SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                  For the quarterly period ended June 30, 2006

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

                        Commission File Number: 000-22855


                        AMERICAN SOIL TECHNOLOGIES, INC.
        (Exact name of small business issuer as specified in its charter)


         Nevada                                                   95-4780218
(State or other jurisdiction of                                 (IRS Employer
incorporation or organization)                               Identification No.)


                12224 Montague Street, Pacoima, California 91331
                    (Address of principal executive offices)


                                 (818) 899 4686
                           (Issuer's telephone number)

                                       N/A
              (Former name, former address and former fiscal year,
                         if changed since last report)

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

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

As of August 14, 2006 the number of shares of Common Stock issued and
outstanding was 27,156,218

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
                                      INDEX

                                                                           Page
                                                                          Number
                                                                          ------
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)                                    3

     Balance Sheet - June 30, 2006                                          3

     Statements of Operations -
     For the three and six months ended June 30, 2006 and 2005              4

     Statements of Cash Flow -
     For the six months ended June 30, 2006 and 2005                        5

     Notes to Financial Statements                                          7

Item 2. Management's Discussion and Analysis of Financial
        Conditions and Results of Operations                               20

Item 3. Internal Controls                                                  24

PART II - OTHER INFORMATION

Item 1. Legal Proceedings                                                  25

Item 2. Changes in Securities                                              25

Item 3. Defaults Upon Senior Securities                                    25

Item 4. Submission of Matters to a Vote of Security Holders                25

Item 5. Other Information                                                  25

Item 6. Exhibits and Reports on Form 8-K                                   26

SIGNATURES                                                                 27

                                       2
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AMERICAN SOIL TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEET
JUNE 30, 2006 (UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S>                                                                               <C>
ASSETS:
CURRENT ASSETS
   Cash and cash equivalents                                                      $     25,825
   Accounts receivable, net of allowance of doubtful accounts of $32,356                75,426
   Employee advances                                                                     2,509
   Inventory                                                                           390,271
   Prepaid expenses and other current assets                                            43,987
                                                                                  ------------
      Total current assets                                                             538,018
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $267,750                    344,562
INTELLECTUAL PROPERTY, net of accumulated amortization of $371,263                   2,295,904
RELATED PARTY NOTES RECEIVABLE                                                          62,709
                                                                                  ------------
    TOTAL ASSETS                                                                  $  3,241,193
                                                                                  ============

LIABILITIES AND STOCKHOLDERS' DEFICIT:

CURRENT LIABILITIES:
   Accounts payable                                                               $    540,050
   Accrued liabilities                                                                  28,622
   Notes payable - current portion                                                      21,423
   Note payable related parties - current portion                                       22,000
   Capital lease obligation - current portion                                           19,816
   Debentures payable to related parties - current portion                              66,777
                                                                                  ------------
      Total current liabilities                                                        698,688
NOTES PAYABLE - long-term portion                                                       61,429
CAPITAL LEASE OBLIGATION - long-term portion                                            64,946
NOTES PAYABLE TO RELATED PARTIES                                                       627,500
DEBENTURES PAYABLE TO RELATED PARTIES - long term portion                              902,933
                                                                                  ------------
      Total liabilities                                                              2,355,496
                                                                                  ------------
STOCKHOLDERS' DEFICIT:
   Series A preferred stock, $0.50 stated value, 10,000,000 shares
    authorized, 2,763,699 shares issued and outstanding                              1,381,849
   Series B preferred stock, 4,500,000 shares authorized, issued
    and outstanding                                                                  2,250,000
   Common stock, $0.001 par value, 100,000,000 shares authorized,
     27,156,218 shares issued and outstanding                                           27,156
   Paid in capital                                                                  12,471,244
   Accumulated deficit                                                             (15,244,552)
                                                                                  ------------
      Total stockholders' deficit                                                      885,697
                                                                                  ------------

    TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                   $  3,241,193
                                                                                  ============
</TABLE>

                 The accompanying notes are an integral part of
                     these unaudited financial statements.

                                       3
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE  30, 2006 AND JUNE  30, 2005 (UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                               Three Months      Three Months       Six Months        Six Months
                                                  Ended             Ended             Ended             Ended
                                                 June 30,          June 30,          June 30,          June 30,
                                                   2006              2005              2006              2005
                                               ------------      ------------      ------------      ------------
<S>                                            <C>               <C>               <C>               <C>
NET REVENUES                                   $    236,438      $    217,710      $    360,863      $    470,007
                                               ------------      ------------      ------------      ------------

COST OF GOODS SOLD                                  153,003           130,064           235,820           284,637

                                               ------------      ------------      ------------      ------------
GROSS INCOME                                         83,435            87,646           125,043           185,370
                                               ------------      ------------      ------------      ------------
OPERATING EXPENSES
  General and administrative                        348,165           304,503           718,452           906,431
  Sales and marketing                               152,349            54,225           339,138           194,338
  Research and development                            5,168             8,456            16,465            10,052
  Depreciation                                       29,264            25,881            58,895            51,761
  Amortization                                       78,492            11,711            90,203            23,422

                                               ------------      ------------      ------------      ------------
      Total operating expenses                      613,438           404,776         1,223,153         1,186,004
                                               ------------      ------------      ------------      ------------

OPERATING LOSS                                     (530,003)         (317,130)       (1,098,110)       (1,000,634)
                                               ------------      ------------      ------------      ------------
OTHER (INCOME)/EXPENSE
  Interest expense and related costs                 51,312            28,446           145,133            90,776
  Other expense                                         244                --               289                --
  Loss on sale                                       11,968
  Interest income                                      (684)             (675)           (1,359)           (1,315)
                                               ------------      ------------      ------------      ------------
      Total other (income)/expense                   50,872            27,771           156,031            89,461
                                               ------------      ------------      ------------      ------------

LOSS BEFORE INCOME TAXES                           (580,875)         (344,901)       (1,254,141)       (1,090,095)
                                               ------------      ------------      ------------      ------------

