**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-KSB**





**[X]
      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**




For
      the
      fiscal year ended December 31, 2005





**[ 
       ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT** **OF
      1934**





*Commission
      File Number: 000-31539*





**BODISEN
      BIOTECH, INC.**


(Name
      of
      small business issuer in its charter)





Delaware
            
            98-0381367State
                or other jurisdiction of incorporation or organization
            
            I.R.S.
                Employer Identification Number





North
      Part of Xinquia Road, Yang Ling AG


High-Tech
      Industries Demonstration Zone


Yang
      Ling, China 712100


(Address
      of principal executive office)





Issuer's
      telephone number: 86-29-870749





Securities
      registered under Section 12(b) of the Exchange Act: None





Securities
      registered under Section 12(g) of the Exchange Act: None





Check
      whether the Issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the Registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days.) Yes [X] No [   ]





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B is not contained in this form, and no disclosure will be
      contained, to the best of the Registrant's knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-KSB
      or any amendment to this Form 10-KSB. [   ]





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act) Yes [   ] No [X]





The
      Issuer's revenues for the year ending December 31, 2005 were $30,975,350.





As
      of
      March 24, 2006 the number of shares outstanding of the Issuer's common stock
      was
      18,176,917.





As
      of
      March 24, 2006 the aggregate number of shares held by non-affiliates was
      approximately 10,844,041.





As
      of
      March 24, 2006 the aggregate market value of the Issuer's common stock held
      by
      non-affiliates was $196,765,124, based on the average high and low price of
      $18.145 per share as of March 24, 2006.




**DOCUMENTS
      INCORPORATED BY REFERENCE**  None









**FORM
      10-KSB**




**FOR
      THE FISCAL YEAR ENDED DECEMBER 31, 2004**





**INDEX**





PagePART
                I
            4ITEM
                1. DESCRIPTION OF BUSINESS
            4ITEM
                2. DESCRIPTION OF PROPERTY
            7ITEM
                3. LEGAL PROCEEDINGS
            8ITEM
                4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
            8PART
                II
            9ITEM
                5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
                AND
                SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.
            9ITEM
                6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
                OPERATION
            9ITEM
                7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
            14ITEM
                8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                FINANCIAL DISCLOSURE
            15ITEM
                8A. CONTROLS AND PROCEDURES
            15ITEM
                8B. OTHER INFORMATION
            15PART
                III
            16ITEM
                9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
                COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
            16ITEM
                10. EXECUTIVE COMPENSATION
            18ITEM
                11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                AND
                RELATED STOCKHOLDER MATTERS
            19ITEM
                12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
            20ITEM
                13. EXHIBITS
            21ITEM
                14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
            21









STATEMENT
      REGARDING FORWARD-LOOKING STATEMENTS





In
      this
      annual report, references to “Bodisen Biotech,” “BBC,” “the Company,” “we,”
“us,” and “our” refer to Bodisen Biotech, Inc.





Except
      for the historical information contained herein, some of the statements in
      this
      Report contain forward-looking statements that involve risks and uncertainties.
      These statements are found in the sections entitled "Business," "Management's
      Discussion and Analysis or Plan of Operation," and "Risk Factors." They include
      statements concerning: our business strategy; expectations of market and
      customer response; liquidity and capital expenditures; future sources of
      revenues; expansion of our proposed product line; and trends in industry
      activity generally. In some cases, you can identify forward-looking statements
      by words such as "may," "will," "should," "expect," "plan," "could,"
      "anticipate," "intend," "believe," "estimate," "predict," "potential," "goal,"
      or "continue" or similar terminology. These statements 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. For example, assumptions that could cause actual results to vary
      materially from future results include, but are not limited to: our ability
      to
      successfully develop and market our products to customers; our ability to
      generate customer demand for our products in our target markets; the development
      of our target markets and market opportunities; our ability to manufacture
      suitable products at competitive cost; market pricing for our products and
      for
      competing products; the extent of increasing competition; technological
      developments in our target markets and the development of alternate, competing
      technologies in them; and sales of shares by existing shareholders. 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. Unless we are required to do so under US federal securities
      laws or other applicable laws, we do not intend to update or revise any
      forward-looking statements









**PART
      I**


ITEM
      1.
      DESCRIPTION OF BUSINESS





**Overview
      of Business**




We
      were
      incorporated on January 14, 2000 in Delaware and our principal place of business
      is based in The People’s Republic of China. We are located at: Bodisen Biotech,
      Inc., North Part of Xinquia Road, Yang Ling AG, High-Tech Industries
      Demonstration Zone, Yang Ling, China 712100, Telephone: +862987074957. We are
      primarily engaged in developing, manufacturing and selling organic fertilizers
      and pesticides in the People’s Republic of China.





**Business**





Our
      sole
      operating subsidiary, Yang Ling, was founded in The People’s Republic of China
      on August 31, 2001 and is headquartered in the Shaanxi Province, People’s
      Republic of China. Yang Ling primarily manufactures and markets organic
      fertilizers and pesticides to 20 agricultural provinces of China. We produce
      numerous proprietary product lines, from pesticides to crop specific fertilizer,
      which are then marketed and sold to farmers. We conduct research and development
      to further improve existing products and to develop new formulas and products.





**History**





Prior
      to
      March 1, 2004, the Company was called Stratabid.com, Inc. The Company was a
      startup stage Internet-based commercial mortgage origination business. The
      Company operated primarily through its wholly-owned subsidiary, Stratabid.com
      Online (B.C.) Ltd. (“Stratabid.com Online”), which provided services throughout
      Canada.





Yang
      Ling
      was founded in the People’s Republic of China on August 31, 2001. Yang Ling,
      located in 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. (“BII”), a Delaware
      corporation, as a non-operative holding company.





On
      January 14, 2004, the Company created a wholly-owned subsidiary corporation
      known as Bodisen Holdings, Inc., a Delaware corporation, (“BHI”), to pursue a
      merger with BII the parent of Yang Ling. On February 11, 2004, the Company
      and
      BHI entered into an Agreement and Plan of Merger with BII and the shareholders
      of BII, providing for the merger of BII into BHI, with BHI 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, the Company acquired 100%
      of
      BII’s outstanding stock in exchange for the issuance by the Company of 3 million
      shares of its Common Stock to the holders of BII shares. The Common Stock issued
      in the merger constituted approximately 66% of the outstanding shares of the
      Company after the merger. After the merger, the Company paid a 3 for 1 stock
      dividend and then, by prior agreement, redeemed 3 million post dividend shares
      held by the Company’s former CEO. After these transactions, the shareholders of
      BII held approximately 79% of the Common Stock outstanding. On February 25,
      2004, the Company sold Stratabid.com Online to Derrek Wasson, the Company’s
      former CEO. On March 1, 2004, the Company changed its name from Stratabid.com,
      Inc. to Bodisen Biotech, Inc.





In
      March
      2005 Bodisen Biotech Inc. formed a wholly-owned 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 (“Yang Ling”), Bodisen Biotech, Inc.’s
      operating subsidiary in China, which resulted in Agricultural owning 100% of
      Yang Ling.





The
      Group
      has developed the product line to over 60 items, and, the Directors believe,
      been successful in building the Bodisen brand name. The mandate of the
      government of the People’s Republic of China that farmers increase crop yields
      to decrease the nation’s dependence on food imports, together with the growing
      emphasis on the use of  “environmentally friendly” fertilizers, has also
      been a factor in the growth of the business of the Group.





**Products**





The
      Group
      manufactures over 60 products, which are broken down into 3 product line
      categories:




*Organic
      compound fertilizer*





4


These
      products are the Group’s leading product category, accounting for approximately
      67% of Group turnover. Plants tend to easily absorb organic fertilizer without
      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. The International Organization for
      Standardization (ISO 9001: 2000) has qualified Bodisen’s organic compound
      fertilizer products.


Organic
      fertilizers improve the cation exchange capacity, or “CEC” of soil which is its
      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. Principal functions include:





•
      preserving nitrogen and improving soil fertility;





•
      allowing phosphorous and potash fertilizer to gradually dissolve;





•
      promoting disease resistance; and





•
      activating and maintaining soil moisture content.





*Liquid
      fertilizers*





These
      products account for approximately 19% of Group turnover. 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. The liquid fertilizer
      increases the plant’s yield and shortens the time to harvest whilst heightening
      the colour and lustre of fruit and vegetables.





Liquid
      fertilizer is sold to the farmer in a concentrated form and needs to be mixed
      by
      the farmer with water before spraying onto the plant. Since the liquid
      fertilizer is applied directly to the plant it is more easily
      absorbed.





*Pesticides*





These
      products account for approximately 14% of Group turnover. Bodisen’s pesticide
      products can be applied to all fruit trees and vegetable crops. They kill
      harmful insects that reduce overall crop yields.





**Market
      information**





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. To encourage farmers, of which there are 800
      million in the People’s Republic of China, to remain on their land, the
      government recently eliminated the agriculture tax, which effectively
      increased farmers' disposable income by 20%. Although organic compound
      fertilizers are more expensive than chemical fertilizers, the Directors believe
      that the extra cost is justified by the increase of yield and quality and,
      consequently, the increased margin attained at the market.




**Sales
      and Marketing**





The
      Group’s products are sold directly to over 150 wholesalers in the People’s
      Republic of China, through written sales contracts.





The
      Bodisen brand has been marketed and promoted through trade fairs, conventions
      and the print media, and through television and radio advertising in the
      People’s Republic of China. Since the end-user for its products is the local
      farmer, educational seminars to promote products and organic fertilizers
      directly to farmers are extensively used. To capture a share of the market,
      free
      samples of the products are distributed to allow a trial period to take place,
      the results of which are made know to the surrounding area. The cost of this
      is
      not material and is typically offset by new sales in that test zone.





5


The
      primary tasks in respect of sales goals are to strengthen the home market in
      the
      Shaanxi province and to expand the market outside the Shaanxi province into
      new
      districts where the Group’s products are not well established.





It
      is our
      intention to increase marketing in regions where our products are not well
      known. In addition, promotion of the products through national newspapers in
      China explaining the advantages of the high-tech nature of its environmentally
      friendly product lines will be undertaken. In order to enter the untapped
      markets of western China, the Company will explore selling exclusive franchise
      opportunities to new wholesale agents.





**Raw
      materials**





There
      are
      numerous suppliers of raw materials in Shaanxi Province. To manufacture organic
      compound fertilizer Bodisen uses carbamide, ammonium, potassium chloride and
      zeolite powder. Carbamide, potassium chloride, bluestone, zinc sulfate, borax,
      citric acid and bitter salt, together with other materials are used to
      manufacture liquid fertilizer. Pesticides are manufactured using Mieduowie,
      zinc
      sulphur phosphor, emulsification agents, Dimethylbenzene, sulfur powder and
      Fumeishuang.





