UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-K/A




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




For
the fiscal year ended December 31, 2008




OR





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




For the transition period from
  
  to




Commission
file number: 000-31539


Bodisen
Biotech, Inc.


(Exact
name of registrant as specified in its charter)





Delaware
                      
                      98-0381367(State or other jurisdiction of incorporation or organization)
                      
                      (I.R.S. Employer Identification No.)





Room
      2001, FanMei Building
                      No.
      1 Naguan Zhengjie
                      Xi’an,
      Shaanxi 710068
                      People’s
      Republic of China(Address
      of principal executive offices)
                    
                    (Zip
      Code)




Registrant’s
telephone number:011-86-29-87074957





Securities
registered pursuant to Section 12(b) of the Act: None


Securities
registered pursuant to Section 12(g) of the Act: Common Stock




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


Yes o No þ





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.


Yes o No þ




Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes þ No o




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will
not be contained herein, to the best of registrant’s knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act.





Large
accelerated filer o
        Accelerated filer o




Non-accelerated
filer o  
        Smaller reporting company þ





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes o No þ





At June
30, 2008, the end of our second fiscal quarter, the aggregate market value of
common stock held by non-affiliates of the registrant was approximately
$10,941,000 based on the closing price of $0.65 as reported on the
Over-the-Counter Market.





Number of
shares of common stock outstanding as of March 15,
2009:  18,710,250.







TABLE
OF CONTENTS


TO
ANNUAL REPORT ON FORM 10-K


FOR
YEAR ENDED DECEMBER 31, 2008





PagePART
      IItem
      1.
                      
                      Business
                      
                      1Item
      1A.
                      
                      Risk
      Factors
                      
                      8Item
      1B.
                      
                      Unresolved
      Staff Comments
                      
                      13Item
      2.
                      
                      Properties
                      
                      14Item
      3.
                      
                      Legal
      Proceedings
                      
                      14Item
      4.
                      
                      Submission
      of Matters to a Vote of Security Holders
                      
                      15PART
      IIItem
      5.
                      
                      Market
      for Registrant's Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                      
                      15Item
      6.
                      
                      Selected
      Financial Data
                      
                      16Item
      7.
                      
                      Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                      
                      16Item
      7A.
                      
                      Quantitative
      and Qualitative Disclosures About Market Risk
                      
                      19Item
      8.
                      
                      Financial
      Statements and Supplementary Data
                      
                      20Item
      9.
                      
                      Disagreements
      With Accountants on Accounting and Financial Disclosure
                      
                      21Item
      9A.
                      
                      Controls
      and Procedures
                      
                      22Item
      9B.
                      
                      Other
      Information
                      
                      23PART
      IIIItem
      10.
                      
                      Directors,
      Executive Officers and Corporate Governance
                      
                      23Item
      11.
                      
                      Executive
      Compensation
                      
                      25Item
      12.
                      
                      Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                      
                      26Item
      13.
                      
                      Certain
      Relationships and Related Transactions, and Director
      Independence
                      
                      28Item
      14.
                      
                      Principal
      Accounting Fees and Services
                      
                      28PART
      IVItem
      15.
                      
                      Exhibits,
      Financial Statement Schedules
                      
                      30Signatures
                      
                      
                      
                      31


i




FORWARD
LOOKING STATEMENTS AND CERTAIN TERMINOLOGY





This
annual report contains “forward-looking statements” - that is, statements
related to future, not past, events. In this context, forward-looking statements
often address our expected future business and financial performance, and often
contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,”
“seek,” or “will.” Forward-looking statements by their nature address matters
that are, to different degrees, uncertain. For us, particular uncertainties that
could adversely or positively affect our future results include: our business
strategy; expectations of market and customer response; liquidity and capital
expenditures; future sources of revenues; expansion of our proposed product
line; government policies in the People’s Republic of China; trends in industry
activity generally and litigation concerning the matters surrounding our
delisting from the American Stock Exchange, or Amex, as well as litigation
concerning our ownership of shares in China Natural Gas. These uncertainties may
cause our actual future results to be materially different than those expressed
in our forward-looking statements. Any “forward-looking statements” contained in
this report are only predictions and involve known and unknown risks,
uncertainties and other factors, including, but not limited to, the risks
outlined under “Risk Factors,” that may cause our or our industry’s 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. Although
we believe that the expectations reflected in the forward looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. We undertake no obligation to update or revise any
forward-looking statements other than as required by applicable law or
regulations




As used
in this annual report, the terms “we,” “us,” “our,” the “Company” and “Bodisen”
mean Bodisen Biotech, Inc., a Delaware corporation, and its subsidiaries (unless
the context indicates a different meaning). Bodisen is a trademark of Bodisen
Biotech, Inc. All other company names and trademarks included in this annual
report are trademarks, registered trademarks or trade names of their respective
owners.








PART
I





ITEM
1. BUSINESS




Overview
of Business





We are
engaged in developing, manufacturing and selling organic fertilizers, liquid
fertilizers, pesticides and insecticides in the People’s Republic of China, and
have developed a product line of over 60 items. We manufacture our proprietary
product lines, which are then marketed and sold to distributors, which
distributors in turn sell our products to farmers. In addition to our
manufacturing and sales and marketing efforts, we conduct research and
development to further improve existing products and to develop new formulae and
products.





Bodisen
Biotech, Inc. was incorporated on January 14, 2000, and our current structure is
the result of a series of mergers and other combinations, including a reverse
triangular merger with our predecessor, Stratabid.com, Inc. As a result of these
transactions, Bodisen Biotech, Inc. owns 100% of Bodisen Agricultural Technology
Co., Ltd., or “Bodisen Agricultural,” which in turn owns 100% of Yang Ling
Bodisen Biology Science and Technology Development Company Limited, or “Yang
Ling.” Yang Ling, which is our sole operating subsidiary, is located in the
People’s Republic of China. Further details regarding these transactions are
provided below in the summary of our history.





Our over
60 products cover three categories: organic compound fertilizers, liquid
fertilizers, and pesticides and insecticides. Organic compound fertilizer
products are our leading product category, accounting for approximately 97.9%
and 48.6% of our revenue in 2008 and 2007, respectively. Liquid fertilizers
accounted for approximately 1.2% and 34.9% of our revenue in 2008 and 2007,
respectively. Pesticides and insecticides accounted for approximately 0.9% and
16.5% of our revenue in 2008 and 2007, respectively.





We
currently distribute our products solely in the People’s Republic of China, and
our products are currently sold within a group of approximately 20 Chinese
agricultural provinces and government-controlled cities. Approximately 80% of
our sales are attributable to the local Shaanxi province, 8% of sales are
attributable to Henan province, and 5% of sales are attributable to Shanxi
province. We also sell a smaller percentage of our products to additional
provinces and government-controlled cities, including Ningxia province,
Guangdong province and Heilongjian province.





History
and Company Structure





Bodisen
Biotech, Inc. was incorporated on January 14, 2000 in Delaware, and our
principal place of business is based in the People’s Republic of China. Our
principal executive offices are located at: Room 2001, FanMei Building, No. 1
Naguan Zhengjie, Xi’an, Shaanxi, China, 7100068. Our telephone number is
+011-86-29-87074957. Our current structure is the result of a series of mergers
and other combinations, including a reverse triangular merger with our
predecessor, Stratabid.com, Inc. A summary of these transactions is provided
below.





Prior to
March 1, 2004, we were called Stratabid.com, Inc., which was a startup stage
Internet-based commercial mortgage origination business. We operated primarily
through our wholly-owned subsidiary, Stratabid.com Online (B.C.) Ltd., or
“Stratabid.com Online,” which provided services in Canada.





Our sole
operating subsidiary, Yang Ling, was founded in the People’s Republic of China
on August 31, 2001. Yang Ling, which is located in the Yang Ling Agricultural
High-Tech Industries Demonstration Zone, was primarily engaged in developing,
manufacturing and selling pesticides and compound organic fertilizers in the
People’s Republic of China. On November 19, 2003, Yang Ling incorporated Bodisen
International, Inc., or “Bodisen International,” a Delaware corporation, as a
non-operative holding company.





On
December 15, 2003, Bodisen International entered in to an agreement with all of
the stockholders of Yang Ling to exchange all of the outstanding stock of
Bodisen International for all of the issued and outstanding stock of Yang Ling.
After the consummation of the transaction, the former stockholders of Yang Ling
owned 1,500 shares of common stock of Bodisen International, which represented
100% of Bodisen International’s issued and outstanding shares, and Bodisen
International owned 100% of Yang Ling. For U.S. federal income tax purpose, the
transaction was intended to be qualified as a tax-free transaction under section
351 of the Internal Revenue Code of 1986, as amended.








1





We
accounted for the exchange of shares with Yang Ling as a reverse acquisition
under the purchase method of accounting because the stockholders of Yang Ling
obtained control of the consolidated entity. Accordingly, the merger of the two
companies was recorded as a recapitalization of Yang Ling, with Yang Ling being
treated as the continuing entity.





On
January 14, 2004, we created a wholly-owned subsidiary corporation currently
known as Bodisen Holdings, Inc., a Delaware corporation, or “Bodisen Holdings”
(formerly Bodisen Acquisition Corp.), to pursue a merger with Bodisen
International, the parent of Yang Ling. On February 11, 2004, we and Bodisen
Holdings entered into an Agreement and Plan of Merger with Bodisen International
and the shareholders of Bodisen International, providing for the merger of
Bodisen International into Bodisen Holdings, with Bodisen Holdings being the
surviving entity in the merger. The transactions provided for in the Agreement
and Plan of Merger closed on February 24, 2004.











In the
merger, we acquired 100% of Bodisen International’s outstanding stock in
exchange for the issuance of 3,000,000 shares of our common stock to the holders
of Bodisen International shares. The common stock issued in the merger
constituted approximately 66% of our outstanding shares after the
merger.





The
exchange of shares with Stratabid was accounted for as a reverse acquisition
under the purchase method of accounting because the stockholders of Bodisen
International obtained control of Stratabid. Accordingly, the merger of the two
companies was recorded as a recapitalization of the Company, with the Company
being treated as the continuing entity.





On
February 25, 2004, we sold Stratabid.com Online to Derek Wasson, our former CEO.
In consideration of the sale, Mr. Wasson returned 750,000 (pre-dividend) shares
of our common stock to us for cancellation and forgave all of our indebtedness
to him. Other than indebtedness of Bodisen International, we had no indebtedness
or other liability of any kind or nature after the sale of the business to Mr.
Wasson, save and except for liabilities incurred in connection with the
merger.











After the
merger, we paid a three for one stock dividend and then, by prior agreement,
cancelled the shares that were previously returned by our former CEO. After
these transactions, the shareholders of Bodisen International held approximately
79% of our outstanding common stock. On March 1, 2004, we changed our name to
Bodisen Biotech, Inc.





In March
2005, we formed a new wholly-owned subsidiary by the name of Yang Ling Bodisen
Agricultural Technology Co., Ltd., or “Bodisen Agricultural.” In June 2005,
Bodisen Agricultural completed a transaction with Yang Ling, our operating
subsidiary in the People’s Republic of China, which resulted in Bodisen
Agricultural owning 100% of Yang Ling.








2




As a
result of the foregoing, we now own 100% of Bodisen Agricultural, which in turn
owns 100% of Yang Ling. Bodisen Holdings and Bodisen Agriculture Material Co.
Ltd. are also our subsidiaries.




In June 2006, we created another wholly
owned subsidiary in Xinjiang, China by the name of Bodisen Agriculture Material
Co. Ltd.





Industry
Background and Markets





The
People’s Republic of China is the exclusive market for our organic compound
fertilizers, liquid fertilizers, pesticides and insecticides. We sell our
products within a group of 20 Chinese agricultural provinces and
government-controlled cities. Approximately 80% of our sales are attributable to
the local Shaanxi province, 8% of sales are attributable to Henan province, and
5% of sales are attributable to the neighboring Shanxi province. We also sell a
smaller percentage of our products to additional provinces and government
controlled cities, including Ningxia province, Guangdong province and
Heilongjian province.





Although
the People’s Republic of China has the world’s largest population of over 1.3
billion people, its arable land on a per capita basis is only 0.09 hectares
(Source: 2006 China Statistical Yearbook), or less than one-sixth of that
present in the United States (Source: U.S. State Department, www.america.gov).
This combination of limited arable land and a large and growing population has
created a significant need to increase the amount of crops per hectare in the
People’s Republic of China.





Our
Business and Products





As noted
above in the “Business Overview” section of this report, we manufacture over 60
products, which can be broken down into the following categories:




·
            Organic compound
      fertilizers;


·
            Liquid fertilizers;
      and


·
            Pesticides and
      insecticides.




Organic
Compound Fertilizers





Organic
compound fertilizers are our leading products, accounting for approximately
97.9% and 48.6% of our revenue in 2008 and 2007, respectively.




Organic
fertilizers are composed of natural nutritional elements that not only improve
the quality and yield of the crops but also improve the soil quality; this in
turn improves the yield. Organic compound fertilizer accelerates reproduction of
soil microbes to improve soil quality through the decomposition of organic
material and the improvement of the soil’s retention of nitrogen. Moreover, this
application can activate dormant soil by increasing soil nitrates and moisture
content that otherwise is not enhanced by traditional chemical fertilizers. This
process controls the release of nutritional elements that enhances the quality,
quantity and health of crops. Although organic compound fertilizers typically
are more expensive than chemical fertilizers, we believe that the extra cost is
justified by the increase of yield and quality and, consequently, the increased
margin attained at the market.





Plants
tend to easily absorb organic fertilizer without many of the side effects found
in chemical fertilizer products, and this organic process strengthens
photosynthesis, which improves the overall health of a plant in resisting
drought and disease.




Organic
fertilizers also improve the cation exchange capacity, or “CEC,” of soil, which
refers to the soil’s ability to hold positively charged ions (cations), making
them available for uptake by the plant roots. This not only allows for improved
uptake of nutrients by the plant but can also reduce leaching, which is of
particular concern in sandy soil. Leaching moves nutrients away from the plant
roots and into the subsurface water. Additional functions of organic compound
fertilizer include:





·
            preserving nitrogen and improving
      soil fertility;


·
            allowing phosphorus and potash
      fertilizer to gradually
dissolve;


·
            promoting disease resistance;
      and


·
            activating and maintaining soil
      moisture content.





Our
organic fertilizer line includes compound organic fertilizers containing organic
matter content levels of 20%, 25%, 35% and 45%. Each of these organic compound
fertilizers can then be further narrowed into one of the following product
types: wide field, fruit, vegetable, melon or pepper. We also produce various
“Bulk Blend” or “BB” organic fertilizers, which contain organic matter content
levels of 35%, 40% and 54%. In addition, we produce various solid organic
fertilizers.


3





Our
process for manufacturing organic compound fertilizer products has received ISO
9001: 2000 certification. ISO 9000 has become an international reference for
quality management requirements in business-to-business dealings, and the ISO
9000 family is primarily concerned with quality management.





Liquid
Fertilizers





Liquid
fertilizer products accounted for approximately 1.2% and 34.9% of our revenue in
2008 and 2007, respectively.





The early
application of liquid fertilizers aids absorption of the key elements and
nutrients of the fertilizer, which may increase the rate of photosynthesis and
improve the health of the plant, making it more resistant to disease, drought
and cold weather. Liquid fertilizer increases the plant’s yield and shortens the
time to harvest while heightening the color and luster of fruit and vegetables.
These products may also prolong growing periods, guarantee sufficient nutrition
during different crop stages and improve pest resistance in certain fruits and
vegetables and other crops. Liquid fertilizer is sold to farmers in a
concentrated form and needs to be mixed with water before it is sprayed onto
plants.




Our
liquid fertilizer line includes the following products: “New Guo Li Dan (500G
and 250G),” “New Shi Kang Lu (500G),” New Jia An Gai,” “An Fu Lv Ye Wang,” “Tian
Feng,” and “Feng Chan Su (20KG).”





Pesticides
and Insecticides





Our
pesticides and insecticides account for approximately 0.9% and 16.5% of our
revenues in 2008 and 2007, respectively.





Our
pesticide products can be applied to all fruit trees and vegetable crops, and
are used to kill various insects and pests that reduce crop yield. Our
insecticide products are applied to various fruit trees, vegetables and other
crops to kill bacteria and to prevent the reproduction of harmful insects and
pests.





Our
pesticides and insecticides include the following products: “Wei Te Li Oil,” “A
Wei Chai Oil,” “Lun Mei Su,” “Li Jun Sha,” “Jin Li Sheng,” and “Lun Mei
Qing.”





Methods
of Distribution





We
currently sell each of the products identified above through a network of over
150 regional distributors in the People’s Republic of China. These distributors
in turn sell the products to the end-users (typically farmers). Typically, we
enter into non-exclusive, short-term written distribution agreements with our
distributors. Upon signing a distribution agreement, the distributor will
indicate its intent to purchase specified products, and we agree to provide
those products upon the distributor’s request. We generally make sales to
distributors on a rolling basis. This means that there is a lag between when we
deliver our products to our distributors (and recognize revenues for those
shipments) and when we receive payment for those products. Typically, accounts
are settled anywhere from one to two months and up to seven months after
delivery of our products, often in connection with an order for additional
product, although we may extend other payment terms to our distributors
depending on their ability to pay. We also make advances to suppliers for the
purchase of their materials. The products are then sold to farmers and other
end-users by the distributor.





Each year
we participate in the Yang Ling region’s annual agricultural trade fair and
exhibition. Many of our distributors attend this trade fair, and the event
accounts for the vast majority of our sales contracts. Sales are then made
pursuant to these contracts throughout the year.





We expect
to distribute products that are manufactured in our new Xinjiang facility
through similar arrangements with distributors; however, we have not yet
established relationships with distributors. The construction of our Xinjiang
facility is nearly finished and we are in the process of applying production
license from government.





Raw
Materials





Production
of organic fertilizer products, pesticides and insecticides requires a variety
of raw materials, and Shaanxi Province provides numerous suppliers of such
materials. We currently maintain short-term (typically one-year) supply
contracts with 11 material suppliers, 7 of whom are considered “key” suppliers.
This is a decrease from 19 relationships we maintained in the past. We have
terminated some of our prior relationships based on problems with the quality of
materials and supplier inability to satisfy contract requirements. During 2008
and 2007, we did not experience any significant delays in receiving raw
materials from our suppliers, while in 2006 we had some minor issues related to
road construction in front of one of our facilities.


4





The
specific raw materials and suppliers used for each of our product lines are
described below.





Organic
Compound Fertilizer Raw Materials and Suppliers





To
manufacture organic compound fertilizer, we use carbamide, monoammonium
phosphate, ammonium acid carbonate, humic acid, oil shale, zeolite powder,
phosphorus, coarse whiting, potassium, iron oxide red and potassium chloride. We
obtain these raw materials for organic compound fertilizers from many different
suppliers in the People’s Republic of China.