INCOME TAX  PROVISION                                    --                --                --                --
                                               ------------      ------------      ------------      ------------

NET LOSS                                       $   (580,875)     $   (344,901)     $ (1,254,141)     $ (1,090,095)
                                               ============      ============      ============      ============

NET LOSS PER SHARE:
  Basic:                                       $      (0.02)     $      (0.02)     $      (0.05)     $      (0.06)
                                               ============      ============      ============      ============
  Diluted:                                     $      (0.02)     $      (0.02)     $      (0.05)     $      (0.06)
                                               ============      ============      ============      ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
  Basic                                          27,063,772        22,319,222        26,784,929        18,567,579
                                               ============      ============      ============      ============
  Diluted                                        27,063,772        22,319,222        26,784,929        18,567,579
                                               ============      ============      ============      ============
</TABLE>
                 The accompanying notes are an integral part of
                     these unaudited financial statements.

                                       4
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND JUNE 30, 2005 (UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                            Six Months             Six Months
                                                               Ended                 Ended
                                                           June 30, 2006         June 30, 2005
                                                           -------------         -------------
<S>                                                         <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                  $(1,254,141)          $(1,090,095)
  Adjustments to reconcile net loss to net cash
   used by operating activities:
    Depreciation and amortization                               149,098                75,183
    Provision for bad debt                                           --                20,694
    Loss on disposal of fixed assets                             11,968
    Amortization of debt discount                                55,000
    Stock issued for services                                    34,000               117,500
  Changes in assets and liabilities:
    Accounts receivable                                          57,727              (109,480)
    Receivables from officers and employees                      (4,454)                1,192
    Prepaid and other current assets                             52,580                 6,859
    Inventory                                                  (177,311)              (66,235)
    Accounts payable                                            292,926               (16,889)
    Accrued liabilities                                         (13,778)              229,626

                                                            -----------           -----------
         Net cash  used by operating activities                (796,385)             (831,645)
                                                            -----------           -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of intellectual property                             (4,200)
  Purchases of property and equipment                           (13,643)                   --
                                                            -----------           -----------
         Net cash used for investing activities                 (17,843)                   --
                                                            -----------           -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from Officer Advance                                      --                53,000
  Proceeds from related party notes payable                     472,000
  Proceeds from issuance from common stock                      567,652
  Proceeds from convertible debentures                               --               200,000
  Proceeds from sales/leaseback transaction                      75,000                    --
  Principal repayments on convertible debentures                 (7,869)               (7,137)
  Principal repayments on capital lease obligation              (11,377)               (8,380)
  Repayments on notes payable                                  (310,349)               (8,738)
  Proceeds from sale of preferred stock                         300,000                    --
  Proceeds from stock issuances                                  50,000

                                                            -----------           -----------
         Net cash provided by financing activities              567,405               796,397
                                                            -----------           -----------

DECREASE IN CASH AND CASH EQUIVALENTS                          (246,823)              (35,248)

CASH AND CASH EQUIVALENTS, beginning of period                  272,648                52,467
                                                            -----------           -----------

CASH AND CASH EQUIVALENTS, end of period                    $    25,825           $    17,219
                                                            ===========           ===========
</TABLE>
                 The accompanying notes are an integral part of
                     these unaudited financial statements.

                                       5
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS  (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND JUNE 30, 2005 (UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                      Six Months Ended    Six Months Ended
                                                        June 30, 2006       June 30, 2005
                                                        -------------       -------------
<S>                                                      <C>                 <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
  Interest Paid                                          $   41,494          $   54,629
                                                         ==========          ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
  Common stock issued in exchange for
   intellectual property                                 $   33,750          $        0
                                                         ==========          ==========
  Series B preferred stock issued in exchange
   for patent                                            $1,950,000          $        0
                                                         ==========          ==========
  Conversion of debt and accrued interest to
   common stock                                          $  338,673          $1,994,799
                                                         ==========          ==========

  Conversion of preferred stock to common stock          $        0          $1,000,000
                                                         ==========          ==========
  Common stock issued in exchange for equipment
   and inventory                                         $   16,128          $        0
                                                         ==========          ==========
</TABLE>

                 The accompanying notes are an integral part of
                     these unaudited financial statements.

                                       6
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS FOR THE
SIX  MONTHS ENDED JUNE  30, 2006 AND JUNE  30, 2005 (UNAUDITED)
--------------------------------------------------------------------------------

1. ORGANIZATION AND BASIS OF PRESENTATION

     The accompanying unaudited financial statements have been prepared in
     accordance with accounting principles generally accepted in the United
     States for interim financial information and the instructions for Form
     10-QSB and Regulation S-B. Accordingly, they do not include all of the
     information and footnotes required by accounting principles generally
     accepted in the United States for complete financial statements. All
     adjustments that, in the opinion of management are necessary for a fair
     presentation of the results of operations for the interim periods have been
     made and are of a recurring nature unless otherwise disclosed herein. The
     results of operations for the three and six months ended June 30, 2006 are
     not necessarily indicative of the results that will be realized for the
     entire fiscal year. These financial statements should be read in
     conjunction with the Company's Annual Report on Form 10-KSB for the period
     ended December 31, 2005.

     American Soil Technologies, Inc. (the "Company"), formerly Soil Wash
     Technologies, Inc., was incorporated in California on September 22, 1993.
     On November 24, 1999, the Company entered into an exchange agreement for
     the reverse acquisition of New Directions Manufacturing, Inc., a publicly
     traded Nevada corporation incorporated on January 9, 1997 ("New
     Directions"), wherein New Directions would acquire the assets of the
     Company and change its name to American Soil Technologies, Inc. This
     exchange agreement was effective as of the close of business on December
     31, 1999.