The
      Company has short-term material supplier contracts with its 19 major suppliers.
      Business with other suppliers is conducted on an order-by-order basis, a
      practice that is typical throughout the agrochemical industry in The People’s
      Republic of China. The Directors believe that the Group has very good relations
      with the agricultural supplier community.





**Research
      and Development**





The
      research and development team consists of four professionals, who perform
      administrative and ministerial functions. Much of the research is done in close
      cooperation with universities and research laboratories in the Yang Ling and
      Xian Metropolitan areas with related costs incurred by such universities and
      research laboratories and not by the Company. In 2005, the Company budgeted
      to
      spend U.S.$130,000 on research and development, the majority of which was
      dedicated to existing research programs. The following projects were commenced
      in 2004 and are currently scheduled for completion in 2006:





*Pesticides
      projects*





Project
      Ion is the study of copper, zinc and manganese ions in combination with silver
      ions to control and remove crop disease brought about by fungi. The objective
      is
      to determine whether the combination of these metal ions will prohibit the
      release of an intrusive enzyme from fungi that kills crops in China.





Project
      Fly is the development of a protein abstract from a common fly to develop
      bacteria-based pesticides, which may have a better effect on a plant’s
      resistance to insects. This project seeks to isolate a series of anti-bacteria
      peptides from the proteins of a common fly. This kind of anti-bacteria peptide
      could effectively control many pathogens which may prove more effective than
      the
      pesticides which are currently available.





*Fertilizer
      projects*





Project
      Amino Acid is a program that was developed to build a new compound fertilizer
      product, based on a proactive amino acid enzyme.





Project
      Build utilizes a technique for the manufacturing of organic compound fertilizer,
      which could enhance the quality of organic fertilizer products.





**Intellectual
      property**





The
      Group
      owns trademarks in the “Bodisen” name, which is used on all products. Bodisen is
      also a recognized trade name in the provinces in The People’s Republic of China
      in which the Group conducts business. Bodisen protects its proprietary
      technology and formulae by keeping such technology and formulae confidential.
      If
      such technology or formulae are disclosed to a third party that is not under
      an
      obligation of confidentiality or are accidentally disclosed, Bodisen may not
      be
      able to protect its technology against being exploited by third parties. The
      Directors believe this is adequate protection. The Company acquired rights
      for
      fluid and compound fertilizer technology from a third party. Most intellectual
      property was developed in-house or with various universities and research
      laboratories (which may not be owned by Bodisen). Only certain key executives
      of
      the Company have knowledge of such proprietary technology and formulae. The
      Directors believe that there are adequate systems in place to prevent disclosure
      of the proprietary technology and formulae. Since the Company does not hold
      patents for its products, the Company may not be in a position to adequately
      protect its intellectual property rights. See “Risk Factors” in Part I.





6


**Government
      and Environmental Regulation**





Bodisen’s
      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 state, local
      governments and industry agencies, which are controlled and monitored through
      the issuance of licenses. To date, the Group has been compliant with all
      registrations and requirements for the issuance and maintenance of all licenses
      required by the governing bodies. As of the date of this document, all license
      fees and filings are current. These licenses obtained by the Group 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. The National Certificate for Production of
      Industrial Products will be valid until February 26, 2009.





*Certificate
      for pesticide registration*





Pesticide
      registration is required for the production of liquid fertilizer and issued
      by
      Ministry of Agriculture, People’s Republic of China.





*Production
      standard*





The
      Company is 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 the Group were to lose any
      of
      these licenses, it would only have a limited time to reapply for such licenses
      and would face possible regulatory fines. The Group is subject to relevant
      environmental laws and regulations that require outlay of capital and the
      obtaining of relevant permits in order to engage in business
      operations.





**Competition**





The
      Directors consider that the compound 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. Bodisen has not yet identified any
      competition in the Shaanxi province that operates in all three segments
      (compound, liquid and pesticide) of the organic fertilizer business. The
      Directors believe that the Company’s most significant Chinese competitor is Tian
      Bang Shaanxi and that the only international competitor company is DuPont.





**Employees**





As
      of
      March 17, 2006 we had a total of 543 employees of which approximately 6 are
      executive and senior managers, 80 are business and accounting staff, 10 are
      warehouse and purchasing staff, 12 are drivers or secretaries and the balance
      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.





ITEM
      2.
      DESCRIPTION OF PROPERTY





The
      Group’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, 712100 and the telephone number is
      +86-29-87074957. The Company owns two factories, which include three production
      lines, an office building, one warehouse, and two research laboratories which
      are located on 10,900 square meters of land. The rent for the office building
      is
      $121 a month from May 20, 2004 through May 20, 2005. The Group also leases
      a
      warehouse in Yang Ling near the site of its factories. This warehouse is 300
      square meters in area. The rent of the warehouse is $194 a month from January
      2005 through May 2005. The Group completed a new 609,840 square foot
      manufacturing facility on March 15, 2005 and in November 2005 the Company broke
      ground on a new facility, adjacent to the facility completed in March 2005,
      for
      production of a new product line. The Directors believe that its owned and
      leased property, along with the properties being developed in its current
      facility expansion plans, will be sufficient for its current and immediately
      foreseeable operating needs.





7


ITEM
      3.
      LEGAL PROCEEDINGS





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





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





None




8


**PART
      II**





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





Our
      common stock is traded on the American Stock Exchnage under the symbol “BBC.”
Prior to August 29, 2005, our common stock traded on the Over-the-Counter
      Bulletin Board under the symbol "BBOI." 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.





**2005****High*******
            
            **Low*******1stQuarter
            
            $
            6.30
            
            $
            5.052ndQuarter
            
            
            6.25
            
            
            5.043rdQuarter
            
            
            7.87
            
            
            5.104thQuarter
            
            
            15.94
            
            
            6.12




**High*******
            
            **Low*******1stQuarter
            
            $
            13.90
            
            $
            0.252ndQuarter
            
            
            7.62
            
            
            4.403rdQuarter
            
            
            8.60
            
            
            6.104thQuarter
            
            
            7.31
            
            
            5.60





As
      of
      March 24, 2006, there were approximately 896 holders of record of our common
      stock.





**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.





**Recent
      Issuances of Unregistered Securities.**





On
      February 24, 2004, the Company issued 3.0 million shares of its Common Stock
      to
      the stockholders of Bodisen International, Inc., in connection with the
      acquisition of the Company’s current sole operating subsidiary, Yang Ling
      Bodisen Biology Science and Technology Development Company Limited. See Item
      1,
“Description of Business, Introduction and Background,” above. The sale was
      effective pursuant to a private placement under Section 4(2) and/or Regulation
      D
      of the Securities Act of 1933, as amended.





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





**INTRODUCTION**





The
      following discussion should be read in conjunction with the Financial Statements
      and Notes thereto. Our fiscal year ends December 31. ****** This
      document contains certain forward-looking statements including, among others,
      anticipated trends in our financial condition and results of operations and
      our
      business strategy. (See “Factors Which May Affect Future Results”). These
      forward-looking statements are based largely on our current expectations and
      are
      subject to a number of risks and uncertainties. Actual results could differ
      materially from these forward-looking statements. Important factors to consider
      in evaluating such forward-looking statements include (i) changes in external
      factors or in our internal budgeting process which might impact trends in our
      results of operations; (ii) unanticipated working capital or other cash
      requirements; (iii) changes in our business strategy or an inability to execute
      our strategy due to unanticipated changes in the industries in which the Company
      operates; and (iv) various competitive market factors that may prevent us from
      competing successfully in the marketplace.





9


**Overview**





The
      Company is incorporated under the laws of the state of Delaware and its
      operating subsidiary, Yang Ling, is headquartered in the Shaanxi Province,
      the
      People’s Republic of China. The Group engages in the business of manufacturing
      and marketing organic fertilizers and pesticides in the People’s Republic of
      China. It produces numerous product lines, from pesticides to crop specific
      fertilizers. These products are then marketed and sold to over 150 wholesalers
      throughout the 20 provinces of the People’s Republic of China. The Group
      conducts research and development to further improve existing products and
      develop new formulae and products.





**Significant
      Accounting Policies**





*Use
      of estimates*





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires the Group 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.





*Accounts
      receivable*





The
      Group
      maintains reserves for potential credit losses on accounts receivable. It
      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 primarily on a specific identification
      basis.





*Inventories*





Inventories
      are valued at the lower of cost (determined on a weighted average basis) or
      market. The Group compares the cost of inventories with the market value and
      allowance is made for writing down the inventories to their market value, if
      lower.





*Property
      and equipment*





Property
      and equipment are stated at cost. Expenditures for maintenance and repairs
      are
      charged to earnings as incurred; additions, renewals and betterments are
      capitalized. When property and equipment are retired or otherwise disposed
      of,
      the related cost and accumulated depreciation are removed from the respective
      accounts, and any gain or loss is included in operations. Depreciation of
      property and equipment is provided using the straight-line method for
      substantially all assets with estimated lives of: 30 years for building, 10
      years for machinery, 5 years for office equipment and 8 years for vehicles.





*Intangible
      assets*





Intangible
      assets consist of rights to use land and proprietary technology rights to
      fertilizers. 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. Potential impairment of
      goodwill after July 1, 2002 is being evaluated in accordance with SFAS No.
      142.
      The SFAS No. 142 is applicable to the financial statements of the Group
      beginning July 1, 2002.





*Revenue
      recognition*





The
      Group’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 by the Group exist
      and collectibility is reasonably assured. Payments received before all of the
      relevant criteria for revenue recognition are satisfied are recorded as unearned
      revenue.





10


*Stock-based
      compensation*





In
      October 1995, the FASB issued SFAS No. 123, “Accounting for Stock-Based
      Compensation”. SFAS No. 123 prescribes accounting and reporting standards for
      all stock-based compensation plans, including employee stock options, restricted
      stock, employee stock purchase plans and stock appreciation rights. SFAS No.
      123
      requires compensation expense to be recorded (i) using the new fair value method
      or (ii) using the existing accounting rules prescribed by Accounting Principles
      Board Opinion No. 25, “Accounting for stock issued to employees” (APB 25) and
      related interpretations with proforma disclosure of what net income and earnings
      per share would have been had the Group adopted the new fair value method.
      The
      Group uses the intrinsic value method prescribed by APB 25 and have opted for
      the disclosure provisions of SFAS No. 123.





*Income
      taxes*





The
      Group
      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.





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 Group have
      been
      approved by the local tax bureau and the Management Regulation of Yang Ling
      Agricultural High-Tech Industries Demonstration Zone. The Group is exempted
      from
      income tax in its first two years of operations.





*Foreign
      currency transactions and comprehensive income (loss)*





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. Transactions occur in Chinese Renminbi. The unit of
      Renminbi is in Yuan.





