**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
 
 **FORM
        10-QSB/A**
 **** (Mark
        One)
 
 xQUARTERLY
            REPORT UNDER SECTION
            13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 **For
        the quarterly period ended March 31, 2007**
 
 oTRANSITION
        REPORT UNDER SECTION
        13 OR 15(d) OF THE EXCHANGE ACT
 
 For
        the
        transition period from ________________ to _______________
 
 **001-28195**
 (Commission
        file number)
 
 **AGFEED
        INDUSTRIES, INC.**
 (Exact
        name of small business issuer as specified in its charter)
 
 **Nevada**
              
              **20-2597168**(State
                  or other jurisdiction
              
              (IRS
                  Employerof
                  incorporation or organization)
              
              Identification
                  No.)
  **1095
        Qing Lan Avenue**
 **Economic
        and Technical Development Zone**
 **Nan
        Chang City, Jiangxi Provence**
 **China,
        330013**
 (Address
        of principal executive offices)
 
 **86-0791-2189878**
 (Issuer's
        telephone number)
 
 **N/A**
 (Former
        name, former address and former fiscal year, if changed since last
        report)
 
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90 days. Yes x No o
 
 State
        the
        number of shares outstanding of each of the issuer's classes of common equity,
        as of the latest practicable date: As of May 11, 2007 - 26,276,756 shares
        of
        common stock
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).  Yes
o
        No x
 
 
 Transitional
        Small Business Disclosure Format (check one): Yes o No x
 
 
 
 **AGFEED
        INDUSTRIES, INC.**
 **Index**
 
 PageNumberEXPLANATORY
                NOTE
              1PART
                  I.
              FINANCIAL
                  INFORMATIONItem
                  1.
              Financial
                  Statements
              F-1Consolidated
                  Balance Sheet as of March 31, 2007 (unaudited)
              F-1Consolidated
                  Statements of Income and Other Comprehensive Income for the three
                  months
                  ended March 31, 2007 and 2006 (unaudited)
              F-2Consolidated
                  Statements of Cash Flows for the three months ended March 31, 2007
                  and
                  2006 (unaudited)
              F-3Notes
                  to Consolidated Financial Statements (unaudited)
              F-4Item
                  2.
              Management's
                  Discussion and Analysis or Plan of Operations
              2Item
                  3A(T).
              Controls
                  and Procedures
              22PART
                  II.
              OTHER
                  INFORMATION
              22Item
                  1.
              Legal
                  Proceedings
              22Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              23Item
                  3.
              Defaults
                  Upon Senior Securities
              23Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              24Item
                  5.
              Other
                  Information
              24Item
                  6.
              Exhibits
              24SIGNATURES
              24
  
 EXPLANATORY
        NOTE
  We
        are amending this Quarterly Report on Form
        10-QSB in its entirety to report certain segment reporting and other information
        for the periods presented and to include additional risk factors, which changes
        are being made to conform the information presented in this report to
        disclosures made in our Registration Statement on Form SB-2 that was declared
        effective by the Securities and Exchange Commission on October 25,
        2007.
  1




Item 1. Financial Statements





**AGFEED
                INDUSTRIES, INC. AND SUBSIDIARIES****CONSOLIDATED
                BALANCE SHEET****AS
                OF MARCH 31, 2007**





**March
                31,****2007**(unaudited)**ASSETS****CURRENT
                ASSETS:**Cash and
                cash equivalents
            
            $
            2,672,889Accounts
                receivable, net of allowance for doubtful accounts of $55,507
            
            
            3,445,680Advances
                to suppliers
            
            
            244,826Other
                receivable
            
            
            87,234Due
                from related parties
            
            
            93,187Inventory
            
            
            930,526Prepaid
                expense
            
            
            162,215Other
                current assets
            
            
            1,739Total
                current assets
            
            
            7,638,296**PROPERTY
                AND EQUIPMENT, net**
            
            
            1,372,149**INTANGIBLE
                ASSETS**
            
            
            542,752**TOTAL
                ASSETS**
            
            $
            9,553,197**LIABILITIES
                AND STOCKHOLDERS' EQUITY****CURRENT
                LIABILITIES:**Accounts
                payable
            
            $
            1,339,353Other
                payables
            
            
            44,458Unearned
                revenue
            
            
            50,875Accrued
                expenses
            
            
            49,084Accrued
                payroll
            
            
            24,179Short
                term loans
            
            
            699,192Due
                to related party
            
            
            4,661Tax
                and welfare payable
            
            
            411,816Total
                current liabilities
            
            
            2,623,618**STOCKHOLDERS'
                EQUITY:**Common
                stock, $0.001 per share; 75,000,000 shares authorized;25,000,003
                shares issued and outstanding
            
            
            25,000Additional
                paid-in capital
            
            
            4,022,044Other
                comprehensive income
            
            
            167,752Statutory
                reserve
            
            
            328,733Retained
                earnings
            
            
            2,386,050Total
                stockholders' equity
            
            
            6,929,579**TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY**
            
            $
            9,553,197




The
        accompanying notes are an integral part of these consolidated financial
        statements.
  F-1





**AGFEED
        INDUSTRIES, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME**
 **FOR
        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**
   **Three
                  Months Ended March 31,****2007**
              
              **2006**(unaudited)
              
              (unaudited)**Net
                  Revenue**
              
              $
              4,978,295
              
              $
              2,094,289**Cost
                  of Revenue**
              
              
              3,435,089
              
              
              1,305,090**Gross
                  profit**
              
              
              1,543,206
              
              
              789,199Operating
                  expensesSelling
                  expenses
              
              
              343,391
              
              
              265,512General
                  and administrative expenses
              
              
              221,924
              
              
              109,471Total
                  operating expenses
              
              
              565,315
              
              
              374,983**Income
                  from operations**
              
              
              977,891
              
              
              414,216Non-operating
                  income (expense):Other
                  income (expense)
              
              
              9,070
              
              
              948Interest
                  income
              
              
              10,167
              
              
              181Interest
                  expense
              
              
              (42,649
              )
              
              -Total
                  non-operating income (expense)
              
              
              (23,412
              )
              
              1,129Income
                  before income tax
              
              
              954,479
              
              
              415,345Income
                  tax
              
              
              175,298
              
              
              136,963**Net
                  income**
              
              $
              779,181
              
              $
              278,382Other
                  comprehensive incomeForeign
                  currency translation gain
              
              
              50,906
              
              
              11,132**Comprehensive
                  Income**
              
              $
              830,087
              
              $
              289,514**Weighted
                  average shares outstanding :**Basic
              
              
              24,344,447
              
              
              15,006,723Diluted
              
              
              24,344,447
              
              
              15,006,723**Earnings
                  per share:**Basic
              
              $
              0.03
              
              $
              0.02Diluted
              
              $
              0.03
              
              $
              0.02




The
            accompanying notes are an integral part of these consolidated financial
            statements.
  F-2
  **AGFEED
          INDUSTRIES, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
          STATEMENT OF CASH FLOWS**
 **FOR
          THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**
  **Three
                    Months Ended March 31,****2007**
                
                **2006**(unaudited)
                
                (unaudited)**CASH
                    FLOWS FROM OPERATING ACTIVITIES:**Net
                    income
                
                $
                779,181
                
                $
                278,382Adjustments
                    to reconcile net income to net cashprovided
                    in operating activities:Depreciation
                
                
                39,845
                
                
                25,608Amortization
                
                
                46,360
                
                
                1,217(Increase)
                    / decrease in assets:Accounts
                    receivable
                
                
                (1,626,525
                )
                
                (523,979
                )Other
                    receivable
                
                
                117,454
                
                
                13,680Inventory
                
                
                (143,070
                )
                
                (54,143
                )Due
                    from related party
                
                
                7,336
                
                
                (80,235
                )Advances
                    to suppliers
                
                
                (165,678
                )
                
                (5,887
                )Prepaid
                    expense
                
                
                (150,247
                )
                
                12,771Other
                    assets
                
                
                535
                
                
                (3,728
                )Increase
                    / (decrease) in current liabilities:Accounts
                    payable
                
                
                519,177
                
                
                176,736Unearned
                    revenue
                
                
                (31,388
                )
                
                (3,857
                )Other
                    payables
                
                
                (12,995
                )
                
                1,910Due
                    to related party
                
                
                -
                
                
                (180,566
                )Accrued
                    expenses
                
                
                (44,618
                )
                
                56,969Accrued
                    payroll
                
                
                (13,371
                )
                
                5,736Tax
                    and welfare payable
                
                
                128,147
                
                
                122,427Net
                    cash provided by operating activities
                
                
                (549,857
                )
                
                (156,959
                )**CASH
                    FLOWS FROM INVESTING ACTIVITIES**Acquisition
                    of property and equipment
                
                
                (24,125
                )
                
                (32,490
                )Net
                    cash used in investing activities
                
                
                (24,125
                )
                
                (32,490
                )**CASH
                    FLOWS FROM FINANCING ACTIVITIES:**Repayment
                    on advances from stockholders
                
                
                (753,521
                )
                
                -Advances
                    from related parties
                
                
                -
                
                
                108,449Collections
                    on advances to related parties
                
                
                930,623
                
                
                193,992Proceeds
                    from the sale of common stock
                
                
                3,000,000
                
                
                -Offering
                    costs
                
                
                (276,335
                )
                
                -Payment
                    on note payable
                
                
                (1,102,004
                )
                
                -Collection
                    on subscription receivable
                
                
                226,083
                
                
                -Net
                    cash provided by financing activities
                
                
                2,024,846
                
                
                302,441Effect
                    of exchange rate changes on cash and cash equivalents
                
                
                17,925
                
                
                (21,197
                )**NET
                    INCREASE IN CASH AND CASH EQUIVALENTS**
                
                
                1,468,789
                
                
                91,795**CASH AND
                    CASH EQUIVALENTS, BEGINNING BALANCE**
                
                
                1,204,100
                
                
                136,406**CASH AND
                    CASH EQUIVALENTS, ENDING BALANCE**
                
                $
                2,672,889
                
                $
                228,201**SUPPLEMENTAL
                    DISCLOSURE OF CASH FLOW INFORMATION:**Interest
                    paid
                
                $
                42,649
                
                $
                2,280Income
                    taxes paid
                
                $
                -
                
                $
                13,831
  The
        accompanying notes are an integral part of these consolidated financial
        statements.




F-3





**AGFEED
      INDUSTRIES, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





**Note
      1 - Organization and Basis of Presentation**








The
      unaudited consolidated financial statements have been prepared by Agfeed
      Industries, Inc. (the “Company”) pursuant to the rules and regulations of the
      Securities Exchange Commission. The information furnished herein reflects all
      adjustments (consisting of normal recurring accruals and adjustments) which
      are,
      in the opinion of management, necessary to fairly present the operating results
      for the respective periods. Certain information and footnote disclosures
      normally present in annual consolidated financial statements prepared in
      accordance with accounting principles generally accepted in the United States
      of
      America have been omitted pursuant to such rules and regulations. These
      consolidated financial statements should be read in conjunction with the audited
      consolidated financial statements and footnotes included in the Company’s Annual
      Report on Form 10-KSB/A. The results for the three months ended March 31, 2007
      are not necessarily indicative of the results to be expected for the full year
      ending December 31, 2007.








Organization
      and Line of Business




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





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





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





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




As
        a
        result of the reverse merger transactions described above, the historical
        financial statements presented are those of Nanchang Best and Shanghai Best,
        the
        operating entities.




F-4
  **AGFEED
        INDUSTRIES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
  On
      December 20, 2006, the Company entered into and closed a share purchase
      agreement with Guangxi Huijie Sci. & Tech. Feed Co, Ltd., a company formed
      pursuant to the laws of the People's Republic of China (“Guangxi Huijie”), and
      the shareholders of Guangxi Huijie pursuant to which the Company acquired all
      the outstanding shares of Guangxi Huijie for a total purchase price of eight
      million six hundred thousand Chinese Renminbi (8,600,000 CNY), equivalent to
      approximately U.S. $1,100,420 based on exchange rates reported in the Wall
      Street Journal for December 20, 2006.





The
      Company obtained the funds for the acquisition of the Guangxi Huijie shares
      by
      borrowing 8,600,000 CNY from Sunrise Capital International, Inc. The proceeds
      of
      the loan from Sunrise Capital International, Inc. were paid directly to the
      selling shareholders of Guangxi Huijie as consideration and as provided by
      the
      share purchase agreement. The Company's repayment obligation is evidenced by
      a
      promissory note bearing interest at the rate of seven percent per annum (7%)
      and
      maturing in six months. This loan was repaid in March 2007.





The
      Company is engaged in the research and development, manufacturing, marketing,
      distribution and sale of pre-mix fodder blended feed and feed additives
      primarily for use in China's domestic pork husbandry market. The Company
      operates production plants in Nanchang City, Shanghai City and Nanning City
      and
      sells to distributors and large-scale swine farms.





Stock
      Splits




On
      November 17, 2006, the Company declared a stock dividend of two additional
      shares of common stock for each share of common stock outstanding (effectively
      a
      three for one stock split). All share information for common shares has been
      retroactively restated for this stock split.




Basis
      of Presentation





The
      accompanying consolidated financial statements include the accounts of AgFeed
      Industries, Inc. and its 100% wholly-owned subsidiaries Nanchang Best and
      Shanghai Best (for all periods presented) and Guangxi Huijie (from the date
      of
      acquisition, December 20, 2006).   All significant inter-company accounts
      and transactions have been eliminated in consolidation.