     The Company is primarily engaged in the marketing of polymer and other soil
     amendments to the agricultural turf and horticulture industries. The
     Company's products are used to decrease water usage, increase nutrient
     retention in soil, enhance seed germination and sprout emergence, clarify
     ponds and increase the effectiveness of chemical fertilizers and biological
     additives. The Company recently acquired the patent to a slow release
     fertilizer to be used primarily in the turf segment of its business The
     Company also has exclusive license rights to the use of patented polymer
     application techniques as well as numerous patents on a unique machine
     designed to inject polymer and other liquid products into existing turf and
     some crops.

     GOING CONCERN AND MANAGEMENT'S PLANS

     The Company has sustained significant losses and has an accumulated deficit
     of $15,244,552. The ability of the Company to continue as a going concern
     is dependent upon obtaining additional capital and financing, and
     generating positive cash flow from operations. The Company intends to seek
     additional capital either through debt or equity offerings and is
     attempting to increase sales volume and operating margins to achieve
     profitability.

     The financial statements do not include any adjustments relating to the
     recoverability and classification of asset carrying amounts or the amount
     and classification of liabilities that might result should the Company be
     unable to continue as a going concern.

                                       7
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     CASH AND CASH EQUIVALENTS: This includes all short-term highly liquid
     investments that are readily convertible to known amounts of cash and have
     original maturities of three months or less. At times cash deposits may
     exceed government insured limits.

     ACCOUNTS AND NOTES RECEIVABLE: The Company utilizes the allowance method to
     provide a reserve for uncollectible accounts. The Company determines any
     required allowance by considering a number of factors including length of
     time trade accounts receivable are past due and the Company's previous loss
     history. The Company records a reserve account for accounts receivable when
     they become uncollectible, and payments subsequently received on such
     receivables are credited to the allowance for doubtful accounts.

     INVENTORIES consist primarily of purchased polymer soil and other
     amendments. Inventories are stated at the lower of cost (on a first-in,
     first-out basis) or market.

     PROPERTY AND EQUIPMENT: Property and equipment is stated at cost less
     accumulated depreciation. Depreciation is recorded on a straight-line basis
     over the estimated useful lives of the assets ranging from 3 to 7 years.
     Depreciation expense was $29,634 and $59,895 and $25,881 and $51,762 for
     the three and six month periods ended June 30, 2006 and 2005, respectively.

     INTELLECTUAL PROPERTY: The exclusive licenses to the patented polymer
     application techniques purchased December 31, 1999, are being amortized
     using the straight line method over the life of the licenses, which is 14
     1/2 years.

     On March 15, 2006, the Company acquired patents through the acquisition of
     Advanced Fertilizer Technologies, Inc., a non-operating entity, for
     4,500,000 shares of preferred series B stock valued at $2,250,000. The
     acquired company owned the patent on a slow release fertilizer used
     primarily in the turf segment of its business. The Company will collect
     revenues from two existing licenses and will sell products developed under
     the patents directly to its customers including to qualified distributors.
     The patent has approximately 8 years left to expiration. The valued
     assigned to the patents of the acquired company was $1,950,000.

     The carrying value of these assets is periodically evaluated for
     impairment.

     ADVERTISING: The Company expenses advertising costs as incurred.
     Advertising expense was $132,782 and $301,888 and $40,851 and $160,575 for
     the three and six month periods ended June 30, 2006 and 2005, respectively.

     REVENUE RECOGNITION: Revenue is recognized from the soil enhancement
     products upon sale and shipment, or if the sale includes installation, upon
     completion of the installation process and acceptance by the customer.

     INCOME TAXES: The Company provides for income taxes based on the provisions
     of Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR
     INCOME TAXES, which, among other things, requires that recognition of
     deferred income taxes be measured by the provisions of enacted tax laws in
     effect at the date of financial statements.

     NET LOSS PER SHARE: Net loss per share is calculated using the weighted
     average number of shares of common stock outstanding during the year. The
     Company has adopted the provisions of SFAS No. 128, EARNINGS PER SHARE.

                                       8
<PAGE>
     FINANCIAL INSTRUMENTS: Financial instruments consist primarily of accounts
     receivable, related party notes receivable, and obligations under accounts
     payable, convertible debentures and notes payable. The carrying amounts of
     accounts receivable and accounts payable approximate fair value because of
     the short term maturity of those instruments. The carrying values of notes
     payable to unrelated entities approximate fair value because they contain
     market value interest rates and have specified repayment terms. The fair
     value of the related party note receivable, debentures and notes payable
     cannot be determined because of the Company's affiliation with the parties
     with whom the agreements exist. The Company has applied certain assumptions
     in estimating these fair values. The use of different assumptions or
     methodologies may have a material effect on the estimates of fair values.

     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.

     Significant estimates made in connection with the preparation of the
     accompanying financial statements include the carrying value of accounts
     and notes receivable, the carrying value of the patented licenses and
     self-constructed machinery.

     PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
     the accounts of the Company and its wholly owned subsidiaries. All
     significant intercompany accounts and transactions have been eliminated.

     STOCK-BASED COMPENSATION: Effective January 1, 2006, the Company adopted
     the provisions of SFAS No. 123R using the modified prospective application
     transition method. Under this method, compensation cost for the portion of
     awards for which the requisite service has not yet been rendered that are
     outstanding as of the adoption date is recognized over the remaining
     service period. The compensation cost for that portion of awards is based
     on the grant-date fair value of those awards as calculated for pro forma
     disclosures under SFAS No. 123, as originally issued. All new awards that
     are modified, repurchased, or cancelled after the adoption date are
     accounted for under provisions of SFAS no. 123R. Prior periods have not
     been restated under this transition method. The Company recognizes
     share-based compensation ratably using the straight-line attribution method
     over the requisite service period. In addition, pursuant to SFAS No. 123R,
     the Company is required to estimate the amount of expected forfeitures when
     calculating share-based compensation, instead of accounting for forfeitures
     as they occur, which was the Company's practice prior to the adoption of
     SFAS 123R. As of January 1, 2006 the cumulative effect of adopting the
     estimated forfeiture method was not material.