Liquid
Fertilizer Raw Materials and Suppliers





The raw
materials we use to manufacture our liquid fertilizer are carbamide, potassium
chloride, ammonium bicarbonate, borax, ferrous sulphate, bluestone, zinc
sulphate, manganese sulfate, citric acid, chlorocholine chloride, dodecane,
peregal, ethene, calcium chloride, monoammonium phosphate, bitter salt, amino
acid, sodium humate, polyacrylimide, humic acid and carbon white. There are
several suppliers from whom we obtain these raw materials.




Pesticide and Insecticide Raw
Materials and Suppliers





The raw
materials used to manufacture pesticides and insecticides include
jiajiliujunlung, thiram, muzhisuhuansuanna, active floridin, vaseline,
meiduowei, phoxin, qingwujuzhi, emulsifying agent, dimethylbenzene, aweijunsu,
#0 diesel oil, damanling, sulfur powder, carbendazim, mancozeb, dodecane,
hexamethylenamine, french chalk, malathion, shellfish powder, xiuqingjuzhi,
together with additional raw materials that constitute part of our proprietary
formulae.





We obtain
these raw materials for pesticides and insecticides from Shaanxi Tianshun
Chemical Industry Co., Ltd. We also have access to additional suppliers for each
of the necessary raw materials in the event that our primary supplier is unable
to satisfy our manufacturing needs.





Intellectual
property





We rely
on trade secret protection for our proprietary technology and formulae. We
currently do not own any patents and have not applied for any patents on our
proprietary technology and formulae. A patent application requires a detailed
description of our technology and formulae, which would then be made available
to the general public. We believe that a patent application and disclosure would
be detrimental to our business, as it would reveal features unique to our
products. Most of our intellectual property was developed in-house or with
various universities and research laboratories (which may not be owned by our
company). For information regarding the potential consequences of our
intellectual property strategy, please see the paragraph of Item 1A, “Risk
Factors,” titled “We may not
be able to adequately protect and maintain our intellectual
property.”





We hold
certain government approved intellectual property rights in our trade secrets
and proprietary information. Certain intellectual property rights in the
People’s Republic of China are decided by the government registry, and we have
registered our formulae and proprietary information with the Chinese government.
We hold certificates for these rights, which must be registered on an annual
basis.





We also
own trademarks in the “Bodisen” name, which is used on all
products.





Seasonality
and Volatility





The
fertilizer and pesticide businesses are highly seasonal, based upon the
planting, growing and harvesting cycles. The seasonality of these industries has
its primary effect on the sales volume of our product. Typically, we experience
a higher sales volume in the second and third quarters, with a lower volume in
the first and fourth quarters.





Our sales
volume can be volatile as a result of a number of factors,
including:





·
            Weather patterns and field
      conditions (particularly during periods of high fertilizer
      consumption);


·
            Quantities of fertilizers
      imported to primary markets;


·
            Current and projected grain
      inventories and prices, which are heavily influenced by U.S. exports,
      worldwide grain markers, and domestic demands (food, feed,
      biofuel);


·
            Government regulation,
      intervention and unexpected changes in government policies;
      and


·
            The reputation of our products
      and company in the
marketplace.





In
addition to the effect on sales volume, certain factors may have an effect on
the prices of our organic fertilizer, pesticide and insecticide products. These
factors include raw material and other product related costs, as well as
expenses related to our workforce and employees.


5





Inventory
and Working Capital





For each
of our products, we maintain an inventory system to meet customer demands.
Typically, we produce our products upon receipt of customer orders. We do,
however, hold excess inventory to ensure an adequate supply of products. We
maintain a larger inventory for “in-season” products, while our inventory for
out of season products is less.




In order
to ensure a continuous allotment of goods and raw materials, we operate on an
advanced payment system with our suppliers. We pay our suppliers based on our
projected needs for raw materials and other supplies, which allows us to
maintain a stock of such materials and supplies sufficient to sustain continued
production.





We do not
have policies related to warranties or the return of merchandise. We do,
however, provide our customers with extended payment terms and payment
options.





Although
each company in the fertilizer, pesticide and insecticide industry adopts its
own practices based on its employees, equipment, materials and other resources,
we believe that our operations are generally consistent with those of other
companies in the industry. We are continuing in our efforts to ensure that we
exceed industry expectations for product quality, development and overall
performance.





Sales
and Marketing





We market
and promote the Bodisen brand through trade fairs, conventions and the print
media, and through television and radio advertising in the People’s Republic of
China. As noted previously, a significant portion of our sales are generated
directly or indirectly via the annual trade fair and agricultural exhibition in
Yang Ling. Because the end-users of our products are local farmers, we also
conduct educational seminars to promote products and organic fertilizers
directly to farmers. In addition, we send our promotional team to the
countryside and other agricultural areas to advance product recognition through
field tests. To capture additional markets, we distribute free samples of our
products to new areas, allowing for a product trial period. The results of these
trials are then made known to surrounding areas. The cost of such efforts is not
material and is typically offset by new sales in those test zones.





Our
primary tasks with respect to sales goals are to strengthen our home market in
the Shaanxi province and to expand the market outside the Shaanxi province into
new districts where our products are not well established.





It is our
intention to increase marketing in regions where our products are not well
known. We anticipate that once we commence operations in our new facility in
Xinjiang, we will begin efforts to promote and market our products within that
region. In addition, we expect to engage in general promotion of our products
through national newspapers in the People’s Republic of China, where we plan to
explain the advantages of the high-tech nature of our environmentally friendly
product lines. Although we considered selling exclusive franchise opportunities
to new wholesale agents, we have since decided against proceeding with any such
projects.





Customers





We sell
our products directly to over 150 regional distributors in the People’s Republic
of China through written sales contracts. Typically, these non-exclusive
distribution contracts have a one-year term and, upon signing the contract, the
distributor will indicate its intent to purchase a certain quantity of our
products. Distributors who fail to place orders for the quantities estimated
under these contracts are generally not held responsible for failing to place
orders reflecting the estimated quantity.





All of
our sales currently are directed to our distributors, and we do not make any
sales directly to farmers or other end users of our products.





One
customer accounted for 17.0% and 11.2% of our revenues as of December 31, 2008
and 2007, respectively. We do not believe that our business would be materially
harmed by the loss of this customer or any of our other current
customers.





In
November 2007 we entered into contracts providing for approximately $9.4 million
worth of sales for 2008. As of December 31, 2008, we had received approximately
$5.1 million in net revenues in connection with these and other sales
contracts.





Following
the November 2007 agricultural trade fair and exhibition in Yang Ling, we have
received approximately $9 million in commitments for 2009.


6





Competition





The
organic fertilizer industry in the People’s Republic of China is largely
fragmented with most competitors operating small regional factories, serving
local requirements. Most companies in this industry do not widely promote their
products. We have not yet identified any competitors in the Shaanxi province
that operate in all of our product lines (organic compound fertilizer, liquid
fertilizer and pesticide and insecticides). We believe that we occupy nearly 10%
of the Shaanxi fertilizer market, and that no fertilizer company possesses a
larger market share in Shaanxi. This conclusion is based on our knowledge of the
Shaanxi Province’s land and area and its fertilizer needs. Our competitive
position in the fertilizer industry is strengthened by our emphasis on the use
of “environmentally friendly” fertilizer products.





We
believe that our only international competitor is DuPont.





Research
and Development





In 2008,
we budgeted to spend approximately $2,100 for research and development and in
2008, we focused our research and development efforts on our liquid fertilizer
product line.





In 2009,
we have budgeted approximately $12,000 for research and development, which we
also plan to use to our liquid fertilizer product line.





Government
and Environmental Regulation





Our
products and services are subject to regulation by governmental agencies in the
People’s Republic of China and Shaanxi Province. Business and company
registrations, along with the products, are certified on a regular basis and
must be in compliance with the laws and regulations of the People’s Republic of
China and provincial and local governments and industry agencies, which are
controlled and monitored through the issuance of licenses. We believe that we
have complied with all registrations and requirements for the issuance and
maintenance of the licenses required of us by the governing bodies. As of the
date of this annual report, all of our license fees and filings are current. Our
licenses include:





National
Certificate for Production of Industrial Products





The
National Certificate for Production of Industrial Products for compounded
fertilizers was issued by the National Industrial Products Production License
Office on February 27, 2004. This certificate was valid until February 26,
2009.





Certificate
for Pesticide Registration





Pesticide
registration is required for the production of liquid fertilizer and issued by
the Ministry of Agriculture of the People’s Republic of China. This registration
also applies to our production of insecticides.





Production
standard





We are
registered with Bureau of Quality Controls and Technology, Shaanxi Provincial
Government, Xi’an.





The cost
of obtaining and maintaining these licenses is not prohibitive and it is illegal
to do business without these licenses. If we were to lose any of these licenses,
we would only have a limited time to reapply for such licenses and would face
possible regulatory fines.





While we
are subject to relevant environmental laws and regulations that require outlay
of capital and the obtaining of relevant permits, we do not anticipate any
extraordinary capital expenditures in 2009 for such purposes. We did not make
any extraordinary capital expenditures in 2008 or 2007 related to compliance
with environmental laws and regulations, including expenditures necessary to
obtain relevant permits.





Our new
Mancozeb product is awaiting government approval. Prior to the launch of our
Mancozeb product, the Chinese government pesticide office instituted a review of
all pesticide production companies. As a result, we suspended the installation
of our Mancozeb facility pending completion of this government review. Although
we continue to work with the government and local authorities to advance the
approval process, we have not yet received such approval and do not know when
such approval will be received, if at all. Once the government has completed its
review and subject to receipt of approval, we expect to continue the
installation and launch of the Mancozeb facility.





Except
for approvals that have already been obtained, our anticipated new facility in
Xinjiang will not require any additional permits or authorizations.





Employees





As of
December 31, 2008, we had a total of 283 employees. Of these employees,
approximately 23 were executive and senior managers, 80 were business and
accounting staff, 14 were warehouse and purchasing staff, and 20 were drivers or
secretaries. The balance consists of production workers. We have not experienced
any work stoppages and we consider relations with our employees to be good. We
are not a party to any collective bargaining agreements.


7




Executive
Officers of the Registrant




Certain
information regarding our current executive officers is provided
below:





Name
              
              Age
              
              PositionBo
      Chen
              
              51
              
              President,
      Chief Executive Officer and Chairman of the BoardChunsheng
      Wang
              
              45
              
              Chief
      Operating OfficerJunyan
      Tong
              
              37
              
              Chief
      Financial Officer





Available
Information





We file
electronically with the Securities and Exchange Commission, or the “SEC,” our
annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports
on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934. The public may read and copy any materials we file with the SEC at the
SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The
public may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The address of that
site is http://www.sec.gov.





Our
website is located at http://www.bodisen.com. We currently do not make our
annual reports on Form 10-K, quarterly reports on Form 10-Q or current reports
on Form 8-K or amendments thereto available on our website because the
information is available via the SEC website. You may, however, obtain a free
copy of such reports and amendments to those reports filed or furnished pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act, as amended (15 U.S.C.
78m(a) or 78o(d)) on the day of filing with the SEC by contacting the Investor
Relations Department at our corporate offices by calling +011-86-29-87074957 or
by sending an e-mail message to info@bodisen.com.





ITEM
1A. RISK FACTORS





Risks
Related To Our Business





Legal
actions could result in financial losses or harm to our business.





We are,
and in the future may be, subject to legal actions in the ordinary course of our
operations, both domestically and internationally. In late 2006, various
shareholders of our company filed eight purported class actions in the U.S.
District Court for the Southern District of New York against our company and
certain of our officers and directors (among others), asserting claims under the
federal securities laws.





In
October 2008 the New York Federal Court presiding over the eight consolidated
class actions against Bodisen and its management granted the Company’s initial
motion to dismiss the cases.  In addition, the court has notified
Bodisen that it also granted the Company’s second motion to dismiss, which
challenged the subject matter jurisdiction of the court over about 40% of the
class and thus sought to reduce the number of potential class plaintiffs
significantly.





In
addition, we are currently in litigation regarding our ownership of shares of
China Natural Gas, which was our single largest asset, except construction in
progress, based on market value of such shares at December 31, 2008. For more
information relating to these matters, see Item 3 “Legal Proceedings.”
Substantial legal liability in these or future legal or regulatory actions could
have a material financial effect or cause significant reputational harm, which
in turn could seriously harm our business prospects and our ability to continue
as a going concern.





We
may be exposed to potential risks relating to our internal control over
financial reporting and our ability to have those controls attested to by our
independent auditors.





We are
(and were required last year) to include a report of management on our internal
control over financial reporting in our annual reports on Form 10-K. Although
beginning this year, because we are now a smaller reporting issuer, our
independent registered public accounting firm is not required to attest to and
report on management’s assessment of the effectiveness of our internal control
over financial reporting as well as the operating effectiveness of such internal
controls for this year, such attestation of our independent registered public
accounting firm was required in our annual report for the year ended December
2006, when we were considered to be an accelerated filer. For the reasons
described under Item 9A in this annual report, we have not yet completed our
evaluation of our internal control over financial reporting and can provide no
assurance that we will receive a positive attestation from our independent
auditors on such evaluation when completed. While we have no reason to believe
that our reported financial results and other information included in this
annual report are inaccurate or incomplete in any material respect, we may
nevertheless identify significant deficiencies or material weaknesses in our
internal control over financial reporting in connection with the completion of
our report. In the event we identify significant deficiencies or material
weaknesses in our internal controls that we cannot remediate in a timely manner
or we are unable to receive a positive attestation from our independent auditors
with respect to our internal controls, it could have a material adverse effect
on our business, financial condition and results of operations.


8





We
may require additional financing in the future and a failure to obtain such
required financing could inhibit our ability to grow.





As of
December 31, 2008, we had $90,716 of cash and cash equivalents. Although we
expect that our cash and cash flow from operations will be sufficient to meet
our anticipated needs for the next twelve months, if we decide to expand our
business more broadly than currently estimated, or if our business grows more
rapidly than we expect, we may need to raise additional financing in the future.
Our ability to obtain additional funding would be subject to a number of
factors, including market conditions, operational performance and investor
sentiment. These factors may make the timing, amount, terms and conditions of
additional funding unattractive, or unavailable, to us. If we are not able to
obtain additional financing in the future, we will not be able to grow our
business, which could have a material adverse effect on our financial condition,
results of operations and liquidity.





The
terms of any future financing may adversely affect your interest as stockholders
and could restrict the operation of our business.





If we
require additional financing, we may be required to incur indebtedness or issue
equity securities, the terms of which may adversely affect your interests in our
company. For example, any future indebtedness may be senior in right of payment
to your shares upon liquidation. In addition, the terms of any future
indebtedness may limit the operation of our business by imposing restrictions on
our ability to grant security interests in our assets or make distributions,
require us to comply with certain financial covenants or obtain consent before
undertaking certain actions. Similarly, the terms of any equity securities we
issue may be senior in right of payment of dividends to our common stock and may
contain superior rights and other rights as compared to our common stock.
Further, any such issuance of equity securities may dilute your interest in our
company.





We
may not be able to adequately protect and maintain our intellectual
property.





Our
success will depend on our ability to continue to develop and market fertilizer
and pesticide/insecticide products. We protect our proprietary technology and
formulae by keeping such technology or formulae confidential. If such technology
or formulae are disclosed to a third party that is not under an obligation to
keep the technology confidential, we may not be able to protect our technology
or formulae against being exploited by third parties. We currently have not
applied for patents for our technology products or formulae as we believe an
application for such patents would result in public disclosure of our
proprietary technology and formulae with no guarantee that we would have
enforceable rights in our intellectual property. Public knowledge of our
proprietary technology and formulae without enforceable intellectual property
rights could have a material adverse effect on our business, financial condition
and results of operations.





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. The loss of the services of one or more of our key personnel
could impede implementation of our business plan and result in reduced
profitability. We do not carry key person life or other insurance in respect of
any of our officers or employees (other than Directors’ & Officers’ (or
D&O) insurance). Our future success will also depend on the continued
ability to attract, retain and motivate highly qualified technical sales and
marketing customer support. Because of the rapid growth of the economy in the
People’s Republic of China, competition for qualified personnel is intense. We
cannot guarantee that we will be able to retain our key personnel or that we
will be able to attract, assimilate or retain qualified personnel in the future.
If we are unsuccessful in our efforts in this regard, it could have an adverse
effect on our business, financial condition and results of
operations.





We
do not have supplier contracts with all of our trade vendors.





As is
typical in the agricultural industry in the People’s Republic of China, we do
not have supplier contracts with all of our trade vendors. Where we do not have
contracts in place, we conduct business on an order-by-order basis. Because we
do not have supply contracts in place, we have no guarantee that we will be able
to continue to receive adequate supplies for the production of our products or
that our suppliers will not continually raise their prices. Despite not having
supplier contracts in place in every case, we believe that we have very good
relations with the agricultural vendor community. Nonetheless, because we
conduct business in this fashion, it exposes us to some risk in the production
of our products, which could have an adverse effect on our business, financial
condition and results of operations.





We currently rely on a small number
of suppliers for raw materials used to produce our products.





For the
year ended December 31, 2008, two vendors provided 16% and 6% of our raw
materials (compared to two vendors providing 70.3%, and 10.5% of our raw
materials in 2007). Although we have written agreements with these suppliers, we
cannot guarantee that they will comply with the terms of our agreements, or that
they will be able to deliver sufficient quantities of these raw materials in
order for us to meet the increasing demand for our products. If we are not able
to manufacture our products because of issues in the supply of necessary raw
materials, it could have a material adverse effect on our business, financial
condition and results of operations.


9





Disruptions
to our chain of production could have a material adverse effect on our
business.





If there
is disruption in our chain of production - from receipt of raw materials, to
stoppages at our facilities, to delivery of our products - for whatever reason,
it could have a material adverse effect on our business. The manufacture of our
products relies on the delivery of raw materials to our facilities, the absence
of work stoppages or other problems at our manufacturing facilities, as well as
the ability to ship our products in a timely fashion. Although disruptions are
infrequent, they can have an effect on our operations. For example, in mid-2006,
road construction began in front of one of our manufacturing facilities, which
affected our ability to receive supplies and ship products and consequently had
a negative effect on our business. Similar road improvement projects over which
we have no control could occur in the future. If we are unable to manufacture
and deliver our products in a timely fashion, we could suffer harm to our
reputation and our revenues and operating expenses could be negatively
affected.





We may be unable to pass along raw
materials price increases to our customers, which could negatively affect our
results of operations.