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





Foreign
      Currency Translation





As
      of
      March 31, 2007, the accounts of the Company were maintained, and their
      consolidated financial statements were expressed in the Chinese Yuan Renminbi
      (CNY). Such consolidated financial statements were translated into U.S. Dollars
      (USD) in accordance with Statement of Financial Accounts Standards ("SFAS")
      No.
      52, "Foreign Currency Translation," with the CNY as the functional currency.
      According to the Statement, all assets and liabilities were translated at the
      exchange rate on the balance sheet date, stockholder's equity are translated
      at
      the historical rates and statement of operations items are translated at the
      weighted average exchange rate for the year. The resulting translation
      adjustments are reported under other comprehensive income in accordance with
      SFAS No. 130, "Reporting Comprehensive Income”.


F-5
  **AGFEED
        INDUSTRIES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
  **Note
      2 - Summary of Significant Accounting Policies**








Use
      of
      Estimates





The
      preparation of financial statements in conformity with United States generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenues and expenses during the
      reporting period. Actual results could differ from those estimates.





Cash
      and Cash Equivalents





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





Accounts
      Receivable





The
      Company maintains reserves for potential credit losses on accounts receivable.
      Management reviews the composition of accounts receivable and analyzes
      historical bad debts, customer concentrations, customer credit worthiness,
      current economic trends and changes in customer payment patterns to evaluate
      the
      adequacy of these reserves. The
      Company offers credit terms from 30-90 days and in certain cases longer than
      90
      days. The Company monitors collectibility based on established
      criteria. The allowance for doubtful debts amounted to $55,507 as of
      March 31, 2007.





Advances
      to Suppliers





The
      Company makes advances to certain vendors for purchase of its materials. The
      advances to suppliers are interest free and unsecured. At March 31, 2007, the
      Company had advances to suppliers in the amount of $244,826.





Inventories





Inventory
      is stated at the lower of cost, as determined by weighted-average method, or
      market. Management compares the cost of inventories with the market value,
      and
      allowance is made for writing down the inventories to their market value, if
      lower.





Prepaid
      expenses





Included
      in prepaid expenses is $160,000
      for a good faith deposit with a company that the Company is in negotiations
      to
      acquire.








Property
      & Equipment





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


F-6
  **AGFEED
        INDUSTRIES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


Office
                equipment
            
            
            5
                yearsOperating
                equipment
            
            
            10
                yearsVehicles
            
            
            5
                yearsBuildings
            
            
            20
                years





The
      following are the details of the property and equipment at March 31,
      2007:




Office
                equipment
            
            $
            73,101Operating
                equipment
            
            
            498,167Vehicles
            
            
            237,666Buildings
            
            
            935,848Total
            
            
            1,744,782Less
                accumulated depreciation
            
            
            (372,633
            )$
            1,372,149





Depreciation
      expense for the three months ended March 31, 2007 and 2006 was $39,845 and
      $25,608, respectively.





Long-Lived
      Assets





Effective
      January 1, 2002, the Company adopted Statement of Financial Accounting Standards
      No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS
      144”), which addresses financial accounting and reporting for the impairment or
      disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the
      Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,”
and the accounting and reporting provisions of APB Opinion No. 30, “Reporting
      the Results of Operations for a Disposal of a Segment of a Business.” The
      Company periodically evaluates the carrying value of long-lived assets to be
      held and used in accordance with SFAS 144. SFAS 144 requires impairment losses
      to be recorded on long-lived assets used in operations when indicators of
      impairment are present and the undiscounted cash flows estimated to be generated
      by those assets are less than the assets’ carrying amounts. In that event, a
      loss is recognized based on the amount by which the carrying amount exceeds
      the
      fair market value of the long-lived assets. Loss on long-lived assets to be
      disposed of is determined in a similar manner, except that fair market values
      are reduced for the cost of disposal. Based on its review, the Company believes
      that, as of March 31, 2007 there were no significant impairments of its
      long-lived assets.




Intangible
      Assets


Intangible
      assets consist of the right to use land and computer software. Net intangible
      assets at March 31, 2007 are as follows:





Right
                to use land
            
            $
            556,773Computer
                software
            
            
            11,312Total
            
            
            568,085Less
                Accumulated amortization
            
            
            (25,333
            )Intangibles,
                net
            
            $
            542,752


F-7
  **AGFEED
        INDUSTRIES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


Per
      the
      People's Republic of China's governmental regulations, the Government owns
      all
      land. The Company leases land pursuant to two real estate contracts with
      the government of the People's Republic of China. One real estate contract
      for a period from November 2006 through October 2056 and the other real estate
      contract is from January 2000 through December 2050. The Company obtained
      possession of the land in July of 2005. Accordingly, the Company is amortizing
      the cost of the right to use land from that date.




The
      right
      to use land is amortized over a period of 50 years and the computer software
      is
      amortized over three years.





Fair
      Value of Financial Instruments





Statement
      of financial accounting standard No. 107, Disclosures about fair value of
      financial instruments, requires that the Company disclose estimated fair values
      of financial instruments. The carrying amounts reported in the statements of
      financial position for current assets and current liabilities qualifying as
      financial instruments are a reasonable estimate of fair value.





Revenue
      Recognition




The
      Company's revenue recognition policies are in compliance with Staff accounting
      bulletin (SAB) 104. Revenue is recognized when services are rendered to
      customers when a formal arrangement exists, the price is fixed or determinable,
      the delivery is completed, no other significant obligations of the Company
      exist
      and collectibility is reasonably assured. The Company determines that delivery
      has occurred when the customer picks up the product and when the product is
      shipped FOB.  Payments received before all of the relevant criteria for
      revenue recognition are satisfied are recorded as unearned revenue. The Company
      is not subject to VAT withholdings.




The
        Company gives volume rebates to certain customers based on volume achieved.
        The
        Company accrues sales rebates based on actual sales volume. The Company does
        not
        offer any of its customers the unconditional right to return purchased products.
        Customers are only permitted to return defective products. In addition, the
        Company does not provide any price protection or similar rights to its
        customers.
 
 There
        are
        no differences in the Company’s arrangements with its different types of
        customers. Accordingly, the Company does not have different revenue recognition
        policies for different types of customers.
 
 The
        Company offers credit terms ranging from 30 to 90 days for most customers.
        From
        some large customers, the Company may extend these terms beyond 90
        days.




The
      Company gives volume rebates to certain customers based on volume achieved.
      The
      Company accrues sales rebates based on actual sales volume.




Stock-Based
      Compensation





The
      Company accounts for its stock-based compensation in accordance with SFAS No.
      123R, “Share-Based Payment, an Amendment of FASB Statement No. 123.” The Company
      recognizes in the statement of operations the grant-date fair value of stock
      options and other equity-based compensation issued to employees and
      non-employees. No options were outstanding at March 31, 2007 nor had any options
      been granted in prior periods.





Income
      Taxes





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




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




Foreign
      Currency Transactions and Comprehensive Income





Accounting
      principles generally require that recognized revenue, expenses, gains and losses
      be included in net income. Certain statements, however, require entities to
      report specific changes in assets and liabilities, such as gain or loss on
      foreign currency translation, as a separate component of the equity section
      of
      the balance sheet. Such items, along with net income, are components of
      comprehensive income. The functional currency of the Company is Chinese
      Renminbi. The unit of Renminbi is in Yuan. Translation gains of $167,753 at
      March 31, 2007 are classified as an item of other comprehensive income in the
      stockholders’ equity section of the consolidated balance sheet. During the three
      months ended March 31, 2007 and 2006, other comprehensive income in the
      consolidated statements of income and other comprehensive income included
      translation gains of $50,907 and $11,132, respectively.


F-8
  **AGFEED
        INDUSTRIES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


Basic
      and Diluted Earnings Per Share





Earnings
      per share is calculated in accordance with the Statement of financial accounting
      standards No. 128 (SFAS No. 128), “Earnings per share”. SFAS No. 128 superseded
      Accounting Principles Board Opinion No.15 (APB 15). Net earnings per share
      for
      all periods presented has been restated to reflect the adoption of SFAS No.
      128.
      Basic net earnings per share is based upon the weighted average number of common
      shares outstanding. Diluted net earnings per share is based on the assumption
      that all dilutive convertible shares and stock options were converted or
      exercised. Dilution is computed by applying the treasury stock method. Under
      this method, options and warrants are assumed to be exercised at the beginning
      of the period (or at the time of issuance, if later), and as if funds obtained
      thereby were used to purchase common stock at the average market price during
      the period. There were no options, warrants or dilutive securities outstanding
      during the three months ended March 31, 2006 and during the three months ended
      March 31, 2007, there were 160,000 warrants outstanding, but the exercise price
      was greater than the Company average stock price for the quarter; therefore,
      the
      basic and diluted earnings per shares for both the three months ended March
      31,
      2007 and 2006 are the same.




Statement
      of Cash Flows





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





Segment
      Reporting





Statement
      of Financial Accounting Standards No. 131 (“SFAS 131”), “Disclosure About
      Segments of an Enterprise and Related Information” requires use of the
“management approach” model for segment reporting. The management approach model
      is based on the way a company’s management organizes segments within the company
      for making operating decisions and assessing performance. The Company has
      determined that it has three reportable segments (see Note 11).




Recent
      Pronouncements




Fair
      Value Measurements




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


F-9
  **AGFEED
        INDUSTRIES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
  Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans, an
      Amendment of FASB Statements No. 87, 88, 106, and 132R




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







Fair
      Value Option for Financial Assets and Financial Liabilities





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





Other-Than-Temporary
      Impairment




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


F-10
  **AGFEED
        INDUSTRIES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
  FASB
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an
      interpretation of FASB Statement No.109.”




Interpretation
      48 prescribes a recognition threshold and a measurement attribute for the
      financial statement recognition and measurement of a tax position taken or
      expected to be taken in a tax return. Benefits from tax positions should be
      recognized in the financial statements only when it is more likely than not
      that
      the tax position will be sustained upon examination by the appropriate taxing
      authority that would have full knowledge of all relevant information. The amount
      of tax benefits to be recognized for a tax position that meets the
      more-likely-than-not recognition threshold is measured as the largest amount
      of
      benefit that is greater than fifty percent likely of being realized upon
      ultimate settlement. Tax benefits relating to tax positions that previously
      failed to meet the more-likely-than-not recognition threshold should be
      recognized in the first subsequent financial reporting period in which that
      threshold is met or certain other events have occurred. Previously recognized
      tax benefits relating to tax positions that no longer meet the
      more-likely-than-not recognition threshold should be derecognized in the first
      subsequent financial reporting period in which that threshold is no longer
      met.
      Interpretation 48 also provides guidance on the accounting for and disclosure
      of
      tax reserves for unrecognized tax benefits, interest and penalties and
      accounting in interim periods. Interpretation 48 is effective for fiscal years
      beginning after December 15, 2006. The change in net assets as a result of
      applying this pronouncement will be a change in accounting principle with the
      cumulative effect of the change required to be treated as an adjustment to
      the
      opening balance of retained earnings on January 1, 2007, except in certain
      cases
      involving uncertainties relating to income taxes in purchase business
      combinations. In such instances, the impact of the adoption of Interpretation
      48
      will result in an adjustment to goodwill. While the Company analysis of the
      impact of adopting Interpretation 48 is not yet complete, it do not currently
      anticipate it will have a material impact on the Company’s consolidated
      financial statements.




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




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




**Note
      3 - Notes Payable**





Notes
      payable at March 31, 2007 were as follows:




Short-term
                bank loan; interest rate of 7.02% payable monthly.
              The
                term of the loan is from May 18, 2006 to May 17, 2007.
              This
                loan is collateralized by the Company’s office building,
              workshop,
                employee dorms and use right of land.
            
            $
            582,660Short-term
                bank loan; interest rate of 6.125% at March 31,
              2007.
                The term of the loan is from December 5, 2006 to
              December
                4, 2007, has an interest rate between 5.58% and
              6.125%,
                and is payable monthly. This loan is collateralized by
              the
                Company’s machinery and equipment.
            
            
            116,532$
            699,192


F-11
  **AGFEED
        INDUSTRIES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
  **Note
      4 - Stockholders’ Equity**




On
          February 6, 2007, the Board of Directors approved the sale of 2,750,000
          units in
          a private placement offering. Each unit consisted of one share of common
          stock
          and a warrant to purchase 8% of one share of common stock. The warrants
          expire
          in three years and are have an exercise price of $5.00 per share. On February
          28, 2007, the Company received the minimum required placement of $3,000,000
          USD
          of units of its securities consisting of shares of common stock and stock
          purchase warrants (8% warrant coverage) in a private placement exempt from
          registration under the Securities Act. A total of 1,000,000 units, each
          unit
          representing one share of the Company’s common stock and a three year common
          stock purchase warrant, were sold through the end of business February
          28, 2007.
          Accordingly, the Company issued 1,000,000 shares of its common stock and
          warrants to purchase 80,000 shares of its common stock at this closing.
          Each
          unit is priced at $3.00 with $3,000,000 in total having been received.
          Fees of
          (i) 8% of the securities placed payable in cash, and (ii) a number of common
          stock purchase warrants equal to 8% of the number of units placed were
          paid to
          participating selected dealers. The stock purchase warrants have a term
          of three
          years and are exercisable for one share of common stock at an initial exercise
          price of $5.00. The securities offered in the private placement have not
          been
          registered under the Securities Act, or any state securities laws, and
          unless so
          registered, may not be sold in the United States except pursuant to an
          exemption
          from, or in a transaction not subject to, the registration requirements
          of the
          Securities Act and applicable state securities laws.
  **Note
        5 - Employee Welfare Plan**





The
      Company has its own employee welfare plan in accordance with Chinese law and
      regulations before all three subsidiaries in China become Sino-Foreign joint
      ventures. The Company made annual contributions of 14% of all employees’
salaries to the employee welfare plan. The total expense for the above plan
      was
      $4,412 and $16,081 for the three months ended March 31, 2007 and 2006,
      respectively. In
      accordance with Chinese law, a Sino-Foreign joint venture is not required to
      accrue welfare payable in advances since January 2006, and local entities are
      not required to accrue such payable since January 2007. Accordingly, all three
      subsidiaries have stopped accruing welfare payable. Instead, welfare expense
      is
      recorded as incurred.The Company has recorded welfare payable of $78,610
      as of March 31, 2007 which is included in tax and welfare payable in the
      accompanying consolidated balance sheet.