     Prior to January 1, 2006, the Company accounted for share-based
     compensation using the intrinsic value method prescribed by Accounting
     Principles Board Opinion No. 25, "Accounting for Stock Issued to
     Employees," and related interpretations and elected the disclosure option
     of SFAS no. 123 as amended by SFAS no. 148, "Accounting for Stock-Based
     Compensation - Compensation and Disclosure." SFAS No. 123 requires that
     companies either recognize compensation expense for grants of stock, stock
     options and other equity instruments based on fair value, or provide pro
     forma disclosure of net income and earnings per share in the notes to the
     financial statements. Accordingly, the Company measured compensation
     expense for stock options as the excess, if any, of the estimated fair
     market value of the Company's stock at the date of grant over the exercise
     price. The following table details the effect on net income and earnings
     per share for the three months ended March 31, 2005 had compensation
     expense for the stock plans been recorded based on the fair value method
     under SFAS No. 123.

                                       9
<PAGE>
                                                             Six Months Ended
                                                              June 30, 2006
                                                              -------------
     Net Loss                                                  $(1,254,141)

     Deduct: Stock-based employee
     compensation expense determined
     under the fair value based method,
     net of tax                                                          0
                                                               -----------

     Pro forma net loss                                        $(1,254,141)
                                                               ===========

     Net loss per share as reported                            $      (0.5)
                                                               ===========

     Net loss per share pro forma                              $      (0.5)
                                                               ===========

     The per share weighted average fair values of stock options granted during
     the year ended June 30, 2003 was $0.12 on the date of the grant using the
     Black-Scholes option pricing model with the following assumptions: 1)
     Dividend Yield of 0%, 2) Volatility Factor of 204%, 3) Risk-Free Interest
     Rate of 3.38% and 4) Average Expected Option Life of 10 years.

     There were no stock options granted in the six months ended June 30, 2006
     and 2005. No options expired or were exercised during the six month period
     ended June 30, 2006. All options outstanding at January 1, 2006 were fully
     vested. Therefore, no compensation expense was recognized in the period
     ended June 30, 2006 as a result of the implementation of SFAS No. 123R.

     The Company initiated a stock option plan during the three months ended
     June 30, 2001 under which the Company could grant up to one million
     options. Under the plan all employees and directors, subject to employment
     terms, have been granted options to purchase 219,998 and 225,002 shares,
     respectively. The options are exercisable at $3.75 and $4.13 per share,
     respectively. At the time of the grants the market price of the stock was
     $3.75. Therefore, 219,998 options were granted at the market price and
     225,002 options were granted at 10% in excess of the market price. The
     options are vested when granted and are exercisable for ten years from the
     date of grant subject to cancellation upon termination of employment.
     During the three months ended June 30, 2003, all outstanding options under
     the 2001 Plan were surrendered by the holders and cancelled by the Company.

     In November 2002, the Company enacted a stock option plan (the "2002 Plan")
     to provide additional incentives to selected employees, directors and
     consultants. Two million shares were authorized by a majority of the
     shareholders for issuance as Incentive Stock Options or Nonstatutory Stock
     Options. The 2002 Plan anticipates qualifying under Section 423 of the
     Internal Revenue Code of 1986, as an "employee stock purchase plan". Under
     the 2002 Plan, options may be granted to key employees, officers, directors
     or consultants. The purchase price of the common stock subject to each
     Incentive Stock Option shall not be less than the fair market value (as
     determined in the 2002 Plan) or in the case of a grant of an Incentive
     Stock Option to a principal shareholder, not less than 110% of the fair
     market value of such common stock at the time each option is granted. The
     2002 Plan shall terminate 10 years from the date of adoption by the
     Company. The options are vested when granted and exercisable for 10 years
     from the date of grant and are subject to cancellation upon termination of
     employment. Under the Plan, the Company has granted options to purchase
     1,010,000 shares and 300,000 shares at $0.50 and $0.25, respectively. The
     market price at the date of grant was $0.12.

                                       10
<PAGE>
     A 2005 Stock Option/Stock Issuance Plan (the "2005 Plan") was authorized by
     the majority shareholders during the three months ended June 30, 2005. The
     2005 Plan provides for the issuance of up to 10,000,000 shares of common
     stock to our directors, officers, employees and consultants in the form of
     stock options and shares of common stock.

     The 2005 Plan has two separate components: the option grant program and the
     stock issuance program. To date, no shares of common stock or stock options
     have been issued pursuant to the 2005 Plan.

     Grants under the option grant program may be structured as installment
     options which become exercisable for vested shares over the optionee's
     period of service or as immediately exercisable options for unvested shares
     which will be subject to repurchase by the Company, at the option exercise
     price paid per share, upon the optionee's termination of service prior to
     vesting in those shares. All option grants must have an exercise price not
     less than 100% of the fair market value of the option shares on the grant
     date.

     The stock issuance program allows eligible persons to purchase shares of
     common stock at fair market value or at a discount of up to 15% of fair
     market value. The shares may be fully vested when issued or may vest over
     time as the recipient provides services or as specified performance
     objectives are attained. In addition, shares of common stock may be issued
     as bonus awards in recognition of services rendered, without any cash
     outlay required of the recipient.

     The Board of Directors will initially administer the 2005 Plan, except that
     the Board may, at its discretion, establish a committee comprised of two or
     more members of the Board or two or more other persons to administer the
     2005 Plan (the "Plan Administrator").