The raw
materials that we use in the manufacture of our products are subject to
fluctuation due to market prices. If raw materials prices significantly increase
and we are unable to pass along these costs to our customers, our operating
expenses will increase and our results of operations could be negatively
affected.





We sell many of our products on
credit, which exposes us to risk of payment defaults. We also make interest-free
and unsecured advances to suppliers for the purchase of materials, which exposes
us to risk of default.





As is
typical in the People’s Republic of China, we generally sell our products to
distributors on a rolling basis. This means that there is a lag between when we
deliver our products to our distributors (and recognize revenues for those
shipments) and when we receive payment for those products. Typically, accounts
are settled anywhere from one to two months and up to seven months after
delivery of our products, although we may extend other payment terms to our
distributors depending on their ability to pay. Often times, if a customer does
not order additional products for delivery, we do not have significant leverage
to ensure prompt payment of outstanding accounts. In addition to accounts
receivables from customers, we also make advances to suppliers for the purchase
of their materials. These activities expose us to risk of default. A farmer’s
inability to sell his agricultural goods, or grow crops due to inclement
weather, could hinder his ability to timely pay his credit obligations to our
distributors, which affects their ability to make payment to us. Notably, in
2007, many of our customers did not make payments to our company for products
delivered and we no longer believe that we will be able to collect such
payments. Further, we have no guarantee that our suppliers will meet their
delivery obligations to our company in order for us to produce our goods in a
timely fashion. As of December 31, 2008, we had accounts receivable, net of
allowance for doubtful accounts, of $719,607 compared to $618,052 in 2007,
advances to suppliers of $0 compared to $9,741,090 in 2007, and we had
allowances for doubtful accounts of $6,069,700 compared to $25,447,689 in 2007.
If an unexpected number of our suppliers and creditors continue to default in
their obligations to us, it could have a material adverse effect on our
liquidity.





Adverse
weather conditions could reduce demand for our products, which could have a
negative effect on our revenues.





Demand
for our products fluctuates significantly with weather conditions, which may
delay the use of our products on crops or render them unnecessary at all. In
addition, demand for our products is also affected by natural disasters such as
floods, drought, hail, tornadoes and earthquakes. If demand for our products
declines, this would have a negative effect on our revenues. In addition, in the
event that crop yields are reduced for any reason, including natural disasters,
farmers may default on their payments to our distributors, who, in turn, could
default on their payments to our company. Further, we have no guarantee that our
suppliers will meet their delivery obligations to our company in order for us to
produce our goods in a timely fashion. In 2007, for example, there was
unseasonably cold Spring weather in Shaanxi, which was followed by a flood and
drought in the third quarter of 2007. These events affected crop plantings and
the use of fertilizers, which had a material adverse effect on our 2007
revenues. Further, many of our customers did not make payments to our company in
2007 for products delivered and we had allowances for doubtful accounts of
$6,069,700 at December 31, 2008 compared to $25,447,689 at December 31, 2007.
Continued defaults could have a negative effect on our cash flows and results of
operations.





Our
success depends upon the development of the People’s Republic of China’s
agricultural industry.





The
People’s Republic of China is currently the world’s most populous country and
one of the largest producers and consumers of agricultural products. Over 40% of
the People’s Republic of China’s labor force is engaged in agriculture, even
though only about 14% of the land is suitable for cultivation. (Source: CIA
Factbook) Although the People’s Republic of China hopes to further increase
agricultural production, incomes for Chinese farmers are stagnating. Despite the
Chinese government’s continued emphasis on agricultural self-sufficiency,
inadequate port facilities and a lack of warehousing and cold storage facilities
impedes the domestic agricultural trade. If the Chinese agricultural market does
not develop, or develops slower than we expect, it could have an adverse effect
on our business, financial condition and results of operations.


10





Our
operating subsidiary may be restricted from making distributions to our
company.





We are a
legal entity separate and distinct from Yang Ling, which is our indirect
wholly-owned operating subsidiary. Aside from our financing activities, the
receipt of dividends from Yang Ling is currently our only other source of cash
to pay shareholder dividends and to meet our other obligations. Yang Ling is
subject to Chinese regulations that currently permit the payment of dividends
only out of accumulated profits as determined in accordance with Chinese
accounting standards and regulations. These accounting standards and regulations
also require Yang Ling to set aside a portion of its after tax profits to fund
certain reserve funds. See Note 11 to our consolidated financial statements
included in this annual report for more information about these regulations.
Although it has been able to do so, to date Yang Ling has not paid us any
dividends. In the future, if Yang Ling does not accumulate sufficient profits
under Chinese accounting standards and regulations after funding the required
reserves, it will not be able to pay us any dividends, and consequently, we may
be unable to pay any dividends to our stockholders.





We
do not anticipate paying dividends on our common stock.





We have
never paid dividends on our common stock and do not anticipate paying dividends
in the foreseeable future. Our Board of Directors currently intends to follow a
policy of retaining all of our earnings, if any, to finance the development and
expansion of our business.





Our
corporate structure may subject you to two levels of taxation on the payment of
dividends or upon a disposition of our operating subsidiary, thereby
substantially reducing the return on your investment.





If Yang
Ling, our wholly-owned indirect subsidiary, pays a dividend to us, its parent
company, for distribution to our stockholders as a dividend, or if Yang Ling
(rather than us, its parent company) is ultimately sold, the dividend or the
proceeds of that transaction would be subject to two levels of tax: one at the
parent corporate level and one at the parent stockholder level. Because we
conduct our operations through Yang Ling, any dividends we pay must come from
Yang Ling. Additionally, if a sale were to occur, it would most likely be Yang
Ling that would be sold, rather than our company. Because of applicable tax
laws, if Yang Ling pays a dividend to us in the future or if Yang Ling is sold
in the future, those proceeds may be subject to two levels of taxation: (i) we
will pay tax on the dividend or sale proceeds received from Yang Ling, and (ii)
our stockholders will pay tax on the distribution of the dividend or the
proceeds of the sale. These two levels of taxation will effectively reduce the
financial return on your investment in our company.





The
industry in which we do business is highly competitive and we face competition
from numerous fertilizer manufacturers in China and elsewhere.





We
compete with numerous local Chinese fertilizer manufacturers. Although we may
have greater resources than many of our competitors, most of which are small
local fertilizer companies, it is possible that these competitors have better
access in certain local markets to customers and prospects, an enhanced ability
to customize products to a particular region or locality and established local
distribution channels within a small region. Furthermore, we may face
competition from international producers and traders who import products into
China that generally are of higher quality than those produced in the local
Chinese market. Although we believe that we have many competitive strengths that
differentiate our products and the Bodisen brand, we nevertheless must compete
aggressively to maintain and grow our market share. If we are not successful in
our marketing and advertising efforts to increase awareness of our brands, our
revenues could decline and it could have a material adverse effect on our
business, financial condition and results of operations.





The
admission of the People’s Republic of China into the World Trade Organization
could lead to increased foreign competition for us.





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 for us may result in an increase of
foreign products and could in turn lead to increased competition in the domestic
agricultural market. Increase competition from foreign products could lead to
downward pricing pressure, which could have a negative effect on our gross
profit margins and adversely affect our business, financial condition and
results of operations.





We
may not be able to obtain regulatory or governmental approvals for our
products.





The
manufacture and sale of our agricultural products in the People’s Republic of
China is regulated by the People’s Republic of China and the Shaanxi Provincial
Government. The legal and regulatory regime governing our industry is evolving,
and we may become subject to different, including more stringent, requirements
than those currently applicable to our company. Because we must obtain permits
and other regulatory approvals for the manufacture of our products. we may be
vulnerable to local and national government agencies or other parties who wish
to renegotiate the terms and conditions of, or terminate their agreements or
other understandings with us, or implement new or more stringent requirements,
which may require us to suspend or delay production of our products. For
example, we are still delaying the launch of our Mancozeb product line because
the Chinese government pesticide office instituted a review of all pesticide
production companies. Although our licenses and regulatory filings are current,
we have had to suspend the installation of our Mancozeb facility pending the
completion of the government review. If we are unable to manufacture and
distribute our products, even temporarily, it could have a material adverse
effect on our business, financial condition and results of
operations.


11





Risks
Related to the People’s Republic of China





The
People’s Republic of China’s Economic Policies could affect our
Business.





Virtually
all of our assets are located, and virtually all of our revenues are derived
from our operations, in the People’s Republic of China. Accordingly, our
business, financial condition and results of operations are subject, to a
significant extent, to the economic, political and legal developments in the
People’s Republic of China.





While the
People’s Republic of China’s economy has experienced significant growth in the
past twenty years, such growth has been uneven, both geographically and among
various sectors of the economy. The Chinese government has implemented various
measures to encourage economic growth and guide the allocation of resources.
Some of these measures benefit the overall economy of the People’s Republic of
China, but they may also have a negative effect on us. For example, operating
results and financial condition may be adversely affected by the government
control over capital investments or changes in tax regulations.





Over the
past 20 years, the Chinese economy has experienced periods of rapid expansion
and fluctuating rates of inflation. These factors have led to the adoption by
the Chinese government, from time to time, of various corrective measures
designed to restrict the availability of credit or regulate growth and contain
inflation. High inflation may in the future cause the Chinese government to
impose controls on credit and/or prices, or to take other action that could
inhibit economic activity in China, and thereby harm the market for our
products, which could have a negative effect on our business, financial
condition and results of operations.





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.





Capital
outflow policies in the People’s Republic of China may hamper our ability to
remit income to the United States.





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 we believe that we are currently 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 remit all income earned and proceeds received in connection with its
operations or from the sale of its operating subsidiary to our
stockholders.





Fluctuation
of the Renminbi may indirectly affect our financial condition by affecting the
volume of cross- border money flow.





Because
we report our financial statements in U.S. dollars but generate virtually all of
our revenues and expenses in Renminbi, we are exposed to translation risk
resulting from fluctuations between the value of the U.S. dollar and the value
of the Renminbi. The value of the Renminbi fluctuates and is subject to changes
in the People’s Republic of China’s political and economic conditions. Since
1994, the conversion of Renminbi into foreign currencies, including U.S.
dollars, has been based on rates set by the People’s Bank of China, which are
set based upon the interbank foreign exchange market rates and current exchange
rates of a basket of currencies on the world financial markets. As of December
31, 2008, the exchange rate between the Renminbi and the U.S. dollar was 6.82
Renminbi to every one U.S. dollar.





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, modern banking,
computer or 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.





Because
most of our directors and all of our officers reside outside of the United
States and virtually all of our assets are located in the People’s Republic of
China, you may have difficulty enforcing certain rights.







12





Risks
Related to Our Common Stock




Our
common stock is no longer listed on the American Stock Exchange, or Amex, and is
currently quoted only on the Pink Sheets in the United States, which may have an
unfavorable impact on our stock price and liquidity.




On
November 6, 2006, we received notice of deficiency from the Amex that we were
not in compliance with certain continued listing standards and on March 22,
2007, we received notice from Amex of its intent to delist our shares of common
stock. We decided not to appeal Amex’s decision and our common stock is
currently quoted in the United States on the Pink Sheets under the symbol
“BBCZ.” See Item 5 of this annual report for more information regarding the
market for shares of our common stock. The Pink Sheets are a significantly more
limited market than the Amex and the quotation of our shares on the Pink Sheets
may result in a less liquid market available for existing and potential
stockholders to trade shares of our common stock in the United States. This
could depress the trading price of our common stock and could have a long-term
adverse impact on our ability to raise capital in the future.




The
market price for our common stock may be volatile, which could result in a
complete loss of your investment.




Our
common stock is not widely traded or traded in great volume. This was the case
even prior to delisting from Amex. Because of the limited trading market and
volume, the market price for our common stock is likely to be highly volatile
and subject to wide fluctuations in response to factors including the
following:




·
            actual or anticipated
      fluctuations in our operating
  results;





·
            changes in financial estimates by
      securities analysts;





·
            market conditions, including new
      product announcements by us or our competitors, changes in the economic
      performance or market valuations of competitor companies, as well as
      acquisition
announcements;





·
            additions or departures of key
      personnel; and





·
            legal and regulatory
      developments.




Volatility
in our common stock price may make the value of an investment in our shares more
speculative.




We
could become subject to penny stock regulations and restrictions, which could
make it difficult for our stockholders to sell their shares of stock in our
company.




SEC
regulations generally define “penny stocks” as equity securities that have a
market price of less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain exemptions. As of March 25, 2009, the
closing bid price for our common stock was $0.25 per share. Although we
currently meet the net worth exemption from the “penny stock” definition, no
assurance can be given that such exemption will be maintained. If we lose the
exemption, our common stock may become subject to Rule 15g-9 under the Exchange
Act, which regulations are commonly referred to as the “Penny Stock Rules.” The
Penny Stock Rules impose additional sales practice requirements on
broker-dealers prior to selling penny stocks, which may make it burdensome to
conduct transactions in our shares. If our shares become subject to the Penny
Stock Rules, it may be difficult to sell shares of our stock, and because it may
be difficult to find quotations for shares of our stock, it may be impossible to
accurately price an investment in our shares. There can be no assurance that our
common stock will continue to qualify for an exemption from the Penny Stock
Rules. In any event, even if our common stock continues to remain exempt from
the Penny Stock Rules, we remain subject to Section 15(b)(6) of the Exchange
Act, which gives the SEC the authority to restrict any person from participating
in a distribution of a penny stock if the SEC determines that such a restriction
would be in the public interest.





ITEM
1B. UNRESOLVED STAFF COMMENTS





Not
applicable.


13





ITEM
2. PROPERTIES





Our
principal executive offices are located in leased office space located at Room
2001, FanMei Building No. 1 Naguan Zhengjie, Xian, Shaanxi province, People’s
Republic of China, 710068, and the telephone number is +011-86-29-87074957. The
office space is approximately 328 square meters in area.





We also
maintain two separate factories in Yang Ling, China, situated at differing
locations within the Yang Ling Agriculture High-Tech Industries Demonstration
Zone. These two factories occupy an aggregate of approximately 56,745 square
meters of land and contain our production lines, as well as office buildings,
warehouses and two research laboratories. We also use a leased warehouse, which
occupies 300 square meters of land in close proximity to both of our Yang Ling
factories.





In
connection with an agreement with the city government of A La Er, China (which
is located in the Uygur autonomous region of Xinjiang, China), we agreed to
invest in the construction of a manufacturing facility that will be able to
produce up to 200,000 metric tons of fertilizer and pesticide products. This
facility will be located in Xinjiang, China and is projected to be approximately
120 acres (80,000 square meters). We believe that, with the strong government
support that we are receiving and the regional market demand for fertilizer and
pesticide products, Xinjiang represents a significant long-term growth
opportunity for Bodisen. We began construction of the facility in April 2006 and
originally believed construction would be completed in November 2006. However,
there have been a series of delays, including delays caused by local weather
conditions (an early winter, late spring and frequent sandstorms). Although we
now expect to begin initial production at the new facility during 2008, we
cannot however, guarantee that production at this facility will begin in 2008.
To date, we have spent approximately $11.8 million on this facility and expect
that completion could cost another approximately $3.0 million. Although we
believe we will have sufficient funds to complete the facility, in the event we
do not have sufficient funds, we will be required to obtain them from additional
sources and there is no guarantee that we will succeed in doing so.





Following
the 2006 admission of our shares to trading on the AIM market of the London
Stock Exchange plc, we indicated that we intended to use certain proceeds from
that offering to construct an additional facility in Northeast China. We have
since decided not to pursue this project at this time.





We have
entered into land-lease arrangements for our properties. We do not own any land
because, under the People’s Republic of China’s governmental regulations, the
government owns all land.





We
believe that our owned and leased properties, along with the properties being
developed in our current facility expansion plans, will be sufficient for our
current and immediately foreseeable operating needs.





ITEM
3. LEGAL PROCEEDINGS




From time
to time, we may become involved in various lawsuits and legal proceedings that
arise in the ordinary course of business. Litigation is, however, subject to
inherent uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm our business. Other than the matters
described below, we are currently not aware of any such legal proceedings or
claims that we believe would or could have, individually or in the aggregate, a
material adverse affect on our business, financial condition, results of
operations or liquidity.





In late
2006, various shareholders of our company filed eight purported class actions in
the U.S. District Court for the Southern District of New York against our
company and certain of our officers and directors (among others), asserting
claims under the federal securities laws. The complaints contain allegations
about the our prior financial disclosures and our internal controls and a prior,
now-terminated relationship with a financial advisor. The complaints do not
specify an amount of damages that plaintiffs seek.





The eight
actions are Stephanie Tabor vs. Bodisen, Inc., et al., Case No. 06-13220 (filed
November 2006), Fraser Laschinger vs. Bodisen, Inc., et al., Case No. 06-13254
(filed November 2006), Anthony DeSantis vs. Bodisen, Inc., et. al., Case
No. 06-13454 (filed November 2006), Yuchen Zhou vs. Bodisen, Inc., et. al.,
Case No. 06-13567 (filed November 2006), William E. Cowley vs. Bodisen,
Inc., et. al., Case No. 06-13739 (filed December 2006), Ronald Stubblefield
vs. Bodisen, Inc., et. al., Case No. 06-14449 (filed December 2006), Adam
Cohen vs. Bodisen, Inc., et. al., Case No. 06-15179 (filed December 2006)
and Lawrence M. Cohen vs. Bodisen, Inc., et. al., Case No. 06-15399 (filed
December 2006). Plaintiffs have not specified an amount of damages they seek.
Last year, the Court consolidated each of the actions into a single
proceeding.





In
October 2008 the New York Federal Court presiding over the eight consolidated
class actions against Bodisen and its management granted our initial motion to
dismiss the cases.





In
addition, the court has notified Bodisen that it also granted our second motion
to dismiss, which challenged the subject matter jurisdiction of the court over
about 40% of the class and thus sought to reduce the number of potential class
plaintiffs significantly. The court has not provided us this written decision,
however, we hope to receive it soon.


14





In
2007, Ji Xiang, a shareholder of China Natural Gas (and son of
its Chairman and CEO) instituted litigation in the Chinese court system in
Shaanxi province challenging the validity of our ownership of 2,063,768 shares
of China Natural Gas common stock. We obtained these shares in September 2005 in
a share transfer agreement and assert that we have fully performed our
obligations under the agreement and are entitled to own the shares. The parties
in the Chinese litigation have submitted their evidence and now await a decision
from the Chinese court. Also, in January 2008, the same shareholder instituted
litigation in a Utah state court against Yangling Bodisen Biotech Development
Co. Ltd. and Interwest Transfer Co. (China Natural Gas’s transfer agent) seeking
to prevent us from selling our shares in China Natural Gas. Plaintiff has
obtained an order from the Utah court provisionally preventing us from selling
the China Natural Gas shares pending a decision on the merits of the underlying
dispute. We intend to vigorously and thoroughly defend our company against this
claim. While we believe we will prevail in these litigation matters and
establish our right of ownership to the China Natural Gas shares, an adverse
outcome could have a material adverse effect on our business, financial
condition, results of operations or liquidity.





ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS




Not
applicable.




PART II




ITEM
5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES




Market
Information





Since
April 2, 2007, our common stock has been traded on the Pink Sheets under the
symbol “BBCZ.” Prior to April 2, 2007, our common stock was traded on the
American Stock Exchange under the symbol “BBC.” Prior to August 29, 2005, our
common stock traded on the Over-the-Counter Bulletin Board under the symbol
“BBOI.” In addition, since February 6, 2006, our common stock has been traded on
AIM, a market operated by the London Stock Exchange plc, under the symbol
“BODI.”





The
following table sets forth the high and low bid prices of our common stock for
the periods indicated. The quotations set forth below reflect inter-dealer
prices, without retail mark-up, markdown or commission and may not represent
actual transactions.





QUARTER
                  
                  HIGH ($)
                  
                  
                  LOW ($)1st
      Quarter 2007
                  
                  $
                  5.40
                  
                  
                  $
                  3.312nd
      Quarter 2007
                  
                  $
                  3.43
                  
                  
                  $
                  1.753rd
      Quarter 2007
                  
                  $
                  2.75
                  
                  
                  $
                  0.874th
      Quarter 2007
                  
                  $
                  2.92
                  
                  
                  $
                  0.641st
      Quarter 2008
                  
                  $
                  1.01
                  
                  
                  $
                  0.652nd
      Quarter 2008
                  
                  $
                  0.80
                  
                  
                  $
                  0.403rd
      Quarter 2008
                  
                  $
                  0.65
                  
                  
                  $
                  0.114th
      Quarter 2008
                  
                  $
                  0.55
                  
                  
                  $
                  0.10





As of
March 25, 2009, there were approximately 411 holders of record of our common
stock.





Of the
approximately 411 holders of record, 28 holders of record currently hold shares
of our common stock on behalf of additional persons residing in the People’s
Republic of China. Some or all of the 19 stockholders of Bodisen International
(which, prior to the “reverse merger,” was the parent of Yang Ling, our
principal operating subsidiary) who received stock in the “reverse merger” held
at least a portion of such shares on behalf of additional persons residing in
the People’s Republic of China. Prior to the reverse merger that resulted in our
current corporate structure, various individuals provided investment capital to
Yang Ling. After the reverse merger, we issued share certificates for our common
stock to reflect the value of the earlier investments. Pursuant to an
arrangement with the initial investors, we issued share certificates to certain
individuals other than the initial investors (including Qiong Wang, a Director,
and Bo Chen, our Chairman, CEO and President), who held title to those shares as
nominee for the benefit of those investors. Following our reverse merger and our
payment of a three for one stock dividend, Ms. Wang held legal title to a total
of 3,748,780 shares, of which she held 3,028,780 as nominee for the benefit of
the initial investors and 720,000 for her own benefit, and Mr. Chen held legal
title to 3,584,096 shares, of which he held 2,894,096 as nominee for the benefit
of the initial investors and 690,000 for his own benefit. Thus, Ms. Wang and Mr.
Chen held 5,922,876 shares beneficially for others, apart from the shares they
held for themselves.




In late
2005, some of the initial investors began to request that the beneficially-held
shares be transferred to them so that they could hold the shares in their own
names. In response, Ms. Wang and Mr. Chen transferred shares they held
beneficially for the initial investors to their children, who in turn
effectuated the transfer of such shares to the initial investors. Over time,
this process continued so that eventually, Ms. Wang and Mr. Chen transferred
indirectly through their children all of the 5,922,876 beneficially-held shares
to the initial investors, with the exception of approximately 738,000 shares. We
hold the originals of 28 stock certificates representing these approximate
738,000 shares in our offices in Xi’an, China.


15




The
record holders of the 28 share certificates are nominees only and hold the
shares for the benefit of initial investors or their assigns. The nominees have
not asserted any interest in or made any claim to these shares. We have
confirmed that the share certificates are genuine and that the records of our
transfer agent are consistent with the information that appears on the
certificates.




Dividends





We have
never declared or paid any cash dividends on our common stock. We currently
intend to retain future earnings, if any, to finance the expansion of our
business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.





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





·
            making up cumulative prior years’
      losses, if any;


·
            allocations to the “statutory
      surplus reserve” of at least 10% of income after tax, as determined under
      the People’s Republic of China’s accounting rules and regulations, until
      the fund amounts to 50% of a company’s registered
      capital;


·
            allocations of 5-10% of income
      after tax, as determined under the People’s Republic of China’s accounting
      rules and regulations, to a company’s “statutory common welfare fund,”
      which is established for the purpose of providing employee facilities and
      other collective benefits to a company’s employees;
    and


·
            allocations to the discretionary
      surplus reserve, if approved in the stockholders’ general
      meeting.





Accordingly,
we established a reserve for the annual contribution of 10% of net income to the
welfare fund, and the amount included in the statutory reserve for the years
ended December 31, 2008 and 2007 amounted to $0 and $0,
respectively.





Recent
Issuances of Unregistered Securities





None.





Issuer
Repurchases of Equity Securities





None.




ITEM
6. SELECTED FINANCIAL DATA





Intentionally
Omitted.





ITEM 7. MANAGEMENT’S DISCUSSION AND
ANALYSISOF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS





FORWARD
LOOKING STATEMENTS





The
following information should be read in conjunction with our selected
consolidated financial and operating data and the accompanying consolidated
financial statements and related notes thereto included elsewhere in this annual
report. The following discussion may contain forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in these forward-looking statements. Factors
that could cause or contribute to these differences include, but are not limited
to, those discussed below and elsewhere in this annual report, particularly in
“Risk Factors” and “Note Regarding Forward Looking Statements.”





Virtually
all of our revenues and expenses are denominated in Renminbi ("RMB"), the
currency of the People's Republic of China. Because we report our financial
statements in U.S. dollars, we are exposed to translation risk resulting from
fluctuations of exchange rates between the RMB and the U.S. dollar. There is no
assurance that exchange rates between the RMB and the U.S. dollar will remain
stable. A devaluation of the RMB relative to the U.S. dollar could adversely
affect our business, financial condition and results of operations. See “Risk
Factors.” We do not engage in currency hedging and to date, inflation has not
had a material impact on our business.





Unless
otherwise specified, references to Notes to our consolidated financial
statements are to the Notes to our audited consolidated financial statements as
of December 31, 2008 and 2007 and for the two-year period ended December 31,
2008.


16





Overview





We are
incorporated under the laws of the state of Delaware and our operating
subsidiary, Yang Ling, is headquartered in Shaanxi Province, the People’s
Republic of China. We are engaged in developing, manufacturing and selling
organic fertilizers, liquid fertilizers, pesticides and insecticides in the
People’s Republic of China and produce numerous proprietary product lines, from
pesticides to crop-specific fertilizers. We market and sell our products to
distributors throughout the People's Republic of China, and these distributors,
in turn, sell our products to farmers. We also conduct research and development
to further improve existing products and develop new formulas and
products.





Critical
Accounting Policies and Estimates





The
accounting and reporting policies that we use affect our consolidated financial
statements. Certain of our accounting and reporting policies are critical to an
understanding of our results of operations and financial condition, and in some
cases, the application of these policies can be significantly affected by the
estimates, judgments and assumptions made by management during the preparation
of our consolidated financial statements. These accounting and reporting
policies are described below. See Note 2 to our consolidated financial
statements for further discussion of our accounting policies.





Accounts
receivable





We
maintain reserves for potential credit losses on accounts receivable and record
them primarily on a specific identification basis. In order to establish
reserves, we review the composition of accounts receivable and analyze
historical bad debts, customer concentrations, customer credit worthiness,
current economic trends and changes in customer payment patterns to evaluate the
adequacy of these reserves. This analysis and evaluation requires the use of
judgments and estimates. Because of the nature of the evaluation, certain of the
judgments and estimates are subject to change, which may require adjustments in
future periods.





Inventories





We value
inventories at the lower of cost (determined on a weighted average basis) or
market. When evaluating our inventory, we compare the cost with the market value
and make allowance to write them down to market value, if lower. The
determination of market value requires the use of estimates and judgment by our
management.





Intangible
assets





We
evaluate intangible assets for impairment, at least on an annual basis and
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable from its estimated future cash flows. This evaluation
requires the use of judgments and estimates, in particular with respect to
recoverability. Recoverability of intangible assets, other long-lived assets
and, goodwill is measured by comparing their net book value to the related
projected undiscounted cash flows from these assets, considering a number of
factors including past operating results, budgets, economic projections, market
trends and product development cycles. If the net book value of the asset
exceeds the related undiscounted cash flows, the asset is considered impaired,
and a second test is performed to measure the amount of impairment
loss.





Recent
Accounting Pronouncements





In June
2007, the FASB issued FASB Staff Position No. EITF 07-3, “Accounting for
Nonrefundable Advance Payments for Goods or Services Received for use in Future
Research and Development Activities” (“FSP EITF 07-3”), which addresses whether
nonrefundable advance payments for goods or services that used or rendered for
research and development activities should be expensed when the advance payment
is made or when the research and development activity has been
performed.  Management is currently evaluating the effect of this
pronouncement on financial statements.





In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
Combinations.” SFAS No. 141R  changes how a reporting enterprise
accounts for the acquisition of a business. SFAS
No. 141R  requires an acquiring entity to recognize all the
assets acquired and liabilities assumed in a transaction at the acquisition-date
fair value, with limited exceptions, and applies to a wider range of
transactions or events. SFAS No. 141R is effective for fiscal years
beginning on or after December 15, 2008 and early adoption and
retrospective application is prohibited.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51.  SFAS 160 clarifies that a noncontrolling
interest in a subsidiary is an ownership interest in the consolidated entity
that should be reported as equity in the consolidated financial
statements.  SFAS 160  changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to both parent and the
noncontrolling interest.  SFAS 160  is effective for the
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008.  Based on current conditions, we do not
expect the adoption of SFAS 160 to have a significant impact on its results of
operations or financial position.


17





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities an amendment of FASB Statement No. 133.”  SFAS
161  changes the disclosure requirements for derivative instruments
and hedging activities. Entities are required to provide enhanced disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under SFAS 133 and its
related interpretations, and (c) how derivative instruments and related hedged
items affect an entity’s financial position, financial performance, and cash
flows.  Based on current conditions, we do not expect the adoption of
SFAS 161 to have a significant impact on its results of operations or financial
position.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.”  SFAS 162 identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy).  SFAS 162 will not have an
impact on our financial statements.





In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts, an interpretation of FASB Statement No. 60.”  The
scope of SFAS 163 is limited to financial guarantee insurance (and reinsurance)
contracts, as described in this Statement, issued by enterprises included within
the scope of Statement 60. Accordingly, SFAS 163 does not apply to financial
guarantee contracts issued by enterprises excluded from the scope of Statement
60 or to some insurance contracts that seem similar to financial guarantee
insurance contracts issued by insurance enterprises (such as mortgage guaranty
insurance or credit insurance on trade receivables). SFAS 163 also does not
apply to financial guarantee insurance contracts that are derivative instruments
included within the scope of FASB Statement No. 133, “Accounting for Derivative
Instruments and Hedging Activities.” SFAS 163 will not have an impact on our
financial statements.





For
information regarding these and other recent accounting pronouncements and their
expected impact on our future financial condition or results of operations, see
Note 2 to our consolidated financial statements.





Results
of Operations





Year ended December 31, 2008
compared to year ended December 31, 2007





Revenue.
We generated revenues of $7,594,458 for the year ended December 31, 2008, a
decrease of $4,514,121 or 37.3%, compared to $12,108,579 for the year ended
December 31, 2007. The significant decrease in revenue was due to the abnormally
cold spring time weather of Shaanxi province, which affected crop plantings and
decreased the use of fertilizer.





Gross
Profit. We achieved a gross profit of $2,030,113 for the year ended December 31,
2008, a decrease of $3,316,096 or 62.0%, compared to $5,346,209 for the year
ended December 31, 2007. The significant decrease in gross profit was due to the
significant decrease in revenue as result of decreased sales, and, to a lesser
extent, increased commodities prices, which increased our costs of revenues.
Gross margin (gross profit as a percentage of revenues), decreased, from 44.2%
for the year ended December 31, 2007, to 26.7% for the year ended December 31,
2008 primarily due to changes in overall product mix comprising
sales.  In addition, during 2008, the Company sold approximately
$2,600,000 of older inventory to a customer at cost.





Operating
expenses. We incurred operating expenses of $11,036,750 for the year ended
December 31, 2008, a decrease of $19,872,954 or 64.3% compared to $30,909,704
for the year ended December 31, 2007. The significant decrease in our operating
expenses is due to the decrease in our general and administrative expenses as a
result of a significant increase in allowance for doubtful accounts in
2007.





Aggregated
selling expenses accounted for $2,558,396 of our operating expenses for the year
ended December 31, 2008, an increase of $785,852 or 44.3% compared to $1,772,544
for the year ended December 31, 2007. The increase in our aggregated selling
expenses is primarily due the increase in advertising
expense.  General and administrative expenses accounted for $5,866,097
of our operating expenses for the year ended December 31, 2008, which decreased
$23,271,063 or 79.9% compared to $29,137,160 for the year ended December 31,
2007.  The significant decrease in our general and administrative
expenses is primarily related to an increase during 2007 in our allowance for
doubtful accounts, legal fees associated with litigation and other matters in
connection with the Amex delisting and a loss of approximately
$1,700,000 due to storm damage in August 2007.  Write down of assets
in 2008 consisted of a write down of our inventory of $1,624,397 due to
obsolescence and a write down of an investment of $987,860.





Non
Operating Income and Expenses. We had total non-operating income of $2,045,834
for the year ended December 31, 2008 compared to total non-operating income of
$274,276 for the year ended December 31, 2007.  Other income was
$1,889,898 for the year ended December 31, 2008 compared to $(69,519) for the
year ended December 31, 2007.  The change is primarily due to bad debt
recoveries during the year ended December 31, 2008.  Total
non-operating income includes interest income of $155,936 for the year ended
December 31, 2008 compared to only $348,113 of interest income for the year
ended December 31, 2007.





Net
Income (Loss). For the foregoing reasons, we had a net loss of $6,919,037 for
the year ended December 31, 2008, a decrease of $18,408,355 or 72.7% compared to
net loss of $25,327,392 for the year ended December 31, 2007.  We had
earnings (loss) per share of $(0.37) for the year ended December 31, 2008
compared to earnings per share of $(1.38) for the year ended December 31,
2007.


18





Liquidity
and Capital Resources





We are
primarily a parent holding company for the operations carried out by our
indirect operating subsidiary, Yang Ling, which carries out its activities in
the People’s Republic of China. Because of our holding company structure, our
ability to meet our cash requirements apart from our financing activities,
including payment of dividends on our common stock, if any, substantially
depends upon the receipt of dividends from our subsidiaries, particularly Yang
Ling.





As of
December 31, 2008, we had $90,716 of cash and cash equivalents compared to
$617,406 as of December 31, 2007. The significant decrease in cash is due to an
increase in net cash used in investing.





Based on
past performance and current expectations, we believe our cash and cash
equivalents and cash generated from operations will satisfy our current working
capital needs, capital expenditures and other liquidity requirements associated
with our operations. However, to the extent our allowance for bad debts in
insufficient to cover our actual bad debt experience, our liquidity would be
negatively impacted.





Cash
Flows





We had
$6,161,699 provided by our operating activities for the year ended December 31,
2008 compared to $7,932,725 used in 2007. The significant increase in cash
provided was due to the advances from the suppliers and the receipt of other
receivables.




We used
$6,924,024 of cash for investing activities for the year ended December 31,
2008, compared to $3,743,357 in 2007.  We used cash of $9,117,104 in
connection with additions to construction in process for the year ended December
31, 2008 compared to $3,648,750 in 2007.





We had no
cash provided by financing activities for the year ended December 31, 2008 and
2007.





Loan
Receivables




In August
2006, we made an unsecured loan of $1,306,745 to one of our suppliers.
Because we will receive interest payments (at a rate of 13% per annum) on this
amount from the supplier, we account for this as a loan rather than an advance
to a supplier. This loan is to be repaid by August 2008. In November 2006,
we made an unsecured $814,096 advance payment to a company for the
installation of a facility to house a new compound fertilizer production
line in a new building.  The installation of that facility occurred in
November 2007. We accounted for this as a loan under applicable accounting rules
because the advance payment bears interest at rate of 13% per
annum.  These two loan receivables were paid off during
2008.  See Note 7 to our annual consolidated financial statements
included in this Form 10-K.





Contractual
Commitments





In August
2006, we entered into a 30-year land-lease arrangement with the government of
the People’s Republic of China, under which we pre-paid $2,529,818 upon
execution of the contract of lease expense for the next 15 years. We agreed to
make a prepayment for the next eight years in November 2021, and will make a
final pre-payment in November 2029 for the remaining seven years. The annual
lease expense amounts to approximately $169,580. Our land-lease arrangement is
currently our only material on- and off-balance sheet expected or contractually
committed future obligation.





Off-Balance
Sheet Arrangements





We
currently do not have any material off-balance sheet arrangements except for the
remaining pre-payments under the land-lease arrangement described
above.




ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





Intentionally
Omitted




19




ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA




Bodisen
Biotech, Inc. and Subsidiaries
 Consolidated
Financial Statements
 Years
Ended December 31, 2008 and 2007
  Contents
 
 PageReport
      of Independent Registered Public Accounting Firm
                        
                        
                        F-1Financial
      Statements:Consolidated
      Balance Sheets as of December 31, 2008 and 2007
                        
                        
                        F-2Consolidated
      Statements of Operations and Other Comprehensive Loss for the years ended
      December 31, 2008 and 2007
                        
                        
                        F-3Consolidated
      Statement of Stockholders' Equity for the years ended December 31, 2008
      and 2007
                        
                        
                        F-4Consolidated
      Statements of Cash Flows for the years ended December 31, 2008 and
      2007
                        
                        
                        F-5Notes
      to Consolidated Financial Statements
                        
                        
                        F-6
  20
 MORGENSTERN,
SVOBODA & BAER, CPA’s, P.C.
 