**Note
      6 - Statutory Common Welfare Fund**




As
      stipulated by the Company Law of the People’s Republic of China (PRC), net
      income after taxation can only be distributed as dividends after appropriation
      has been made for the following:








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


F-12
  **AGFEED
        INDUSTRIES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


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





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





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





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





The
      Company has appropriated $86,991 and $31,209 as reserve for the statutory
      surplus reserve for the three months ended March 31, 2007 and 2006,
      respectively.





**Note
      7 -**  **Earnings
      Per Share**





Earnings
      per share for the three months ended March 31, 2007 and 2006 were determined
      by
      dividing net income for the periods by the weighted average number of both
      basic
      and diluted shares of common stock and common stock equivalents outstanding.
      At
      March 31, 2007 and 2006, there were no dilutive securities.





**Note
      8 - Related Party Transactions**





During
      the three months ended March 31, 2007, the Company repaid $742,468 in advances
      from the companies that were related to the Company prior to the first quarter
      of 2007.  All these companies were related to the Company though one common
      shareholder who is a majority shareholder in all the related companies.




Due
      to
      related parties and due from related parties represent amounts payable and
      receivable from related partiesarising from purchases and sales transactions.





Advances
      to and from related parties and shareholders are non interest bearing and are
      payable or receivable on demand.





Sales
      to
      related parties amounted to $77,054 and $25,746 for the three months ended
      March 31, 2007 and 2006, respectively.





Due
      from
      related parties amounted to $93,187 as of March 31, 2007.





Purchases
      from related parties amounted to $9,284 and $4,928 for the three months ended
      March 31, 2007 and 2006, respectively.




F-13
  **AGFEED
        INDUSTRIES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
  Due
      to
      related party amounted to $4,661 as of March 31, 2007.





**Note
      9 - Taxes**





Local
      PRC
      Income Tax





Pursuant
      to the tax laws of China, general enterprises are subject to income tax at
      an
      effective rate of 33%.





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





For
                the Three MonthsEnded
                March 31,2007
            
            2006Tax
                provision (credit) at statutory rate
            
            
            34%
            
            
            34%Foreign
                tax rate difference
            
            
            (1%)
            
            
            (1%)Effect
                of tax holiday and waiver ofcurrent
                tax liability
            
            
            (15%)
            
            
            -18%
            
            
            33%





In
      July
      2006, as a result of an investment by a foreign investor in one of the Company’s
      subsidiaries, the Company’s subsidiary became a Sino-Foreign Joint Venture.
      Pursuant to the Chinese income tax law, the Company’s subsidiary became fully
      exempt from income tax for a period of two years from July 14, 2006 to July
      14,
      2008, followed by a reduced tax rate of 15% for the next three years. Concurrent
      with the exemption, the tax authorities waived approximately CNY 3,400,000
      ($425,429) in taxes due.




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





If
      the
      Company’s subsidiary had not been exempt from paying income taxes due to the
      Sino-Foreign Joint Venture described above, income tax expense for the three
      months ended March 31, 2007 would have been approximately $313,000 and earnings
      per share would have been reduced to $0.01.








**Note
      10 - Acquisition of**  **Guangxi
      Huijie Sci. & Tech. Feed Co, Ltd**





On
      December 20, 2006, the Company completed its acquisition of Guangxi Huijie.
      The
      Company acquired 100% of Guangxi Huijie’s issued and outstanding shares of
      common stock for $1,100,420 which was paid in cash. Guangxi Huijie is engaged
      in
      the research and development, manufacture, marketing, distribution and sale
      of
      pre-mix fodder blended feed and feed additives primarily for use in China’s
      domestic pork husbandry market. Guangxi Huijie operates a production plant
      in
      Nanning City and sells to distributors and large-scale swine farms. The Company
      acquired Guangxi Huijie as part of its strategic growth plan.


F-14
  **AGFEED
        INDUSTRIES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
  The
      operating results of Guangxi Huijie are included in the accompanying
      consolidated statements of operations from the acquisition date.




The
      following table summarizes the fair values of the assets acquired and
      liabilities assumed at the date of acquisition.






Cash
            
            $
            151,990Accounts
                receivable
            
            
            473,976Other
                receivables
            
            
            166,741Inventory
            
            
            290,184Other
                current assets
            
            
            57,809Property
                and equipment
            
            
            614,510Intangible
                assets
            
            
            464,246Accounts
                payable
            
            
            (218,131
            )Notes
                payable
            
            
            (115,326
            )Advances
                from related party
            
            
            (737,827
            )Other
                current liabilities
            
            
            (47,752
            )Purchase
                price
            
            $
            1,100,420





The
      intangible assets, which is principally land rights, is being amortized over
      50
      years.





The
      pro
      forma financial information  shown below presents the consolidated
      operations of the Company as if the Guangxi Huijie acquisition had occurred
      as
      of the beginning of the periods presented is presented below.








**For
                the three months ended March 31, 2006**




**As
                Reported****by
                the**
            
            **Guangxi****Company**
            
            **Huijie**
            
            **Adjustments**
            
            
            
            **Pro
                forma**Net
                Revenue
            
            $
            2,094,289
            
            $
            1,543,893
            
            $
            -
            
            
            
            
            $
            3,638,182Cost
                of Revenue
            
            
            1,305,090
            
            
            1,068,569
            
            
            -
            
            
            
            
            
            2,373,659Gross
                Profit
            
            
            789,199
            
            
            475,324
            
            
            -
            
            
            
            
            
            1,264,523Operating
                expenses:Selling
                expenses
            
            
            265,512
            
            
            39,178
            
            
            -
            
            
            
            
            
            304,690General
                and administrative expenses
            
            
            109,471
            
            
            44,124
            
            
            1,356
            
            
            a.
            
            
            154,951Total
                operating expenses
            
            
            374,983
            
            
            83,302
            
            
            1,356
            
            
            
            
            
            459,641Income
                from operations
            
            
            414,216
            
            
            392,022
            
            
            (1,356
            )
            
            
            
            
            804,882Non-operating
                income (expense):Other
                income (expense)
            
            
            948
            
            
            (129
            )Interest
                income
            
            
            181
            
            
            164
            
            
            -
            
            
            
            
            
            345Interest
                expense
            
            
            -
            
            
            (1,756
            )
            
            (19,423
            )
            
            b.
            
            
            (21,179
            )Total
                non-operating income (expense)
            
            
            1,129
            
            
            (1,721
            )
            
            (19,423
            )
            
            
            
            
            (20,834
            )Income
                before income tax
            
            
            415,345
            
            
            390,301
            
            
            (20,779
            )
            
            
            
            
            784,048Income
                tax
            
            
            136,963
            
            
            96,562
            
            
            -
            
            
            
            
            
            233,525Net
                income
            
            $
            278,382
            
            $
            293,739
            
            $
            (20,779
            )
            
            
            
            $
            550,523Earnings
                per share
            
            $
            0.02
            
            
            
            
            
            
            
            
            
            
            $
            0.04Weighted
                average shares outstanding
            
            
            15,006,723
            
            
            
            
            
            
            
            
            
            
            
            15,006,723





a.
            to
                record additional amortization for the increase in basis of the land
                use
                rights as a result of the purchase.


b.
            to
                record interest expense on the acquisition
                note.




F-15





**AGFEED
      INDUSTRIES, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**


**Note
        11 - Segment Information**
 
 The
        Company’s predominant business is the research & development, manufacture,
        marketing, distribution, and sale of pre-mix fodder blended feed and feed
        additives primarily for use in China’s domestic pork husbandry market. The
        Company is organized into three wholly owned subsidiaries: Shanghai Best
        Animal
        Husbandry Co., LTD. (“Shanghai”), Nanchang Best Animal Husbandry Co., LTD.
        (“Nanchang”), and Guangxi Huijie Sci & Tech. Feed Co., LTD.
        (“Guangxi”).
 
 Shanghai
        is located in the Nanxiang, Jia Ding district, Shanghai and sells its products
        to approximately 300 customers, consisting of 90 local distributors and 210
        large scale pig farms. Nanchang is located in Chang Bei District Industrial
        Park, in Nanchang, Jiangxi Province and sells its products to approximately
        360
        customers, consisting of 170 local distributors and 190 large scale pig farms.
        Guangxi is located in Coastal Industrial Park, Liangquin District, Nanning
        City,
        Guangxi Province and sells its products to approximately 325 customers,
        consisting of 140 local distributors and 185 large scale pig
        farms.




The
      following tables summarize segment information as of March 31, 2007 and for
      the
      three months ended March 31, 2007 and 2006:


**3/31/2007**
              
              **3/31/2006****Revenues
                  from unrelated entities**Shanghai
              
              $
              1,383,925
              
              $
              813,910Guangxi
              
              
              1,543,893
              
              
              -Nanchang
              
              
              2,050,477
              
              
              1,280,3794,978,295
              
              
              2,094,289**Intersegment
                  revenues**Shanghai
              
              
              -
              
              
              -Guangxi
              
              
              -
              
              
              -Nanchang
              
              
              496,987
              
              
              -496,987
              
              
              -**Total
                  Revenues**Shanghai
              
              
              1,383,925
              
              
              813,910Guangxi
              
              
              1,543,893
              
              
              -Nanchang
              
              
              2,547,464
              
              
              1,280,379Less
                  Intersegment revenues
              
              
              (496,987
              )
              
              -4,978,295
              
              
              2,094,289**Income
                  from operations**Shanghai
              
              
              234,387
              
              
              138,098Guangxi
              
              
              392,022
              
              
              -Nanchang
              
              
              420,483
              
              
              276,118Holding
                  Company
              
              
              (69,001
              )
              
              -977,891
              
              
              414,216**Interest
                  income**Shanghai
              
              
              214
              
              
              76Guangxi
              
              
              164
              
              
              -Nanchang
              
              
              938
              
              
              105Holding
                  Company
              
              
              8,851
              
              
              -10,167
              
              
              181**Interest
                  Expense**Shanghai
              
              
              -
              
              
              -Guangxi
              
              
              1,885
              
              
              -Nanchang
              
              
              10,184
              
              
              -Holding
                  Company
              
              
              30,580
              
              
              -42,649
              
              
              -**Income
                  tax expense**Shanghai
              
              
              78,736
              
              
              45,919Guangxi
              
              
              96,562
              
              
              91,044Nanchang
              
              
              -
              
              
              -175,298
              
              
              136,963**Net
                  Income**Shanghai
              
              
              159,856
              
              
              93,228Guangxi
              
              
              293,739
              
              
              -Nanchang
              
              
              416,316
              
              
              185,154Holding
                  Company
              
              
              (90,730
              )
              
              -779,181
              
              
              278,382**Provision
                  for depreciation**Shanghai
              
              
              8,696
              
              
              8,123Guangxi
              
              
              8,660
              
              
              -Nanchang
              
              
              22,489
              
              
              17,48539,845
              
              
              25,608**Total
                  Assets**Shanghai
              
              
              1,782,887Guangxi
              
              
              2,146,635Nanchang
              
              
              4,306,423Holding
                  Company
              
              
              1,317,2529,553,197


**Note
      12 - Subsequent Event**




On
      February 6, 2007, the Board of Directors approved the sale of 2,750,000 units
      in
      a private placement offering. Each unit consisted of one share of common stock
      and a warrant to purchase 8% of one share of common stock. The warrants expire
      in three years and are have an exercise price of $5.00 per share. On February
      28, 2007, the Company received the minimum required placement of $3,000,000
      USD
      of units of its securities consisting of shares of common stock and stock
      purchase warrants (8% warrant coverage) in a private placement exempt from
      registration under the Securities Act. A total of 1,000,000 units, each unit
      representing one share of the Company’s common stock and a three year common
      stock purchase warrant, were sold through the end of business February 28,
      2007.
      Accordingly, the Company issued 1,000,000 shares of its common stock and
      warrants to purchase 80,000 shares of its common stock at this closing. Each
      unit is priced at $3.00 with $3,000,000 in total having been received. Fees
      of
      (i) 8% of the securities placed payable in cash, and (ii) a number of common
      stock purchase warrants equal to 8% of the number of units placed were paid
      to
      participating selected dealers. The stock purchase warrants have a term of
      three
      years and are exercisable for one share of common stock at an initial exercise
      price of $5.00. The securities offered in the private placement have not been
      registered under the Securities Act, or any state securities laws, and unless
      so
      registered, may not be sold in the United States except pursuant to an exemption
      from, or in a transaction not subject to, the registration requirements of
      the
      Securities Act and applicable state securities laws.