     The following summarizes information at June 30, 2006:

<TABLE>
<CAPTION>
                      Options Outstanding                               Options Exercisable
    ----------------------------------------------------     ----------------------------------------

                          Number        Weighted Average      Weighted        Number         Weighted
                      outstanding at       Remaining          Average     Exercisable at     Average
        Range of         June 30,       Contractual Life     Exercise        June 30,        Exercise
     Exercise Prices       2006            (in years)          Price           2006           Price
     ---------------       ----            ----------          -----           ----           -----
<S>      <C>             <C>                  <C>              <C>           <C>              <C>
         $  0.50         680,000              6.50            $  0.50        680,000         $  0.50

                      Warrants Outstanding                               Warrants Exercisable
    ----------------------------------------------------     ----------------------------------------

                          Number        Weighted Average      Weighted        Number         Weighted
                      outstanding at       Remaining          Average     Exercisable at     Average
        Range of         June 30,       Contractual Life     Exercise        June 30,        Exercise
     Exercise Prices       2006            (in years)          Price           2006           Price
     ---------------       ----            ----------          -----           ----           -----
        $  0.23          300,000               1.50           $  0.23        300,000         $  0.23
        $  0.23           21,000                .50           $  0.23         21,000         $  0.23
</TABLE>

                                       11
<PAGE>
     IMPAIRMENT OF LONG-LIVED ASSETS: The Company assesses long-lived assets for
     impairment in accordance with the provisions of SFAS 144, ACCOUNTING FOR
     THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS. SFAS 144 requires that the
     Company report discontinued operations separately from continuing
     operations and long-lived assets to be disposed of at their fair value net
     of the cost of disposal.

     RECLASSIFICATIONS: Certain reclassifications have been made to the June 30,
     2005 financial statements in order to conform to the June 30, 2006
     presentation.

     RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

     In December 2004 the FASB issued a revised Statement 123 (SFAS 123R),
     "ACCOUNTING FOR STOCK-BASED COMPENSATION" requiring public entities to
     measure the cost of employee services received in exchange for an award of
     equity instruments based on grant date fair value. The cost will be
     recognized over the period during which an employee is required to provide
     service in exchange for the award -- usually the vesting period. The
     effective date for this statement is as of the first interim period that
     begins after June 15, 2005. The effect of the implementation was
     insignificant.

  3. INVENTORY

     Inventory is comprised entirely of finished goods at June 30, 2006.

  4. INTELLECTUAL PROPERTY

     On December 31, 1999 the Company purchased exclusive license rights to
     patented polymer application techniques. Additionally, during the three
     months ended March 31, 2006, the Company purchased a total of $1,987,950 in
     intellectual property, primarily a patent. The licenses are being amortized
     using the straight line method over the life of the licenses, which is 14
     1/2 years. The patent is being amortized over eight years, the remaining
     life of the patent. The carrying value of these assets is periodically
     evaluated for impairment. The amortization expense was $78,492 and $90,203
     and $11,711 and $23,422 for the three and six month periods ended June 30,
     2006 and 2005, respectively. The following summarizes the estimated future
     amortization expense of the intellectual property:

               Year                     Amount
               ----                     ------
     Remaining six months of
               2006                     $145,298
               2007                      291,561
               2008                      291,561
               2009                      291,561
               2010                      291,561
            Thereafter                   984,362
                                      ----------
              Total                   $2,295,904
                                      ==========

                                       12
<PAGE>
5. PROPERTY AND EQUIPMENT

     Property and equipment consisted of the following at June 30, 2006:

     Machinery                                           $ 545,518
     Vehicle                                                44,615
     Office furnishings, fixtures and equipment             21,178
                                                         ---------
       Total                                               612,311
       Less accumulated depreciation                      (267,750)
                                                         ---------

              Property and equipment, net                $ 344,562
                                                         =========

     Included in the machinery category is approximately $380,000 of capitalized
     costs associated with the construction of a demonstration injection
     machine. The machine was placed in service in the quarter ended March 31,
     2004.

6. NOTE RECEIVABLE

     The $60,000 note receivable is due from an individual who was formerly
     contracted to perform services for the Company as its Chief Technical
     Officer, and who also holds the patents licensed to the Company. Under the
     terms of the note receivable, the Company is to receive 4.5% interest on
     the note, to be satisfied through the reduction of royalties due to the
     individual. During the six months ended June 30, 2006 and 2005, the Company
     recognized $675 and $675 in interest income and $727 and $2570 in royalty
     expense, respectively, related to this agreement.

7. NOTES PAYABLE

     Notes payable at June 30, 2006 are comprised of the following:

     Convertible debenture to related party, original
     balance of $250,000, interest at 8% per annum, interest
     payable quarterly. Principal is convertible at a rate
     of $0.50 for one share of common stock. Principal due
     February 1, 2008.                                               $  250,000

     Convertible debenture to related party, original
     balance of $250,000, interest at 8% per annum, interest
     payable quarterly. Principal is convertible at a rate
     of $0.50 for one share of common stock. Principal due
     March 27, 2008.                                                    250,000

     Convertible debenture to related party, original
     balance of $25,000, interest at 8% per annum, interest
     payable quarterly. Principal is convertible at a rate
     of $0.50 for one share of common stock. Principal due
     February 1, 2007.                                                   25,000

     Convertible debenture to related party, original
     balance of $25,000, interest at 8% per annum, interest
     payable quarterly. Principal is convertible at a rate
     of $0.50 for one share of common stock. Principal due
     February 1, 2007.                                                   25,000

     Convertible debenture to related party, original
     balance of $25,000, interest at 8% per annum, interest
     payable quarterly. Principal is convertible at a rate
     of $0.50 for one share of common stock. Principal due
     August 15, 2007.                                                    20,000

                             13
<PAGE>
     Note payable to related party, original balance of
     $22,000, interest at prime rate payable monthly. Note
     is unsecured and due upon demand.                                   22,000

     Convertible debenture to related party, original
     balance of $250,000, interest at 10% per annum. Monthly
     principal and interest payments of $3,000 are due
     through 2014. Principal is convertible at a rate of
     $3.00 for one share of common stock.                               199,710

     Convertible debenture to related party, original
     balance of $200,000, interest at 8% per annum, interest
     payable quarterly. Principal is convertible at a rate
     of $0.50 for one share of common stock. Principal due
     February 1, 2008.                                                  200,000