 CERTIFIED
PUBLIC ACCOUNTANTS
 40
Exchange Place, Suite 1820
 New York,
N.Y.10005
 TEL:  (212)
925-9490
 FAX:
(212) 226-9134
 E-MAIL:  MSBCPAS@gmail.com
  
 Report of
Independent Registered Public Accounting Firm
   Board of
Directors and Stockholders of
 Bodisen
Biotech, Inc.
  We have
audited the accompanying consolidated balance sheets of Bodisen Biotech, Inc as
of December, 31 2008 and 2007, and the related consolidated statements of
income, stockholders’ equity and comprehensive income, and cash flows for each
of the years in the two-year period ended December 31, 2008. Bodisen Biotech,
Inc’s management is responsible for these financial statements. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Bodisen Biotech, Inc and
subsidiaries as of December 31, 2008 and 2007, and the results of their
operations and their consolidated cash flows for each of the years in the
two-year period ended December 31, 2008 in conformity with accounting principles
generally accepted in the United States of America.
 
  /s/
Morgenstern, Svoboda & Baer CPA’s P.C.
 Morgenstern,
Svoboda & Baer CPA’s P.C.
 Certified
Public Accountants
 
 New York,
N.Y.
 March 27,
2009
 F-1
  BODISEN
      BIOTECH, INC. AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETSAS
      OF DECEMBER 31, 2008 AND 20072008
                                                        
                                                        
                                                        2007ASSETSCURRENT
      ASSETS:Cash
      & cash equivalents
                                                        
                                                        $
                                                        90,716
                                                        
                                                        
                                                        $
                                                        617,406Accounts
      receivable, net of allowance for doubtful accounts of $6,069,700 and
      $25,447,689
                                                        
                                                        
                                                        719,607
                                                        
                                                        
                                                        
                                                        618,052Other
      receivable
                                                        
                                                        
                                                        375,780
                                                        
                                                        
                                                        
                                                        2,292,763Inventory
                                                        
                                                        
                                                        2,629,280
                                                        
                                                        
                                                        
                                                        1,179,448Advances
      to suppliers
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        9,741,090Prepaid
      expense and other current assets
                                                        
                                                        
                                                        803,091
                                                        
                                                        
                                                        
                                                        5,066,015Total
      current assets
                                                        
                                                        
                                                        4,618,474
                                                        
                                                        
                                                        
                                                        19,514,774PROPERTY
      AND EQUIPMENT, net
                                                        
                                                        
                                                        5,373,232
                                                        
                                                        
                                                        
                                                        5,306,254CONSTRUCTION
      IN PROGRESS
                                                        
                                                        
                                                        17,542,626
                                                        
                                                        
                                                        
                                                        7,722,756MARKETABLE
      SECURITY
                                                        
                                                        
                                                        6,191,304
                                                        
                                                        
                                                        
                                                        14,239,999INTANGIBLE
      ASSETS, net
                                                        
                                                        
                                                        5,093,073
                                                        
                                                        
                                                        
                                                        2,050,652OTHER
      ASSETS
                                                        
                                                        
                                                        3,669,063
                                                        
                                                        
                                                        
                                                        3,720,785LOAN
      RECEIVABLE
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        2,439,275TOTAL
      ASSETS
                                                        
                                                        $
                                                        42,487,772
                                                        
                                                        
                                                        $
                                                        54,994,495LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT
      LIABILITIES:Accounts
      payable
                                                        
                                                        $
                                                        710,475
                                                        
                                                        
                                                        $
                                                        1,186,768Accrued
      expenses
                                                        
                                                        
                                                        102,556
                                                        
                                                        
                                                        
                                                        219,936Total
      current liabilities
                                                        
                                                        
                                                        813,031
                                                        
                                                        
                                                        
                                                        1,406,704STOCKHOLDERS'
      EQUITY:Preferred
      stock, $0.0001 per share; authorized 5,000,000 shares; nil issued and
      outstandingCommon
      stock, $0.0001 per share; authorized 30,000,000 shares; issued and
      outstanding 18,710,250 and 18,310,250
                                                        
                                                        
                                                        1,871
                                                        
                                                        
                                                        
                                                        1,831Additional
      paid-in capital
                                                        
                                                        
                                                        33,945,822
                                                        
                                                        
                                                        
                                                        33,860,062Other
      comprehensive income
                                                        
                                                        
                                                        11,440,962
                                                        
                                                        
                                                        
                                                        16,520,775Statutory
      reserve
                                                        
                                                        
                                                        4,314,488
                                                        
                                                        
                                                        
                                                        4,314,488Retained
      earnings
                                                        
                                                        
                                                        (8,028,402
                                                        )
                                                        
                                                        
                                                        (1,109,365
                                                        )Total
      stockholders' equity
                                                        
                                                        
                                                        41,674,741
                                                        
                                                        
                                                        
                                                        53,587,791TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                                                        
                                                        $
                                                        42,487,772
                                                        
                                                        
                                                        $
                                                        54,994,495The
      accompanying notes are an integral part of these consolidated financial
      statements
 F-2
  BODISEN
      BIOTECH, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSSFOR
      THE YEARS ENDED DECEMBER 31, 2008 AND 20072008
                                                          
                                                          
                                                          2007Net
      Revenue
                                                          
                                                          $
                                                          7,594,458
                                                          
                                                          
                                                          $
                                                          12,108,579Cost
      of Revenue
                                                          
                                                          
                                                          5,564,345
                                                          
                                                          
                                                          
                                                          6,762,370Gross
      profit
                                                          
                                                          
                                                          2,030,113
                                                          
                                                          
                                                          
                                                          5,346,209Operating
      expensesSelling
      expenses
                                                          
                                                          
                                                          2,558,396
                                                          
                                                          
                                                          
                                                          1,772,544General
      and administrative expenses
                                                          
                                                          
                                                          5,866,097
                                                          
                                                          
                                                          
                                                          29,137,160Write
      down of assets
                                                          
                                                          
                                                          2,612,257
                                                          
                                                          
                                                          
                                                          -Total
      operating expenses
                                                          
                                                          
                                                          11,036,750
                                                          
                                                          
                                                          
                                                          30,909,704Income
      (loss) from operations
                                                          
                                                          
                                                          (9,006,637
                                                          )
                                                          
                                                          
                                                          (25,563,495
                                                          )Non-operating
      income (expense):Other
      income (expense), net
                                                          
                                                          
                                                          1,889,898
                                                          
                                                          
                                                          
                                                          (69,519
                                                          )Interest
      income
                                                          
                                                          
                                                          155,936
                                                          
                                                          
                                                          
                                                          348,113Interest
      expense
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          (4,318
                                                          )Total
      non-operating income (expense)
                                                          
                                                          
                                                          2,045,834
                                                          
                                                          
                                                          
                                                          274,276Loss
      before provision for income taxes
                                                          
                                                          
                                                          (6,960,803
                                                          )
                                                          
                                                          
                                                          (25,289,219
                                                          )Provision
      (benefit) for income taxes
                                                          
                                                          
                                                          (41,766
                                                          )
                                                          
                                                          
                                                          38,173Net
      loss
                                                          
                                                          
                                                          (6,919,037
                                                          )
                                                          
                                                          
                                                          (25,327,392
                                                          )Other
      comprehensive income (loss)Foreign
      currency translation gain
                                                          
                                                          
                                                          2,968,882
                                                          
                                                          
                                                          
                                                          3,349,735Unrealized
      gain (loss) on marketable equity security
                                                          
                                                          
                                                          (8,048,695
                                                          )
                                                          
                                                          
                                                          7,739,130Comprehensive
      loss
                                                          
                                                          $
                                                          (11,998,850
                                                          )
                                                          
                                                          $
                                                          (14,238,527
                                                          )Weighted
      average shares outstanding :Basic
                                                          
                                                          
                                                          18,474,388
                                                          
                                                          
                                                          
                                                          18,310,250Diluted
                                                          
                                                          
                                                          18,474,388
                                                          
                                                          
                                                          
                                                          18,310,250Loss
      per share:Basic
                                                          
                                                          $
                                                          (0.37
                                                          )
                                                          
                                                          $
                                                          (1.38
                                                          )Diluted
                                                          
                                                          $
                                                          (0.37
                                                          )
                                                          
                                                          $
                                                          (1.38
                                                          )The
      accompanying notes are an integral part of these consolidated financial
      statements
 
 F-3
 
 BODISEN
      BIOTECH, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENT OF STOCKHOLDERS' EQUITYFOR
      THE YEARS ENDED DECEMBER 31, 2008 AND 2007RetainedAdditional
                                    
                                    
                                    Other
                                    
                                    
                                    
                                    
                                    
                                    Earnings/
                                    
                                    
                                    TotalCommon
      Stock
                                    
                                    
                                    Paid
                                    
                                    
                                    Comprehensive
                                    
                                    
                                    Statutory
                                    
                                    
                                    (Accumulated
                                    
                                    
                                    Stockholders'Shares
                                    
                                    
                                    Amount
                                    
                                    
                                    in
      Capital
                                    
                                    
                                    Income
                                    
                                    
                                    Reserve
                                    
                                    
                                    Deficit)
                                    
                                    
                                    EquityBalance,
      December 31, 2006
                                    
                                    
                                    18,310,250
                                    
                                    
                                    $
                                    1,831
                                    
                                    
                                    $
                                    33,860,062
                                    
                                    
                                    $
                                    5,431,910
                                    
                                    
                                    $
                                    4,314,488
                                    
                                    
                                    $
                                    24,218,027
                                    
                                    
                                    $
                                    67,826,318Change
      in foreign currency translation gain
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    3,349,735
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    3,349,735Change
      in unrealized gain on marketable equity security
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    7,739,130
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    7,739,130Net
      loss
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    (25,327,392
                                    )
                                    
                                    
                                    (25,327,392
                                    )Transfer
      to statutory reserve
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Balance,
      December 31, 2007
                                    
                                    
                                    18,310,250
                                    
                                    
                                    
                                    1,831
                                    
                                    
                                    
                                    33,860,062
                                    
                                    
                                    
                                    16,520,775
                                    
                                    
                                    
                                    4,314,488
                                    
                                    
                                    
                                    (1,109,365
                                    )
                                    
                                    
                                    53,587,791Change
      in foreign currency translation gain
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    2,968,882
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    2,968,882Change
      in unrealized gain on marketable equity security
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    (8,048,695
                                    )
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    (8,048,695
                                    )Issuance
      of 400,000 common stock for consulting services
                                    
                                    
                                    400,000
                                    
                                    
                                    
                                    40
                                    
                                    
                                    
                                    59,960
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    60,000Value
      of warrants issued for consulting services
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    25,800
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    25,800Net
      loss
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    (6,919,037
                                    )
                                    
                                    
                                    (6,919,037
                                    )Transfer
      to statutory reserve
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Balance,
      December 31, 2008
                                    
                                    
                                    18,710,250
                                    
                                    
                                    $
                                    1,871
                                    
                                    
                                    $
                                    33,945,822
                                    
                                    
                                    $
                                    11,440,962
                                    
                                    
                                    $
                                    4,314,488
                                    
                                    
                                    $
                                    (8,028,402
                                    )
                                    
                                    $
                                    41,674,741The
      accompanying notes are an integral part of these consolidated financial
      statements
 
 F-4
  BODISEN
      BIOTECH, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE YEARS ENDED DECEMBER 31, 2008 AND 20072008
                                                                    
                                                                    
                                                                    2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                                                                    
                                                                    $
                                                                    (6,919,037
                                                                    )
                                                                    
                                                                    $
                                                                    (25,327,392
                                                                    )Adjustments
      to reconcile net loss to net cashprovided
      by (used in) operating activities:Depreciation
      and amortization
                                                                    
                                                                    
                                                                    519,370
                                                                    
                                                                    
                                                                    
                                                                    478,027Allowance
      for (recovery of )bad debts
                                                                    
                                                                    
                                                                    (1,879,558
                                                                    )
                                                                    
                                                                    
                                                                    23,777,908Write
      down of assets
                                                                    
                                                                    
                                                                    2,612,257
                                                                    
                                                                    
                                                                    
                                                                    -Common
      stock issued for services
                                                                    
                                                                    
                                                                    60,000
                                                                    
                                                                    
                                                                    
                                                                    -Value
      of warrants issued for services
                                                                    
                                                                    
                                                                    25,800
                                                                    
                                                                    
                                                                    
                                                                    -(Increase)
      / decrease in assets:Accounts
      receivable
                                                                    
                                                                    
                                                                    (1,468,913
                                                                    )
                                                                    
                                                                    
                                                                    (4,965,277
                                                                    )Other
      receivable
                                                                    
                                                                    
                                                                    2,041,625
                                                                    
                                                                    
                                                                    
                                                                    (1,596,224
                                                                    )Inventory
                                                                    
                                                                    
                                                                    (2,968,248
                                                                    )
                                                                    
                                                                    
                                                                    711,601Deposits
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    (100,501
                                                                    )Advances
      to suppliers
                                                                    
                                                                    
                                                                    10,242,896
                                                                    
                                                                    
                                                                    
                                                                    3,656,973Prepaid
      expense
                                                                    
                                                                    
                                                                    4,442,283
                                                                    
                                                                    
                                                                    
                                                                    (4,566,786
                                                                    )Other
      assets
                                                                    
                                                                    
                                                                    95,574
                                                                    
                                                                    
                                                                    
                                                                    -Increase
      / (decrease) in current liabilities:Accounts
      payable
                                                                    
                                                                    
                                                                    (512,590
                                                                    )
                                                                    
                                                                    
                                                                    144,607Other
      payable
                                                                    
                                                                    
                                                                    (129,760
                                                                    )
                                                                    
                                                                    
                                                                    (145,661
                                                                    )Net
      cash provided by (used in) operating activities
                                                                    
                                                                    
                                                                    6,161,699
                                                                    
                                                                    
                                                                    
                                                                    (7,932,725
                                                                    )CASH
      FLOWS FROM INVESTING ACTIVITIESAcquisition
      of property and equipment
                                                                    
                                                                    
                                                                    (64,871
                                                                    )
                                                                    
                                                                    
                                                                    (94,607
                                                                    )Additions
      to construction in progress
                                                                    
                                                                    
                                                                    (9,117,104
                                                                    )
                                                                    
                                                                    
                                                                    (3,648,750
                                                                    )Acquisiton
      of intangible assets
                                                                    
                                                                    
                                                                    (306,981
                                                                    )
                                                                    
                                                                    
                                                                    -Repayment
      of loans receivable
                                                                    
                                                                    
                                                                    2,564,932
                                                                    
                                                                    
                                                                    
                                                                    -Net
      cash used in investing activities
                                                                    
                                                                    
                                                                    (6,924,024
                                                                    )
                                                                    
                                                                    
                                                                    (3,743,357
                                                                    )Effect
      of exchange rate changes on cash and cash equivalents
                                                                    
                                                                    
                                                                    235,635
                                                                    
                                                                    
                                                                    
                                                                    469,161NET
      DECREASE IN CASH & CASH EQUIVALENTS
                                                                    
                                                                    
                                                                    (526,690
                                                                    )
                                                                    
                                                                    
                                                                    (11,206,921
                                                                    )CASH
      & CASH EQUIVALENTS, BEGINNING OF PERIOD
                                                                    
                                                                    
                                                                    617,406
                                                                    
                                                                    
                                                                    
                                                                    11,824,327CASH
      & CASH EQUIVALENTS, END OF PERIOD
                                                                    
                                                                    $
                                                                    90,716
                                                                    
                                                                    
                                                                    $
                                                                    617,406SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Interest
      paid
                                                                    
                                                                    $
                                                                    -
                                                                    
                                                                    
                                                                    $
                                                                    -Income
      taxes paid
                                                                    
                                                                    $
                                                                    -
                                                                    
                                                                    
                                                                    $
                                                                    -SUPPLEMENTAL
      NON-CASH INVESTING AND FINANCING ACTIVITIES:Transfer
      of land rights from other assets to intangible assets
                                                                    
                                                                    $
                                                                    2,696,003
                                                                    
                                                                    
                                                                    $
                                                                    -Receivables
      exchanged for investment interest in Chinese company
                                                                    
                                                                    $
                                                                    3,291,264
                                                                    
                                                                    
                                                                    $
                                                                    -The
      accompanying notes are an integral part of these consolidated financial
      statements
 F-5
 Bodisen
Biotech, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2008 and 2007
 
 Note
1 - Organization and Basis of Presentation
 
 Organization and Line of
Business
 
 Yang Ling
Bodisen Biology Science and Technology Development Company Limited (“BBST”) was
founded in the People’s Republic of China on August 31, 2001. BBST, located in
Yang Ling Agricultural High-Tech Industries Demonstration Zone, is primarily
engaged in developing, manufacturing and selling pesticides and compound organic
fertilizers in the People’s Republic of China.
 
 On
February 24, 2004, Bodisen International, Inc. (“BII”), the non-operative
holding company of BBST (accounting acquirer) consummated a merger agreement
with Stratabid.com, Inc. (legal acquirer) (“Stratabid”), a Delaware corporation,
to exchange 12,000,000 shares of Stratabid to the stockholders of BII, in which
BII merged into Bodisen Holdings, Inc. (BHI), an acquisition subsidiary of
Stratabid, with BHI being the surviving entity. As a part of the merger,
Stratabid cancelled 3,000,000 shares of its issued and outstanding stock owned
by its former president and declared a stock dividend of three shares on each
share of its common stock outstanding for all stockholders on record as of
February 27, 2004.
 
 Stratabid
was incorporated in the State of Delaware on January 14, 2000 and before the
merger, was a start- up stage Internet based commercial mortgage origination
business based in Vancouver, BC, Canada.
 
 The
exchange of shares with Stratabid has been accounted for as a reverse
acquisition under the purchase method of accounting because the stockholders of
BII obtained control of Stratabid. On March 1, 2004, Stratabid was renamed
Bodisen Biotech, Inc. (the “Company”). Accordingly, the merger of the two
companies has been recorded as a recapitalization of the Company, with the
Company (BII) being treated as the continuing entity. The historical financial
statements presented are those of BII.
 
 As a
result of the reverse merger transaction described above the historical
financial statements presented are those of BBST, the operating
entity.
 
 In March
2005, Bodisen Biotech Inc. completed a $3 million convertible debenture private
placement through an institutional investor. Approximately $651,000 in
incremental and direct expenses relating to this private placement has been
amortized over the term of the convertible debenture. None of the expenses were
paid directly to the institutional investor.  The net proceeds from
this offering were invested as initial start-up capital in a newly created
wholly-owned Bodisen subsidiary by the name of “Yang Ling Bodisen Agricultural
Technology Co., Ltd. (“Agricultural”). In June 2005, Agricultural completed a
transaction with Yang Ling Bodisen Biology Science and Technology Development
Company Limited (“BBST”), Bodisen Biotech, Inc.’s operating subsidiary in China,
which resulted in Agricultural owning 100% of BBST.
 
 In June
2006, BBST created another wholly owned subsidiary in the Uygur autonomous
region of Xinjiang, China by the name of Bodisen Agriculture Material Co. Ltd.
(“Material”).
 