F-16




*This
        Quarterly Report on Form 10-QSB/A includes forward-looking statements within
        the
        meaning of Section 27A of the Securities Act of 1933, as amended, and Section
        21E of the Securities Exchange Act of 1934, as amended. We have based these
        forward-looking statements on our current expectations and projections about
        future events. These forward-looking statements are subject to known and
        unknown
        risks, uncertainties and assumptions about us that may cause our actual results,
        levels of activity, performance or achievements to be materially different
        from
        any future results, levels of activity, performance or achievements expressed
        or
        implied by such forward-looking statements. In some cases, you can identify
        forward-looking statements by terminology such as “may,” “will,” “should,”
“could,” “would,” “expect,” “plan,” anticipate,” believe,” estimate,” continue,”
or the negative of such terms or other similar expressions. Factors that
        might
        cause or contribute to such a discrepancy include, but are not limited to,
        those
        listed under the heading “Risk Factors” beginning on page 11 and those
        listed in our other Securities and Exchange Commission filings. The following
        discussion should be read in conjunction with our Financial Statements and
        related Notes thereto included elsewhere in this report.*
 
 **Item
        2.**  **Management’s
        Discussion and Analysis or Plan of Operations**
  **Overview**
 
 We
        are
        incorporated under the laws of the state of Nevada. We engage in the business
        of
        the research and development, manufacture, marketing and sale of fodder and
        blended feed for use in China’s domestic animal husbandry markets. Our chief
        source of revenues is the sale of feed products for pigs, however, we do
        produce
        other feed products for chickens and cows. We sell our products in approximately
        ten provinces within the People’s Republic of China.
 
 We
        currently conduct our business through the following three operating
        subsidiaries in China:
 
 ·
              Nanchang
                  Best is located in the province of
                  Jiangxi,
 ·
              Shanghai
                  Best is located in Shanghai City, and
 ·
              Guangxi
                  Huijie is located in the province of
                  Guangxi.
 
 We
        operate each subsidiary independently with regard to manufacturing and marketing
        and sales efforts. We do have some sharing of sales referrals and leads amongst
        the subsidiaries, but they do not compete against each other for new sales.
        Most
        of our research and development occurs at Nanchang and Guangxi, and each
        shares
        their efforts with the other and Shanghai. In addition, many of the
        administrative duties are performed by Nanchang for Shanghai, and we are
        attempting to study the feasibility of centralizing more administrative
        functions.
 
 We
        are
        targeting growth through three main channels: (i) organic growth through
        increasing sales at each of our current operating subsidiaries, (ii) the
        distribution of our products through approximately 101 independently owned
        retail locations (as of May 11, 2007), and (iii) an aggressive acquisition
        program to increase the number of provinces in China in which we do business.
 
 Our
        revenues increased 12.9% in 2006 as compared to 2005 and our net income
        increased 110% in 2006 as compared to 2005. Similarly, in the three month
        period ended March 31, 2007, our revenues increased 137.7% and our net
        income increased 179.9% compared to the three month period ended March
        31, 2006. The increases we experienced in both periods are the result of
        our
        organic growth at each operating subsidiary. In addition, the growth in the
        first quarter of fiscal 2007 reflects the acquisition of our Guangxi Huijie
        subsidiary in December 2006. Since we acquired Nanchang Best and Shanghai
        Best
        in October 2006, we have effectively marketed our products through a team
        based
        approach, sharing sales leads and referrals. We also developed the new Arubao
        Series of product at Nanchang Best and introduced the product in our three
        current subsidiaries.
 
 2
 In
          January 2007, we launched independently owned retail stores to
          complement our existing distribution channels. We will continue to market
          our
          products to the operators of large swine farms and large distributors.
          We will
          now rely on the owners of these independent retail stores to market
          and sell our products to the smaller swine farms. Even though the number
          of
          small swine farms in China is declining, we did not want to lose revenues
          by
          forgoing sales to this market segment. We determined that the best and
          most
          efficient use of our resources is to concentrate on the larger customers
          and
          allow the franchisees to sell to the smaller farmers.
 
 In
          order
          to provide excellent customer service and differentiate ourselves from
          our
          competition, at our customer’s request, we supply to them customized
          formulations of our products. In any given month, the cost of the various
          additives used in these customized formulations fluctuates, which can result
          in
          temporary increases in unit cost of goods sold. We believe even though
          this may
          have an effect on our short term profits, we take the long term view that
          it
          increases customer loyalty and builds the AgFeed brand. The increase in
          our
          revenues during the three months ended March 31, 2007 were mostly due
          to increases in the volume of products sold as a direct result of new products
          launched and our expansion to new markets. We also experienced increases
          in our
          cost of goods sold during the three months ended March 31, 2007. The
          costs of corn and soybean meal, which are two of our main raw materials,
          increased approximately 18.5% and 11.2%, respectively. In order to remain
          competitive in our markets, we have not increased the prices of our products
          to
          pass these cost increases on to our customers. Accordingly, our revenues
          have
          not increased during the three month period ended March 31, 2007 in
          proportion to our cost of goods sold. We believe that this competitive
          pricing
          strategy has and will continue to increase our sales volume and ultimately
          increase our long-term revenue growth.
 We
        also
        continue to aggressively search for acquisition targets in our industry,
        throughout China. The growth in sales and net revenues we experienced in
        the
        first quarter of fiscal 2007 compared to the first quarter of 2006 was
        due in part to our acquisition of Guangxi Huijie late in December
        2006.
 
 **Critical
        Accounting Policies**
 
 In
        presenting our financial statements in conformity with accounting principles
        generally accepted in the United States, we are required to make estimates
        and
        assumptions that affect the amounts reported therein. Several of the estimates
        and assumptions we are required to make relate to matters that are inherently
        uncertain as they pertain to future events. However, events that are outside
        of
        our control cannot be predicted and, as such, they cannot be contemplated
        in
        evaluating such estimates and assumptions. If there is a significant unfavorable
        change to current conditions, it will likely result in a material adverse
        impact
        to our consolidated results of operations, financial position and in liquidity.
        We believe that the estimates and assumptions we used when preparing our
        financial statements were the most appropriate at that time. Presented below
        are
        those accounting policies that we believe require subjective and complex
        judgments that could potentially affect reported results.
 
 USE
        OF
        ESTIMATES: Our discussion and analysis of our financial condition and results
        of
        operations are based upon our consolidated financial statements, which have
        been
        prepared in accordance with accounting principles generally accepted in the
        United States of America. The preparation of these consolidated financial
        statements requires us to make estimates and judgments that affect the reported
        amounts of assets, liabilities, revenues and expenses, and related disclosures
        of contingent assets and liabilities. On an ongoing basis, we evaluate our
        estimates, including those related to impairment of long-lived assets, and
        allowance for doubtful accounts. We base our estimates on historical experience
        and on various other assumptions that we believe to be reasonable under the
        circumstances, the results of which form the basis for making judgments about
        the carrying value of assets and liabilities that are not readily apparent
        from
        other sources. Actual results may differ from these estimates under different
        assumptions or conditions; however, we believe that our estimates, including
        those for the above-described items, are reasonable.
 
 3
 Areas
        that require estimates and assumptions include valuation of accounts receivable
        and inventory, determination of useful lives of property and equipment,
        estimation of certain liabilities and sales returns.
 
 ***Allowance
        For Doubtful Accounts***
 The
        Company continually monitors customer payments and maintains a reserve for
        estimated losses resulting from its customers’ inability to make required
        payments. In determining the reserve, the Company evaluates the collectibility
        of its accounts receivable based upon a variety of factors. In cases where
        the
        Company becomes aware of circumstances that may impair a specific customer’s
        ability to meet its financial obligations, the Company records a specific
        allowance against amounts due. For all other customers, the Company recognizes
        allowances for doubtful accounts based on its historical write-off experience
        in
        conjunction with the length of time the receivables are past due, customer
        creditworthiness, geographic risk and the current business environment. Actual
        future losses from uncollectible accounts may differ from the Company’s
        estimates.
 
 ***Inventories***
 Inventories
        are stated at the lower of cost or market. Cost is determined using the
        first-in, first-out method. The Company evaluates its ending inventories
        for
        estimated excess quantities and obsolescence. The Company’s evaluation includes
        the analysis of future sales demand by product, within specific time horizons.
        Inventories in excess of projected future demand are written down to net
        realizable value. In addition, the Company assesses the impact of changing
        technology on inventory balances and writes-down inventories that are considered
        obsolete. Inventory obsolescence and excess quantities have historically
        been
        minimal.
 
 ***Long-Lived
        Assets***
 The
        Company periodically assesses potential impairments to its long-lived assets
        in
        accordance with the provisions of SFAS No. 144, “Accounting for the
        Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 requires, among
        other things, that an entity perform an impairment review whenever events or
        changes in circumstances indicate that the carrying value may not be fully
        recoverable. Factors considered by the Company include, but are not limited
        to:
        significant underperformance relative to expected historical or projected
        future
        operating results; significant changes in the manner of use of the acquired
        assets or the strategy for the Company’s overall business; and significant
        negative industry or economic trends. When the Company determines that the
        carrying value of a long-lived asset may not be recoverable based upon the
        existence of one or more of the above indicators of impairment, the Company
        estimates the future undiscounted cash flows expected to result from the
        use of
        the asset and its eventual disposition. If the sum of the expected future
        undiscounted cash flows and eventual disposition is less than the carrying
        amount of the asset, the Company recognizes an impairment loss. An impairment
        loss is reflected as the amount by which the carrying amount of the asset
        exceeds the fair market value of the asset, based on the fair market value
        if
        available, or discounted cash flows. To date, there has been no impairment
        of
        long-lived assets.
 
 Property
        and equipment: Useful lives of property and equipment is based on historical
        experience and industry norms. Changes in useful lives due to changes in
        technology or other factors can affect future depreciation
        estimates.
 REVENUE
          RECOGNITION: Our revenue recognition policies are in compliance with Staff
          accounting bulletin (SAB) 104. Revenue is recognized when services are
          rendered
          to customers when a formal arrangement exists, the price is fixed or
          determinable, the delivery is completed, no other significant obligations
          exist
          and collectibility is reasonably assured. Payments received before all
          of the
          relevant criteria for revenue recognition are satisfied are recorded as
          unearned
          revenue. We are not subject to VAT withholdings. We give volume rebates
          to
          certain customers based on volume achieved. We accrue sales rebates based
          on
          actual sales volume. Sales rebates for the year ended December 31, 2005
          and 2006
          and the three months ended March 31, 2006 and 2007 were $ 74,046 and
          $258,503 and $34,572 and $49,084 respectively. Sales returns for the three
          months ended March 31, 2006 and 2007 were $13,956 and $15,219
          respectively.
 
 4
 We
        make
        estimates and judgments when determining whether the collectibility of revenue
        from customers is reasonably assured. Management estimates regarding
        collectibility impact the actual revenues recognized each period and the
        timing
        of the recognition of revenues. Our assumptions and judgments regarding future
        collectibility could differ from actual events, thus materially impacting
        our
        financial position and results of operations.
 
 Sales
        returns and allowances have historically been insignificant. Accordingly,
        estimating returns is not critical. However, if circumstances change, returns
        and allowance may impact the company’s earnings.
  The
          Company gives volumes rebates to certain customers based on volume achieved.
          Sales rebates are accrued based on actual sales volume. Sales rebates for
          the
          year ended December 31, 2005 and 2006 were $74,046 and $258,503, respectively.
          The Company does not offer any of its customers the unconditional right
          to
          return purchased products. Customers are only permitted to return defective
          products. In addition, the Company does not provide any price protection
          or
          similar rights to its customers.
 
 There
          are
          no differences in the Company’s arrangements with its different type of
          customers. Accordingly, the Company does not have different revenue recognition
          policies for different types of customers.
 
 The
          Company offers credit terms ranging from 30 to 90 days for most customers.
          For
          some large customers, the Company may extend these terms beyond 90
          days.
  Recent
          Accounting
          Pronouncements
 Fair
        Value Measurements
 
 In
        September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which
        establishes a framework for measuring fair value, and expands disclosures
        about
        fair value measurements required under the accounting pronouncements, but
        does
        not change existing guidance as to whether or not an instrument is carried
        at
        fair value. Additionally, it establishes a fair value hierarchy that prioritizes
        the information used to develop those assumptions. SFAS No. 157 is effective
        for
        financial statements issued for fiscal years beginning after November 15,
        2007,
        and interim periods within those fiscal years. Earlier application is
        encouraged, provided that the reporting entity has not yet issued financial
        statements for the fiscal year, including financial statements for an
        interim period within the fiscal year. The Company is currently evaluating
        the
        impact, if any, that SFAS No. 157 will have on its consolidated financial
        statements.
 
 Employers’
        Accounting for Defined Benefit Pension and Other Postretirement Plans, an
        Amendment of FASB Statements No. 87, 88, 106, and 132R
  In
        September 2006, the FASB, issued SFAS, No. 158, “Employers’ Accounting for
        Defined Benefit Pension and Other Postretirement Plans, an Amendment of FASB
        Statements No. 87, 88, 106, and 132R,” which requires employers to recognize the
        underfunded or overfunded status of a defined benefit postretirement plan
        as an
        asset or liability in its statement of financial position and to recognize
        changes in the funded status in the year in which the changes occur through
        accumulated other comprehensive income. Additionally, SFAS No. 158 requires
        employers to measure the funded status of a plan as of the date of its year-end
        statement of financial position. The new reporting requirements and related
        new
        footnote disclosure rules of SFAS No. 158 are effective for fiscal years
        ending
        after December 15, 2006. We adopted the provisions of SFAS No. 158 for the
        year
        end 2006, and the effect of recognizing the funded status in accumulated
        other
        comprehensive income was not significant. The new measurement date requirement
        applies for fiscal years ending after December 15, 2008.
  Fair
        Value Option for Financial Assets and Financial Liabilities
 
 In
        February of 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
        Assets and Financial Liabilities—Including an amendment of FASB Statement No.
        115.” The statement permits entities to choose to measure many financial
        instruments and certain other items at fair value. The objective is to improve
        financial reporting by providing entities with the opportunity to mitigate
        volatility in reported earnings caused by measuring related assets and
        liabilities differently without having to apply complex hedge accounting
        provisions. The statement is effective as of the beginning of an entity’s first
        fiscal year that begins after November 15, 2007. We are analyzing the potential
        accounting treatment.
 
