing the Nursery Fulfillment Agreement with Morgan Creek Tropicals10-KSB12/31/200799.184/15/200899.19Press release Announcing the Presentation to Southern California Keiretsu Investor Network Forum10-KSB12/31/200799.194/15/2008 99.20Press release Announcing the Powerful National Investment Conference This Saturday Morning Presented by SCIA -- Southern California Investment Association in Newport Beach, CA10-KSB12/31/20074/15/2008 34     ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 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-KSB for fiscal 2007 and 2006 were approximately $20,000 and $15,000, respectively. Audit Related Fees  The aggregate fees billed by the Companys auditors for professional services rendered for audit related fees for fiscal years 2007 and 2006 were $0 and $0. Tax Fees The aggregate fees billed by the Companys auditors for professional services to be rendered for tax fees for fiscal years 2007 and 2006 were $0 and $0, respectively. All Other Fees The aggregate fees billed by the Company's auditors for all other non-audit services rendered to the Company, such as attending meetings and other miscellaneous financial consulting in fiscal 2007 and 2006 were $0 and $0, respectively.  35    SIGNATURES  In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  US Farms, Inc. (Registrant)    By: /s/ Yan K. Skwara Yan K. Skwara, Chief Executive Officer and Principal Financial Officer (On behalf of the Registrant)   Date: December 15, 2008  36    EXHIBIT 31 CERTIFICATION  I, Yan K. Skwara, certify that:  1. I have reviewed this report on Form 10-KSB/A of US Farms, Inc.;  2. Based on my knowledge, this annual 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 quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this quarterly report;  4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to me 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; and  c. Evaluated the effectiveness of the small business issuer disclosure controls and procedures and presented in this report my 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 small business issuers internal control over financial reporting that occurred during the small business issuers most recent fiscal quarter (the small business issuers fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuers internal control over financial reporting; and  5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuers auditors of the small business issuer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 small business issuer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 small business issuers internal control over financial reporting.  Date: December 15, 2008  /s/ Yan K. Skwara Yan K. Skwara Chief Executive Officer and Principal Financial Officer     EXHIBIT 32 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 Executive Officer and 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/A of the Company for the fiscal year ended December 31, 2007 (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.     /s/ Yan K. Skwara Yan K. Skwara Chief Executive Officer and Principal Financial Officer December 15, 2008       US FARMS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007 AND 2006           REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  TO THE BOARD OF DIRECTORS US FARMS, INC. AND SUBSIDIARIES:  We have audited the accompanying consolidated balance sheets of US Farms, Inc. and Subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of operations, stockholders equity and cash flows for the years 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 on our audit.  We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform our audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. 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 audit provides 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 at December 31, 2007 and 2006 and the results of its operations and its stockholders equity and cash flows for the periods then ended 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. For the year ended December 31, 2007 the company report a net loss of $5,955,327 and has an accumulated deficit of $23,396,921 as of December 31, 2007. In addition, the Companys current liabilities exceed current assets by $2,537,724 as of December 31, 2007.  The Company's viability is dependent upon its ability to obtain future financing and the success of its future operations. These factors raise substantial doubt as to the Company's ability to continue as a going concern. Management's plan in regard to these matters is described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.  /s/ Gruber & Company, LLC Gruber & Company, LLC Saint Louis, Missouri April 2, 2008       US Farms, Inc. and SubsidiariesConsolidated Balance SheetsDecember, 3120072006AssetsCurrent AssetsCash$           24,487$            2,468Accounts Receivable1,797,04573,358Inventories781,243-Prepaid Expenses & Other Assets115,8906,000Total Current Assets2,718,66581,826Property & Equipment, Net363,2376,667Other Assets565,436750Total Assets$      3,647,338$           89,243Liabilities & Stockholders' Equity (Deficit)Current LiabilitiesAccounts Payable$      2,495,895$         774,941Accrued Expenses759,010572,407Accrued Interest Payable246,733567,719Derivative Liability662,088-Convertible Debenture500,000500,000Notes Payable592,663597,381Total Current Liabilities5,256,3893,012,448Notes Payable111,289-Total Liabilities5,367,6783,012,448Commitments & Contingencies--Stockholders' Equity (Deficit)Series B Preferred Stock, $0.001 par value, 1,000,000 shares8989authorized, 88,500 shares issued and outstandingCommon Stock, $0.001 par value, 500,000,000 shares39,58017,686authorized, 39,580,035 and 17,685,613 issued andoutstanding, respectivelyAdditional Paid-in Capital21,655,19214,514,894Other Comprehensive Loss(18,000)(14,000)Treasury Stock, at cost(280)(280)Accumulated Deficit(23,396,921)(17,441,594)Total Stockholders' Equity (Deficit)(1,720,340)(2,923,205)Total Liabilities & Stockholders' Equity (Deficit)$      3,647,338$           89,243The accompanying notes are an integral part of these financial statements.      US Farms, Inc. and SubsidiariesConsolidated Statements of OperationsFor the Year EndedDecember 31,20072006Sales, net$      9,460,585$         361,414Cost of Good Sold8,688,884325,273Gross Profit771,70136,141Operating ExpensesSelling, General and Administrative3,184,4861,176,252Stock Compensation Expense2,690,9613,307,740Depreciation and Amortization53,5441,333Total Operating Expenses5,928,9914,485,325Income (Loss) from Operations(5,157,290)(4,449,184)Other Income (Expense)Gain on Extinguishment of Debt-98,256Derivative Expense(662,088)-Interest Expense(135,949)(120,982)Total Other  Income (Expense)(798,037)(22,726)Income (Loss) Before Income Taxes(5,955,327)(4,471,910)Provision for Income Taxes--Net Income (Loss)$     (5,955,327)$     (4,471,910)Net Income per ShareBasic$             (0.18)$             (0.33)Diluted$             (0.13)$             (0.28)Number of Shares Used in Per Share CalculationsBasic32,711,91713,567,807Diluted46,664,87015,807,360The accompanying notes are an integral part of these financial statements.       US Farms, Inc. and SubsidiariesConsolidated Statements of Cash FlowsFor the Year EndedDecember 31,20072006Cash Flows from Operating ActivitiesNet Loss$     (5,955,327)$     (4,471,910)Adjustments to reconcile net loss to net cash used in operating activities:Common Stock Issued  for Services2,690,9613,307,740Depreciation & Amortization53,5441,333Derivative Expense662,088-Gain on Extinguishment of Debt-98,256Non-Cash Loss on Marketable Equity Securities4,000-Changes in operating assets and liabilities:Accounts Receivable(1,723,687)(67,358)Inventories(781,243)-Prepaid Expenses & Other Current Assets(109,890)-Other Assets(564,686)-Accounts Payable1,720,954267,617Accrued Expenses186,60357,998Accrued Interest Payable(320,986)206,221Total adjustments1,817,6583,871,807Net Cash Used in Operating Activities(4,137,669)(600,103)Cash Flows from Investing ActivitiesPurchase of Property and Equipment(410,114)(8,000)Net Cash Used in Investing Activities(410,114)(8,000)Cash Flows from Financing ActivitiesNet Proceeds (Payments) from Promissory Notes477,753-Debt Reduction-(91,873)Stock Issued for Cash4,092,049702,444Net Cash Provided by Financing Activities4,569,802610,571Net Increase (Decrease) in Cash22,0192,468Cash Beginning of Period2,468-Cash at End of Period$           24,487$            2,468Supplemental Disclosure of Cash Flow Information: Cash Paid during the period for interest$           13,125$                 -Cash Paid during the period for Income Taxes--Supplemental Disclosure of Non-Cash Items:Notes Payable Issued for Inventory and Equipment$         250,000$                 -Common Stock Issued for Property and Equipment-8,000Common Stock Issued for Conversion of Promissory Notes379,182160,183The accompanying notes are an integral part of these financial statements.   US Farms, Inc and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  Note 1  Organization, Business & Operations Business US Farms, Inc. (OTCBB: USFI) is a diversified commercial Farming, Nursery and Brokerage company based in Southern California. The Companys principal operations are located in Southern California in the Imperial Valley, North County San Diego and Los Angeles. Organization US Farms, Inc. grows, markets and distributes horticultural products through a number of wholly owned subsidiaries which include: American Nursery Exchange, Inc. (ANE); California Management Solutions, Inc. (CMS); California Produce Exchange, Inc. (CPE); American Aloe Vera Growers, Inc. (AAVG); Imperial Ethanol, Inc. (IE); Sammys Produce, Inc. (SPI); US Ag Transportation, Inc (USAT); US Produce, Inc. (USPI); Texas Garlic & Spice, Inc. (TGS); US Trading Group, Inc. (USTG); and World Garlic & Spice, Inc. (WGS). History US Farms, Inc. (formerly International Sports and Media Group, Inc. from December 19, 2003 through July 14, 2006 and formerly San Diego Soccer Development Corporation from December 12, 1995 through December 18, 2003), (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. 