**Recent
      Accounting Pronouncements**





In
      November 2004, the FASB has issued FASB Statement No. 151, “Inventory Costs, an
      Amendment of ARB No. 43, Chapter 4” (“FAS No. 151”). The amendments made by FAS
      No. 151 are intended to improve financial reporting by clarifying that abnormal
      amounts of idle facility expense, freight, handling costs, and wasted materials
      (spoilage) should be recognized as current-period charges and by requiring
      the
      allocation of fixed production overheads to inventory based on the normal
      capacity of the production facilities.





The
      guidance is effective for inventory costs incurred during fiscal years beginning
      after June 15, 2005. Earlier application is permitted for inventory costs
      incurred during fiscal years beginning after November 23, 2004. The provisions
      of FAS No. 151 will be applied prospectively. The Company does not expect the
      adoption of FAS No. 151 to have a material impact on its consolidated financial
      position, results of operations or cash flows.





In
      December 2004, the FASB issued FASB Statement No. 123R, “Share-Based Payment, an
      Amendment of FASB Statement No. 123” (“FAS No. 123R”). FAS No. 123R requires
      companies to recognize in the statement of operations the grant- date fair
      value
      of stock options and other equity-based compensation issued to employees. FAS
      No. 123R is effective beginning in the Company’s second quarter of fiscal 2005.
      The Company is in process of evaluating the impact of this pronouncements on
      its
      consolidated financial position, results of operations or cash flows.


In
      December 2004, the FASB issued SFAS Statement No. 153, “Exchanges of
      Non-monetary Assets.” The Statement is an amendment of APB Opinion No. 29 to
      eliminate the exception for non-monetary exchanges of similar productive assets
      and replaces it with a general exception for exchanges of non- monetary assets
      that do not have commercial substance. The Company believes that the adoption
      of
      this standard will have no material impact on its financial statements.





11


In
      March
      2004, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No.
      03-1, “The Meaning of Other-Than-Temporary Impairment and its Application to
      Certain Investments.” The EITF reached a consensus about the criteria that
      should be used to determine when an investment is considered impaired, whether
      that impairment is other-than-temporary, and the measurement of an impairment
      loss and how that criteria should be applied to investments accounted for under
      SFAS No. 115, “Accounting In Certain Investments In Debt And Equity Securities.”
EITF 03-01 also included accounting considerations subsequent to the recognition
      of an other-than-temporary impairment and requires certain disclosures about
      unrealized losses that have not been recognized as other-than-temporary
      impairments. Additionally, EITF 03-01 includes new disclosure requirements
      for
      investments that are deemed to be temporarily impaired. In September 2004,
      the
      Financial Accounting Standards Board (FASB) delayed the accounting provisions
      of
      EITF 03-01; however the disclosure requirements remain effective for annual
      reports ending after June 15, 2004. The Company will evaluate the impact of
      EITF
      03-01 once final guidance is issued.





*Year
      Ended December 31, 2005 compared to Year Ended December 31,
      2004*





Revenue.
      The Company generated revenues of $30,975,350 for the twelve months ended
      December 31, 2005, an increase of $14,749,454 or 90.9%, compared to $16,225,896
      for the twelve months ended December 31, 2004. The growth in revenue was
      primarily attributable to the increase in our customer base as we continue
      to
      aggressively market our products and the growing awareness in the agricultural
      industry in the markets in which we do business of the efficacy of our products.
      The Bodisen brand name has become synonymous with proven higher crop yields.
      The
      completion of our new factory in early 2005 enabled us to meet the growing
      demand for all of our products.





Gross
      profit. The Company achieved a gross profit of $11,504,229 for the twelve months
      ended December 31, 2005, an increase of $4,932,298 or 75.1%, compared to
      $6,571,931 for the twelve months ended December 31, 2004. Gross margin, as
      a
      percentage of revenues, decreased from 40.5% for the twelve months ended
      December 31, 2004, to 37.1% for the twelve months ended December 31, 2005. The
      decrease in gross margin was primarily attributable to increased costs of raw
      materials, as well as an increase in the costs of shipping our products. The
      widespread increase in the cost of all raw materials in China lead us to seek
      the $5,000,000 short term note payable in December 2005, so that we could lock
      in raw materials prices at off season levels for 2006.





Operating
      expenses. The Company incurred operating expenses of $2,431,753 an increase
      of
      $908,403 or 59.6%, compared to $1,523,350 for the twelve months ended December
      31, 2004. These operating expenses are related to increased sales and marketing
      costs related to the 90.9% increase in sales for 2005.


Aggregated
      selling expenses of $935,444 account for expenses related to costs associated
      with sales and marketing of the Company's products and with transportation
      of
      Company's products. As we continue to grow revenues, we are selling Bodisen
      products greater distances from our factories, leading to increased shipping
      costs, most notably on the compound fertilizer product which is sold in 50
      kilogram (110 pounds) units. The increase in the cost of fuel experienced in
      the
      second, third and fourth quarters of 2005 has also had an effect on operating
      expenses. Operating expenses include general and administrative expenses of
      $1,496,309 for the twelve months ended December 31, 2005 and relate to cost
      of
      maintaining the company's facilities, salaries and research and
      development.





Net
      Income. Net income increased by 47.6% to $7,421,112, an increase of $2,393,709,
      from $5,027,403. Earnings per share (EPS) rose to $0.48 in 2005 from $0.33
      in
      2004. The
      increase was attributed to the growth in the demand for the Company's products
      as we enter new markets throughout China. This growth occurred as a result
      of
      management's discipline with respect to costs and attention to the bottom line
      despite a decrease in gross margins.





**Liquidity
      and Capital Resources**





As
      of
      December 31, 2005 Bodisen Biotech, Inc. had $6,276,897cash and cash equivalents
      on hand, compared to $2,121,811 cash and cash equivalents on hand as of December
      31, 2004.





For
      December 31, 2005 accounts payable was $49,893, other payables were $18,773
      and
      short term loans was $4,396,114, reflecting the $5,000,000 note issued December
      8, 2005 and subsequently paid. Cash outflows for investing activities increased
      from $2,778,136 to $5,768,028 as a result of additions made to construction
      in
      progress, acquisitions of property and equipment and the purchase of marketable
      securities. The Company's accounts receivable for the year ended December 31,
      2005, were $7,478,152. Based on past performance and current expectations,
      we
      believe our cash and cash equivalents and cash generated from operations will
      satisfy our working capital needs, capital expenditures and other liquidity
      requirements associated with our operations.




12


On
      March
      16, 2005, we completed a $3 million convertible debenture private placement
      through an institutional investor. We issued
      a
      one year 9% debenture convertible into shares of common stock by dividing the
      aggregate principal and accrued interest by a conversion price of $4.80; and
      three year warrants to purchase 187,500 shares of common stock at $4.80 per
      share, In connection with the placement a three year warrant was issued to
      purchase 40,000 shares of common stock at $6.88 per share. During the course
      of
      2005 the note was fully converted to 657,402 shares of common stock. All of
      the
      warrants were exercised during December 2005 and January 2006. The
      net
      proceeds from this offering were used towards capital contribution of the
      registration of a wholly-owned Bodisen subsidiary by the name of Yang Ling
      Bodisen Agricultural Technology Co., Ltd.





On
      February 3, 2006, we entered into an agreement to sell 1,643,836 shares of
      our
      common stock at 730 pence (approximately $12.99). These shares are to be traded
      on the AIM Market of the London Stock Exchange. The resulting proceeds were
      approximately 12,000,000 British pounds sterling (approximately $21,360,000).
      The proceeds are intended for construction of two factories in the Northwest
      and
      Northeast of China, allowing us to greatly increase the geographical area in
      which we can sell our products by overcoming the logistical issues in selling
      and shipping our products over increasingly greater distances. In addition,
      proceeds will also be used to purchase raw materials and for general corporate
      purposes.





On
      March
      15, 2006 we completed a financing of US$5,322,506 by issuing 380,179 restricted
      shares of common stock at $14.00 per share to private institutional investors
      in
      a private placement. These shares are to be traded on the AIM Market of the
      London Stock Exchange. The proceeds of this financing are to be used to repay
      the $5,000,000 short term note plus interest which we entered into on December
      2005.





The
      majority of Bodisen Biotech, Inc. revenues and majority of the expenses in
      2005
      were denominated primarily in Renminbi ("RMB"), the currency of the People's
      Republic of China. There is no assurance that exchange rates between the RMB
      and
      the U.S. dollar will remain stable. A devaluation of the RMB relative to the
      U.S. dollar could adversely affect our business, financial condition and results
      of operations. We do not engage in currency hedging. Inflation has not had
      a
      material impact on our business.




13


ITEM
      7.
      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





**Bodisen
      Biotech, Inc. and Subsidiaries**


**Consolidated
      Financial Statements**


**Years
      Ended December 31, 2005 and 2004**








Page**Report
                  of Independent Registered Public Accounting Firm**
              F-1**Financial
                  Statements:**Consolidated
                  Balance Sheet as of December 31, 2005
              F-2Consolidated
                  Statements of Income and Other Comprehensive Income for the years
                  ended
                  December 31, 2005 and 2004
              F-3Consolidated
                  Statement of Stockholders' Equity for the years ended December
                  31, 2005
                  and 2004
              F-4Consolidated
                  Statements of Cash Flows for the years ended December 31, 2005
                  and
                  2004
              F-5Notes
                  to Consolidated Financial Statements
              F-6




14




***Report
      of Independent Registered Public Accounting Firm***











Board
      of
      Directors and Stockholders of


Bodisen
      Biotech, Inc.





We
      have
      audited the accompanying consolidated balance sheet of Bodisen Biotech, Inc.
      (a
      Delaware corporation) and subsidiaries as of December 31, 2005, and the related
      consolidated statements of income and other comprehensive income, stockholders'
      equity, and cash flows for the years ended December 31, 2005 and 2004. These
      consolidated financial statements are the responsibility of the Company's
      management. Our responsibility is to express an opinion on these consolidated
      financial statements based on our audits.




We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the
      consolidated financial statements are free of material misstatement. An audit
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the financial statements. An audit also includes assessing the
      accounting principles used and significant estimates made by management, as
      well
      as evaluating the overall consolidated financial statement presentation. We
      believe that our audits provide a reasonable basis for our opinion.




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Bodisen
      Biotech, Inc. and Subsidiaries as of December 31, 2005, and the consolidated
      results of their operations and their consolidated cash flows for the years
      ended December 31, 2005 and 2004, in conformity with U.S. generally accepted
      accounting principles.




/s/
      Kabani & Company, Inc.