 5
 Other-Than-Temporary
        Impairment
 
 FASB
        Staff Position on FAS No. 115-1 and FAS No. 124-1 (“the FSP”), “The Meaning of
        Other-Than-Temporary Impairment and Its Application to Certain Investments,” was
        issued in November 2005 and addresses the determination of when an investment
        is
        considered impaired, whether the impairment on an investment is
        other-than-temporary and how to measure an impairment loss. The FSP also
        addresses accounting considerations subsequent to the recognition of
        other-than-temporary impairments on a debt security, and requires certain
        disclosures about unrealized losses that have not been recognized as
        other-than-temporary impairments. The FSP replaces the impairment guidance
        on
        Emerging Issues Task Force (EITF) Issue No. 03-1 with references to
        existing authoritative literature concerning other-than-temporary
        determinations. Under the FSP, losses arising from impairment deemed to be
        other-than-temporary, must be recognized in earnings at an amount equal to
        the
        entire difference between the securities cost and its fair value at the
        financial statement date, without considering partial recoveries subsequent
        to
        that date. The FSP also required that an investor recognize other-than-temporary
        impairment losses when a decision to sell a security has been made and the
        investor does not expect the fair value of the security to fully recover
        prior
        to the expected time of sale. The FSP is effective for reporting periods
        beginning after December 15, 2005. The adoption of this statement will not
        have
        a material impact on our consolidated financial statements.
  The
            Company adopted the provisions of FASB Interpretation No. 48, Accounting
            for
            Uncertainty in Income Taxes, on January 1, 2007. As a result of the
            implementation of FIN 48, the company made a comprehensive review of
            its
            portfolio of tax positions in accordance with recognition standards established
            by FIN 48. As a result of the implementation of Interpretation 48, the
            Company
            recognized no material adjustments to liabilities or stockholders equity.
            When
            tax returns are filed, it is highly certain that some positions taken
            would be
            sustained upon examination by the taxing authorities, while others are
            subject
            to uncertainty about the merits of the position taken or the amount of
            the
            position that would be ultimately sustained. The benefit of a tax position
            is
            recognized in the financial statements in the period during which, based
            on all
            available evidence, management believes it is more likely than not that
            the
            position will be sustained upon examination, including the resolution
            of appeals
            or litigation processes, if any. Tax positions taken are not offset or
            aggregated with other positions. Tax positions that meet the
            more-likely-than-not recognition threshold are measured as the largest
            amount of
            tax benefit that is more than 50 percent likely of being realized upon
            settlement with the applicable taxing authority. The portion of the benefits
            associated with tax positions taken that exceeds the amount measured
            as
            described above is reflected as a liability for unrecognized tax benefits
            in the
            accompanying balance sheets along with any associated interest and penalties
            that would be payable to the taxing authorities upon
            examination.
 6
 Considering
        the Effects of Prior Year Misstatements in Current Year Financial
        Statements
 
 In
        September 2006, the Securities and Exchange Commission issued Staff Accounting
        Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when
        Quantifying Misstatements in Current Year Financial Statements,” (“SAB
        108”),which provides interpretive guidance on the consideration of the effects
        of prior year misstatements in quantifying current year misstatements for
        the
        purpose of a materiality assessment. The Company adopted SAB 108 in the fourth
        quarter of 2006 with no impact on its consolidated financial
        statements.
 
 **Results
        of Operations**
 
 *Three
        Months Ended March 31, 2007 Compared to Three Months Ended March 31,
        2006*
 Three
                  Months ended March 31, 2007
              
              Three
                  Months ended March 31, 2006
              
              $
                  Change
              
              %
                  ChangeRevenues
              
              $
              4,978,295
              
              $
              2,094,289
              
              $
              2,884,006
              
              
              137.7
              %Cost
                  of Sales
              
              
              3,435,089
              
              
              1,305,090
              
              
              2,129,999
              
              
              163.2
              %Gross
                  Profits
              
              
              1,543,206
              
              
              789,199
              
              
              754,007
              
              
              95.5
              %Selling,
                  General and Administrative Expenses
              
              
              565,315
              
              
              374,983
              
              
              190,332
              
              
              50.7
              %Net
                  Income
              
              
              779,181
              
              
              278,382
              
              
              500,799
              
              
              179.9
              %
 
 Revenues.
        The increase in revenues was due to an increase in the volume of feed products
        that we sold, the acquisition of the Guangxi Huijie subsidiary and the
        introduction in the first quarter of 2007 of the Airubao Series, a new special
        blended feed product formulated especially for baby pigs. Guangxi contributed
        approximately 1,436 metric tons (MT) of premix volume during the three
        months ended March 31, 2007, accounting for significantly all of the increase
        in
        premix sales volume. Nanchang experienced a decrease of approximately 453
        MT of premix volume and Shanghai experienced a decrease of
        approximately 151 MT of premix volume during this three month period. 
During the three months ended March 31, 2007, we focused on increasing sales
        of
        the Airubao Series, which is a special blended feed product. For comparative
        purposes, we will analyze the blended feed and Airubao Series together. Together
        the blended category sold 3,848 MT compared to only 390 MT during the
        same period a year ago. This increase was due to the new Airubao sales and
        approximately 603 MT of blended feed sold by Guangxi, as well as an
        increase of approximately 2,035 MT of blended feed sold by Nanchang and an
        increase of approximately 820 MT sold by Shanghai during the three month
        period
        ended March 31, 2007 compared to the same period in 2006.  Guangxi also
        accounted for 149 MT of other feed products. Nanchang sold 45 MT and
        Shanghai sold 78 MT of other feed products during the three months ended
        March 31, 2007.  Overall, the Guangxi acquisition provided approximately
        28.20% of our revenues while Nanchang provided 46.53% and Shanghai provided
        25.27% of our total revenues during the three month period ended March 31,
        2007 and Guangxi contributed approximately 25.9% of the total volume
        of feeds during the three month period ended March 31, 2007 and Nanchang
        contributed approximately 48.6% and Shanghai contributed approximately 25.5%
        of
        the total volume of feeds during the three month period ended March 31,
        2007.  Nanchang's revenues increased approximately 78.59% during the three
        months ended March 31, 2007 compared to the same period in 2006. 
Shanghai's revenues increased approximately 60.01% during the three months
        ended
        March 31, 2007 compared to the same period in 2006.
 
 While
        the
        increase in the average sales price of our blended products also contributed
        to
        our increase in revenues, this effect was offset by the decrease in the average
        sales price of our other products category. Also, we strategically did not
        seek
        to maximize our sales prices in order to remain competitive in our markets.
        We
        believe that this competitive pricing strategy has and will contribute to
        our
        increased sales volumes and ultimately lead to long-term revenues
        growth.
 
 7
 Feed
                  Type
              
              Metric
                  Tons Sold
                3
                  months ended March 31, 2007
              
              Metric
                  Tons Sold
                3
                  months ended March 31, 2006
              
              Difference
              
              %
                  changePremix
              
              
              4,331
              
              
              3,498
              
              
              832
              
              
              23.80
              %Blended
              
              
              1,128
              
              
              390
              
              
              738
              
              
              189.23
              %Airubao
              
              
              1,900
              
              
              0
              
              
              1,900
              
              
              N/AOther
              
              
              272
              
              
              97
              
              
              175
              
              
              181.90
              %Total
              
              
              7,631
              
              
              3,985
              
              
              3,645
              
              
              91.49
              %
  The
        average sale price/MT during the three months ended March 31, 2007 and March
        31,
        2006 of each of our product classes is set forth below.
  Feed
                  Type
              
              Average
                  Price/MT 3 Months Ended
                March
                  31, 2007
              
              Average
                  Price/MT 3 Months Ended
                March
                  31, 2006
              
              Difference
              
              %
                  changePremix
              
              $
              630.46
              
              $
              595.39
              
              $
              35.06
              
              
              5.89Blended
              
              
              630.73
              
              
              444.08
              
              
              186.65
              
              
              42.03Other
              
              
              1,042.01
              
              
              914.56
              
              
              127.45
              
              
              13.94
 
 The
        average sale price/MT was calculated in U.S. Dollars using a conversion factor
        of 7.58 RMB to $1.00 USD. The average price for each product category was
        calculated by multiplying the prices charged in each product category at
        each
        operating subsidiary by a weighted average of revenues generated in each
        product
        category at each operating subsidiary as compared to total revenues generated
        by
        that product by all operating subsidiaries for the period. The Airubao Series
        is
        included in the calculations for blended feed.
 
 During
        the first quarter of 2007, we launched the Airubao Series, a new special
        blended
        feed designed specifically for baby pigs. The Airubao Series is meant to
        be used
        four days after weaning. The main ingredients used in these products are
        amino
        acids, vitamins, feed additives and minerals. These products are intended
        to
        maximize the baby pig’s feed intake, help the baby pig adapt to corn feeding,
        enhance immunity and digestibility and reduce post-weaning syndrome. We
        anticipate that the large pig farms will be the largest users of the Airubao
        Series although we have also introduced the Series to the small individual
        farmers. We have gained immediate acceptance from our customers. This product
        line consists of a series of three distinct formulations, the average gross
        margin is approximately 24% and the average selling price is approximately
        $670
        per MT. The Annual Report on China’s Feed Industry, published by the Chinese
        government, estimates that the market for premium baby pig feed is approximately
        $3.8 billion per year.
 Cost
          of
          Goods Sold. We experienced approximately 37.8% and 5.9% increases in the
          unit
          cost of goods sold for blended feed and premix products, respectively,
          during
          the three month period ended March 31, 2007 compared to the same period
          in 2006.
          In order to provide excellent customer service and differentiate ourselves
          from
          our competition, at our customer’s request, we supply customized formulations of
          our products. In any given period, the cost of the various additives used
          as raw
          materials in our products fluctuates, which can result in increases in
          unit cost
          of goods sold. During the three month period ended March 31, 2007, the
          costs of
          corn and soybean meal increased approximately 18.5% and 11.2%, respectively.
          These additives constitute approximately 20% of our concentrate feed raw
          material costs and 60% to 80% of our blended feed raw material costs. These
          increased costs offset our increases in revenues. Even though this may
          have an
          adverse effect on our short term profits, we take the long term view that
          this
          practice results in customer loyalty, builds the AgFeed brand and will
          ultimately lead to increased sales and gross profits. In addition, we are
          presently experiencing more stable pricing in these additives, which we
          anticipate will stabilize our cost of goods sold.
  Nanchang
        experienced a 109.30% increase in cost of goods sold during the three months
        ended March 31, 2007 compared to the same period in 2006.  Shanghai
        experienced a 89.76% increase in cost of goods sold during the three months
        ended March 31, 2007 compared to the same period in 2006.
 8
  Gross
        Profit. Gross margins decreased to 31% from 37.68% during the three months
        ended
        March 31, 2007 as compared to the same period last year. The decrease in
        gross
        margin can be attributed to several factors: (i) the cost of introducing
        the
        Airubao Series; (ii) we experienced an approximate 37.8% increase in the
        unit
        cost of goods sold of blended feed during the three months ended March 31,
        2007
        compared to the same period in 2006; and (iii) the unit cost of goods sold
        for
        premix products increased approximately 5.9% during the three months ended
        March
        31, 2007 compared to the same period in 2006.
  Gross
          margins at Nanchang for the three month period ended March 31, 2007 were
          approximately 25.58% compared to 36.50% for the same period in 2006. Gross
          margins at Shanghai for the three month period ended March 31, 2007 were
          30.07%
          compared to 41.04% for the same period in 2006. Gross margins at Guangxi
          for the
          three month period ended March 31, 2007 were approximately 30.79%. Gross
          margin
          calculations for each subsidiary are calculated prior to any adjustments
          for
          intercompany sales, which are reflected in the consolidated financial
          statements.
 Selling,
        General and Administrative Expenses. We incurred legal and audit expense
        in the
        three month period ended March 31, 2007 of approximately $104,000 associated
        with being a publicly traded United States reporting company that we did
        not
        incur during the same period in 2006. The increase in our general and
        administrative expense also reflects the addition of our Guangxi subsidiary,
        which had approximately $44,124 of general and administrative expenses during
        the three months ended March 31, 2007. General and administrative expense
        includes overhead expenses such as rent, management and staff salaries, general
        insurance, marketing, accounting, legal and offices expenses. Selling expenses
        for the period increased by 29.33% due to the 137.7% increase in revenues
        and
        the costs associated with entering markets in neighboring provinces, as well
        as
        the addition of our Guangxi subsidiary, which had approximately $39,178 of
        selling expenses during the three months ended March 31, 2007. We attempted
        to
        control our selling expenses through the use of strict cost controls and
        efficient use of our distribution channels.
 
 Net
        Income. Our increase in net income was due to an increase in income from
        operations offset by an increase in non-operating income due to net interest
        expense of approximately $23,412. The major reason for the net
        increase in non operating expenses during this period in 2007 was interest
        expense paid in connection with the Guangxi acquisition and short term loans
        of
        approximately $699,192.  This interest expense was offset by interest
        income earned on the net proceeds of our financings of approximately $2,723,665.
         In addition, our Nanchang Best subsidiary became a Sino Foreign Joint
        Venture due to an investment by a foreign investor in July 2006. Nanchang
        Best
        receives favorable tax status and is exempt from all income tax through July
        14,
        2008 and then will pay a reduced rate of 15% for the next three years.
  **Off-Balance
          Sheet Arrangements**
 
 There
          were no off-balance sheet arrangements during the three months ended March
          31, 2007 that have, or are reasonably likely to have, a current or future
          affect
          on our financial condition, revenues or expenses, results of operations,
          liquidity, capital expenditures or capital resources that is material to
          our
          interests.
 