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.   Note 2 - Going Concern and Management's Plans  The accompanying consolidated financial statements have been prepared in conformity with generally accepted   accounting principles which contemplate continuation of the company as a going concern. However, the Company has an accumulated deficit of $23,396,921 as of December 31, 2006 including losses of $5,955,327 and $4,471,910 for the years ended December 31, 2007 and 2006, respectively. The Companys total liabilities exceed its total assets by $1,720,340. In addition, the Company is in default on certain of its promissory notes, is in litigation with a Convertible Debenture holder and a secured note holder, and is in technical default with several vendors of the Perishable Agricultural Commodities Act (PACA). In order to continue as a going concern and achieve a profitable level of operations, the Company will require, among other things, additional capital resources.  Managements plans to obtain such resources for the Company include (1) raising additional capital through the sale of common stock; (2) continuing the practice of issuing common stock as consideration for certain employee and marketing services; and (3) converting promissory notes into common stock. Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. During the next twelve months the Companys plan of operation is to raise approximately $5,000,000 which the Company intends to invest in its farming and nursery operations, which includes acquiring plant inventory, hiring staff and for sales and marketing purposes. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraphs and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Note 3 - Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements for the year ended December 31, 2007 and 2006 include the accounts of US Farms, Inc. and its wholly owned subsidiaries (collectively the Company). All significant inter-company accounts and transactions have been eliminated in consolidation. Cash and cash equivalents The Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents. Inventories Inventories are stated at the lower of cost or market. Cost is computed on a weighted-average basis, which approximates the first-in, first-out method; market is based upon estimated replacement costs. Costs included in inventory primarily include the following: vegetable or plant, picking and hauling, overhead, labor, materials and freight. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates   Property & equipment Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over useful lives of 3 to 20 years. The cost of assets sold or retired and the related amounts of accumulated depreciation are removed from the accounts in the year of disposal. Any resulting gain or loss is reflected in current operations. Assets held under capital leases are recorded at the lesser of the present value of the future minimum lease payments or the fair value of the leased property. Expenditures for maintenance and repairs are charged to operations as incurred. Impairment of long-lived assets Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations for a Disposal of a Segment of a Business." The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144. SFAS 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. Basic and Diluted Net Income per Share Basic earnings per share is calculated using the weighted-average number of common shares outstanding during the period without consideration of the dilutive effect of stock warrants and convertible notes. The basic weighted-average number of common shares outstanding was 32,711,917 and 13,567,807 for the years ended December 31, 2007 and 2006, respectively. Diluted earnings per share is calculated using the weighted-average number of common shares outstanding during the period after consideration of the dilutive effect of stock warrants and convertible notes, which were 46,664,870 and 15,807,360 for the years ended December 31, 2007 and 2006, respectively. Stock-based compensation In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123(R), Share-Based Payment. This pronouncement amends SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) requires that companies account for awards of equity instruments issued to employees under the fair value method of accounting and recognize such amounts in their statements of operations. Under SFAS No. 123(R), we are required to measure compensation cost for all stock-based awards at fair value on the date of grant and recognize compensation expense in our consolidated statements of operations over the service period that the awards are expected to vest. The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of SFAS 123(R) and the Emerging Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services". Common stock issued to non-employees in exchange for services is accounted for based on the fair value of the services received.  