**Certified
      Public Accountants**





Los
      Angeles, California


February
      22, 2006





F-1




**BODISEN
        BIOTECH, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        BALANCE SHEET**
 **AS
        OF DECEMBER 31, 2005**


**December
                  31,****2005****ASSETS****CURRENT
                  ASSETS:**Cash
                  & cash equivalents
              
              $
              6,276,897Accounts
                  receivable, net of allowance for doubtful accounts of $263,376
              
              
              7,478,152Other
                  receivable
              
              
              1,037,683Inventory
              
              
              1,180,007Advances
                  to suppliers
              
              
              4,563,471Prepaid
                  expense
              
              
              60,635Other
                  current assets
              
              
              3,440Total
                  current assets
              
              
              20,600,285**PROPERTY
                  AND EQUIPMENT, net**
              
              
              4,887,841**CONSTRUCTION
                  IN PROGRESS**
              
              
              1,872,945**MARKETABLE
                  SECURITY**
              
              
              6,810,434**INTANGIBLE
                  ASSETS**
              
              
              2,119,587**TOTAL
                  ASSETS**
              
              $
              36,291,092**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****CURRENT
                  LIABILITIES:**Note
                  payable, net of discount of $603,886
              
              $
              4,396,114Accounts
                  payable
              
              
              49,893Other
                  payables
              
              
              18,773Accrued
                  expenses
              
              
              409,209Total
                  current liabilities
              
              
              4,873,989**STOCKHOLDERS'
                  EQUITY:**Preferred
                  stock, $0.0001 per share; authorized 5,000,000 shares; none issuedCommon
                      stock, $0.0001 per share; authorized 30,000,000 shares;issued
                      and outstanding 16,120,902
              
              
              1,613Additional
                  paid-in capital
              
              
              12,082,793Other
                  comprehensive income
              
              
              4,531,009Statutory
                  reserve
              
              
              2,366,931Retained
                  earnings
              
              
              12,434,757Total
                  stockholders' equity
              
              
              31,417,103**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              $
              36,291,092
  The
        accompanying notes are an integral part of these consolidated financial
        statements


F-2


**BODISEN
        BIOTECH, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**




**Years
                  Ended December 31,****2005**
              
              **2004****Net
                  Revenue**
              
              $
              30,975,350
              
              $
              16,225,896**Cost
                  of Revenue**
              
              
              19,471,121
              
              
              9,653,965**Gross
                  profit**
              
              
              11,504,229
              
              
              6,571,931Operating
                  expensesSelling
                  expenses
              
              
              935,444
              
              
              615,549General
                  and administrative expenses
              
              
              1,496,309
              
              
              907,801Total
                  operating expenses
              
              
              2,431,753
              
              
              1,523,350**Income
                  from operations**
              
              
              9,072,476
              
              
              5,048,581Non-operating
                  income (expense):Other
                  income (expense)
              
              
              137,870
              
              
              7,623Interest
                  income
              
              
              (121,410
              )
              
              45,338Interest
                  expense
              
              
              (1,667,824
              )
              
              (74,139
              )Total
                  non-operating income (expense)
              
              
              (1,651,364
              )
              
              (21,178
              )**Net
                  income**
              
              $
              7,421,112
              
              $
              5,027,403Other
                  comprehensive incomeForeign
                  currency translation gain
              
              
              519,066
              
              
              68,855Unrealized
                  gain on marketable equity security
              
              
              3,943,088
              
              
              —**Comprehensive
                  Income**
              
              $
              11,883,266
              
              $
              5,096,258**Weighted
                  average shares outstanding :**Basic
              
              
              15,427,494
              
              
              15,268,000Diluted
              
              
              15,589,336
              
              
              15,328,356**Earnings
                  per share:**Basic
              
              $
              0.48
              
              $
              0.33Diluted
              
              $
              0.48
              
              $
              0.33
  The
        accompanying notes are an integral part of these consolidated financial
        statements


F-3


**BODISEN
      BIOTECH, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENT OF STOCKHOLDERS' EQUITY**


**FOR
      THE YEARS ENDED DECEMBER 31, 2005 AND 2004**




**Common
                  Stock****Shares**
              
              **Amount**
              
              **Additional**
                  **Paid**
                    **in
                      Capital**
              
              **Other**
                  **Comprehensive**
                  **Income**
              
              **Statutory**
                    **Reserve**
              
              **Retained**
                  **Earnings**
              
              **Total**
                  **Stockholders'**
                    **Equity****Balance
                  January 1, 2004**
              
              
              15,268,000
              
              $
              1,527
              
              $
              5,991,823
              
              $
              —
              
              $
              263,794
              
              $
              2,089,379
              
              $
              8,346,523Cumulative
                  translation adjustment
              
              
              
              
              
              
              
              
              
              
              
              68,855
              
              
              
              
              
              
              
              
              68,855Net
                    loss for the year ended December 31, 2004
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              5,027,403
              
              
              5,027,403Transfer
                  to statutory reserve
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              754,111
              
              
              (754,111
              )
              
              —**Balance
                  December 31, 2004**
              
              
              15,268,000
              
              
              1,527
              
              
              5,991,823
              
              
              68,855
              
              
              1,017,905
              
              
              6,362,671
              
              
              13,442,781Conversion
                    of convertible debenture and interest to common stock
              
              
              657,402
              
              
              66
              
              
              3,155,498
              
              
              
              
              
              
              
              
              
              
              
              3,155,564Exercise
                  of warrants for cash
              
              
              195,500
              
              
              20
              
              
              955,020
              
              
              
              
              
              
              
              
              
              
              
              955,040Value
                    of beneficial conversion feature in connectionwith
                    $3 million convertible note
              
              
              
              
              
              
              
              
              803,381
              
              
              
              
              
              
              
              
              
              
              
              803,381Value
                        of warrants issued in connectionwith
                        $3 million convertible note
              
              
              
              
              
              
              
              
              365,881
              
              
              
              
              
              
              
              
              
              
              
              365,881Value
                        of warrants issued in connectionwith
                        $5 million note payable
              
              
              
              
              
              
              
              
              811,190
              
              
              
              
              
              
              
              
              
              
              
              811,190Change
                  in foreign currency translation gain
              
              
              
              
              
              
              
              
              
              
              
              519,066
              
              
              
              
              
              
              
              
              519,066Change
                  in unrealized gain on marketable equity security
              
              
              
              
              
              
              
              
              
              
              
              3,943,088
              
              
              
              
              
              
              
              
              3,943,088Net
                  Income for the year ended December 31, 2005
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              7,421,112
              
              
              7,421,112Transfer
                  to statutory reserve
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,349,026
              
              
              (1,349,026
              )
              
              —**Balance
                  December 31, 2005**
              
              
              16,120,902
              
              $
              1,613
              
              $
              12,082,793
              
              $
              4,531,009
              
              $
              2,366,931
              
              $
              12,434,757
              
              $
              31,417,103


The
        accompanying notes are an integral part of these consolidated financial
        statements




F-4


**BODISEN
        BIOTECH, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENT OF CASH FLOWS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2005 AND 2004**
   **Years
                  Ended December 31,****2005**
              
              **2004****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  income
              
              $
              7,421,112
              
              $
              5,027,403Adjustments
                      to reconcile net income to net cashprovided
                      in operating activities:Depreciation
                  and amortization
              
              
              324,638
              
              
              302,803Common
                  stock issued for interest expense
              
              
              155,564
              
              
              —Amortization
                  of debt discounts
              
              
              1,376,566
              
              
              —(Increase)
                  / decrease in assets:Accounts
                  receivable
              
              
              (2,333,365
              )
              
              (3,166,143
              )Other
                  receivable
              
              
              (987,322
              )Inventory
              
              
              (388,251
              )
              
              51,612Advances
                  to suppliers
              
              
              (3,732,975
              )
              
              1,178,306Prepaid
                  expense
              
              
              (45,290
              )Other
                  assets
              
              
              (3,388
              )
              
              (48,736
              )Increase
                  / (decrease) in current liabilities:Accounts
                  payable
              
              
              (63,927
              )
              
              (1,521,819
              )Unearned
                  revenue
              
              
              —
              
              
              (15,888
              )Other
                  payables
              
              
              (11,716
              )
              
              (35,350
              )Accrued
                  expenses
              
              
              111,369
              
              
              196,031Net
                  cash provided by operating activities
              
              
              1,823,015
              
              
              1,968,219**CASH
                  FLOWS FROM INVESTING ACTIVITIES**Issuance
                  of loan receivable
              
              
              —
              
              
              (968,000
              )Payment
                  on loan receivable
              
              
              976,368
              
              
              —Acquisition
                  of property and equipment
              
              
              (3,642,530
              )
              
              (435,814
              )Additions
                  to construction in progress
              
              
              (234,520
              )
              
              (1,374,322
              )Purchase
                  of marketable security
              
              
              (2,867,346
              )
              
              —Net
                  cash used in investing activities
              
              
              (5,768,028
              )
              
              (2,778,136
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Payments
                  on note payable
              
              
              (976,368
              )
              
              (111,900
              )Loans
                  made to officers
              
              
              (2,383,217
              )
              
              —Repayments
                  of loans to officers
              
              
              2,383,217
              
              
              —Proceeds
                  from issuance of convertible note
              
              
              3,000,000
              
              
              —Proceeds
                  from issuance of note payable
              
              
              5,000,000
              
              
              —Proceeds
                  from the exercise of warrants
              
              
              955,040
              
              
              —Net
                  cash provided by (used in) financing activities
              
              
              7,978,672
              
              
              (111,900
              )Effect
                  of exchange rate changes on cash and cash equivalents
              
              
              121,427
              
              
              68,855**NET
                  INCREASE (DECREASE) IN CASH & CASH
                  EQUIVALENTS**
              
              
              4,155,086
              
              
              (852,962
              )**CASH
                  & CASH EQUIVALENTS, BEGINNING BALANCE**
              
              
              2,121,811
              
              
              2,974,773**CASH
                  & CASH EQUIVALENTS, ENDING BALANCE**
              
              $
              6,276,897
              
              $
              2,121,811**SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:**Interest
                  paid
              
              $
              68,144
              
              $
              60,231Income
                  taxes paid
              
              $
              —
              
              $
              —


The
        accompanying notes are an integral part of these consolidated financial
        statements


F-5


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





Organization
      and Line of Business




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. Bodisen International, Inc.
      (“BII”) is a Delaware Corporation, incorporated on November 19, 2003. BII was a
      non-operative holding company of BBST. On December 15, 2003, BII entered in
      to
      an agreement with all the stockholders of BBST to exchange all of the
      outstanding stock of BII for all the issued and outstanding stock of BBST.
      After
      the consummation of the agreement, the former stockholders of BBST own 1,500
      shares of common stock of BII, which represent 100% of BII’s issued and
      outstanding shares. For U.S. Federal income tax purpose, the transaction is
      intended to be qualified as a tax-free transaction under section 351 of the
      Internal Revenue Code of 1986, as amended.