 **Liquidity
          and Capital Resources**
 
 At
          March
          31, 2007, we had $2,672,889 cash and cash equivalents on hand. On April
          29,
          2007, we completed a final closing of a private placement offering of units
          pursuant to which we sold an aggregate of 2,276,753 units at an offering
          price
          of $3.00 per unit for aggregate gross proceeds of $6,830,259. Each unit
          consisted of one share of common stock and a warrant to purchase 8% of
          one share
          of common stock. Accordingly, we issued an aggregate of 2,276,753 shares
          of our
          common stock and warrants to purchase 182,146 shares of our common stock
          to the
          37 accredited investors who participated in this offering. The warrants
          are
          exercisable for a period of three years at an exercise price of $5.00 per
          share.
          We received net proceeds from the private placement of appoximately $6,230,000
          after payments to two selected dealers and one finder and legal and accounting
          costs associated with the financing totaling approximately $600,000. We
          used
          $1,131,000 of the net proceeds to repay the short term bank loan we had
          in
          connection with our acquisition of Guangxi Huijie. We also used $160,000
          to make
          a good faith deposit with a company that we are in negotiations to
          acquire.
 9
  As
        of
        March 31, 2007, we had total loans payable of $699,192, comprised of two
        loans. There was one short term bank loan to Nanchang of $582,660,
        with an interest rate of 7.02% per annum payable monthly. This loan matures
        on
        May 17, 2007, and is collateralized by our office building, workshop, employee
        dorms, and use right of land. There is one short term bank loan to
        Guangxi Huijie in the principal amount of $116,532, with an interest rate
        of
        6.12% per annum payable monthly.  This loan matures on December 4, 2007 and
        is collateralized by our office equipment.
  We
        have
        purchased and sold products to other business entities that our President,
        Mr.
        Xiong Junhong has an ownership stake.
  As
          of
          March 31, 2007 these other entities have a balance due to us in the amount
          of
          $93,187 for products that we sold to them. The following chart provides
          the
          amount due from each entity and the percentage ownership of Mr. Xiong in
          each
          entity.
  Name
                    of Business Entity
                
                Amount
                    due to AgFeed
                
                Percentage
                    ownership of Mr. XiongBeijing
                    Best Animal Husbandry Co., Ltd.
                
                $
                21,728
                
                
                51
                %Nanchang
                    Tiandiren Tech. Development Co., Ltd.
                
                
                37
                
                
                73
                %Xiamen
                    Best Animal Husbandry Co., Ltd
                
                
                5,338
                
                
                52
                %Guangzhou
                    Best Animal Husbandry Co., Ltd.
                
                
                20,670
                
                
                78.5
                %Jiujiang
                    Best Hog Farm
                
                
                45,414
                
                
                87
                %Total
                    Amount Due
                
                $
                93,187
 
 As
          of
          March 31, 2007 we owe Nanchang Tiandiren Technology Development Co., Ltd
          $4,661
          for products that we purchased from them. Mr. Xiong owns 73% of this
          entity.
 During
        the three months ended March 31, 2007, we used $549,857 in our operating
        activities. This use of cash was primarily due to net income of
        $779,181, an increase in accounts payable of $579,177, and an increase in
        accrued payroll of $128,147, offset by increases in accounts receivable
        of $1,626,525, an increase in inventory of $143,070, and an increase
        in prepaid expenses of $150,247, which is largely accounted for by the
        $160,000 good faith deposit to the company we are negotiating to
        acquire.
 
 We
        used
        $24,125 in investing activities during the three month period ended March
        31, 2007 for the acquisition of property and equipment.
 
 We
        received $2,024,846 in cash from financing activities. We received $2,723,665,
        net of offering costs, from the sale of our securities during the three
        months ended March 31, 2007. We collected $226,083 for subscription receivables
        and $930,623 from related parties due to us. These amounts were offset by
        the
        following payments we made: $753,521 repayment to shareholders, and the payment
        of $1,102,004 on the note receivable associated with the acquisition of
        Guangxi.
 At
          March
          31, 2007, our accounts receivable balance was approximately $3.446 million,
          which was approximately 69.22% of our net revenues for the three months
          ended
          March 31, 2007. The reason for the large increase in our accounts receivable
          at
          March 31, 2007 is that our sales increased due to the introduction of our
          Airubao series of products during the first quarter of 2007. Approximately
          $3.9
          million or 79% of our sales during the quarter ended March 31, 2007 occurred
          in February and March 2007. Given that our credit terms range from
          30-90 days and in certain cases exceed 90 days, a significant portion of
          these
          sales remained in accounts receivable at March 31, 2007. Through May 14,
          2007,
          we had collected approximately $2.8 million of the approximately 3.5
          million of accounts receivable at March 31, 2007, of which approximately
          $175,000 of the amount collected was greater than 90 days old at March
          31, 2007.
          We anticipate collecting approximately 70% of this remaining balance of
          accounts
          receivable that were greater than 90 days old at March 31, 2007 **** in
          2007
          and a substantial portion of the remaining balance during 2008. While we
          believe that the uncollectible portion of our accounts receivable at March
          31,
          2007 will be in line with our historical collection results and will not
          have a
          material adverse effect on our liquidity, we will continue to assess the
          collectibility of our accounts receivable as our sales continue to increase
          and
          evaluate the need to increase our allowance for doubtful
          accounts.
  Our
          principal demands for liquidity are to increase capacity, raw materials
          purchase, sales distribution, and the possible acquisition of new subsidiaries
          or joint ventures in our industry as opportunities present themselves,
          as well
          as general corporate purposes. We estimate that we will require approximately
          $6,200,000 to maintain our current operations and achieve these goals in
          2007,
          which include a potential joint venture outside of China, completion of
          the
          acquisition for which we have made a deposit of $160,000 and an additional
          acquisition that we are presently budgeting. We will also require an additional
          $3,000,000 that we are budgeting for a potential acquisition in 2008. We
          anticipate that the amount of cash we have on hand as of the date of this
          report
          as well as the cash that we will generate from operations will satisfy
          these
          requirements.
 10
 We
        intend
        to meet our liquidity requirements, including capital expenditures related
        to
        the purchase of equipment, purchase of raw materials, and the expansion of
        our
        business, through cash flow provided by operations and funds raised through
        cash
        investments. We may also use short term loans bank loans to meet our liquidity
        requirements.
 
 The
        majority of the Company’s revenues and expenses were denominated primarily in
        Renminbi (“RMB”), the currency of the People’s Republic of China. There is no
        assurance that exchange rates between the RMB and the U.S. Dollar will remain
        stable. The Company does not engage in currency hedging. Inflation has not
        had a
        material impact on the Company’s business.
 
 **RISK
        FACTORS**
 
 *You
        should carefully consider the risks described below in evaluating our business
        and future prospects. The risks described below are not the only ones facing
        our
        company. Additional risks not presently known to us or that we currently
        believe
        are immaterial may also impair our business operations. Our business could
        be
        harmed by any of these risks. The trading price of our common stock could
        decline due to any of these risks and you may lose all or part of your
        investment. In assessing these risks, you should also refer to the other
        information contained in this reports, including our consolidated financial
        statements and related notes.*
 
 **Risks
        Related to Our Business**
 
 **We
        cannot be certain that our product innovations and marketing successes will
        continue.**
  We
        believe that our past performance has been based on, and our future success
        will
        depend upon, in part, our ability to continue to improve our existing products
        through product innovation and to develop, market and produce new products.
        We
        cannot assure you that we will be successful in the introduction, marketing
        and
        production of any new products or product innovations, or that we will develop
        and introduce in a timely manner innovations to our existing products which
        satisfy customer needs or achieve market acceptance. Our failure to develop
        new
        products and introduce them successfully and in a timely manner could harm
        our
        ability to grow our business and could have a material adverse effect on
        our
        business, results of operations and financial condition.
 
 **Our
        success depends on our management team and other key personnel, the loss
        of any
        of whom could disrupt our business operations.**
 
 Our
        future success will depend in substantial part on the continued service of
        our
        senior management and founders. The loss of the services of one or more of
        our
        key personnel could impede implementation and execution of our business strategy
        and result in the failure to reach our goals. We do not carry key person
        life
        insurance in respect of any of our officers or employees. Our future success
        will also depend on the continued ability to attract, retain and motivate
        highly
        qualified personnel in many fields of our operations. The rapid growth of
        the
        economy in The People’s Republic of China has caused intense competition for
        qualified personnel. We cannot assure you that we will be able to retain
        our key
        personnel or that we will be able to attract, train or retain qualified
        personnel in the future.
  **Our
        acquisition strategy involves a number of risks and we have a limited history
        of
        successful acquisitions. Even when an acquisition is completed, we may have
        integration issues that may not produce as positive results as management
        may
        have projected.**
  We
        have
        completed one acquisition since 2006 and intend to grow through the acquisition
        of additional companies.
  11
 We
        are
        regularly engaged in acquisition discussions with a number of companies located
        in China and anticipate that one or more potential acquisition opportunities,
        including those that would be material, may become available in the near
        future.
        If and when appropriate acquisition opportunities become available, we intend
        to
        pursue them actively. Acquisitions involve a number of special risks, including:
  •
              failure
                  of the acquired business to achieve expected results;
  •
              diversion
                  of management’s attention;
  •
              failure
                  to retain key personnel of the acquired business;
  •
              additional
                  financing, if necessary and available, could increase leverage,
                  dilute
                  equity, or both;
  •
              the
                  potential negative effect on our financial statements from the
                  increase in
                  goodwill and other intangibles; and
  •
              the
                  high cost and expenses of completing acquisitions and risks associated
                  with unanticipated events or liabilities.
  These
        risks could have a material adverse effect on our business, results of
        operations and financial condition.
 
 We
        have
        faced, and expect to continue to face, increased competition for acquisition
        candidates, which may limit our number of opportunities to acquire companies
        and
        may lead to higher acquisition prices. We cannot assure you that we will
        be able
        to identify, acquire, or manage profitably additional businesses or to integrate
        successfully any acquired businesses into our existing business without
        substantial costs, delays or other operational or financial difficulties.
        In
        future acquisitions, we also could incur additional indebtedness or pay
        consideration in excess of fair value, which could have a material adverse
        effect on our business, results of operations and financial condition. In
        addition, we may
        inadvertently assume unknown liabilities in acquisitions that we complete. Assumption
        of unknown liabilities in acquisitions may harm our financial condition and
        operating results. Acquisitions may be structured in such a manner that would
        result in the assumption of unknown liabilities not disclosed by the seller
        or
        uncovered during pre-acquisition due diligence. These obligations and
        liabilities could harm our financial condition and operating
        results.
  **Rising
        energy prices could adversely affect our operating results.**
  In
        the
        last few years, energy prices have risen dramatically, which has resulted
        in
        increased fuel costs for our businesses and raw materials costs for our branded
        products. Rising energy prices could adversely affect demand for our products
        and increase our operating costs, both of which would reduce our sales and
        operating income.
 
 **We
        rely on independently owned wholesale distributors who do not exclusively
        offer
        our products to their customers.**
  The
        loss
        of, or significant adverse change in, our relationship with any of our key
        wholesale distributors could cause our net sales, income from operations
        and
        cash flow to decline. The loss of, or reduction in, orders from any significant
        customer, losses arising from customer disputes regarding shipments, fees,
        merchandise condition or related matters, or our inability to collect accounts
        receivable from any major customer could reduce our income from operations
        and
        cash flow.
  12
 **We
        may not be able to reach our revenue and net income targets due to unpredictable
        market conditions.**
  Our
        primary end user customers are commercial hog farms and individual farmers.
        Although hog prices in The People’s Republic of China have reached multi-year
        highs, we cannot predict how long such favorable environment may last or
        predict
        the buying behavior of our customers as they adjust to market conditions.
        Therefore, our market expectations and projections may exceed our actual
        financial performance.
 
 **We
        are a major purchaser of many commodities that we use for raw materials and
        packaging, and price changes for the commodities we depend on may adversely
        affect our profitability.**
 
 We
        enter
        into contracts for the purchase of raw materials at fixed prices, which are
        designed to protect us against raw material price increases during their
        term.
        However, when necessary, we attempt to recover our commodity cost increases
        by
        increasing prices, promoting a higher-margin product mix and creating additional
        operating efficiencies. Nevertheless, the raw materials used in our business
        are
        largely commodities that experience price fluctuations caused by external
        conditions and changes in governmental agricultural programs.
 
 We
        also
        use paper products, such as corrugated cardboard, aluminum products, films
        and
        plastics to package our products. Substantial increases in prices of packaging
        materials or higher prices of our raw materials could adversely affect our
        operating performance and financial results.
 
 Commodity
        price changes may result in unexpected increases in raw material and packaging
        costs, and we may be unable to increase our prices to offset these increased
        costs without suffering reduced volume, revenue and income. In addition,
        any
        substantial fluctuation in the prices of raw materials, if not offset by
        increases in our sales prices, could adversely affect our profitability.
 
 **Outbreaks
        of livestock disease can adversely affect sales of our products.**
 
 Outbreaks
        of livestock diseases can significantly affect demand for our products. An
        outbreak of disease could result in governmental restrictions on the sale
        of
        livestock products to or from customers, or require our customers to destroy
        their flocks. This could result in the cancellation of orders by our customers
        and create adverse publicity that may have a material adverse effect on the
        agricultural products industry and our ability to market our products
        successfully.
 