Fair value of financial instruments Statement of financial accounting standard No. 107, Disclosures about fair value of financial instruments, requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value. Revenue recognition Sales of products and related costs of products sold are recognized when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price is fixed or determinable and (iv) collectability is reasonably assured. These terms are typically met upon shipment of product to the customer. Service revenue, including freight, storage and distribution charges are recorded when services are performed and sales of the related products are delivered. Shipping and Handling In accordance with Emerging Issues Task Force (EITF) Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs, we include shipping and handling fees billed to customers in net revenues. Amounts incurred by us for freight are included in cost of goods sold. Allowance for doubtful accounts We provide an allowance for estimated uncollectible accounts receivable balances based on historical experience and the aging of the related accounts receivable. As of December 31, 2007 and 2006 the Company has reserved $150,000 and $0 for doubtful accounts, respectively. Advertising The Company expenses advertising costs as incurred. Advertising costs for the years ended December 31, 2007 and 2006 were $90,249 and $25,114 respectively. Income Taxes The Company accounts for income taxes using the liability method as required by Statement of Financial Accounting Standards ("FASB") No. 109, Accounting for Income Taxes ("SFAS 109"). Under this method, deferred tax assets and liabilities are determined based on differences between their financial reporting and tax basis of assets and liabilities. The Company was not required to provide for a provision for income taxes for the periods ended December 31, 2007 and 2006, as a result of net operating losses incurred during the periods. As of December 31, 2007, the Company has available approximately $23,400,000 of net operating losses ("NOL") available for income tax purposes that may be carried forward to offset future taxable income, if any. These carryforwards expire in various years through 2026. At December 31, 2007 and 2006, the Company has a deferred tax asset of approximately $7,500,000 and $5,300,000, relating to the Company's net operating losses, respectively. The Company's deferred tax asset has been fully reserved by a valuation allowance since realization of its benefit is uncertain. The Company's ability to utilize its NOL carryforwards may be subject to an annual limitation in future periods pursuant to Section 382 of the Internal Revenue Code of 1986, as amended.   The provision for income taxes using the federal and state tax rates as compared to the Company's effective tax rate is summarized as follows: December 31,20072006Statutory Federal Tax (Benefit) Rate-34%-34%Statutory State Tax (Benefit) Rate-5%-5%Effective Tax (Benefit) Rate-39%-39%Valuation Allowance39%39%Effective Income Tax0%0% Significant components of the Company's deferred tax assets at December 31, 2007 and 2006 are as follows: December 31,20072006Net Operating Loss Carryforward$      7,500,214$      5,288,444Valuation Allowance(7,500,214)(5,288,444)Net Deferred Tax Asset$                 -$                 - Shares issued to acquire goods and services from non-employees The Company accounts for the issuance of equity instruments to acquire goods and services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more reliably measurable. Research and development costs Expenditures for research & development are expensed as incurred. Such costs are required to be expensed until the point that technological feasibility is established. The Company incurred approximately $60,000 and $10,000 in research and development costs during the years ended December 31, 2007 and 2006, respectively.  These expenses related to feasibility studies prepared regarding the building of an ethanol facility in the Imperial Valley, California for the wholly-owned Imperial Ethanol, Inc. subsidiary. Reclassifications Certain items in the prior year financial statements have been reclassified for comparative purposes to conform to the presentation in the current periods presentation. These reclassifications have no effect on the previously reported income (loss). Recently Issued Accounting Pronouncements In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (FAS 141(R)). This Statement provides greater consistency in the accounting and financial reporting of business combinations. It requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in the transaction, establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed, and requires the acquirer to disclose the nature and financial effect of the business combination. FAS 141(R) is effective for fiscal years beginning after December 15, 2008. We will adopt FAS 141(R) no later than the first quarter of fiscal 2010 and are currently assessing the impact the adoption will have on our financial position and results of operations.   