The
      exchange of shares with BBST has been accounted for as a reverse acquisition
      under the purchase method of accounting since the stockholders of the BBST
      obtained control of the consolidated entity. Accordingly, the merger of the
      two
      companies has been recorded as a recapitalization of BBST, with BBST being
      treated as the continuing entity. The historical financial statements presented
      are those of BBST. The continuing company has retained December 31 as its fiscal
      year end. The financial statements of the legal acquirer are not significant;
      therefore, no pro forma financial information is submitted.





On
      February 24, 2004, BII consummated a merger agreement with Stratabid.com, Inc.
      (“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 since 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 being treated as the continuing entity. The financial statements of
      legal acquirer are not significant; therefore, no pro forma financial
      information is submitted.





In
      March
      2005, Bodisen Biotech Inc. completed a $3 million convertible debenture private
      placement through an institutional investor. Approximately $651,000 in expenses
      relating to this private placement has been amortized over the term of the
      convertible debenture. The net proceeds from this offering were sent to China
      towards capital contribution of the registration of a 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 (“Yang
      Ling”), Bodisen Biotech, Inc.’s operating subsidiary in China, which resulted in
      Agricultural owning 100% of Yang Ling.





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 ($).





Foreign
      Currency Translation





As
      of
      December 31, 2005 and 2004, the accounts of the Company were maintained, and
      their consolidated financial statements were expressed in the Chinese Yuan
      Renminbi (CNY). Such consolidated financial statements were translated into
      U.S.
      Dollars (USD) in accordance with Statement of Financial Accounts Standards
      ("SFAS") No. 52, "Foreign Currency Translation," with the CNY as the functional
      currency. According to the Statement, all assets and liabilities were translated
      at the exchange rate on the balance sheet date, stockholder's equity are
      translated at the historical rates and statement of operations items are
      translated at the weighted average exchange rate for the year. The resulting
      translation adjustments are reported under other comprehensive income in
      accordance with SFAS No. 130, "Reporting Comprehensive Income





F-6


**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.





Cash
      and Cash Equivalents





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





Accounts
      Receivable





The
      Company maintains reserves for potential credit losses on accounts receivable.
      Management reviews the composition of accounts receivable and analyzes
      historical bad debts, customer concentrations, customer credit worthiness,
      current economic trends and changes in customer payment patterns to evaluate
      the
      adequacy of these reserves. Terms of the sales vary from COD through a credit
      term up to 9 to 12 months. Reserves are recorded primarily on a specific
      identification basis. Allowance for doubtful debts amounted to $263,376 as
      at
      December 31, 2005.





Advances
      to Suppliers





The
      Company advances to certain vendors for purchase of its material. The advances
      to suppliers are interest free and unsecured. The advances to suppliers amounted
      to $4,563,471 at December 31, 2005.





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.





Loan
      Receivable





On
      December 8, 2004, the Company entered in to an agreement to loan $968,000 to
      an
      unrelated party. The loan was unsecured, payable by December 7, 2005 and carried
      an interest rate of 8.7% per annum. The amount was repaid in full by the due
      date.





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
 
 F-7
 At
        December 31, 2005, the following are the details of the property and
        equipment:
 
 Operating
                  equipment
              
              $
              923,688Vehicles
              
              
              362,780Office
                  equipment
              
              
              63,403Buildings
              
              
              4,142,1295,492,000Less
                  accumulated depreciation
              
              
              (604,159
              )$
              4,887,841





Depreciation
      expense for the years ended December 31, 2005 and 2004 was $193,634 and
      $172,622, respectively.





On
      December 31, 2005, the Company has “Capital Work in Progress” representing the
      construction in progress of the Company’s manufacturing plant amounting
      $1,872,945.





Marketable
      Securities





Marketable
      securities consist 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





Effective
      January 1, 2002, the Company adopted Statement of Financial Accounting Standards
      No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS
      144”), which addresses financial accounting and reporting for the impairment or
      disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the
      Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,”
and the accounting and reporting provisions of APB Opinion No. 30, “Reporting
      the Results of Operations for a Disposal of a Segment of a Business.” The
      Company periodically evaluates the carrying value of long-lived assets to be
      held and used in accordance with SFAS 144. SFAS 144 requires impairment losses
      to be recorded on long-lived assets used in operations when indicators of
      impairment are present and the undiscounted cash flows estimated to be generated
      by those assets are less than the assets’ carrying amounts. In that event, a
      loss is recognized based on the amount by which the carrying amount exceeds
      the
      fair market value of the long-lived assets. Loss on long-lived assets to be
      disposed of is determined in a similar manner, except that fair market values
      are reduced for the cost of disposal. Based on its review, the Company believes
      that, as of December 31, 2005 there were no significant impairments of its
      long-lived assets.





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





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





F-8


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.





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, 2005 and 2004 were insignificant.





Stock-Based
      Compensation





In
      October 1995, the FASB issued SFAS No. 123, “Accounting for Stock-Based
      Compensation”. SFAS No. 123 prescribes accounting and reporting standards for
      all stock-based compensation plans, including employee stock options, restricted
      stock, employee stock purchase plans and stock appreciation rights. SFAS No.
      123
      requires compensation expense to be recorded (i) using the new fair value method
      or (ii) using the existing accounting rules prescribed by Accounting Principles
      Board Opinion No. 25, “Accounting for stock issued to employees” (APB 25) and
      related interpretations with proforma disclosure of what net income and earnings
      per share would have been had the Company adopted the new fair value method.
      The
      Company uses the intrinsic value method prescribed by APB 25 and has opted
      for
      the disclosure provisions of SFAS No.123.





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.





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 is exempted from income tax through
      October 2007.





In
      March
      2005, Bodisen Biotech Inc. formed a new 100% wholly-owned subsidiary named
      Yang
      Ling Bodisen Agricultural Technology Co., Ltd. (“Agricultural”) in China. 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 Yang Ling
      Bodisen Biology Science and Technology Development Company Limited (“Yang Ling”,
      Bodisen Biotech, Inc.’s operating subsidiary in China), which resulted in
      Agricultural owning 100% of Yang Ling.





If
      the
      Company had not been exempt from paying income taxes during the years ended
      December 31, 2005 and 2004, income tax expense would have been approximately
      $2,859,000 and $1,659,000, respectively, and earnings per share would have
      been
      reduced by $0.19 and $0.11, respectively.





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 $587,921 at
      December 31, 2005 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, 2005 and 2004, other comprehensive income in the consolidated
      statements of income and other comprehensive income included translation gains
      of $519,066 and $68,855, respectively.





F-9


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.





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.





Recent
      Pronouncements





In
      May
      2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections."
      This statement applies to all voluntary changes in accounting principle and
      requires retrospective application to prior periods' financial statements of
      changes in accounting principle, unless this would be impracticable. This
      statement also makes a distinction between "retrospective application" of an
      accounting principle and the "restatement" of financial statements to reflect
      the correction of an error. This statement is effective for accounting changes
      and corrections of errors made in fiscal years beginning after December 15,
      2005.





In
      February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments”. SFAS No. 155 amends SFAS No 133, “Accounting for
      Derivative Instruments and Hedging Activities”, and SFAF No. 140, “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities”. SFAS No. 155, permits fair value remeasurement for any hybrid
      financial instrument that contains an embedded derivative that otherwise would
      require bifurcation, clarifies which interest-only strips and principal-only
      strips are not subject to the requirements of SFAS No. 133, establishes a
      requirement to evaluate interest in securitized financial assets to identify
      interests that are freestanding derivatives or that are hybrid financial
      instruments that contain an embedded derivative requiring bifurcation, clarifies
      that concentrations of credit risk in the form of subordination are not embedded
      derivatives, and amends SFAS No. 140 to eliminate the prohibition on the
      qualifying special-purpose entity from holding a derivative financial instrument
      that pertains to a beneficial interest other than another derivative financial
      instrument. This statement is effective for all financial instruments acquired
      or issued after the beginning of the Company’s first fiscal year that begins
      after September 15, 2006.





In
      December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment,
      an
      Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires
      companies to recognize in the statement of operations the grant- date fair
      value
      of stock options and other equity-based compensation issued to employees. FAS
      No. 123R is effective beginning in the Company's first quarter of fiscal 2006.





In
      June
      2005, the EITF reached consensus on Issue No. 05-6, Determining the Amortization
      Period for Leasehold Improvements ("EITF 05-6.") EITF 05-6 provides guidance
      on
      determining the amortization period for leasehold improvements acquired in
      a
      business combination or acquired subsequent to lease inception. The guidance
      in
      EITF 05-6 will be applied prospectively and is effective for periods beginning
      after June 29, 2005. EITF 05-6 is not expected to have a material effect on
      its
      consolidated financial position or results of operations.





F-10


The
      Company believes that the adoption of these standards will have no material
      impact on its financial statements.





**Note
      3 - Principles of Consolidation**





The
      accompanying consolidated financial statements include the accounts of Bodisen
      Biotech, Inc., its 100% wholly-owned subsidiary Bodisen Holdings, Inc. (“BHI”),
      BHI’s 100% wholly- owned subsidiary Yang Ling Bodisen Biology Science and
      Technology Development Company Limited, and a 100% wholly-owned subsidiary,
      incorporated in March 2005, named Yang Ling Bodisen Agricultural Technology
      Co.,
      Ltd. All significant inter-company accounts and transactions have been
      eliminated in consolidation.





**Note
      4 - Advances to officers**





During
      the six month period ending June 30, 2005, the Company advanced $2,383,217
      to 4
      officers as a short term loan. Said loan was interest free, unsecured, and
      payable upon demand. These loans were repaid during the quarter ended September
      30, 2005.





**Note
      5 - Marketable Security**





During
      the year ended December 31, 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, 2005, the fair value of this investment was $6,810,434 which resulted in
      an
      unrealized gain of $3,943,088 which is included in other comprehensive income.
      At December 31, 2005, this represented a 10.2% interest in China Natural Gas,
      Inc.








**Note
      6 - Intangible Assets**





Net
      intangible assets at December 31, 2005 were as follows:




Rights
                to use land
            
            $
            1,693,833Fertilizers
                proprietary technology rights
            
            
            991,3042,685,137Less
                Accumulated amortization
            
            
            (565,550
            )$
            2,119,587





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.





Amortization
      expense for the Company’s intangible assets for the years ended December 31,
      2005 and 2004 amounted to $131,004 and $130,181, respectively.





F-11


Amortization
      expense for the Company’s intangible assets over the next five fiscal years is
      estimated to be: 2006-$130,000, 2007-$130,000, 2008-$130,000, 2009-$130,000
      and
      2010-$130,000.