 **Our
        products and processes can expose us to product liability
        claims.**
 
 Product
        liability claims or product recalls can adversely affect our business reputation
        and expose us to increased scrutiny by local, provincial, and central
        governmental regulators. The packaging, marketing and distribution of
        agricultural feed products entail an inherent risk of product liability and
        product recall and the resultant adverse publicity. We may be subject to
        significant liability if the consumption of any of our products causes injury,
        illness or death of livestock, other animals or humans. We could be required
        to
        recall certain of our products in the event of contamination or damage to
        the
        products. In addition to the risks of product liability or product recall
        due to
        deficiencies caused by our production or processing operations, we may encounter
        the same risks if any third party tampers with our products. We cannot assure
        you that we will not be required to perform product recalls, or that product
        liability claims will not be asserted against us, in the future. Any claims
        that
        may be made may create adverse publicity that would have a material adverse
        effect on our ability to market our products successfully or on our business,
        reputation, prospects, financial condition and results of operations. A
        successful product liability claim in excess of our insurance coverage could
        have a material adverse effect on us and could prevent us from obtaining
        adequate product liability insurance in the future on commercially reasonable
        terms.
 
 13
 **We
        may not be able to obtain regulatory approvals for our
        products.**
 
 The
        manufacture and sale of agricultural products in The People’s Republic of China
        is regulated by The People’s Republic of China and the local provincial
        governments. Although our licenses and regulatory filings are current, the
        uncertain legal environment in The People’s Republic of China and its industry
        may be vulnerable to local government agencies or other parties who wish
        to
        renegotiate the terms and conditions of, or terminate their agreements or
        other
        understandings with us.
 
 **We
        face significant competition in the sales of our agricultural feed
        products.**
 
 Competition
        in the agricultural feed industry, especially with companies with greater
        resources, may make us unable to compete successfully in these industries,
        which
        could adversely affect our business.
 
 In
        general, the competitive factors in the agricultural feed industry in The
        People’s Republic of China include:
 
 ·
              Price;
 
 ·
              Product
                  quality;
 
 ·
              Brand
                  identification;
 
 ·
              Breadth
                  of product line; and
 
 ·
              Customer
                  service.
 
 To
        the
        extent that our products and services do not exhibit these qualities, our
        ability to compete will be hindered.
 
 **Concerns
        with the safety and quality of agricultural feed products could cause customers
        to avoid our products.**
 
 We
        could
        be adversely affected if our customers and the ultimate consumers of our
        products lose confidence in the safety and quality of various feed products.
        Adverse publicity about these types of concerns, such as the recent publicity
        concerning the substance melamine, whether or not valid, may discourage our
        customers from buying our products or cause production and delivery disruptions.
        Any negative change in customer perceptions about the safety and quality
        of our
        products could adversely affect our business and financial
        condition.
 
 **If
        our feed products become adulterated or misbranded, we would need to recall
        those items and may experience product liability claims if consumers are
        injured
        as a result.**
 
 Animal
        feed products occasionally contain contaminants due to inherent defects in
        those
        products or improper storage or handling. Under adverse circumstances, animal
        feed manufacturers may need to recall some of their products if they become
        adulterated or misbranded and may also be liable if the consumption of any
        of
        their products causes injury.
 
 14
 While
        we
        have never been required to recall any of our products and we maintain insurance
        that we believe is adequate to cover this type of loss, a widespread product
        recall could result in changes to one or more of our business processes,
        product
        shortages, a loss of customer confidence in our food or other adverse effects
        on
        our business.
 
 If
        we are
        required to defend against a product liability claim, whether or not we are
        found liable under the claim, we could incur substantial costs, our reputation
        could suffer and our customers might substantially reduce their existing
        or
        future orders from us.
 
 **We
        may not be able to adequately protect and maintain our intellectual property,
        trademark, and brand names.**
 
 Our
        success will depend on our ability to continue to develop and market fodder
        and
        blended feed products. We currently have not applied for patents for our
        products or formulae, as our management believes an application for such
        patents
        would result in public knowledge of our proprietary technology and formulas.
        As
        we do not have patent protection for this technology or formulae, we may
        not be
        able to protect our rights to this intellectual property, if our competitors
        discover or illegally obtain this technology or formulae. Our inability to
        protect our rights to this intellectual property may adversely affect our
        ability to prevent competitors from using our products and
        developments.
 
 **Some
        of our significant customer and supplier contracts are
        short-term.**
 
 Some
        of
        our customers and suppliers operate through purchase orders or short-term
        contracts. Though we have long-term business relationships with many of our
        customers and suppliers and alternative sources of supply for key items,
        we
        cannot be sure that any of these customers or suppliers will continue to
        do
        business with us on the same basis. Additionally, although we try to renew
        these
        contracts as they expire, there can be no assurance that these customers
        or
        suppliers will renew these contracts on terms that are favorable to us, if
        at
        all. The termination of or modification to any number of these contracts
        may
        adversely affect our business and prospects, including our financial performance
        and results of operations.
 
 **Risks
        Related to Conducting Our Business in The People’s Republic of
        China**
 
 **We
        are subject to international economic and political risks over which we have
        little or no control and may be unable to alter our business practice in
        time to
        avoid the possibility of reduced revenues.**
 
 All
        of
        our business is conducted in The People’s Republic of China. Doing business
        outside the United States, particularly in The People’s Republic of China,
        subjects us to various risks, including changing economic and political
        conditions, major work stoppages, exchange controls, currency fluctuations,
        armed conflicts and unexpected changes in United States and foreign laws
        relating to tariffs, trade restrictions, transportation regulations, foreign
        investments and taxation. We have no control over most of these risks and
        may be
        unable to anticipate changes in international economic and political conditions
        and, therefore, unable to alter out business practice in time to avoid the
        possibility of reduced revenues.
 
 **The
        People’s Republic of China’s economic policies could affect our
        business.**
 
 Substantially
        all of our assets are located in The People’s Republic of China and
        substantially all of our revenue is derived from our operations in The People’s
        Republic of China. Accordingly, our results of operations and prospects are
        subject, to a significant extent, to the economic, political and legal
        developments in The People’s Republic of China.
  15
 While
        The
        People’s Republic of China’s economy has experienced significant growth in the
        past twenty years, such growth has been uneven, both geographically and among
        various sectors of the economy. The Chinese government has implemented various
        measures to encourage economic growth and guide the allocation of resources.
        Some of these measures benefit the overall economy of The People’s Republic of
        China, but they may also have a negative effect on us. For example, operating
        results and financial condition may be adversely affected by the government
        control over capital investments or changes in tax regulations. The economy
        of
        The People’s Republic of China has been changing from a planned economy to a
        more market-oriented economy. In recent years, the Chinese government has
        implemented measures emphasizing the utilization of market forces for economic
        reform and the reduction of state ownership of productive assets, and the
        establishment of corporate governance in business enterprises; however, a
        substantial portion of productive assets in The People’s Republic of China are
        still owned by the Chinese government. In addition, the Chinese government
        continues to play a significant role in regulating industry development by
        imposing industrial policies. It also exercises significant control over
        The
        People’s Republic of China’s economic growth through the allocation of
        resources, the control of payment of foreign currency-denominated obligations,
        the setting of monetary policy and the provision of preferential treatment
        to
        particular industries or companies.
 
 **We
        may have difficulty establishing adequate management, legal and financial
        controls in The People’s Republic of China.**
 
 The
        People’s Republic of China historically has not adopted a Western style of
        management and financial reporting concepts and practices, as well as in
        modern
        banking, computer and other control systems. We may have difficulty in hiring
        and retaining a sufficient number of qualified employees to work in The People’s
        Republic of China. As a result of these factors, we may experience difficulty
        in
        establishing management, legal and financial controls, collecting financial
        data
        and preparing financial statements, books of account and corporate records
        and
        instituting business practices that meet Western standards.
 
 **Our
        bank accounts are not insured or protected against loss.**
 
 We
        maintain our cash with various banks and trust companies located in The People’s
        Republic of China. Our cash accounts are not insured or otherwise protected.
        Should any bank or trust company holding our cash deposits become insolvent,
        or
        if we are otherwise unable to withdraw funds, we would lose the cash on deposit
        with that particular bank or trust company.
 
 **As
        we have limited business insurance coverage in The People’s Republic of China,
        any loss which we suffer may not be insured or may be insured to only a limited
        extent.**
 
 The
        insurance industry in The People’s Republic of China is still in an early state
        of development and insurance companies located in The People’s Republic of China
        offer limited business insurance products. In the event of damage or loss
        to our
        properties, our insurance may not provide as much coverage as if we were
        insured
        by insurance companies in the United States.
 
 **We
        may face judicial corruption in The People’s Republic of
        China.**
 
 Another
        obstacle to foreign investment in The People’s Republic of China is corruption.
        There is no assurance that we will be able to obtain recourse in any legal
        disputes with suppliers, customers or other parties with whom we conduct
        business, if desired, through The People’s Republic of China’s poorly developed
        and sometimes corrupt judicial systems.
 
 16
 **We
        may face obstacles from the communist system in The People’s Republic of
        China.**
 
 Foreign
        companies conducting operations in The People’s Republic of China face
        significant political, economic and legal risks. The Communist regime in
        The
        People’s Republic of China, including a cumbersome bureaucracy, may hinder
        Western investment.
 
 **If
        relations between the United States and The People’s Republic of China worsen,
        investors may be unwilling to hold or buy our stock and our stock price may
        decrease.**
 
 At
        various times during recent years, the United States and The People’s Republic
        of China have had significant disagreements over political and economic issues.
        Controversies may arise in the future between these two countries. Any political
        or trade controversies between the United States and The People’s Republic of
        China, whether or not directly related to our business, could reduce the
        price
        of our common stock.
 
 **The
        government of The People’s Republic of China could change its policies toward
        private enterprise or even nationalize or expropriate private enterprises,
        which
        could result in the total loss of our and your investment.**
 
 Our
        business is subject to significant political and economic uncertainties and
        may
        be affected by political, economic and social developments in The People’s
        Republic of China. Over the past several years, the government of The People’s
        Republic of China has pursued economic reform policies including the
        encouragement of private economic activity and greater economic
        decentralization. The government of The People’s Republic of China may not
        continue to pursue these policies or may significantly alter them to our
        detriment from time to time with little, if any, prior notice.
 
 Changes
        in policies, laws and regulations or in their interpretation or the imposition
        of confiscatory taxation, restrictions on currency conversion, restrictions
        or
        prohibitions on dividend payments to stockholders, or devaluations of currency
        could cause a decline in the price of our common stock, should a market for
        our
        common stock ever develop. Nationalization or expropriation could even result
        in
        the total loss of your investment.
 
 **The
        nature and application of many laws of The People’s Republic of China create an
        uncertain environment for business operations and they could have a negative
        effect on us.**
 
 The
        legal
        system in The People’s Republic of China is a civil law system. Unlike the
        common law system, the civil law system is based on written statutes in which
        decided legal cases have little value as precedents. In 1979, The People’s
        Republic of China began to promulgate a comprehensive system of laws and
        has
        since introduced many laws and regulations to provide general guidance on
        economic and business practices in The People’s Republic of China and to
        regulate foreign investment. Progress has been made in the promulgation of
        laws
        and regulations dealing with economic matters such as corporate organization
        and
        governance, foreign investment, commerce, taxation and trade. The promulgation
        of new laws, changes of existing laws and the abrogation of local regulations
        by
        national laws could cause a decline in the price of our common stock. In
        addition, as these laws, regulations and legal requirements are relatively
        recent, their interpretation and enforcement involve significant
        uncertainty.
 
 17
 **Although
        we do not import goods into or export goods out of The People’s Republic of
        China, fluctuation of the Renminbi may indirectly affect our financial condition
        by affecting the volume of cross-border money flow.**
 
 Although
        we use the United States dollar for financial reporting purposes, all of
        the
        transactions effected by our operating subsidiaries are denominated in The
        People’s Republic of China’s Renminbi. The value of the Renminbi fluctuates and
        is subject to changes in The People’s Republic of China’s political and economic
        conditions. We do not currently engage in hedging activities to protect against
        foreign currency risks. Even if we chose to engage in such hedging activates,
        we
        may not be able to do so effectively. Future movements in the exchange rate
        of
        the Renminbi could adversely affect our financial condition as we may suffer
        financial losses when transferring money raised outside of China into the
        country or paying vendors for services performed outside of China.
 
 **The
        admission of The People’s Republic of China into the World Trade Organization
        could lead to increased foreign competition for us.**
  Domestic
        competition in the animal feed industry is largely fragmented and foreign
        competition is minimal. However, as a result of The People’s Republic of China
        becoming a member of the World Trade Organization (“WTO”), import restrictions
        on agricultural products are expected to be reduced. With the lowering of
        import
        restrictions and the WTO’s requirement for a reduction of import tariffs as
        condition of membership, such reduced import restrictions and tariffs may
        result
        in an increase of foreign products and could in turn lead to increased
        competition in the domestic agricultural market.
  Risks
        Related to our
        Securities
  **It
        will be extremely difficult to acquire jurisdiction and enforce liabilities
        against our officers, directors and assets based in The People’s Republic of
        China.**
 
 As
        our
        executive officers and director are Chinese citizens, it may be
        difficult, if not impossible, to acquire jurisdiction over these persons
        in the
        event a lawsuit is initiated against us and/or our officers and director
        by a
        stockholder or group of stockholders in the United States. Also, because
        our
        operating subsidiaries and assets are located in The People’s Republic of China,
        it may be extremely difficult or impossible for you to access those assets
        to
        enforce judgments rendered against us or our director or executive offices
        by
        United States courts. In addition, the courts in The People’s Republic of China
        may not permit the enforcement of judgments arising out of United States
        federal
        and state corporate, securities or similar laws. Accordingly, United States
        investors may not be able to enforce judgments against us for violation of
        United States securities laws.
 