In December 2007, the FASB issued SFAS No. 160. Noncontrolling Interests in Consolidated Financial Statements (FAS 160). This Statement amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. FAS 160 is effective for fiscal years beginning after December 15, 2008. We will adopt FAS 160 no later than the first quarter of fiscal 2010 and are currently assessing the impact the adoption will have on our financial position and results of operations. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which permits entities to choose to measure at fair value eligible financial instruments and certain other items that are not currently required to be measured at fair value. The standard requires that unrealized gains and losses on items for which the fair value option has been elected be reported in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We will adopt SFAS No. 159 no later than the first quarter of fiscal 2009. We are currently assessing the impact the adoption of SFAS No. 159 will have on our financial position and results of operations. In September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R). SFAS No. 158 requires company plan sponsors to display the net over- or under-funded position of a defined benefit postretirement plan as an asset or liability, with any unrecognized prior service costs, transition obligations or actuarial gains/losses reported as a component of other comprehensive income in shareholders equity. SFAS No. 158 is effective for fiscal years ending after December 15, 2006. We adopted the recognition provisions of SFAS No. 158 as of the end of fiscal 2007. The adoption of SFAS No. 158 did not have an effect on the Companys financial position or results of operations. In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 establishes a framework for measuring fair value in generally accepted accounting principles, clarifies the definition of fair value and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements. However, the application of SFAS No. 157 may change current practice for some entities. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We will adopt SFAS No. 157 in the first quarter of fiscal 2009. We are currently assessing the impact that the adoption of SFAS No. 157 will have on our financial position and results of operations. In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109 (FIN 48). This interpretation clarifies the application of SFAS No. 109, Accounting for Income Taxes , by defining a criterion that an individual tax position must meet for any part of the benefit of that position to be recognized in an enterprises financial statements and also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006, but earlier adoption is permitted. The Company is in the process of evaluating the impact of the application of the Interpretation to its financial statements.  Note 4 - Inventories At December 31, 2007 and 2006, inventories are comprised of the following:  December 31,20072006Nursery Palms & Cycads and Nursery Materials$         451,157$                 -Potted Aloe Plants and Potting Materials176,636-Tomatoes11,907-Garlic141,543-Total Inventories$         781,243$                 - Note 5 - Property and Equipment At December 31, 2007 and 2006, property and equipment are comprised of the following:  December 31,20072006Machinery & Equipment$           51,459$                 -Vehicles62,3338,000Office Furniture & Equipments18,798-Leasehold Improvements7,969-Buildings & Greenhouses118,418-Capitalized Aloe Crop Costs159,137-Accumulated Depreciation and Amortization(54,877)(1,333)Net Property and Equipment$         363,237$            6,667 We capitalize the crop costs incurred prior to the aloe crop becoming productive. These costs consist primarily of expenditures related to the acquisition of pups and the labor and materials to prepare the land. Amortization of such costs is done over the straight line basis estimated over 5 years. During the years ended December 31, 2007 and 2006, the Company recorded depreciation and amortization expenses of $53,544 and $1,333, respectively. Note 6 - Accrued Expenses At December 31, 2007 and 2006, accounts payable and accrued expenses consist of the following:  December 31,20072006Accrued Payroll and Payroll Taxes$         357,560$         257,560Accrued Legal & Audit Fees50,000-Accrued Penalties and Interest158,199158,199Other Accrued Expenses193,251156,648Total Accrued Expenses$         759,010$         572,407 Note 7  Convertible Debentures and Promissory Notes As of December 31, 2007 the Company had convertible and other third party debt obligations, excluding related accrued interest, totaling $1,203,952 as follows: On October 07, 2004 the Company issued a Convertible Debenture of $500,000, bearing 5% interest per annum repayable in cash or shares of the Company at the option of the note holder.  