     Note payable to related party, original balance of
     $477,500, interest at 8% per annum and payable monthly.
     Principal is due March 17, 2008.                                   477,500

     Note payable to related party, original balance of
     $150,000, interest at prime rate payable monthly. Note
     is unsecured. Principal is due March 14, 2008                      150,000

     Note payable to lending institution, original balance
     of $48,542, and interest at 2.9% per annum. Requires
     monthly principal and interest payments of $736 through
     2009. Collateralized by vehicle.                                    29,368

     Note payable to finance company, original balance of
     $75,000, and interest at 17.7% per annum. Requires
     monthly principal and interest payments of $1,814
     through 2009. Collateralized by polymer injection
     machine.                                                            53,484
                                                                     ----------
            Total                                                     1,702,062

           Less current portion                                        (110,200)
                                                                     ----------

            Total long-term portion                                  $1,591,862
                                                                     ==========

     Future maturities of principal at June 30, 2006 are as follows:

     Due twelve  months ending 6/30/07                               $  110,200
     2008                                                                62,762
     2009                                                             1,375,510
     2010                                                                32,284
     2011                                                                24,987
     2012                                                                27,604
     Thereafter                                                          68,715
                                                                     ----------

              Total                                                  $1,702,062
                                                                     ==========

    The note payable of $477,500 and three convertible debentures are held by an
    entity that holds approximately 21% of the Company's common stock. Notes are
    payable in two years, providing payment is not detrimental to the company.

                                       14
<PAGE>
    During the six months ended June 30, 2006, $250,000 in related party notes
    payable and $51,000 in related accrued interest were converted into
    1,204,000 shares of common stock.

    During the year ended December 31, 2005, the Company entered into a $300,000
    note agreement that included 300,000 warrants as an additional incentive.
    The imputed value of the warrants was calculated to be $66,000 using the
    Black-Scholes valuation model. The note was discounted by this amount and at
    December 31, 2005, $11,000 in expense was recognized on the discount. The
    remaining $55,000 in expense was recognized in the three months ended March
    31, 2006. The effective interest rate of this instrument was determined to
    be 125%.

8. NET LOSS PER SHARE

     Net loss per share is calculated using the weighted average number of
     shares of common stock outstanding during the year. Preferred stock
     dividends are subtracted from the net income to determine the amount
     available to common shareholders. There were no preferred stock dividends
     in the six month periods ended June 30, 2006 and 2005. The following
     securities have been excluded from the calculation because inclusion of
     such would be anti-dilutive:

                                                               Six months ended
                                                                June 30, 2006
                                                                -------------
     Convertible preferred stock                                  7,263,699
     Common stock options                                           680,000
      Warrants                                                      321,000
      Convertible debt                                            1,606,570
                                                                  ---------
                                                                  9,871,269
                                                                  =========

     The following presents the computation of basic and diluted loss per share
     from continuing operations:

<TABLE>
<CAPTION>
                                                 Six Months Ended                            Six Months Ended
                                                  June 30, 2006                                June 30, 2005
                                                  -------------                                -------------
<S>                                 <C>               <C>           <C>           <C>           <C>             <C>
     Net  Loss                      $(1,254,141)                                  $(745,194)

     Preferred stock dividends               --                                          --
                                    -----------                                   ---------

      Loss available to common
      Stockholders                  $(1,254,141)                                  $(745,194)
                                    ===========                                   =========
     BASIC EARNINGS PER SHARE:


     Loss available to common
     stockholders                   $(1,254,141)      26,784,929    $(0.05)       $(745,194)    14,774,251      $(0.05)
                                    ===========                     ======        =========                     ======

     Effect of dilutive securities       N/A             N/A                       N/A            N/A


     DILUTED EARNINGS PER SHARE     $(1,254,141)      26,784,929    $(0.05)       $(745,194)    14,774,251      $(0.05)
                                    ===========                     ======        =========                     ======
</TABLE>

                                       15
<PAGE>
9. RELATED PARTY TRANSACTIONS

     During the three and six month periods ended June 30, 2006 and June 30,
     2005, the Company conducted related party transactions with Board members,
     officers and affiliated entities as described below:

     DIRECTORS & OFFICERS

     Diana Visco, Company Secretary, has a $20,000 Debenture with the Company
     which is convertible at $0.50 per share with interest at 8%, maturing in
     the third calendar quarter of 2007 as well as $150,000 and $22,000 in notes
     payable. Interest incurred on these notes and debenture and was $1,574 and
     $394 during the three and six month periods ended June 30, 2006,
     respectively and $394 and $793 for the three and six month periods ended
     June 30 2005, respectively.

     The holders of the two (2) $25,000 convertible debentures and the $203,665
     convertible debenture are personally related to Louis Visco. Interest
     incurred on these debentures was $6,073 and $12,115 during the three and
     six month periods ended June 30, 2006 and $6,443 and $12,847 for the three
     and six month ended June 30 2005, respectively.

     Louie Visco, Director, is an owner and director of the FLD Corporation, the
     holder of two (2) $250,000 and one (1) $200,000 debentures convertible at
     $0.50 per share with interest at 8%, maturing in the first calendar quarter
     of 2007 and a $477,500 note payable. During the three months ended June 30,
     2005, notes payable and the related accrued interest due to this entity
     totaling $1,837,732 were converted at a rate of $0.40 per share for a total
     of 4,594,330 shares of common stock. In May 2006, $250,000 principal due
     and $51,000 of accrued interest was converted to stock at .37 cents a
     share. Interest incurred on these debentures and note was $19,163 and
     $42,350 during the three and six month periods ended June 30, 2006 and
     $48,102 and $73,612 for the three and six month ended June 30 2005,
     respectively.

     AFFILIATED ENTITIES

     The Company also entered into an operating lease in 2004 for its office
     space with Customized Box Company, an entity beneficially owned by Louie
     Visco. In May 2006 an additional lease was added to include warehouse
     space. Rents charged by this entity for the three and six months ended June
     30, 2006 and 2005 were $5,862 and $7,525 and $1,662 and $3324,
     respectively.