 Basis of
Presentation
 
 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 Renminbi;
however the accompanying consolidated financial statements have been translated
and presented in United States Dollars ($).
 
 F-6
 Bodisen
Biotech, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2008 and 2007
  Foreign Currency
Translation
 
 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”.
 
 Note
2 – Summary of Significant Accounting Policies
 
 Use of
Estimates
 
 The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. It is possible that accounting
estimates and assumptions may be material to the Company due to the levels of
subjectivity and judgment involved.
 
 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 for 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.  Reserves are recorded based on the Company’s
historical collection history.
 
 Advances to
Suppliers
 
 The
Company advances to certain vendors for purchase of its material. The advances
to suppliers are interest free and unsecured.
 
 Inventories
 
 Inventories
are valued at the lower of cost (determined on a weighted average basis) or
market. The Management compares the cost of inventories with the market value
and allowance is made for writing down their inventories to market value, if
lower.
  F-7
 Bodisen
Biotech, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2008 and 2007
 Property & Equipment
& Capital Work In Progress
 
 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 of:
  Operating
      equipment
                      10
      yearsVehicles
                      8
      yearsOffice
      equipment
                      5
      yearsBuildings
                      30
      years
 
 At
December 31, 2008 and 2007, the following are the details of the property and
equipment:
 
 2008
                          
                          
                          2007Operating
      equipment
                          
                          $
                          1,112,855
                          
                          
                          $
                          1,025,862Vehicles
                          
                          
                          760,694
                          
                          
                          
                          722,360Office
      equipment
                          
                          
                          87,552
                          
                          
                          
                          81,671Buildings
                          
                          
                          5,120,667
                          
                          
                          
                          4,735,6657,081,768
                          
                          
                          
                          6,565,558Less
      accumulated depreciation
                          
                          
                          (1,708,536
                          )
                          
                          
                          (1,259,304
                          )$
                          5,373,232
                          
                          
                          $
                          5,306,254
 
 Depreciation
expense for the years ended December 31, 2008 and 2007 was $364,640 and
$336,610, respectively.
 
 On
December 31, 2008 and 2007, the Company has “Capital Work in Progress”
representing the construction in progress of the Company’s manufacturing plant
amounting $17,542,626 and $7,722,756, respectively.
 
 Marketable
Security
 
 Marketable
security consists of 2,063,768 shares of China Natural Gas, Inc. (traded on the
OTCBB: CHNG).  This investment is classified as available-for-sale as
the Company plans to hold this investment for the long-term. This investment is
reported at fair value with unrealized gains and losses included in other
comprehensive income.  The fair value is determined by using the
securities quoted market price as obtained from stock exchanges on which the
security trades.
 
 Investment
income, principally dividends, is recorded when earned. Realized capital gains
and losses are calculated based on the cost of securities sold, which is
determined by the "identified cost" method.
 
 Long-Lived
Assets
 
 The
applies the provisions of Statement of Financial Accounting Standards No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”),
which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,”
and the accounting and reporting provisions of APB Opinion No. 30, “Reporting
the Results of Operations for a Disposal of a Segment of a Business.” The
Company periodically evaluates the carrying value of long-lived assets to be
held and used in accordance with SFAS 144. SFAS 144 requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets’ carrying amounts. In that event, a
loss is recognized based on the amount by which the carrying amount exceeds the
fair market value of the long-lived assets. Loss on long-lived assets to be
disposed of is determined in a similar manner, except that fair market values
are reduced for the cost of disposal. Based on its review, the Company believes
that, as of December 31, 2008 there were no significant impairments of its
long-lived assets.
  F-8
 Bodisen
Biotech, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2008 and 2007
 Intangible
Assets
 
 Intangible
assets consist of Rights to use land and Fertilizers proprietary technology
rights. The Company evaluates intangible assets for impairment, at least on an
annual basis and whenever events or changes in circumstances indicate that the
carrying value may not be recoverable from its estimated future cash flows.
Recoverability of intangible assets, other long-lived assets and, goodwill is
measured by comparing their net book value to the related projected undiscounted
cash flows from these assets, considering a number of factors including past
operating results, budgets, economic projections, market trends and product
development cycles. If the net book value of the asset exceeds the related
undiscounted cash flows, the asset is considered impaired, and a second test is
performed to measure the amount of impairment loss.
 
 Fair Value of Financial
Instruments
 
 On
January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements. SFAS
No. 157 defines fair value, establishes a three-level valuation hierarchy for
disclosures of fair value measurement and enhances disclosures requirements for
fair value measures. The carrying amounts reported in the balance sheets for
receivables and current liabilities each qualify as financial instruments and
are a reasonable estimate of fair value because of the short period of time
between the origination of such instruments and their expected realization and
their current market rate of interest.  The three levels are defined
as follow:
  ·
                Level
      1 inputs
      to the valuation methodology are quoted prices (unadjusted) for identical
      assets or liabilities in active
markets.
 
 ·
                Level
      2 inputs to the valuation methodology include quoted prices for similar
      assets and liabilities in active markets, and inputs that are observable
      for the asset or liability, either directly or indirectly, for
      substantially the full term of the financial
  instrument.
  ·
                Level
      3 inputs
      to the valuation methodology are unobservable and significant to the fair
      value measurement.
 
 The
following table represents our assets and liabilities by level measured at fair
value on a recurring basis at December 31, 2008.
 
 Description
                    
                    Level
      1
                    
                    
                    Level
      2
                    
                    
                    Level
      3AssetsMarketable
      securities
                    
                    $
                    -
                    
                    
                    $
                    6,191,304
                    
                    
                    $
                    -
 
 F-9
 Bodisen
Biotech, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2008 and 2007
 
 Revenue
Recognition
 
 The
Company’s revenue recognition policies are in compliance with Staff accounting
bulletin (SAB) 104. Sales revenue is recognized at the date of shipment 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. Payments received before all of the
relevant criteria for revenue recognition are satisfied are recorded as unearned
revenue.
  The
Company’s revenue is earned in three product lines, which are as
follows:
  For
      the Years End December 31,2008
                                
                                
                                2007Compound
      fertilizer
                                
                                $
                                7,435,718
                                
                                
                                $
                                5,882,663Liquid
      fertilizer
                                
                                
                                94,084
                                
                                
                                
                                4,225,933Pesticide
                                
                                
                                64,656
                                
                                
                                
                                1,999,983$
                                7,594,458
                                
                                
                                $
                                12,108,579
 
 Advertising
Costs
 
 The
Company expenses the cost of advertising as incurred or, as appropriate, the
first time the advertising takes place. Advertising costs for the years ended
December 31, 2008 and 2007 were insignificant.
 
 Stock-Based
Compensation
 
 The
Company adopted SFAS No. 123 (Revised 2004), Share Based Payment(“SFAS
No. 123R”), under the modified-prospective transition method on
January 1, 2006. SFAS No. 123R requires companies to measure and
recognize the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value. Share-based compensation
recognized under the modified-prospective transition method of SFAS
No. 123R includes share-based compensation based on the grant-date fair
value determined in accordance with the original provisions of SFAS
No. 123, Accounting for
Stock-Based Compensation,for all share-based payments granted prior to
and not yet vested as of January 1, 2006 and share-based compensation based
on the grant-date fair-value determined in accordance with SFAS No. 123R
for all share-based payments granted after January 1, 2006. SFAS
No. 123R eliminates the ability to account for the award of these
instruments under the intrinsic value method prescribed by Accounting Principles
Board (“APB”) Opinion No. 25, Accounting for Stock Issued to
Employees, and allowed under the original provisions of SFAS
No. 123. Prior to the adoption of SFAS No. 123R, the Company accounted
for our stock option plans using the intrinsic value method in accordance with
the provisions of APB Opinion No. 25 and related
interpretations.
 
 Income
Taxes
 
 The
Company utilizes SFAS No. 109, “Accounting for Income Taxes,” which requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each period end based on
enacted tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
  F-10
 Bodisen
Biotech, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2008 and 2007
 According
to the Provisional Regulations of the People’s Republic of China on Income Tax,
the Document of Reductions and Exemptions of Income Tax for the Company had been
approved by the local tax bureau and the Yang Ling Agricultural High-Tech
Industries Demonstration Zone. The Company was exempted from income tax through
October 2007.
 
 In March
2005, Bodisen Biotech Inc. formed Agricultural. Under Chinese law, a newly
formed wholly owned subsidiary of a foreign company enjoys an income tax
exemption for the first two years and a 50% reduction of normal income tax rates
for the following 3 years. In order to extend such tax benefits, in June 2005,
Agricultural completed a transaction with BBST, which resulted in Agricultural
owning 100% of BBST.
 
 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 $8,117,004 and
$5,148,122 at December 31, 2008 and 2007, respectively, are classified as an
item of other comprehensive income in the stockholders’ equity section of the
consolidated balance sheet. During the years ended December 31, 2008 and 2007,
other comprehensive income in the consolidated statements of operations and
other comprehensive income included translation gains of $2,968,882 and
$3,349,735, respectively.
 
 Basic and Diluted Earnings
Per Share
 
 Earnings
per share is calculated in accordance with the Statement of Financial Accounting
Standards No. 128 (SFAS No. 128), “Earnings per share.” SFAS No. 128 superseded
Accounting Principles Board Opinion No.15 (APB 15). Net loss per share for all
periods presented has been restated to reflect the adoption of SFAS No. 128.
Basic net loss per share is based upon the weighted average number of common
shares outstanding. Diluted net loss 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.
 
 The following is a reconciliation of the
number of shares (denominator) used in the basic and diluted earnings per share
computations:
 
 2008
                                
                                
                                2007Per
      Share
                                
                                
                                
                                
                                
                                Per
      ShareShares
                                
                                
                                Amount
                                
                                
                                Shares
                                
                                
                                AmountBasic  earnings
      per share
                                
                                
                                18,474,338
                                
                                
                                $
                                (0.37
                                )
                                
                                
                                18,310,250
                                
                                
                                $
                                (1.38
                                )Effect
      of dilutive stock options
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Diluted
      earnings per share
                                
                                
                                18,474,338
                                
                                
                                $
                                (0.37
                                )
                                
                                
                                18,310,250
                                
                                
                                $
                                (1.38
                                )
  F-11
 Bodisen
Biotech, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2008 and 2007
  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. Reportable segments
are based on products and services, geography, legal structure, management
structure, or any other manner in which management disaggregates a company. SFAS
131 has no effect on the Company’s consolidated financial statements as the
Company consists of one reportable business segment. All revenue is from
customers in People’s Republic of China. All of the Company’s assets are located
in People’s Republic of China.
 
 Reclassifications
 
 Certain
prior period amounts have been reclassified to conform to the year ended
December 31, 2008 presentation.
 
 Recent
Pronouncements
 
 In June
2007, the FASB issued FASB Staff Position No. EITF 07-3, “Accounting for
Nonrefundable Advance Payments for Goods or Services Received for use in Future
Research and Development Activities” (“FSP EITF 07-3”), which addresses whether
nonrefundable advance payments for goods or services that used or rendered for
research and development activities should be expensed when the advance payment
is made or when the research and development activity has been
performed.  Management is currently evaluating the effect of this
pronouncement on financial statements.
 
 In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
Combinations.” SFAS No. 141R  changes how a reporting enterprise
accounts for the acquisition of a business. SFAS
No. 141R  requires an acquiring entity to recognize all the
assets acquired and liabilities assumed in a transaction at the acquisition-date
fair value, with limited exceptions, and applies to a wider range of
transactions or events. SFAS No. 141R is effective for fiscal years
beginning on or after December 15, 2008 and early adoption and
retrospective application is prohibited.
 
 In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51.  SFAS 160 clarifies that a noncontrolling
interest in a subsidiary is an ownership interest in the consolidated entity
that should be reported as equity in the consolidated financial
statements.  SFAS 160  changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to both parent and the
noncontrolling interest.  SFAS 160  is effective for the
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008.  Based on current conditions, the Company
does not expect the adoption of SFAS 160 to have a significant impact on its
results of operations or financial position.
  F-12
 Bodisen
Biotech, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2008 and 2007
  In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities an amendment of FASB Statement No. 133.”  SFAS
161  changes the disclosure requirements for derivative instruments
and hedging activities. Entities are required to provide enhanced disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under SFAS 133 and its
related interpretations, and (c) how derivative instruments and related hedged
items affect an entity’s financial position, financial performance, and cash
flows.  Based on current conditions, the Company does not expect the
adoption of SFAS 161 to have a significant impact on its results of operations
or financial position.
 
 In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.”  SFAS 162 identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy).  SFAS 162 will not have an
impact on the Company’s financial statements.
 
 In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts, an interpretation of FASB Statement No. 60.”  The
scope of SFAS 163 is limited to financial guarantee insurance (and reinsurance)
contracts, as described in this Statement, issued by enterprises included within
the scope of Statement 60. Accordingly, SFAS 163 does not apply to financial
guarantee contracts issued by enterprises excluded from the scope of Statement
60 or to some insurance contracts that seem similar to financial guarantee
insurance contracts issued by insurance enterprises (such as mortgage guaranty
insurance or credit insurance on trade receivables). SFAS 163 also does not
apply to financial guarantee insurance contracts that are derivative instruments
included within the scope of FASB Statement No. 133, “Accounting for Derivative
Instruments and Hedging Activities.” SFAS 163 will not have an impact on the
Company’s financial statements.
 
 Note
3 – Principles of Consolidation
 
 The
accompanying consolidated financial statements include the accounts of Bodisen
Biotech, Inc., its 100% wholly-owned subsidiaries Bodisen Holdings, Inc. (BHI),
Yang Ling Bodisen Agricultural Technology Co., Ltd (Agricultural), which was
incorporated in March 2005, and Sinkiang Bodisen Agriculture Material Co., Ltd.
(Material), which was incorporated in June 2006, as well as the accounts of
Agricultural’s 100% wholly- owned subsidiary Yang Ling Bodisen Biology Science
and Technology Development Company Limited (BBST).  All significant
inter-company accounts and transactions have been eliminated in
consolidation.
 
 F-13
 Bodisen
Biotech, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2008 and 2007
 
 Note
4 - Inventory
 
 Inventory
at December 31, 2008 and 2007 consisted of the following:
  2008
                          
                          
                          2007Raw
      Material
                          
                          $
                          1,290,591
                          
                          
                          $
                          425,542Packaging
                          
                          
                          100,926
                          
                          
                          
                          250,018Finished
      Goods
                          
                          
                          1,237,761
                          
                          
                          
                          691,730Consumables
                          
                          
                          --
                          
                          
                          
                          3362,629,278
                          
                          
                          
                          1,367,626Less
      : Obsolescence Reserve
                          
                          
                          --
                          
                          
                          
                          (188,178
                          )Net
      Inventory
                          
                          $
                          2,629,278
                          
                          
                          $
                          1,179,448
  During
the year ended December 31, 2008, the Company wrote down the value its inventory
by $1,624,397 due to obsolescence.
 
 Note
5 – Marketable Security
 
 During
2005, the Company purchased 2,063,768 shares of China Natural Gas, Inc. (traded
on the OTCBB: CHNG) for $2,867,346.  At December 31, 2008 and 2007,
the fair value of this investment was $6,191,304 and $14,239,999, respectively,
which resulted in an unrealized gain (loss) of ($8,048,695) and $7,739,130 for
the years ended December 31, 2008 and 2007, respectively, which is included in
other comprehensive income (loss). At December 31, 2008, this represented a 7.1%
interest in China Natural Gas, Inc.  The CEO of China Natural Gas was
a former board member of the Company.See Note 14 for litigation
regarding these shares of common stock of China Natural Gas, Inc.
 
 Note
6 –Other Long-term Assets
 
 During
2006, the Company acquired a 19.5% and a 19.8% interest in two local companies
by investing a total amount of $1,156,861 in cash.
 
 During
2008, the Company exchanged $3,291,264 of receivables for a 28.8% ownership
interest in a Chinese company.  The Company has written down the value
of this investment by $987,860 at December 31, 2008.
 
 Note
7 - Loan Receivable
 
 In August
2006, the Company entered into an agreement to loan $1,306,745 to an unrelated
party. The loan is unsecured, payable by August 2008 and carries an interest
rate of 13% per annum.
 
 In
November 2006, the Company entered into an agreement to loan $814,096 to an
unrelated party. The loan is unsecured, payable by November 2008 and carries an
interest rate of 13% per annum.
 
 These two
loan receivables were paid off during 2008.
 
 F-14
 Bodisen
Biotech, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2008 and 2007
 
 Note
8– Intangible Assets
 
 Net
intangible assets at December 31, 2008 and 2007 were as follows:
 
 2008
                        
                        
                        2007Rights
      to use land
                        
                        $
                        5,061,427
                        
                        
                        $
                        1,873,929Fertilizers
      proprietary technology rights
                        
                        
                        1,173,600
                        
                        
                        
                        1,096,7046,235,027
                        
                        
                        
                        2,970,633Less
      Accumulated amortization
                        
                        
                        (1,141,954
                        )
                        
                        
                        (919,981
                        )$
                        5,093,073
                        
                        
                        $
                        2,050,652
 
 The
Company’s office and manufacturing site is located in Yang Ling Agricultural
High-Tech Industries Demonstration Zone in the province of Shanxi, People’s
Republic of China. The Company leases land per a real estate contract with the
government of People’s Republic of China for a period from November 2001 through
November 2051. Per the People’s Republic of China’s governmental regulations,
the Government owns all land.
 
 During
July 2003, the Company leased another parcel of land per a real estate contract
with the government of the People’s Republic of China for a period from July
2003 through June 2053.
 
 The
Company has recognized the amounts paid for the acquisition of rights to use
land as intangible asset and amortizing over a period of fifty years. The
“Rights to use land” is being amortized over a 50 year period.
 
 The
Company acquired Fluid and Compound Fertilizers proprietary technology rights
with a life ending December 31, 2011. The Company is amortizing Fertilizers
proprietary technology rights over a period of ten years.
 
 On July
15, 2008, the Company entered into a 50 year land rights agreement.
 
 Amortization
expense for the Company’s intangible assets for the years ended December 31,
2008 and 2007 amounted to $154,730 and $141,416, respectively.
 
 Amortization
expense for the Company’s intangible assets over the next five fiscal years is
estimated to be:  2009-$150,000, 2010-$150,000, 2011-$150,000, 2012-
$150,000; 2013 - $150,000 and thereafter - $4,340,000.
 