As of September 30, 2006, this bond has matured and is in default. On March 11, 2008, the debenture holder filed an Application For and Notice of Default in the Superior Court of Arizona.    Multiple unsecured convertible notes of $491,100, bearing various annual interest rates repayable in cash or shares of the Company at the option of the note holders. As of September 30, 2007, $209,400 of these notes have matured and are in default. On March 22, 2007 the Company, through its wholly owned subsidiary American Nursery, Exchange, Inc., issued a $250,000 promissory note payable to Kurth Nurseries, Inc. for the acquisition of all of the existing plant inventory and equipment of Palm Mountain Nursery located in Vista, California. The four year note bears interest at the rate of 7% per annum with interest and principal due and payable monthly.  As of December 31, 2007 the balance due on this note is $170,352. On March 4, 2008, the Company was informed that a lawsuit for non-payment had been filed February 20, 2008 in a Superior Court in California.  As of this date, the Company has not been served. Non-convertible note payable of $42,500, bearing 10% interest per annum. As of September 30, 2007, this note has matured and is in default. Note 8  Derivative Liability (Warrants) During 2007 the Company entered into private placement agreements in which each unit purchased entitled the holder to one common share and one share purchase warrant exercisable at $0.50 per share. A total of 15,353,400 share purchase warrants were provided. During the year ended December 31, 2007, the share purchase warrants were outstanding as follows:  Number of Warrants15,353,400Exercise Price$              0.50Expiry Date28-Nov-09  The fair value of the share purchase warrants issued during the period ended December 31, 2007, was in the amount of $662,088, which was determined using the Black-Scholes option value model with the following assumptions: Expected Dividend Yield0.00%Risk Free Interest Rate3.00%Expected Volatility66.00%Expected Option Life (in years average)2.75 Note 9 - Stockholders Deficit 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.   As of December 31, 2007, the Company had 88,500 shares of Series B preferred stock issued and outstanding. Common Stock During 2007, the Company issued 15,816,750 shares were issued for cash totaling $4,092,049, 1,125,000 to Officers and Directors of the Company for services totaling $551,250, 3,476,272 shares were issued to non-affiliated parties for services totaling $2,139,711 and 1,476,400 shares were issued for the conversion of promissory notes and associated interest totaling $379,182.   Note 10  Supplemental Disclosure of Cash Flows The Company prepares its statements of cash flows using the indirect method as defined under the Financial Accounting Standard No. 95. The Company paid $0 for income tax and $13,125 in interest for the year ended December 31, 2007. On March 22, 2007 the Company, through its wholly owned subsidiary American Nursery, Exchange, Inc., issued a $250,000 promissory note payable to Kurth Nurseries, Inc. for the acquisition of all of the existing plant inventory and equipment of Palm Mountain Nursery located in Vista, California. Note 11  Segment Information The Company adopted SFAS No.131 Disclosures About Segments of an Enterprise and Related Information in respect of its operating segments. The Companys reportable segments, their subsidiaries, are managed separately because each segment requires different technology and marketing strategies.  The Company evaluates performance based on operating earnings of the respective business units. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.  The corporate assets consist of cash, accounts receivable, inventory, other assets and fixed assets. In determining operating income and loss by reportable segment, general corporate expenses and other income and expense items of a non reporting nature are not considered; as such items are not allocated to the Companys segments. The Companys summarizes its financial reporting in segments which include: California Produce Exchange- Grows and distributes produce (Asparagus, Tomatoes and Garlic) through retail and wholesale distribution channels in the Continental United States. CPE produce is sold in supermarkets and to restaurant suppliers and food processors. This segment includes the wholly owned subsidiaries of CPE, USTG, SPI and WGS. American Nursery Exchange  A floriculture supplier of select ornamental shrubs, color plants, container grown plants, and exotic palms and cycads. Live foliage and trees are sold through wholesale distribution to landscapers, nurseries, supermarkets, and large retailers, and through direct mail covering North America. This segment includes the wholly owned subsidiary ANE. American Aloe Vera Growers - Domestic grower of Aloe Vera. The Company Grows, packs and ships Aloe Vera plants, produce and