**Note
      7 - Short-Term Loans**





At
      December 31, 2004, the Company had three short-term notes payable outstanding
      that totaled $980,100. During the year ended December 31, 2005, all three notes
      were repaid in full.





**Note
      8 - Note Payable**





On
      December 8, 2005, the Company issued a $5,000,000 note payable to Amaranth
      Partners LLC that accrues interest at 9% per annum and is due on March 8, 2006.
      In connection with this note payable agreement, the Company also issued to
      Amaranth Partners LLC a warrant to purchase 133,333 shares of the Company common
      stock for $7.50 per shares. The Company first determined the value of the note
      and the fair value of the detachable warrants issued in connection with this
      note payable. The estimated value of the warrants of $968,282 was determined
      using the Black-Scholes option pricing model and the following assumptions:
      term
      of 5 years, a risk free interest rate of 4.00%, a dividend yield of 0% and
      volatility of 31%. The face amount of the note payable of $5,000,000 was
      proportionately allocated to the note payable and the warrant in the amount
      of
      $4,188,810 and $811,190, respectively. The amount allocated to the warrants
      of
      $811,190 was recorded as a discount on the note payable and will be amortized
      over the year life of the note payable. For the year ended December 31, 2005
      $207,304 has been amortized to interest expense, due to the passage of time.
      The
      unamortized discount at December 31, 2005 amounted to $603,886.





**Note
      9 - Convertible Debenture**





On
      March
      16, 2005, the Company completed a private placement offering. The Company
      received $3,000,000 and issued a one year 9% debenture convertible into shares
      of common stock by dividing the aggregate principal and accrued interest by
      a
      conversion price of $4.80; and three year warrants to purchase 187,500 shares
      of
      common stock at $4.80 per share and three year warrants to purchase 40,000
      shares of common stock at $6.88 per share.





This
      debenture was considered to have an embedded beneficial conversion feature
      because the conversion price was less than the quoted market price at the time
      of the issuance. The Company allocated the proceeds of the debt between the
      warrant and the debt based on relative fair values which amounted to $365,881
      and $2,634,119. The beneficial conversion feature of $803,381 was recorded
      separately based on the intrinsic value method per EITF 00-27. During the year
      ended December 31, 2005, the entire $3,000,000 convertible debenture and
      $155,564 of accrued interest were converted into 657,402 shares of the Company’s
      common stock. In addition, since the entire principal balance of the convertible
      debenture was converted into common stock, the entire debt discount of
      $1,169,262 was amortized to interest expense.




**Note
      10 - Stockholders’ Equity**




On
      February 24, 2004, BII entered into a merger agreement with Stratabid.com,
      Inc.
      (Stratabid) to exchange 12,000,000 shares of Stratabid to the stockholders
      of
      BII (Note 18). As a part of the merger, Stratabid cancelled 3,000,000 shares
      of
      its issued and outstanding stock owned by a majority stockholder 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, after the merger agreement.





During
      the year ended December 31, 2005, the Company issued 657,402 share of common
      stock in connection with the conversion of a $3,000,000 convertible debenture
      and $155,564 of accrued interest. In addition, the Company also issued 195,500
      shares of common stock upon the exercise of warrants and received proceeds
      of
      $955,040.




F-12


**Note
      11 - Stock Options and Warrants**





Stock
      Options





In
      December 2002, the FASB issued SFAS No. 148 “Accounting for Stock Based
      Compensation- Transition and Disclosure”. SFAS No. 148 amends SFAS No. 123,
“Accounting for Stock Based Compensation”, to provide alternative methods of
      transition for a voluntary change to the fair value based method of accounting
      for stock-based employee compensation. In addition, this Statement amends the
      disclosure requirements of Statement 123 to require prominent disclosures in
      both annual and interim financial statements about the method of accounting
      for
      stock-based employee compensation and the effect of the method used, on reported
      results. The Statement is effective for the Companies’ interim reporting period
      ending January 31, 2003.





In
      compliance with FAS No. 148, the Company has elected to continue to follow
      the
      intrinsic value method in accounting for its stock-based employee compensation
      plan as defined by APB No. 25 and has made the applicable disclosures below.





In
      2004
      the board of directors approved the creation of the 2004 Stock Option Plan.
      This
      plan provides for the grant of incentive stock options to employees, directors
      and consultants. Options issued under this plan will expire over a maximum
      term
      of five years from the date of grant.





Pursuant
      to the Stock Option Plan, during the year ended December 31, 2004, the Company
      granted 110,000 stock options to two directors (55,000 options each), of which
      100,000 stock options was granted on June 4, 2004 and the balance of the 10,000
      was granted on December 28, 2004.





On
      the
      first 100,000 stock options granted, 50,000 stock options vested immediately
      and
      50,000 stock options became vested over 8 equal quarterly installments, with
      the
      first installment vesting at the end of the second quarter of 2004. The 10,000
      stock options granted on December 28, 2004 vested on December 31, 2004.





The
      option exercise price was $5 for the first 100,000 stock options which was
      the
      same as fair value of the shares at the time of granting of the options. The
      option exercise price was $5.80 for the second 10,000 stock options which was
      the same as fair value of the shares at the time of granting of the options.





On
      October 4, 2005, the Company granted 26,000 stock options to two directors
      (13,000 options each). 20,000 stock options vested immediately and the remaining
      6,000 stock options became vested 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.





Following
      is a summary of the stock option activity:




Outstanding,
                  December 31, 2003
              
              
              —Granted
              
              
              110,000Forfeited
              
              
              —Exercised
              
              
              —Outstanding,
                  December 31, 2004
              
              
              110,000Granted
              
              
              26,000Forfeited
              
              
              —Exercised
              
              
              —Outstanding,
                  December 31, 2005
              
              
              136,000





F-13


Following
      is a summary of the status of options outstanding at December 31, 2005:




Outstanding
                  Options
              
              Exercisable
                  OptionsExercise
                Price
              Number
              Average
                  Remaining Contractual Life
              Average
                  Exercise Price
              Number
              Average
                  Exercise Price$5.00
              100,000
              3.42
              $5.00
              93,750
              $5.00$5.80
              10,000
              3.99
              $5.80
              10,000
              $5.80$6.72
              26,000
              4.76
              $6.72
              24,000
              $6.72


For
      options granted during the year ended December 31, 2005, the weighted-average
      fair value of such options was $3.76.





The
      assumptions used in calculating the fair value of options granted using the
      Black-Scholes option- pricing model are as follows:








Risk-free
                interest rate
            4.0%Expected
                life of the options
            5.00
                yearsExpected
                volatility
            62%Expected
                dividend yield
            0





For
      options granted during the year ended December 31, 2004, the weighted-average
      fair value of such options was $1.92.





The
      assumptions used in calculating the fair value of options granted using the
      Black-Scholes option- pricing model are as follows:


First
      100,000 stock options granted on June 4, 2004:





Risk-free
                interest rate
            4.0%Expected
                life of the options
            5.00
                yearsExpected
                volatility
            35%Expected
                dividend yield
            0





Second
      10,000 stock options granted on December 28, 2004





Risk-free
                interest rate
            4.0%Expected
                life of the options
            5.00
                yearsExpected
                volatility
            40%Expected
                dividend yield
            0





Had
      the
      Company determined employee stock based compensation cost based on a fair value
      model at the grant date for its stock options under SFAS 123, the Company’s net
      earnings per share would have been adjusted to the pro forma amounts for the
      years ended December 31, 2004 as follow ($ in thousands, except per share
      amounts):








2005
            
            2004Net
                income:As
                reported
            
            $
            7,421,112
            
            $
            5,027,403Stock-Based
                employee compensation expense included in reported net income, net
                of
                tax
            
            
            —
            
            
            —Total
                stock-based employee compensation expense determined under
                fair-value-based method for all rewards, net of tax
            
            
            (106,000
            )
            
            (153,000
            )Pro
                forma
            
            $
            7,315,112
            
            $
            4,874,403Basic
                earnings per share:As
                reported
            
            $
            0.48
            
            $
            0.33Pro
                forma
            
            $
            0.47
            
            $
            0.32Diluted
                earnings per share:As
                reported
            
            $
            0.48
            
            $
            0.33Pro
                forma
            
            $
            0.47
            
            $
            0.32





F-14


Warrants





Following
      is a summary of the warrant activity:





Outstanding,
                December 31, 2004
            
            
            —Granted
            
            
            360,833Forfeited
            
            
            —Exercised
            
            
            195,500Outstanding,
                December 31, 2005
            
            
            165,333





Following
      is a summary of the status of warrants outstanding at December 31, 2005:




Outstanding
                    Warrants
                
                Exercisable
                    WarrantsExercise
                  Price
                Number
                Average
                    Remaining Contractual Life
                Average
                    Exercise Price
                Number
                Average
                    Exercise Price$6.88
                32,000
                2.21
                $6.88
                32,000
                $6.88$7.50
                133,333
                4.94
                $7.50
                133,333
                $7.50
 **Note
          12 - Supplemental Disclosure of Cash Flows**





The
      Company prepares its statements of cash flows using the indirect method as
      defined under the Financial Accounting Standard No. 95.





**Note
      13 - 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 employee welfare plan. The total expense for the above
      plan $82,705 and $80,761 for the years ended December 31, 2005 and 2004,
      respectively. The Company has recorded welfare payable of $260,071 at December
      31, 2005 which is included in accrued expenses in the accompanying consolidated
      balance sheet.








**Note
      14 - 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.





F-15


The
      Company established a reserve for the annual contribution of 5% of net income
      to
      the welfare fund in 2005 and 2004. The amount included in the statutory reserve
      for the years ended December 31, 2005 and 2004 amounted to $449,675 and
      $251,370, respectively.




**Note
      15 - Statutory Reserve**





In
      accordance with the Chinese Company Law, the company has allocated 10% of its
      annual net income, amounting $899,351 and $502,741 as statutory reserve for
      the
      years ended December 31, 2005 and 2004, respectively.




**Note
      16 - Factory Location and Lease Commitments**





BBST’s
      principal executive offices are located at North Part of Xinquia Road, Yang
      Ling
      Agricultural High-Tech Industries Demonstration Zone Yang Ling, Shaanzi
      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. The rent of the office building
      is $121 a month from May 20, 2004 through May 20, 2005. BBST also leases
      warehouses in Yang Ling near the site of Bodisen’s factories. The rent of the
      warehouses is $194 a month from January 2005 through May 2005. Total future
      commitment through June 30, 2005 amounts to $1,573.





The
      Company has committed to pay $18,150 to an advertising agency for an advertising
      campaign, by October 2006.




F-16


**Note
      17 - Earnings Per Share**





Earnings
      per share for years ended December 31, 2005 and 2004 were determined by dividing
      net income for the periods by the weighted average number of both basic and
      diluted shares of common stock and common stock equivalents outstanding.