 F-15
 Bodisen
Biotech, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2008 and 2007
 
 Note
9 – Stock Options
 
 Following
is a summary of the stock option activity:
 
 Options
      outstanding
                          
                          
                          Weighted
      Average Exercise Price
                          
                          
                          Aggregate
      Intrinsic ValueOutstanding,
      December 31, 2006
                          
                          
                          136,000
                          
                          
                          $
                          5.39
                          
                          
                          $
                          50,000Granted
                          
                          
                          -
                          
                          
                          
                          -Forfeited
                          
                          
                          -
                          
                          
                          
                          -Exercised
                          
                          
                          -
                          
                          
                          
                          -Outstanding,
      December 31, 2007
                          
                          
                          136,000
                          
                          
                          $
                          5.39
                          
                          
                          $
                          0Granted
                          
                          
                          400,000
                          
                          
                          
                          0.70Forfeited
                          
                          
                          -
                          
                          
                          
                          -Exercised
                          
                          
                          -
                          
                          
                          
                          -Outstanding,
      December 31, 2008
                          
                          
                          536,000
                          
                          
                          $
                          1.89
                          
                          
                          $
                          0
 
 Following
is a summary of the status of options outstanding at December 31,
2008:
 
 Outstanding
      Options
                    
                    
                    
                    
                    
                    Exercisable
      OptionsExercise
                      Price
                    
                    
                    Number
                    
                    
                    Average
      Remaining Contractual Life
                    
                    
                    Average
      Exercise Price
                    
                    
                    Number
                    
                    
                    Average
      Exercise Price$5.00
                    
                    
                    
                    100,000
                    
                    
                    
                    0.68
                    
                    
                    
                    $5.00
                    
                    
                    
                    100,000
                    
                    
                    
                    $5.00$5.80
                    
                    
                    
                    10,000
                    
                    
                    
                    1.25
                    
                    
                    
                    $5.80
                    
                    
                    
                    10,000
                    
                    
                    
                    $5.80$6.72
                    
                    
                    
                    26,000
                    
                    
                    
                    2.00
                    
                    
                    
                    $6.72
                    
                    
                    
                    26,000
                    
                    
                    
                    $6.72$0.70
                    
                    
                    
                    400,000
                    
                    
                    
                    2.25
                    
                    
                    
                    $0.70
                    
                    
                    
                    400,000
                    
                    
                    
                    $0.70
 
 The
assumptions used in calculating the fair value of warrants granted in 2008 using
the Black-Scholes option- pricing model are as follows:
 
 Risk-free
      interest rate
                        
                        
                        2.05
                        %Expected
      life of the options
                        
                        2.5
      yearsExpected
      volatility
                        
                        
                        128
                        %Expected
      dividend yield
                        
                        
                        0
                        %
 
 Note
10 – Employee Welfare Plans
 
 The
Company has established its own employee welfare plan in accordance with Chinese
law and regulations. The Company makes annual contributions of 14% of all
employees’ salaries to the employee welfare plan. The total expense for the
welfare plan was $0 and $0 for the years ended December 31, 2008 and 2007,
respectively. The Company has recorded welfare payable of $0 and $71,908 at
December 31, 2008 and 2007, respectively, which is included in accrued expenses
in the accompanying consolidated balance sheet.
 
 F-16
 Bodisen
Biotech, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2008 and 2007
 
 Note
11 – 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;
 
 ii.
                Allocations
      to the “Statutory surplus reserve” of at least 10% of income after tax, as
      determined under PRC accounting rules and regulations, until the fund
      amounts to 50% of the Company’s registered
  capital;
 
 iii.
                Allocations
      of 5-10% of income after tax, as determined under PRC accounting rules and
      regulations, to the Company’s “Statutory common welfare fund,” which is
      established for the purpose of providing employee facilities and other
      collective benefits to the Company’s employees;
  and
 
 iv.
                Allocations
      to the discretionary surplus reserve, if approved in the stockholders’
      general meeting.
 
 Pursuant
to the new Corporate Law effective on January 1, 2006, there is now only one
"Statutory surplus reserve" requirement. The reserve is 10 percent of income
after tax, not to exceed 50 percent of registered capital.
 
 The
Company has appropriated $0 and $0 as reserve for the statutory surplus reserve
and welfare fund for the years ended December 31, 2008 and 2007,
respectively.
  Note
12 – Factory Location and Lease Commitments
 
 The
Company’s principal executive offices are located at North Part of Xinquia Road,
Yang Ling Agricultural High-Tech Industries Demonstration Zone Yang Ling,
Shaanxi province, People’s Republic of China. BBST owns two factories, which
includes three production lines, an office building, one warehouse, and two
research labs and, is located on 10,900 square meters of land. These leases
require monthly rental payments of $2,180 and the leases expire in
2013.
  Note
13 – Current Vulnerability Due to Certain Concentrations
 
 Two
vendors provided 16% and 6% of the Company’s raw materials for the year ended
December 31, 2008.  Two vendors provided 70.3% and 10.5% of the
Company’s raw materials for the year ended December 31, 2007.
 
 The
Company’s operations are carried out in the PRC. Accordingly, the Company’s
business, financial condition and results of operations may be influenced by the
political, economic and legal environments in the PRC, by the general state of
the PRC’s economy. The Company’s business may be influenced by changes in
governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversion and remittance abroad, and rates and methods of
taxation, among other things.
 
 F-17
 Bodisen
Biotech, Inc. and Subsidiaries
 Notes
to Consolidated Financial Statements
 For
the Years Ended December 31, 2008 and 2007
 
 Note
14 – Litigation
 
 The
Company is involved in a variety of claims, suits, investigations and
proceedings that arise from time to time in the ordinary course of its business,
including actions with respect to contracts, intellectual property (IP), product
liability, employment, benefits, securities, and other matters.  These
actions may be commenced by a number of different constituents, including
competitors, partners, clients, current or former employees, government and
regulatory agencies, stockholders, and representatives of the locations in
which it does business. The following is a discussion of some of the more
significant legal matters involving the Company.
 
 In late
2006, various shareholders of the Company filed eight purported class actions in
the U.S. District Court for the Southern District of New York against the
Company and certain of its officers and directors (among others), asserting
claims under the federal securities laws.  The complaints contain
allegations about prior financial disclosures and its internal controls and a
prior, now-terminated relationship with a financial advisor.
 
 The eight
actions are Stephanie Tabor vs. Bodisen, Inc., et al., Case No. 06-13220 (filed
November 2006), Fraser Laschinger vs. Bodisen, Inc., et al., Case No. 06-13254
(filed November 2006), Anthony DeSantis vs. Bodisen, Inc., et. al., Case
No. 06-13454 (filed November 2006), Yuchen Zhou vs. Bodisen, Inc., et. al.,
Case No. 06-13567 (filed November 2006), William E. Cowley vs. Bodisen,
Inc., et. al., Case No. 06-13739 (filed December 2006), Ronald Stubblefield
vs. Bodisen, Inc., et. al., Case No. 06-14449 (filed December 2006), Adam
Cohen vs. Bodisen, Inc., et. al., Case No. 06-15179 (filed December 2006)
and Lawrence M. Cohen vs. Bodisen, Inc., et. al., Case No. 06-15399 (filed
December 2006). Plaintiffs have not specified an amount of damages they seek.
Last year, the Court consolidated each of the actions into a single
proceeding.
 
 In
October 2008 the New York Federal Court presiding over the eight consolidated
class actions against Bodisen and its management granted the Company’s initial
motion to dismiss the cases.
 
 In
addition, the court has notified Bodisen that it also granted the Company’s
second motion to dismiss, which challenged the subject matter jurisdiction of
the court over about 40% of the class and thus sought to reduce the number of
potential class plaintiffs significantly. The court has not provided the Company
this written decision, however, the Company hopes to receive it
soon.
 
 In
2007, Ji Xiang, a shareholder of China Natural Gas (and son of
its Chairman and CEO) instituted litigation in the Chinese court system in
Shaanxi province challenging the validity of the Company’s ownership of
2,063,768 shares of China Natural Gas common stock. The Company obtained these
shares in September 2005 in a share transfer agreement and asserts that it has
fully performed its obligations under the agreement and is entitled to own the
shares. The parties in the Chinese litigation have submitted their evidence and
now await a decision from the Chinese court. Also, in January 2008, the same
shareholder instituted litigation in a Utah state court against Yangling Bodisen
Biotech Development Co. Ltd. and Interwest Transfer Co. (China Natural Gas’s
transfer agent) seeking to prevent the Company from selling its shares in China
Natural Gas. Plaintiff has obtained an order from the Utah court provisionally
preventing the Company from selling the China Natural Gas shares pending a
decision on the merits of the underlying dispute. The Company intends to
vigorously and thoroughly defend itself against this claim. While the Company
believes it will prevail in these litigation matters and establish its right of
ownership to the China Natural Gas shares, an adverse outcome could have a
material adverse effect on its business, financial condition, results of
operations or liquidity.
 
 F-18


ITEM
9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES





None.


21





ITEM
9A(T). CONTROLS AND PROCEDURES





Disclosure
Controls and Procedures





Our Chief
Executive Officer and Chief Financial Officer conducted an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of
1934, as amended (the Exchange Act)) as of December 31, 2008. Based on that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were not effective as of the end of
the period covered by this report to ensure that information required to be
disclosed in the reports that we file or submit under the Exchange Act is
accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosures. The reasons that our Chief Executive Officer and
Chief Financial Officer arrived at this conclusion include:





·
            Our inability
      to complete the Management’s Annual Report on Internal Control over
      Financial Reporting.
      For the reasons described below under “Internal Control over Financial
      Reporting,” our management’s assessment of our internal control over
      financial reporting for the years ended December 31, 2008 and 2007 have
      not been completed. Because we were not able to complete the internal
      control reports within the time periods prescribed and include such
      reports in our annual reports on Form 10-K for the years ended December
      31, 2008 and 2007, our management is not able to make a determination at
      this time that our disclosure controls and procedures were effective as of
      December 31, 2008.





Notwithstanding
the conclusion that our disclosure controls and procedures were not effective as
of the end of the period covered by this report, the Chief Executive Officer and
the Chief Financial Officer believe that the financial statements and other
information contained in this annual report present fairly, in all material
respects, our business, financial condition and results of
operations.





Internal
Control over Financial Reporting





Management’s
Annual Report on Internal Control over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. Our internal control over financial reporting is
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Our internal control
over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets, (2) provide reasonable
assurances that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting
principles, and that our receipts and expenditures are being made only in
accordance with authorizations of our management and directors; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material effect
on the consolidated financial statements.





Although
we are now a “smaller reporting company,” in prior periods we were considered to
be an “accelerated filer” under the rules and regulations of the Commission. As
an accelerated filer, we were required to evaluate and assess our internal
control over financial reporting, as required by Section 404 of the
Sarbanes-Oxley Act of 2002 (“SOX 404”) as of the end of the period covered by
our annual report on Form 10-K for the year ended December 31, 2006. Although we
had engaged an outside consulting firm in September 2006 to assist us in
preparing to implement SOX 404, we did not know that we would be considered an
“accelerated filer” until the end of 2006 and would thus be required to include
such report on our 2006 annual report. Because we did not have an accurate
understanding of when compliance with SOX 404 was required, our work to
implement SOX 404 was not sufficiently advanced in order for us to complete the
evaluation on a timely basis with respect to the period ending December 31,
2006. Moreover, management has been unable to fully complete its evaluation and
assessment with respect to the period ending December 31, 2008 prior to the
filing of this Form 10-K for the year ended December 31, 2008. Management
believes that any such assessment should be based on the criteria established in
the “Internal Control - Integrated Framework” issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Although our
independent registered public accounting firm, Morgenstern, Svoboda & Baer,
P.C.. has not specifically identified any significant deficiencies or material
weaknesses, our management has concluded that its internal control over
financial reporting for the period ending December 31, 2008 was not
effective.





Our
inability to complete the required report for the year ended December 31, 2006
prevented our former independent registered public accounting firm, Kabani &
Company, Inc., from being able to satisfactorily complete an audit of our
internal control over financial reporting pursuant to SOX 404, which was
required to be included in our annual report on Form 10-K for the year ended
December 31, 2006. For this reason, Kabani & Company, Inc. disclaimed an
opinion on our internal control over financial reporting for the year ended
December 31, 2006.





This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting. Had
management been able to complete its assessment, such report would not have been
subject to attestation by our registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit us to
provide only management’s report in this annual report for the year ended
December 31, 2008.


22





Notwithstanding
the conclusion that our internal control over financial reporting was not
effective as of the end of the period covered by this report, the Chief
Executive Officer and the Chief Financial Officer believe that the financial
statements and other information contained in this annual report present fairly,
in all material respects, our business, financial condition and results of
operations.





Changes
in Internal Control over Financial Reporting





There
were no changes in internal control over financial reporting (as defined in Rule
13a-15f under the Exchange Act) that occurred during the fourth quarter of 2008
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.





ITEM
9B. OTHER INFORMATION





None.


PART
III




ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE




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




Name
                      
                      Age
                      
                      PositionBo
      Chen
                      
                      51
                      
                      Chairman,
      Chief Executive Officer and PresidentQiong
      Wang
                      
                      43
                      
                      DirectorPatrick
      McManus
                      
                      54
                      
                      DirectorChenglin
      Guo
                      
                      40
                      
                      DirectorChunsheng
      Wang
                      
                      45
                      
                      Chief
      Operating OfficerJunyan
      Tong
                      
                      37
                      
                      Chief
      Financial
Officer





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





On June
4, 2007 and as previously disclosed on a Current Report on Form 8-K, Yiliang Lai
resigned as our Chief Financial Officer, and our Board of Directors appointed
Junyan Tong as our Chief Financial Officer with immediate effect. On February
19, 2008 and as previously disclosed on a Current Report on Form 8-K, David
Gatton resigned from our Board of Directors. Mr. Gatton’s resignation was due to
personal reasons and not because of any disagreement with the Company on any
matter relating to the Company’s operations, policies or
procedures.  On December 8, 2008 and as previously disclosed on a
Current Report on Form 8-K, Linzhang Zhu resigned from our Board of Directors.
Mr. Gatton’s resignation was due to personal health reasons and not because of
any disagreement with the Company on any matter relating to the Company’s
operations, policies or procedures.





Background
of Executive Officers and Directors





Bo Chen,Chairman, Chief
Executive Officer and President of Bodisen; Director and President of our
subsidiary, Yang Ling - Mr. Chen is one of Bodisen’s original founders and
stockholders. He has served as Bodisen’s Chairman and Chief Executive Officer
since January 5, 2007, and as President since 2004. From August 1997 to August
2001, Mr. Bo Chen was Chief Operations Officer and Chief Technology Officer of
Shaanxi Bodisen Chemical Co., Ltd. From July 1994 to December 1997, he was the
Chief Executive Officer and President of Yang Ling Shikanglu Chemurgical
Technology Development Co., Ltd. Mr. Chen received his Bachelor of Science
degree from Shaanxi Normal College in July 1984.





Qiong Wang, Director of
Bodisen; Director of Yang Ling - Mrs. Wang Qiong has served as a Director of
Bodisen since the merger of Bodisen Holding and Bodisen International and she
has been on the board of Yang Ling since Yang Ling was founded in August 2001.
She also served as the Chairman of the Board of Bodisen Biotech, Inc. until
January 5, 2007. Mrs. Wang Qiong has over 10 years experience in the fertilizer
and chemical industry. From 1997 to May 2001, she was the Chief Executive
Officer and President of Shaanxi Bodisen Chemical Co., Ltd., which changed its
name to Yang Ling Bodisen Biology Science and Technology Development
Company Limited on August 31, 2001. From May 1996 to December 1997, she was
the President of Yang Ling Kangyuan Agricultural Chemical Company, a company
dedicated to the research and development of agricultural products. Mrs. Wang
Qiong graduated from North-West Agronomy College, with a Bachelor of Science
degree in 1986.


23





Patrick McManus,Director of
Bodisen - Mr. Patrick McManus, CPA, J.D., joined Bodisen’s Board of Directors on
May 1, 2004 as an independent board member. Mr. McManus brings over 25 years of
experience in business, finance and law to Bodisen. He was elected Mayor of the
City of Lynn, Massachusetts in 1992 and served in this position until his
retirement to the private practice of law and accounting in 2002. While serving
the City of Lynn as its Mayor, he was elected a member and trustee of the
Executive Committee of the U.S. Conference of Mayors (USCM) with responsibility
for developing policy for the USCM. He also served as the Chairman of the USCM
Science and Technology Subcommittee, the Urban Water Council, and the USCM Audit
Committee. Mr. McManus started his career in business with the General Electric
Company in 1979, and was a Professor of Business and Finance at Salem State
College in Massachusetts. He was instrumental in establishing a close alliance
as well as coordinating a regular exchange of visits by members of the U.S.
Conference of Mayors and the China Association of Mayors. Mr. McManus has been a
Certified Public Accountant since 1985. Mr. McManus received his Juris Doctorate
from Boston College Law School and an MBA from Suffolk University. Mr. McManus
also serves as a director of Harbin Electric Co., which is based in Harbin,
China.





Chenglin Guo,Director of
Bodisen - Mr. Guo has an economic management Bachelor Degree from Tianjing
Commercial University.  He is also an engineer and from 1995 to 1996
Mr. Guo was the Manager of Yangling Industry and Commercial Union Training
School.  From 1997 to 1999 he was the head of Xianyang Industry and
Commercial Union Training School, the Vice Head Secretary of Xianyang Commercial
Union, and Manager of Xianyang Industry and Commercial Economic Consulting
Center. From 2000 to present, he has been working in a social service
position.





Chunsheng Wang,Chief
Operating Officer of Bodisen, Executive Vice President and Chief Operating
Officer of Yang Ling - Mr. Wang Chunsheng joined Bodisen in September 2001 as
Chief Operating Officer. From September 1999 to August 2001, Mr. Wang Chunsheng
was Vice General Manager of the Shaanxi Bodisen Chemical Co. Ltd. responsible
for sales and marketing. From January 1997 to July 1999, he held a position as
Senior Sales Manager with the Yang Ling Kangyuan Agricultural Chemical Company.
Mr. Wang Chunsheng holds an agronomist certification.





Junyan Tong,Chief Financial
Officer of Bodisen and Yang Ling - Promoted to the position of Chief Financial
Officer on June 4, 2007. Since 2005, Ms. Tong was serving as the Company’s
Assistant Chief Financial Officer. From 1998-2002, Ms. Tong was Chief Financial
Officer of Shenzhen Rongxun Industry Co., Ltd, a fitness equipment manufacturing
company, where she was in charge of banking, tax matters, foreign currency
issues, general ledgers, budgeting and financial analysis. From 1995-1998, Ms.
Tong served as Financial Manager of Guangdong Zhongyunhui Electric Co., Ltd., a
telecommunications company. There, Ms. Tong was responsible for cost control,
budgeting and foreign currency issues. From 1991-1995, Ms. Tong was Accounting
Manager at Guangdong Dongguan Anbao Industry Co., Ltd., a China-based
electronics appliance company. As Accounting Manager, Ms. Tong handled financial
statements, general ledger and cost control matters. Ms. Tong holds a degree in
financial management from Harbin Economic Management Institute





Board
of Directors





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





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





Committees





Our Board
of Directors has a Nominating Committee and a Compensation
Committee.