bulk leaves through wholesale and retail channels throughout North America. AAVG products are sold in supermarkets, garden and home improvement centers, landscapers and retail outlets. This segment includes the wholly owned subsidiary AAVG. Subsidiaries that are not included in these segments provide support and corporate services to the operating segments or are currently not operational. Segment information at December 31, 2007 is as follows:  AAVGANECPECorporateTotalSales, net$             677,840$        126,409$    8,628,922$            27,414$     9,460,585Cost of Good Sold536,76584,4548,033,42634,2398,688,884Gross Profit141,07541,955595,496(6,825)771,701Operating Expenses169,694212,9881,298,3344,247,9755,928,991Operating Income (Loss)$             (28,619)$       (171,033)$     (702,838)$      (4,254,800)$    (5,157,290)   The segments have $17,742 in cash, $1,797,045 in receivables, $781,243 in inventories, other current assets of $81,846, net fixed assets of $342,208 and Other Assets of $565,436. Accounts payable equaled $2,283,051 and a note payable for $170,352. Note 12  Commitments & Contingencies Legal Proceedings 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. The Company has a judgment from one of its note holders in the amount of $6,000. The Company also has a judgment filed against it by AA One Litho in San Diego Superior Court for services rendered in the amount of $15,523, including interest and related costs at December 31, 2005. The Company has made payments on this judgment and currently owes approximately $3,000. The Company also has a judgment filed against it by Fox Sports World for services rendered in the amount of $11,000. During the third quarter of 2005, a judgment was filed in San Diego Superior Court in the amount of $33,747, including interest and related costs by McCullough and Associates, the Company's former counsel. On March 11, 2008, the Convertible Debenture holder filed an Application For and Notice of Default in the Superior Court of Arizona. This $500,000 Convertible Debenture was issued on October 07, 2004 and bears 5% interest per annum repayable in cash or shares of the Company at the option of the note holder.  This Debenture has been in default since September 2006. On March 31, 2008, a lawsuit was served to the Company for non-payment of a promissory note to Kurth Nurseries, Inc.  This suit was filed February 20, 2008 in a Superior Court in California. Leases We lease facilities and certain equipment under non cancelable operating leases expiring at various dates through 2012. We are committed to make minimum cash payments under these agreements as of December 31, 2007 as follows:  2008$        338,7002009238,8002010220,8002011202,8002012169,000Thereafter-Total$       1,170,100  Note 13  Related Party Transactions We sell bulk Aloe Leaf to an entity that is under common ownership and management.  During 2007, the bulk leaf sales totaled $38,000 from the American Aloe Vera Growers, Inc. subsidiary resulting in gross margins of approximately $8,000. As of December 31, 2007, the receivable due from this entity totaled $35,200.   Note 14 - Subsequent Events Notes Subsequent to the year ended December 31, 2007, the Company received $99,500 in cash in exchange for promissory notes and the Company repaid $21,000 to one promissory note holder. Equity Subsequent to the year ended December 31, 2007, we issued a total of 1,522,000 shares of our common stock to 23 accredited individuals for $159,700 in cash received. Subsequent to the year ended December 31, 2007, we issued a total of 2,346,698 shares of our common stock to 36 individuals for $487,676 in services rendered. Subsequent to the year ended December 31, 2007, we issued a total of 1,000,000 shares of our common stock to one individual for debt reduction of $100,000 ($0.10 per share) and 100,000 shares of our common stock to one individual for debt reduction of $15,000 ($0.15 per share). We believe that the issuance of shares was exempt from registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2). The shares were issued directly by us and did not involve a public offering or general solicitation. The recipients of the shares were afforded an opportunity for effective access to files and records of our company that contained the relevant information needed to make their investment decision, including our financial statements and 34 Act reports. We reasonably believed that the recipients, who are our consultants, employees, officers and/or directors, immediately prior to receiving the shares, had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investment. The recipients had the opportunity to speak with our management on several occasions prior to their investment decision.  Subsequent Issuances of Securities Registered Pursuant to Form S-8  The following list shows the shares issued from a Registration Statement on Form S-8 filed on April 4, 2008.  Person Issued toNumber of SharesValue of SharesStoecklein Law Group300,000$51,000