The
      following is an analysis of the differences between basic and diluted earnings
      per common share in accordance with Statement of Financial Accounting Standards
      No. 128, “Earnings Per Share”.





**Year
                        Ended December 31,****2005**
                    
                    **2004****Income**
                    
                    **Shares**
                    
                    **Per
                        Share**
                    
                    **Income**
                    
                    **Shares**
                    
                    **Per
                        Share****Basic
                        earnings per share**Net
                        income
                    
                    $
                    7,421,112
                    
                    
                    
                    
                    
                    
                    
                    $
                    5,027,403Weighed
                        shares outstanding
                    
                    
                    
                    
                    
                    15,427,494
                    
                    
                    
                    
                    
                    
                    
                    
                    15,268,000$
                    0.48
                    
                    
                    
                    
                    
                    
                    
                    $
                    0.33**Diluted
                        earnings per share**Net
                        income
                    
                    $
                    7,421,112
                    
                    
                    
                    
                    
                    
                    
                    $
                    5,027,403Weighed
                        shares outstanding
                    
                    
                    
                    
                    
                    15,427,494
                    
                    
                    
                    
                    
                    
                    
                    
                    15,268,000Effect
                        of dilutive securitiesOptions
                    
                    
                    
                    
                    
                    83,663
                    
                    
                    
                    
                    
                    
                    
                    
                    60,356Warrants
                    
                    
                    
                    
                    
                    78,179
                    
                    
                    
                    
                    
                    
                    
                    
                    —15,589,336
                    
                    
                    
                    
                    
                    
                    
                    
                    15,328,356$
                    0.48
                    
                    
                    
                    
                    
                    
                    
                    $
                    0.33


**Note
      18 - Merger Agreement**




On
      February 11, 2004, Stratabid entered into an Agreement and Plan of Merger with
      Bodisen Acquisition Corp., a Delaware corporation (“BAC”) wholly-owned by
      Stratabid, Bodisen International, Inc., a Delaware corporation (“BII”) and the
      stockholders of BII. BII has one 100% wholly-owned subsidiary in Shaanxi, China,
      Yang Ling Bodisen Biology Science and Technology Development Company Limited
      (“BBST”). Under the terms of the agreement, BAC acquired 100% of BII’s stock in
      exchange for the issuance by Stratabid of three million shares of its common
      stock to the holders of BII. The new shares constitute approximately 79% of
      the
      outstanding shares of Stratabid, which changed its name to Bodisen Biotech,
      Inc.
      (the “Company”). The Agreement and Plan of Merger was closed on February 24,
      2004.





BII’s
      Chairman of the Board was appointed the Company’s Chief Executive Officer.





F-17


At
      the
      Effective Time, by virtue of the Merger and without any action on the part
      of
      the BAC, BII or the BII Stockholders, the shares of capital stock of each of
      BII
      and the BAC were converted as follows:





i.
            Capital
                Stock of the BAC. Each issued and outstanding share of the BAC’s capital
                stock continued to be issued and outstanding and was converted into
                one
                share of validly issued, fully paid, and non- assessable common stock
                of
                the Surviving Company (Bodisen Holdings, Inc.). Each stock certificate
                of
                the BAC evidencing ownership of any such shares continued to evidence
                ownership of such shares of capital stock of the Surviving Company.





ii.
            Conversion
                of BII Shares. Each BII Share that was issued and outstanding at
                the
                Effective Time was automatically cancelled and extinguished and converted,
                without any action on the part of the holder thereof, into the right
                to
                receive at the time and in the amounts described in the Agreement
                an
                amount of Acquisition Shares equal to the number of Acquisition Shares
                divided by the number of BII Shares outstanding immediately prior
                to
                Closing. All such BII Shares, so converted, were no longer outstanding
                and
                were automatically cancelled and retired and ceased to exist, and
                each
                holder of a certificate representing any such shares ceased to have
                any
                rights with respect thereto, except the right to receive the Acquisition
                Shares paid in consideration therefore upon the surrender of such
                certificate in accordance with the Agreement.





iii.
            Within
                thirty (30) days from the Closing Date, Stratabid was required to
                sell its
                business operations, as they exist immediately prior to the Closing,
                to
                Derek Wasson, former president. In consideration of the sale, Mr.
                Wasson
                returned 750,000 Common Shares to Stratabid for cancellation. In
                addition,
                Mr. Wasson forgave all indebtedness owed by Stratabid to Mr. Wasson.
                Other
                than indebtedness of BII, Stratabid 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.




**Note
      19 - Current Vulnerability Due to Certain Concentrations**





Four
      vendors provided 29.9%, 22.4%, 11.6% and 11.2% of the Company’s raw materials
      for the year ended December 31, 2005 and four vendors provided 25.9%, 19.9%,
      14.0% and 10.0% of the Company’s raw materials for the year ended December 31,
      2004. The payable balance for these parties amounted to $0 at December 31,
      2005.





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.





**Note
      20 - Reclassifications**





Certain
      prior period amounts have been reclassified to conform to the year ended
      December 31, 2005 presentation.





**Note
      21 - Subsequent Events (Unaudited)**




On
      February 3, 2006, the Company entered into a placing agreement (the "Placing
      Agreement") with Charles Stanley Securities ("Charles Stanley”) relating to the
      sale of up to 1,643,836 shares of the Company's common stock. Pursuant to the
      Placing Agreement, Charles Stanley has agreed to use its reasonable effort
      to
      sell all such shares of common stock at a price of 730 pence (approximately
      US$12.99) per share, resulting in gross proceeds of approximately 12 million
      British pounds sterling (approximately US$21,360,000).




In
      connection with the placement, the Company's shares would be admitted to trading
      on the AIM Market of the London Stock Exchange. The Company's shares will
      continue to be listed on the American Stock Exchange.




On
      March
      15, 2006, the Company completed financing of $5,322,506 by issuing 380,179
      restricted shares of common stock of the Company at $14.00 per share to
      institutional investors in a private placement pursuant to Regulation S.
      Issuance of these new shares are subject to approval by the American Stock
      Exchange and admission to the London AIM market. The Company has obtained
      approval of the American Stock Exchange. The proceeds from this financing will
      be used to fulfill repayment obligations of a $5 million short term note that
      the Company entered in December 2005 which was used to fund raw materials
      purchases


F-18


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





None





ITEM
      8A.
      CONTROLS AND PROCEDURES





The
      Chief
      Executive Officer and Chief Financial Officer conducted an evaluation of the
      effectiveness of the design and operation of the Company's 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 the end of the period covered
      by
      this report. Based on that evaluation, the Chief Executive Officer and Chief
      Financial Officer concluded that the Company's disclosure controls and
      procedures were effective as of the end of the period covered by this report.
      There were no significant changes in internal control over financial reporting
      (as defined in Rule 13a-15f under the Exchange Act) that occurred during the
      fourth quarter of 2004 that have materially affected, or are reasonably likely
      to materially affect, the Company's internal control over financial
      reporting.




ITEM
      8B.
      OTHER INFORMATION




None.




15


**PART
      III**




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





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




**Name**
            **Age**
            **Position**Wang
                Qiong
            41
            Chairman
                and Chief Executive OfficerBo
                Chen
            48
            Executive
                Director and PresidentPatrick
                McManus
            51
            DirectorDavid
                Gatton
            52
            DirectorWeirui
                Wan
            64
            DirectorWang
                Chunsheng
            42
            Chief
                Operating OfficerYiliang
                Lai
            40
            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.





**Background
      of Executive Officers and Directors**





**Wang
      Qiong,** Chairman
      and Chief Executive Officer of Bodisen and Yang Ling - Mrs. Wang Qiong has
      served as the Chairman of the Board of Bodisen since the merger of BHI and
      BII
      and she has been on the board of Yang Ling since Yang Ling was founded in August
      2001. 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
      Bodisen International, Inc. 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.





**Bo
      Chen,** Director
      and President of Bodisen and Yang Ling - Mr. Chen, the President of Bodisen,
      is
      one of its original founders and stockholders. 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 currently sits on the Board of Directors of
      China
      Natural Gas, Inc. Mr. Chen received his Bachelor of Science degree from Shaanxi
      Normal College in July 1984.





**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. Mayor 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. Mayor McManus is an expert on China. 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





**David
      Gatton,** Director
      of Bodisen - Mr. Gatton joined Bodisen’s Board of Directors on May 1, 2004 as an
      independent board member. Since 1985 Mr. Gatton has served as the Chairman
      and
      President of Development Initiatives, Inc, a Washington, DC-based government
      relations firm specializing in urban affairs, business development and
      marketing, serving a variety of public and private clients. Mr. Gatton advises
      cities, organizations, and companies on business development strategies,
      public/private partnerships and marketing initiatives. He has advised various
      organizations on tax reform, economic development initiatives and a variety
      of
      environmental laws, including the reauthorization of the following Acts of
      the
      United States: the Clean Water Act, the Safe Drinking Water Act, the Resource
      Conservation and Recovery Act, Superfund and the Clean Air Act. Some of Mr.
      Gatton’s major accomplishments include: development of U.S. Sino Memorandum of
      Cooperation between U.S. and China Association of Mayors, development of a
      national brownfield redevelopment initiative, development of several multifamily
      low- and moderate-income housing developments, business development strategies
      for various private firms, and assistance in development of economic development
      projects for numerous cities. Mr. Gatton holds a B.A. from Cornell College,
      and
      a Master’s degree from Harvard University.





16


**Weirui
      Wan,** Director
      of Bodisen - Mr. Weirui Wan joined Bodisen’s Board of Directors on May 1, 2004
      as an independent board member. Mr. Wan has over 40 years of experience in
      management and leadership positions in the agricultural sector in China. He
      started his career in 1967 as an agricultural scientist at the Chinese Academy
      of Water and Soil Preservation, China’s leading government agency on soil and
      agricultural studies. In 1984, Mr. Wan was appointed the position of Deputy
      Director of the Chinese Academy of Water and Soil Preservation. In 1997, Mr.
      Wan
      moved to the city of Yang Ling and was appointed Deputy Governor of the Yang
      Ling Agricultural High-Tech Industries Demonstration Zone and was in charge
      of
      building the zone into the agricultural hub of China. Mr. Wan retired as Deputy
      Governor in 2001 and is currently on the Advisory Board of Yang Ling
      Agricultural High-Tech Industries Demonstration Zone. Mr. Wan graduated from
      Beijing University of Agriculture in 1967 with a Bachelor’s degree in
      Agriculture.





**Wang
      Chunsheng,** 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 Operations 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 agronomist certification.