The
committees and the committee members are listed below:





1. Nominating
Committee:Chenglin
Guo(Chairman) and Patrick McManus


2. Compensation
Committee: Patrick McManus (Chairman) andChenglin Guo





As
previously reported in a Current Report on Form 8-K, at a July 30, 2007 meeting
of our Board of Directors, in light of the fact that our securities are no
longer listed on a national securities exchange or listed in an automated
inter-dealer quotation system of a national securities association, our Board of
Directors took action to disband our audit committee effective July 30,
2007.





Board
Compensation





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


24





Employment
Agreements





There are
currently no employment agreements between the Company and any of its named
executive officers. Further details regarding executive compensation are
provided in Item 11 of this report.





Family
Relationships





Mr.
Chungsheng Wang, our Chief Operating Officer, and Ms. Qiong Wang, a member of
our Board of Directors are siblings.





Beneficial
Ownership Reporting Compliance




Section
16(a) of the Exchange Act, as amended, requires our executive officers,
directors and persons who beneficially own more than 10% of our shares of common
stock to file reports of their beneficial ownership and changes in ownership
(Forms 3, 4 and 5, and any amendment thereto) with the SEC. Executive officers,
directors and greater-than-10% holders are required to furnish us with copies of
all Section 16(a) forms they file.




Based
upon a review of the Forms 3, 4 and 5 (and amendments thereto) furnished to us
for the fiscal year ended December 31, 2008, we have determined that our
directors, officers and greater-than-10% beneficial owners complied with all
applicable Section 16 filing requirements.




Code
of Ethics




The
Company has adopted a Code of Ethics that applies to all officers, directors and
employees of the Company, including the Company’s principal executive officer,
principal financial officer, principal accounting officer and controller. A copy
of the Company’s Code of Ethics is included as an exhibit to this annual report.
Stockholders may request a free copy of the Code of Ethics by contacting the
Investor Relations Department at our corporate offices by calling
+011-86-29-87074957, or by sending an e-mail message to
info@bodisen.com.





Nominating
Procedures





During
2008 there were no material changes to the procedures by which security holders
may recommend nominees to our Board of Directors.




ITEM
11. EXECUTIVE COMPENSATION





Executive
Compensation




The
following table contains information concerning the compensation of our
executive officers and other most highly compensated executive officers for the
fiscal year ended December 31, 2007.




Summary
Compensation Table




Name
      And
                                                                                  Principal Position
                                                                                  
                                                                                  (a)
                                                                                
                                                                                Year
                                                                                  
                                                                                  (b)
                                                                                
                                                                                Salary(1)
                                                                                  ($)
                                                                                  
                                                                                  (c)
                                                                                
                                                                                
                                                                                Bonus
                                                                                  ($)
                                                                                  
                                                                                  (d)
                                                                                
                                                                                
                                                                                Stock
                                                                                  Awards
                                                                                  ($)
                                                                                  
                                                                                  (e)
                                                                                
                                                                                
                                                                                Option
                                                                                  Awards
                                                                                  ($)
                                                                                  
                                                                                  (f)
                                                                                
                                                                                
                                                                                Non-Equity
                                                                                  Incentive
                                                                                  Plan
                                                                                  Compen-
                                                                                  sation
                                                                                  ($)
                                                                                  
                                                                                  (g)
                                                                                
                                                                                
                                                                                Nonqualified
                                                                                  Deferred
                                                                                  Compen-
                                                                                  sation
                                                                                  Earnings
                                                                                  ($)
                                                                                  
                                                                                  (h)
                                                                                
                                                                                
                                                                                All Other
                                                                                  Compensation
                                                                                  ($)
                                                                                  
                                                                                  (i)
                                                                                
                                                                                
                                                                                Total
                                                                                  ($)
                                                                                  
                                                                                  (j)Qiong Wang, former Chief
      Executive Officer
                                                                                
                                                                                2008
                                                                                
                                                                                
                                                                                6,223
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                6,2232007
                                                                                
                                                                                
                                                                                6,025
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                6,025Bo
      Chen
                                                                                
                                                                                2008
                                                                                
                                                                                
                                                                                7,628
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                7,628President
      and current Chief Executive Officer
                                                                                
                                                                                2007
                                                                                
                                                                                
                                                                                5,188
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                5,188Junyan
      Tong
                                                                                
                                                                                2008
                                                                                
                                                                                
                                                                                3,712
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                3,712current
      ChiefFinancial
      Officer
                                                                                
                                                                                2007
                                                                                
                                                                                
                                                                                3,138
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                3,138Chunsheng
      Wang
                                                                                
                                                                                2008
                                                                                
                                                                                
                                                                                4,327
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                4,327Chief
      OperatingOfficer
                                                                                
                                                                                2007
                                                                                
                                                                                
                                                                                4,351
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                N/A
                                                                                
                                                                                
                                                                                
                                                                                4,351




25





(1)All
compensation for the officers identified in this table was paid in Chinese
Renminbi, and is expressed in U.S. dollars based on the exchange rate in effect
as of the last day of the relevant period. The exchange rates between the
Renminbi and the U.S. dollar were 6.82 and 7.17 Renminbi to every one U.S.
dollar at December 31, 2008 and 2007, respectively.




Outstanding
Equity Awards at Fiscal Year-End




None of
our named executive officers had unexercised options, stock that has not vested,
or equity incentive plan awards outstanding as of December 31,
2008.




Compensation
of Directors




Directors
of the Company receive compensation for their services and reimbursement for
their expenses as determined by the Board of Directors from time to
time.




Name
                    
                    (a)
                  
                  Fees Earned or
                    Paid in Cash
                    ($)
                    
                    (b)
                  
                  
                  Stock Awards
                    ($)
                    
                    I
                  
                  
                  Option Awards
                    ($)
                    
                    (d)
                  
                  
                  Non-Equity
                    Incentive
                    Plan Compen-
                    sation
                    ($)
                    
                    (e)
                  
                  
                  Nonqualified
                    Deferred
                    Compensation
                    Earnings
                    ($)
                    
                    (f)
                  
                  
                  All Other
                    Compensation
                    ($)
                    
                    (g)
                  
                  
                  Total
                    ($)
                    
                    (h)Patrick
      McManus
                  
                  
                  24,000
                  
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  24,000Chenglin
      Guo
                  
                  
                  0
                  
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  0Linzhang
      Zhu*
                  
                  
                  3,870
                  
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  3,870*
      Mr. Zhu resigned from our Board effective December 8,
2008.





Compensation
Committee





Our Board
of Directors has a Compensation Committee, which is composed of Patrick McManus
and Chenglin Guo. The function of the Compensation Committee is to evaluate,
recommend to the Board of Directors, and/or determine, the compensation levels
of the Company’s executives, including the Chief Executive Officer, and the
equity allocations relating to the Company’s equity programs.





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




Securities
Authorized for Issuance under Equity Compensation Plans




Pursuant
to our 2004 Stock Option Plan, we are authorized to issue stock options for up
to 1,000,000 shares of our common stock. On June 4, 2004, we granted David
Gatton and Patrick McManus, who were each members of our Board of Directors at
such time, 50,000 stock options each, having an exercise price of $5.00 per
share, which was the same as the market price of the shares at the time of
granting of the option. Of the options subject to such grants, 25,000 of each
grant vested immediately and the remaining 25,000 vested over 8 equal quarterly
installments, where the first installment vested at the end of the second
quarter 2004.





We
granted Messrs. Gatton and McManus an additional 5,000 options each on December
28, 2004, which vested on December 31, 2004. The option exercise price for these
options was $5.80 per share, which was the same as the market price of the
shares at the time of granting of the options.


26





On
October 4, 2005, we granted an additional 13,000 stock options to each Messrs.
Gatton and McManus. Of each grant, 10,000 stock options vested immediately, with
the remaining 3,000 stock options vesting over the next three months. The option
exercise price was $6.72, which was the same as fair value of the shares at the
time of granting of the options.





Mr.
Gatton resigned from our Board of Directors effective February 19,
2008.





Equity Compensation Plan InformationPlan category
                                        
                                        Number of securities to
                                          be issued upon exercise
                                          of outstanding options,
                                          warrants and rights
                                        
                                        Weighted-average
                                          exercise price of
                                          outstanding options,
                                          warrants and rights
                                        
                                        Number of securities
                                          remaining available for
                                          future issuance under
                                          equity compensation
                                          plans (excluding
                                          securities reflected in
                                          column (a)(a)
                                        
                                        (b)
                                        
                                        (c)Equity
      compensation plans approved by security holders
                                        
                                        N/A
                                        
                                        
                                        N/A
                                        
                                        N/AEquity
      compensation plans not approved by security holders
                                        
                                        136,000
                                        
                                        $
                                        5.39
                                        
                                        864,000Total
                                        
                                        136,000
                                        
                                        
                                        
                                        
                                        864,000





During
2008, we also granted to a consultant, 400,000 options to purchase shares of our
common stock for $0.70 per share.  These share we granted outside of
the 2004 Stock Option Plan.





Security
Ownership of Certain Beneficial Owners and Management





The
following table sets forth certain information, as of April 14, 2008 with
respect to the beneficial ownership of the outstanding common stock by (i) any
holder of more than five (5%) percent of our common stock; (ii) each of our
current executive officers and directors; and (iii) our current directors and
executive officers as a group. Except as otherwise indicated, each of the
stockholders listed below has sole voting and investment power over the shares
beneficially owned.





Name of Beneficial Owner(1)
                
                Number of Shares
                  Beneficially Owned
                
                
                Percentage of Shares
                  Beneficially Owned(2)Qiong
      Wang
                
                
                720,000
                
                
                
                3.85
                %Bo
      Chen
                
                
                690,000
                
                
                
                3.69
                %Patrick
      McManus (3)
                
                
                68,000
                
                
                
                *Chunsheng
      Wang
                
                
                0
                
                
                
                *Junyan
      Tong
                
                
                0
                
                
                
                *Chenglin
      Guo
                
                
                0
                
                
                
                *All
      officers and directors as a group (6 persons)
                
                
                1,478,000
                
                
                
                7.87
                %




*
            Less
      than 1%.(1)
            Except
      as otherwise indicated, the address of each beneficial owner is c/o
      Bodisen Biotech, Inc., Room 2001, FanMei Building, No. 1 Naguan Zhengjie,
      Xi’an, Shaanxi, China, 710068.(2)
            Applicable
      percentage ownership is based on 18,710,520 shares of common stock
      outstanding as of April 14, 2008, together with securities exercisable or
      convertible into shares of common stock within 60 days of April 14, 2008
      for each stockholder. Beneficial ownership is determined in accordance
      with the rules of the Securities and Exchange Commission and generally
      includes voting or investment power with respect to securities. Shares of
      common stock that are currently exercisable or exercisable within 60 days
      of April 14, 2008 are deemed to be beneficially owned by the person
      holding such securities for the purpose of computing the percentage of
      ownership of such person, but are not treated as outstanding for the
      purpose of computing the percentage ownership of any other
      person.(3)
            Number
      of shares beneficially owned reflect stock options held by Mr.
      McManus.





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


27





ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS  AND DIRECTOR
INDEPENDENCE





Related
Party Transactions





None.





Director
Independence





Our Board
of Directors has determined that Patrick McManus and Linzhang Zhu meet the
criteria for independence set forth in Rule 10A-3(b)(1) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Our Board of Directors
has also determined that these persons have no material relationships with us -
either directly or as a partner, stockholder or officer of any entity which
could be inconsistent with a finding of their independence as members of our
Board of Directors.





ITEM 14.   PRINCIPAL ACCOUNTING FEES AND
SERVICES




The
aggregate fees billed for each of the fiscal years ended December 31, 2008 and
2006 for professional services rendered by the principal accountant for the
audit our annual financial statements and review of the financial statements
included our Form 10-K or services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements for these
fiscal periods were as follows:




Year Ended December 31, 2008
                          
                          
                          Year Ended December 31, 2007Audit
      Fees
                          
                          $
                          98,360
                          
                          
                          $
                          57,500Audit
      Related Fees
                          
                          $
                          22,100
                          
                          
                          
                          27,997Tax
      Fees
                          
                          
                          -
                          
                          
                          
                          -All
      Other Fees
                          
                          
                          -
                          
                          
                          
                          -Total
                          
                          $
                          124,460
                          
                          
                          $
                          85,497





Audit
services include fees associated with the annual audit and the review of
documents filed with the Securities and Exchange Commission. Audit-related fees
principally include fees reasonably related to the performance of the audit or
review of our financial statements and that are not reported as Audit Fees. Tax
fees included tax compliance, tax advice and tax planning
work.





Pre-Approval
Policies and Procedures




Because
we no longer have an audit committee, the following protocol by which we approve
in advance any audit or permissible non-audit services to be provided to the
Company by its independent auditor is now performed by our full Board of
Directors. Prior to the engagement of the independent auditor for any fiscal
year’s audit, our Board discusses with management anticipated recurring audit,
audit-related, tax and other services expected to be provided by the auditor
during that fiscal year. The Board establishes terms for the performance of the
recurring services that it has pre-approved, and informs on a timely basis, and
in any event for the next scheduled meeting, of any such services rendered by
the independent auditor and the related fees.





The fees
for any services thus approved are budgeted, and our Board requires the
independent auditor and management to report actual fees versus the budget
periodically throughout the year. Our Board will require additional pre-approval
if circumstances arise where it becomes necessary to engage the independent
auditor for additional services above the amount of fees originally
pre-approved. Any audit or non-audit service must be separately pre-approved by
our Board on a case-by-case basis.





Every
request to provide services that are not pre-approved must include a statement
by the independent auditor as to whether, in its view, the request is consistent
with the SEC’s rules on auditor independence.




Our Board
will not grant approval for:




·
            any
      services prohibited by applicable law or by any rule or regulation of the
      SEC or other regulatory body applicable to the
  Company;




·
            provision
      by the independent auditor to the Company of strategic consulting services
      of the type typically provided by management consulting firms;
      or





·
            the
      retention of the independent auditor in connection with a transaction
      initially recommended by the independent auditor, the tax treatment of
      which may not be clear under the Internal Revenue Code and related
      regulations and which it is reasonable to conclude will be subject to
      audit procedure during an audit of the Company’s financial
      statements.




28


Tax
services proposed to be provided by the auditor to any director, officer or
employee of the Company who is in an accounting role or financial reporting
oversight role must be approved by our Board on a case-by-case basis where such
services are to be paid for the by the Company, and our Board will be informed
of any services to be provided to such individuals that are not to be paid for
by the Company.




In
determining whether to grant pre-approval of any non-audit services in the “all
other” category, our Board will consider all relevant facts and circumstances,
including the following four basic guidelines:




·
            whether
      the service creates a mutual or conflicting interest between the auditor
      and the Company;




·
            whether
      the service places the auditor in the position of auditing his or her own
      work;




·
            whether
      the service results in the auditor acting as management or an employee of
      the Company; and




·
            whether
      the service places the auditor in a position of being an advocate for the
      Company.


29




PART
IV





ITEM 15.   EXHIBITS, FINANCIAL STATEMENT
SCHEDULES




Financial
Statements





A list of
the financial statements of the Company filed as part of this Report can be
found in the Index to Financial Statements on page F-1.





Exhibit
                    Number
                  
                  Description of Exhibit3.1
                  
                  Certificate
      of Incorporation (incorporated by reference to Company’s Form SB-2 filed
      September 3, 2002)3.2
                  
                  By-Laws
      (incorporated by reference to Company’s Form SB-2 filed September 3,
      2002).10.1
                  
                  Bodisen
      Biotech, Inc. 2004 Stock Option Plan (incorporated by reference to
      Company’s Form 10-KSB filed March 31, 2005)10.2
                  
                  Form
      of Bodisen Biotech, Inc. Nonstatutory Stock Option Agreement (incorporated
      by reference to Company’s Form 10-KSB filed March 31,
  2005)14.1
                  
                  Code
      of Ethics and Business Conduct for Officers, Directors and Employees of
      Bodisen Biotech, Inc. (incorporated by reference to the Company’s Form
      10-K filed April 30 ,2007)21.1
                  
                  Schedule
      of Subsidiaries (incorporated by reference to the Company’s Form 10-K
      filed April 30 ,2007)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




30





SIGNATURES





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




Bodisen
      Biotech, Inc.March
      30, 2009
            By:
            /s/ Bo ChenBo
      ChenChief
      Executive Officer
              (Principal
      Executive Officer)March
      30, 2009
            By:
            /s/ Junyan TongJunyan
      TongChief
      Financial Officer(Principal
      Financial and Accounting
Officer)





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




SIGNATURE
            
            TITLE
            
            DATE/s/ Bo ChenBo
      Chen
            
            Chairman,
      Chief Executive Officer and President
            
            March
      30, 2009/s/ Junyan TongJunyan
      Tong
            
            Chief
      Financial Officer
            
            March
      30, 2009/s/ Wang QiongWang
      Qiong
            
            Director
            
            March
      30, 2009/s/ Patrick McManusPatrick
      McManus
            
            Director
            
            March
      30, 2009/s/ Chenglin GuoChenglin
      Guo
            
            Director
            
            March
      30, 2009





Exhibit
                      Number
                    
                    Description of Exhibit3.1
                    
                    Certificate
      of Incorporation (incorporated by reference to Company’s Form SB-2 filed
      September 3, 2002)3.2
                    
                    By-Laws
      (incorporated by reference to Company’s Form SB-2 filed September 3,
      2002).10.1
                    
                    Bodisen
      Biotech, Inc. 2004 Stock Option Plan (incorporated by reference to
      Company’s Form 10-KSB filed March 31, 2005)10.2
                    
                    Form
      of Bodisen Biotech, Inc. Nonstatutory Stock Option Agreement (incorporated
      by reference to Company’s Form 10-KSB filed March 31,
  2005)14.1
                    
                    Code
      of Ethics and Business Conduct for Officers, Directors and Employees of
      Bodisen Biotech, Inc. (incorporated by reference to the Company’s Form
      10-K filed April 30, 2007)21.1
                    
                    Schedule
      of Subsidiaries (incorporated by reference to the Company’s Form 10-K
      filed April 30 ,2007)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
      amended*31.2
                    
                    Certification
      of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a),
      promulgated under the Securities and Exchange Act of 1934, as
      amended*32.1
                    
                    Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002
*





* Filed
herewith




31