 **Our
        common stock price is subject to significant volatility, which could result
        in
        substantial losses for investors.**
 
 During
        the four month period ended April 30, 2007, the high and low bid
        prices of our common stock on the Over-The-Counter Bulletin Board (“OTCBB”) were
        $5.50 per share and $1.98 per share, respectively. Prices for our shares
        are
        determined in the marketplace and may accordingly be influenced by many factors,
        including, but not limited to:
 
 ·
                the
                    depth and liquidity of the market for the
                    shares;
 
 ·
                quarter-to-quarter
                    variations in our operating
                    results;
 
 18
 ·
                announcements
                    about our performance as well as the announcements of our competitors
                    about the performance of their
                    businesses;
 
 ·
                investors’
                    evaluations of our future prospects and the food industry
                    generally;
 
 ·
                changes
                    in earnings estimates by, or failure to meet the expectations
                    of,
                    securities analysts;
 
 ·
                our
                    dividend policy; and
 
 ·
                general
                    economic and market
                    conditions.
  In
        addition, the stock market often experiences significant price fluctuations
        that
        are unrelated to the operating performance of the specific companies whose
        stock
        is traded. These market fluctuations could adversely affect the trading price
        of
        our shares.
 
 The
        price
        at which investors purchase shares of our common stock may not be indicative
        of
        the price that will prevail in the trading market. Investors may be unable
        to
        sell their shares of common stock at or above their purchase price, which
        may
        result in substantial losses.
 
 **Shares
        of our common stock lack a significant trading market.**
 
 Shares
        of
        our common stock are not eligible for trading on any national or regional
        exchange. Our common stock is eligible for trading in the over-the-counter
        market on the Over-The-Counter Bulletin Board pursuant to Rule 15c2-11 of
        the
        Securities Exchange Act of 1934. This market tends to be highly illiquid.
        There
        can be no assurance that an active trading market in our common stock will
        develop, or if such a market develops, that it will be sustained. In addition,
        there is a greater chance for market volatility for securities that trade
        on the
        Over-The-Counter Bulletin Board as opposed to securities that trade on a
        national exchange or quotation system. This volatility may be caused by a
        variety of factors, including the lack of readily available quotations, the
        absence of consistent administrative supervision of “bid” and “ask” quotations
        and generally lower trading volume.
 
 **Future
        sales of shares of our common stock by our stockholders could cause our stock
        price to decline.**
 
 We
        cannot
        predict the effect, if any, that market sales of shares of our common stock
        or
        the availability of shares of common stock for sale will have on the market
        price prevailing from time to time. As of May 11, 2007, we had outstanding
        26,276,756 shares of common stock.
  **We
        may issue additional shares of our capital stock or debt securities to raise
        capital or complete acquisitions, which would reduce the equity interest
        of our
        stockholders.**
 
 Our
        certificate of incorporation authorizes the issuance of up to 75,000,000
        shares
        of common stock, par value $.001 per share. As of May 11, 2007,
        26,276,756 of these shares of common stock were issued and outstanding, 364,287
        shares wer reserved for issuance upon exercise of 364,287 issued and outstanding
        warrants.  There are approximately 48,723,244 authorized and unissued
        shares of our common stock which have not been reserved and accordingly,
        are
        available for future issuance. Although we have not entered into any agreements
        as of the date of this offering to issue our unreserved shares of common
        stock,
        we may issue a substantial number of additional shares of our common stock
        to
        complete a business combination or to raise capital. The issuance of additional
        shares of our common stock:
 
 19
 ·
              may
                  significantly reduce the equity interest of investors in this offering;
                  and
 
 ·
              may
                  adversely affect prevailing market prices for our common stock.
 
 **The
        application of the “penny stock” rules could adversely affect the market price
        of our common stock and increase your transaction costs to sell those
        shares.**
 
 Holders
        of shares of our common stock may have difficulty selling those shares because
        our common stock will probably be subject to the penny stock rules. Shares
        of
        our common stock are subject to rules adopted by the Securities and Exchange
        Commission that regulate broker-dealer practices in connection with transaction
        in “penny stocks.” Penny stocks are generally equity securities with a price of
        less than $5.00 which are not registered on a national securities exchange,
        provided that current price and volume information with respect to transaction
        in those securities is provided by the exchange or system. The penny stock
        rules
        require a broker-dealer, prior to a transaction in a penny stock not otherwise
        exempt from those rules, to deliver a standardized risk disclosure document
        prepared by the Securities and Exchange Commission, which contains the
        following:
 
 ·
              a
                  description of the nature and level of risk in the market for penny
                  stocks
                  in both public offerings and secondary
                  trading;
 
 ·
              a
                  description of the broker’s or dealer’s duties to the customer and of the
                  rights and remedies available to the customer with respect to violation
                  to
                  such duties or other requirements of securities
                  laws;
 
 ·
              a
                  brief, clear, narrative description of a dealer market, including
“bid”
                  and “ask” prices for penny stocks and the significance of the spread
                  between the “bid” and “ask” price;
 
 ·
              a
                  toll-free telephone number for inquiries on disciplinary
                  actions;
 
 ·
              definitions
                  of significant terms in the disclosure document or in the conduct
                  of
                  trading in penny stocks; and
 
 ·
              such
                  other information and is in such form (including language, type,
                  size and
                  format), as the Securities and Exchange Commission shall require
                  by rule
                  or regulation.
 
 Prior
        to
        effecting any transaction in penny stock, the broker-dealer also must provide
        the customer with the following:
 
 ·
              the
                  bid and offer quotations for the penny
                  stock;
 
 ·
              the
                  compensation of the broker-dealer and its salesperson in the
                  transaction;
 
 ·
              the
                  number of shares to which such bid and ask prices apply, or other
                  comparable information relating to the depth and liquidity of the
                  market
                  for such stock; and
 
 20
 ·
              monthly
                  account statements showing the market value of each penny stock
                  held in
                  the customer’s account.
 
 In
        addition, the penny stock rules require that, prior to a transaction in a
        penny
        stock not otherwise exempt from those rules, the broker-dealer must make
        a
        special written determination that the penny stock is a suitable investment
        for
        the purchaser and receive the purchaser’s written acknowledgment of the receipt
        of a risk disclosure statement, a written agreement to transactions involving
        penny stocks, and a signed and dated copy of a written suitability statement.
        These disclosure requirements may have the effect of reducing the trading
        activity in the secondary market for a stock that becomes subject to the
        penny
        stock rules.
  **The
        elimination of monetary liability against our directors, officers and employees
        under Nevada law and the existence of indemnification rights to our directors,
        officers and employees may cause us to incur substantial expenditures and
        may
        discourage lawsuits against our directors, officers and
        employees.**
 
 Our
        articles of incorporation contain specific provisions that eliminate the
        liability of our director for monetary damages to our company and shareholders,
        to the extent provided by Nevada law. We may also have or may create contractual
        indemnification obligations under our employment agreements with our officers.
        The foregoing indemnification obligations could result in our company incurring
        substantial expenditures to cover the cost of settlement or damage awards
        against our director and officers, which we may be unable to recoup. These
        provisions and resultant costs may also discourage our company from bringing
        a
        lawsuit against our director and officers for breaches of their fiduciary
        duties, and may similarly discourage the filing of derivative litigation
        by our
        shareholders against our director and officers even though such actions,
        if
        successful, might otherwise benefit our company and shareholders.
 
 **Our
        management owns a significant amount of our common stock, giving them influence
        or control in corporate transactions and other matters, and their interests
        could differ from those of other stockholders.**
 
 Our
        principal executive officers and director, own approximately 29% of our
        outstanding common stock. As a result, they are in a position to significantly
        influence the outcome of matters requiring a stockholder vote, including
        the
        election of directors, the adoption of any amendment to our articles of
        incorporation or bylaws, and the approval of significant corporate transactions.
        Their control may delay or prevent a change of control on terms favorable
        to our
        other stockholders and may adversely affect your voting and other stockholders
        rights.
 
 **Our
        articles of incorporation, our bylaws and provisions of Nevada law could
        make it
        more difficult for a third party to acquire us, even if doing so could be
        in our
        stockholders’ best interest.**
 
 Provisions
        of our articles of incorporation and bylaws could make it more difficult
        for a
        third party to acquire us, even if doing so might be in the best interest
        of our
        stockholders. It could be difficult for a potential bidder to acquire us
        because
        our articles of incorporation and bylaws contain provisions that may discourage
        takeover attempts. These provisions may limit stockholders’ ability to approve a
        transaction that stockholders may think is in their best interests. These
        provisions include a requirement that certain procedures must be followed
        before
        matters can be proposed for consideration at meetings of our
        stockholders.
 
 Provisions
        of Nevada’s business combinations statute also restrict certain business
        combinations with interested stockholders. We have elected not to be governed
        by
        these provisions in our amended and restated articles of incorporation. However,
        this election may not be effective unless we meet certain conditions under
        the
        Nevada statute.
 
 21
 **Capital
        outflow policies in The People’s Republic of China may hamper our ability to
        declare and pay dividends to our shareholders.**
 
 The
        People’s Republic of China has adopted currency and capital transfer
        regulations. These regulations may require us to comply with complex regulations
        for the movement of capital. Although our management believes that we will
        be in
        compliance with these regulations, should these regulations or the
        interpretation of them by courts or regulatory agencies change, we may not
        be
        able to pay dividends to our shareholders outside of The People’s Republic of
        China. In addition, under current Chinese law, we must retain a reserve equal
        to
        10 percent of net income after taxes, not to exceed 50 percent of registered
        capital. Accordingly, this reserve will not be available to be distributed
        as
        dividends to our shareholders. We presently do not intend to pay dividends
        in
        the foreseeable future. Our management intends to follow a policy of retaining
        all of our earnings to finance the development and execution of our strategy
        and
        the expansion of our business.
 
 **Item
        3A(T). Controls and Procedures**
 
 **Evaluation
        of Disclosure Controls and Procedures**
  As
        of
        March 31, 2007, we carried out an evaluation of the effectiveness of the
        design
        and operation of our “disclosure controls and procedures” (as defined in the
        Exchange Act Rules 13a-15(e) and 15d-15(e)) under the supervision and with
        the
        participation of our management, including Junhong Xiong, our Chief Executive
        Officer and Yan Liang Fan, our Chief Financial Officer. Based upon that
        evaluation, Mr. Xiong and Mr. Yan concluded that our disclosure controls
        and
        procedures are effective.
 
 Disclosure
        controls and procedures are controls and other procedures that are designed
        to
        ensure that information required to be disclosed in our reports filed or
        submitted under the Exchange Act are recorded, processed, summarized and
        reported, within the time periods specified in the Securities and Exchange
        Commission’s rules and forms. Disclosure controls and procedures include,
        without limitation, controls and procedures designed to ensure that information
        required to be disclosed in our reports filed under the Exchange Act is
        accumulated and communicated to management to allow timely decisions regarding
        required disclosure.
  During
        the quarter ended March 31, 2007, there were no changes in our internal control
        over financial reporting that have materially affected our internal control
        over
        financial reporting.
  **Part
        II.**  **OTHER
        INFORMATION**
 
 **Item
        1.**  **Legal
        Proceedings**
 
 We
        know
        of no pending legal proceedings to which we are a party which are material
        or
        potentially material, either individually or in the aggregate. We are from
        time
        to time, during the normal course of our business operations, subject to
        various
        litigation claims and legal disputes. We do not believe that the ultimate
        disposition of any of these matters will have a material adverse effect on
        our
        consolidated financial position, results of operations or
        liquidity.
  22


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




On
        April
        29, 2007, we completed a final closing of a private placement offering of
        units
        pursuant to which we sold an aggregate of 2,276,753 units at an offering
        price
        of $3.00 per unit for aggregate gross proceeds of $6,830,259. Each unit
        consisted of one share of common stock and a warrant to purchase 8% of one
        share
        of common stock. Accordingly, we issued an aggregate of 2,276,753 shares
        of our
        common stock and warrants to purchase 182,146 shares of our common stock
        to the
        37 accredited investors who participated in this offering. The warrants are
        exercisable for a period of three years at an exercise price of $5.00 per
        share.
        In addition, we compensated two participating selected dealers and one finder
        that assisted us in the sale of securities in this private placement offering
        by
        (i) paying them cash equal to 8% of the gross proceeds from the sale of units
        placed plus (ii) issuing them warrants to purchase that number of shares
        of our
        common stock equal to 8% of the units placed, as follows:
  
 
 Selected
                  dealer or finder
              Cash
              WarrantsFour
                  Tong Investments, Ltd.
              $360,000
              120,000Legend
                  Securities, Inc.
              $151,861
              50,621Maxim
                  Group LLC
              $
                  34,560
              11,520
 
 The
        warrants granted to these finders have the same terms and conditions as the
        warrants granted in the offering. The net proceeds of this private placement
        offering will be used primarily for working capital purposes.


**Item
      3.**  **Defaults
      Upon Senior Securities**





None.




23




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





None.





**Item
      5.**  **Other
      Information**





None.





**Item
      6.**  **Exhibits**





(a)
            Exhibits





**Exhibit
                Number**
            **Description
                of Exhibit**4.1
            Form
                of Common Stock Purchase Warrant forming part of units sold, and
                also
                issued as compensation to selected dealers in our private placement
                offering that had a final closing in April 2007.4.2
            Form
                of Registration Rights Agreement.31.1
            Certification
                of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
                promulgated under the Securities and Exchange Act of 1934, as
                amended31.2
            Certification
                of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d
                14(a),
                promulgated under the Securities and Exchange Act of 1934, as
                amended32.1
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (Chief Executive
                Officer)32.2
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (Chief Financial
                Officer)





**SIGNATURES**





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




Agfeed
                Industries, Inc.November
              27, 2007
            By:
            /s/ Xiong
              JunhongXiong
                Junhong
              Chief
                Executive Officer (Principal Executive
                Officer)  November
                27, 2007
              By:
              /s/ Yan Liang
                FanYan
                    Liang Fan
                  Chief
                    Financial Officer
                  (Principal
                    Financial and Accounting
                    Officer)





24