     Ronald Salestrom, a former contract employee, is the holder of the patents
     under license to the Company. Per the terms of the license agreement, the
     Company is required to pay Mr. Salestrom one and a half percent (1.5%) of
     net sales generated by the Company as a result of holding the patent. As of
     March 31, 2006, total royalties earned were $4,851. In addition, Mr.
     Salestrom has a note receivable with the Company of $60,000. The note
     accrues interest at 4.5% per annum, with payments to be reduced by
     royalties earned under the license agreement. In the six months ended June
     30, 2006, the Company recognized interest income on this note of $675 and
     $675, respectively. Accrued interest receivable at June 30, 2006 is $2,709.

                                       16
<PAGE>
10. CONCENTRATIONS

     The Company maintains cash balances at banks in California. Accounts are
     insured by the Federal Deposit Insurance Corporation up to $100,000. At
     June 30, 2006, the Company did not exceed those limits.

     During the six month period ended June 30, 2006 sales to four customers
     aggregated to approximately 51% of total sales for the period.
     Approximately 38% of the accounts receivable balance at June 30, 2006 was
     comprised of balances due from two customers.

11.COMMITMENTS

     On October 20, 2004, the Company entered into an agreement with an
     unrelated entity to obtain marketing and sales consulting services The
     agreement has an initial term of six months with automatic six month
     renewals unless either party notifies the other in writing at least thirty
     days prior to the expiration that it does not consent to such renewal. The
     Company will pay $7,000 per month and commissions ranging from five percent
     to ten percent on related sales for these services. This agreement is now
     on a month-to-month basis at $5,000 per month subject to performance.

     In September of 2005, the company entered into a Consulting Agreement (the
     "Agreement") with Telperion Business Consultants, LLC located in New York
     ("Telperion").

     The Agreement provides that Telperion will perform consulting services,
     including business introductions, strategic planning, and assisting the
     Company's management in developing and implementing the Company's investor
     relations/public relations plan. The Agreement has a term of 180 days at
     which time the Company and Telperion can extend the Agreement for another
     term. The Agreement may be cancelled by either party with 30 days written
     notice after the first 60 days of the Agreement. The Company will pay
     Telperion $1,000 upon signing the Agreement and $5,000 per month. The
     monthly payment will accrue until such time as a financing is completed by
     the Company. In addition, 100,000 shares of common stock of the Company
     stock will be issued by the Company to Telperion according to the following
     schedule: 50,000 shares upon signing the Agreement and 50,000 shares upon
     the closing of the Company's next financing. The contract has expired and
     the Company will remit the $30,000 .

     On February 7, 2006 the Company hired Donette Lamson as Vice President for
     Turf and Horticulture and Woodrow Thorpe as Director of Development. Both
     parties received three year contracts. The Company issued 75,000 shares of
     restricted common stock to both Lamson and Thorpe as consideration of them
     assigning their trade secrets, proprietary information, trade marks, and
     customer lists.

     On March 6, 2006, the Company entered into a Professional Services
     Agreement with Grosvenor Financial Partners, LLC, a Delaware corporation,
     located in New Jersey The Agreement provides that Grosvenor will provide
     advisory and consulting services in connection with qualifying suitable
     strategic partners and other business opportunities. The Agreement has a
     term of three years from the date an introduction is made. The Company will
     pay Grosvenor $2,500 per month for five months and $5,000 per month for
     twelve months if the Company enters into a strategic partnership agreement
     with a client introduced by Grosvenor.

     On March 8, 2006, the Company entered into a Brokerage Services Agreement
     with Alchemy Alternatives, Inc., a registered broker/dealer with the
     Securities and Exchange Commission and member of the National Association
     of Securities Dealers, Inc., located in California.

     The Brokerage Agreement provides that Alchemy will provide brokerage and
     advisory services in connection with obtaining financing for the Company in
     an amount up to $10,000,000. The Agreement has a term of three years from

                                       17
<PAGE>
     the date an introduction is made. The Company will pay Alchmey a cash fee
     of 10% and common stock in the amount of 10% of the amount of financing
     received from an introduction by Alchemy.

     There is no material relationship between the Company or its affiliates and
     any of the parties, other than with respect to the Agreement and the
     Brokerage Agreement.

     On March 14, 2006, the Company entered into an Agreement and Plan of
     Acquisition with UTEK Corporation, a Delaware corporation, located in
     Florida and Advanced Fertilizer Technologies, Inc., a Florida corporation,
     located in Florida ("AFTI").

     The Agreement provides that UTEK, as 100% owner of AFTI, shall exchange all
     of their shares of common stock of AFTI for newly issued shares of Series B
     Preferred Stock of the Company. AFTI will then become a wholly-owned
     subsidiary of the Company. AFTI is the owner of a patented method for
     producing suspension fertilizer. The Company also acquired the rights to
     develop and market this patented and proprietary technology as part of this
     transaction.

     There is no material relationship between the Company or its affiliates and
     any of the parties, other than with respect to the Agreement.