**Yiliang
      Lai,** Chief
      Financial Officer of Bodisen and Yang Ling - On November 1, 2005, the Company
      promoted Yiliang Lai to the position of Chief Financial Officer. Mr Lai joined
      the Company as a financial controller in March 2005. Mr Lai has extensive
      experience in accounting and auditing matters. He started his career as an
      accountant at China Shipping in 1986 and in 1999 he joined the CPA firm ShenZhen
      CaiXin as an auditor. In 2001, Mr Lai joined Shaanxi Kaida Limited as head
      of
      accounting and in 2002 he joined Xi’an Hongsheng Biotech as Chief Financial
      Officer. Mr Lai is a Certified Public Accountant in China as well as a Certified
      Auditor.





**Board
      of Directors**





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





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





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





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





Section
      16(a) of the Securities Exchange Act of 1934 requires the Company's directors
      and executive officers, and persons who own more then 10 percent of the
      Company's Common Stock, to file with the SEC the initial reports of ownership
      and reports of changes in ownership of common stock. Officers, directors and
      greater than 10 percent stockholders are required by SEC regulation to furnish
      the Company with copies of all Section 16(a) forms they file.





17


Specific
      due dates for such reports have been established by the Commission and the
      Company is required to disclose any failure to file reports by such dates. In
      light
      of the fact that the Company only became obligated for the filing of reports
      in
      compliance with Section 16(a) of the Securities Exchange Act of 1934 in the
      middle of the fiscal year, do to an inadvertent oversight, there was a failure
      of all officers, directors and greater than 10 percent stockholders of the
      Company to comply with Section 16(a) filing requirements. However, this
      oversight is currently being addressed to rectify the problem.




**Code
      of Ethics**




The
      Company has adopted a Code of Ethics that applies to all officers, directors
      and
      employees of the Company.





ITEM
      10. EXECUTIVE COMPENSATION





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





SUMMARY
      COMPENSATION TABLE




**Long
                Term Compensation****Annual
                Compensation**
            
            **Awards**
            **Payouts**Name
                And
              Principal
              Position
            
            Year
            Salary
              ($)
            Bonus
              ($)
            Other
              Annual
              Compensation
              ($)
            
            Restricted
              Stock
              Compensation
              ($)
            Securities
              Under-
              Lying
              Options/
              SARs
                (#)
            LTIP
              Payouts
              ($)
            All Other
              Compensation
              ($)Wang
                Qiong, Chief Executive Officer and Chairman
            
            2005
              2004
              2003
            31,450
              23,220
              4,400
            -0-
              -0-
              -0-
            -0-
              -0-
              -0-
            
            N/A
              N/A
              N/A
            N/A
              N/A
              N/A
            N/A
              N/A
              N/A
            N/A
              N/A
              N/ADerek
                Wasson, Former Chief Executive Officer
            
            2005
              2004
              2003
            -0-
              -0-
              -0-
            -0-
              -0-
              -0-
            -0-
              -0-
              32,694
                (1)
            
            N/A
              N/A
              N/A
            N/A
              N/A
              N/A
            N/A
              N/A
              N/A
            N/A
              N/A
              N/A


(1)
              Represents
                  consulting fees paid.





**Equity
      Compensation Plan Information**





There
      has
      been no common stock authorized for issuance with respect to any equity
      compensation plan as of the fiscal year ended December 31, 2005.




**Employment
      Agreements**




There
      are
      currently no employment agreements between the Company and any of its named
      executive officers.





18


**Option
      Grants During 2005 Fiscal Year**





The
      following table provides information related to options granted to the named
      executive officers during the 2005 fiscal year. The Company does not have any
      outstanding stock appreciation rights.





Name
            No.
                of
              Securities
              Underlying
              Options
              Granted
              (#)
            %
                of Total
              Options
              Granted
                to
              Employees
              in
                Fiscal
              Year
            Exercise
              Price
              (
                $/Sh)
            Expiration
              DateDavid
                Gatton
            13,000
            50%
            $6.72
            October
                4, 2010Patrick
                McManus
            13,000
            50%
            $6.72
            October
                4, 2010





**Aggregated
      Option Exercises During 2005 Fiscal Year and Fiscal Year-End Option
      Values**





The
      following table provides information related to employee options exercised
      by
      the named executive officers during the 2005 fiscal year and number and value
      of
      such options held at fiscal year-end.





Shares
                Acquired
            Value
            
            Number
                of Securities Underlying Unexercised Options at Fiscal Year- End
                (#)
            
            Value
                of Unexercised In-the-Money Options at Fiscal Year- End ($)
                (1)Name
            on
                Exercise (#)
            Realized
            
            Exercisable
            Unexercisable
            
            Exercisable
            UnexercisableDavid
                Gatton
            N/A
            N/A
            
            63,875
            4,125
            
            550,235
            35,405Patrick
                McManus
            N/A
            N/A
            
            63,875
            4,125
            
            550,235
            35,405


(1)
              Based
                  on the closing price of $14.00, at December 30, 2005.





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





The
      following table sets forth certain information, as of March 24, 2006 with
      respect to the beneficial ownership of the outstanding common stock by (i)
      any
      holder of more than five (5%) percent; (ii) each of our executive officers
      and
      directors; and (iii) our directors and executive officers as a group. Except
      as
      otherwise indicated, each of the stockholders listed below has sole voting
      and
      investment power over the shares beneficially owned.




Name
                  of Beneficial Owner (1)
              
              Number
                  of
                Shares
                Beneficially
                Owned
              
              Percentage
                  of
                Shares
                Beneficially
                Owned
                  (2)Wang
                  Qiong
              
              
              3,748,780
              
              
              20.6
              %Bo
                  Chen
              
              
              3,584,096
              
              
              19.7
              %Patrick
                  McManus
              
              
              68,000
              
              
              *David
                  Gatton
              
              
              68,000
              
              
              *Weirui
                  Wan
              
              
              0
              
              
              *Wang
                  Chunsheng
              
              
              0
              
              
              *Yiliang
                  Lai.
              
              
              0
              
              
              *All
                  officers and directors as a group (7 persons)
              
              
              7,462,626
              
              
              40.8
              %
 * Less
        than
        1%.




19


(1)
            Except
                as otherwise indicated, the address of each beneficial owner is c/o
                Bodisen Biotech, Inc., North Part of Xinquia Road, Yang Ling AG,
                High-Tech
                Industries Demonstration Zone, Yang Ling, China
                712100


(2)
            Applicable
                percentage ownership is based on 18,176,917 shares of common stock
                outstanding as of March 24, 2006, together with securities exercisable
                or
                convertible into shares of common stock within 60 days of March 24,
                2006
                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 March 24, 2006 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.





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





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




The
      following table shows information with respect to each equity compensation
      plan
      under which our common stock is authorized for issuance as of the fiscal year
      ended December 31, 2005.




EQUITY
      COMPENSATION PLAN INFORMATION





Plan
                category
            
            **Number
                of securities**
              **to
                be issued upon**
              **exercise
                of**
              **outstanding
                options,**
              **warrants
                and rights**
            
            **Weighted
                average**
              **exercise
                price of**
              **outstanding
                options,**
              **warrants
                and rights**
            
            **Number
                of securities**
              **remaining
                available for future issuance under equity compensation plans (excluding
                securities reflected in column (a)****(a)**
            
            **(b)**
            
            **(c)****Equity
                compensation plans approved by security holders**
            
            136,000
            
            $5.39
            
            864,000**Equity
                compensation plans not approved by security
                holders**
            
            -0-
            
            -0-
            
            -0-**Total**
            
            136,000
            
            $5.39
            
            864,000




ITEM
      12.
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS





None





20


ITEM
      13.
      EXHIBITS





**Exhibit
                Number**
            **Description
                of Exhibit**3.1
            Certificate
                of Incorporation (incorporated by reference to Company’s Form SB-2 filed
                September 3, 2002).3.2
            Amendment
                to Certificate of Incorporation (incorporated by reference to Company’s
                Form 10-KSB filed March 30, 2004).3.3
            By-Laws
                (incorporated by reference to Company’s Form SB-2 filed September 3,
                2002).10.1
            Loan
                Agreement, dated as of September 28, 2003, between the Company and
                Xianyang City Commercial Bank. (incorporated by reference to Company’s
                Form 10-KSB filed March 30, 2004).10.2
            Bodisen
                Biotech, Inc. 2004 Stock Option Plan (incorporated by reference to
                Company’s Form 10-KSB filed March 31,
                2005).10.3
            Form
                of Bodisen Biotech, Inc. Nonstatutory Stock Option Agreement (incorporated
                by reference to Company’s Form 10-KSB filed March 31,
                2005).21.1
            Schedule
                of Subsidiaries(incorporated
                by reference to Company’s Form 10-KSB filed March 31,
                2005).31.1
            Certification
                of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
                promulgated under the Securities and Exchange Act of 1934, as
                amended31.2
            Certification
                of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d
                14(a),
                promulgated under the Securities and Exchange Act of 1934, as
                amended32.1
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (Chief Executive
                Officer)32.2
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (Chief Financial
                Officer)





ITEM
      14.
      PRINCIPAL ACCOUNTANT FEES AND SERVICES





Audit
      Fees. The aggregate fees billed by our auditors, for professional services
      rendered for the audit of our annual financial statements for the years ended
      December 31, 2005 and 2004, and for the reviews of the financial statements
      included in our Quarterly Reports on Form 10-QSB during that fiscal year were
      $0, and $40,500, respectively.





Audit
      Related Fees. We incurred fees to auditors of $15,000 and $0, respectively,
      for
      audit related fees during the fiscal years ended December 31, 2005 and
      2004.





Tax
      Fees.
      We incurred no fees to auditors for tax compliance, tax advice and tax
      compliance services during the fiscal years ended December 31, 2005 and
      2004.





The
      Audit
      Committee has considered whether the provision of non-audit services is
      compatible with maintaining the principal accountant's
      independence.





21





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.By:
              /s/ Wang
                QiongWang
                  Qiong
                Chief
                  Executive Officer (Principal Executive
                  Officer)
 By:
              /s/ Yiliang
                LaiYiliang
                  Lai
                Chief
                  Financial Officer
                (Principal
                  Financial and Accounting
                  Officer)




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




SIGNATURE
              
              TITLE
              
              DATE/s/Wang
                  Qiong
              
              Chairman
                  and Chief Executive Officer
              
              March
                  28, 2006Wang
                  Qiong/s/
                  Yiliang Lai
              
              Chief
                  Financial Officer
              
              March
                  28, 2006Yiliang
                  Lai/s/
                  Bo Chen
              
              President
                  and Director
              
              March
                  28, 2006Bo
                  Chen/s/
                  Patrick McManus
              
              Director
              
              March
                  28, 2006Patrick
                  McManus/s/
                  David Gatton
              
              Director
              
              March
                  28, 2006David
                  Gatton/s/
                  Weirui Wan
              
              Director
              
              March
                  28, 2006Weirui
                  Wan




22