     CAPITAL LEASES

     The Company leases certain equipment under capital leases that expire
     through 2010. Minimum required lease payments under the lease agreements
     for the years ending December 31 are as follows:

     Year ending December 31,
        Six months remaining in 2006                             $  9,640
        2007                                                       39,214
        2008                                                       25,256
        2009                                                       21,600
        2010                                                       19,800
        Thereafter                                                      0
                                                                 --------
              Total                                               115,510
     Less: Amount representing interest                           (30,748)
                                                                 --------
              Total payments, net of interest                      84,762
     Less: Current portion                                        (19,816)
                                                                 --------
              Total long term minimum lease payments             $ 64,946
                                                                 ========

                                       18
<PAGE>
     Equipment under capital leases is included in machinery and equipment as
     follows:

                                                               June 30, 2006
                                                               -------------
     Machinery and equipment                                     $ 107,000
     Less: Accumulated depreciation                                (19,119)
                                                                 ---------
                                                                 $  87,881
                                                                 =========

12. ACQUISITION OF INTELLECTUAL PROPERTY

     On March 15, 2006, the Company acquired a patent and $300,000 cash for
     4,500,000 shares of Series B preferred stock having a value of $2,250,000.
     The value was determined based on the equivalent value of common stock at
     the stated conversion price of $2,250,000 The acquired company had no
     operations and owned the patent on a slow release fertilizer used primarily
     in the turf segment of its business. The Company will collect royalty
     revenues from two existing licenses and will sell products derived from the
     patents directly to its customers including qualified distributors. The
     patent has approximately 8 years left to expiration. The acquired company
     also had cash deposits of $300,000 effectively resulting in the sale of
     preferred stock for $300,000 and the patent rights.


                                  * * * * * * *

                                       19
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The following discussion and analysis should be read in conjunction with our
financial statements, including the notes thereto, appearing elsewhere in this
Report.

FORWARD-LOOKING STATEMENTS

The following information contains certain forward-looking statements.
Forward-looking statements are statements that estimate the happening of future
events and are not based on historical fact. Forward-looking statements may be
identified by the use of forward-looking terminology, such as "may," "could,"
"expect," "estimate," "anticipate," "plan," "predict," "probable," "possible,"
"should," "continue," or similar terms, variations of those terms or the
negative of those terms. The forward-looking statements specified in the
following information have been compiled by our management on the basis of
assumptions made by management and considered by management to be reasonable.
Our future operating results, however, are impossible to predict and no
representation, guaranty, or warranty is to be inferred from those
forward-looking statements.

OVERVIEW

We own patents and operating rights to certain polymer based soil enhancements
designed to increase production and reduce costs to the agriculture industry.
During the last three years, we have devoted substantial resources, including
executive time and money, to the development of strategic relationships and
contracts for the marketing and distribution of our polymer products.
Additionally, we developed the M-216 Polymer Injector, an injection machine
designed to install our products accurately and quickly on all types and sizes
of turf including golf courses, sport fields, as well as commercial and private
lawns. On March 21, 2006 we acquired the US Patent on a slow release liquid
fertilizer through our acquisition of Advanced Fertilizer Technologies, Inc.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, our selected
financial information:

                                       Six Months Ended        Six Months Ended
                                         June 30, 2006          June 30, 2005
                                         -------------          -------------
                                          (unaudited)            (unaudited)
Statement of Operations Data:
Revenue                                  $    360,863           $    470,007
(Loss)                                   $ (1,254,141)          $ (1,090,095)
(Net Loss) Per Share                     $      (0.05)          $      (0.06)
Balance Sheet Data:
Current Assets                           $    538,018           $    597,157
Total Property & Equipment, Net          $    344,562           $    362,416
Patents, Net                             $  2,295,904           $    421,579
Net Deferred Tax Asset                   $          0           $          0
Total Assets                             $  3,241,193           $  1,451,076
Total Current Liabilities                $    698,688           $    592,444
Accumulated Deficit                      $(15,244,552)          $(13,005,082)

                                       20
<PAGE>
SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED) COMPARED TO SIX MONTHS ENDED JUNE 30,
2005 (UNAUDITED)

REVENUES

Revenues for the six months ended June 30, 2006 were $360,863 compared to
$470,007 for the same period in 2005, a decrease of 23%. This decrease in
revenue was the result of the increase in energy costs and climatic conditions
experienced in our markets as well as some deliveries historically made in this
reporting quarter delayed until the following quarter.

COST OF SALES

Cost of goods sold for the six months ended June 30, 2006 were $235,820 compared
to $284,637 for the six months ended June 30, 2005, a decrease of 17.1%. The
cost of sales is consistent with the gross sales figures, increased material
costs and a direct result of our purchasing controls.

INVENTORY

Inventory balances were $390,271 for the six months ended June 30, 2006 compared
to $393,816 for the six months ended June 30, 2005.

OPERATING EXPENSES

Operating expenses increased by approximately 3% from $1,186,004 for the six
months ended June 30, 2005 compared to $1,223,153 for the six months ended June
30, 2006. This increase in operating expenses was a result of the increased cost
of sales and marketing.

INCOME TAXES

We did not provide for income tax expense or provision for the period ended June
30, 2006 because any income tax benefit generated from taxable losses incurred
is equally offset by an increase in the valuation allowance for the deferred
income tax asset.

NET LOSS

We experienced a net loss from operations of $(1,254,141) for the six months
ended June 30, 2006 as compared to a net loss of $(1,090,095) for the six months
ended June 30, 2005. The increase in the net loss is directly related to our
increase in general and administrative expenses from $1,186,004 in the six
months ended June 30, 2005 to $1,223,153 for the six months ended June 30, 2006.
Our sales and marketing efforts increased by $144,800. We also increased our
interest expenses by $54,357. We continue to focus our efforts on developing
strategic alliances, marketing agreements, and distribution networks. Revenue
from the sale of products decreased from $470,007 for the six months ended June
30, 2005 to $360,863 for the six months ended June 30, 2006. This decrease in
revenue was the result of the increase in energy costs and climatic conditions
experienced in our markets as well as some deliveries historically made in this
reporting quarter delayed until the following quarter.

                                       21
<PAGE>
SEASONALITY

Our efforts in the United States have focused on the southern states and
therefore generally experience year round growing cycles, with the sale of the
agricultural products preceding the growing cycle of various crops.
International sales have not been sufficient enough or the geographic
distribution of sales concentrated enough to determine if a seasonal trend
exists although the initial indication is that our markets will become diverse
and therefore not indicate significant seasonal variations. As we expand into
the residential and commercial segments nationally, we will experience some
seasonal declines in sales during the fall and winter quarters in less temperate
climates.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents totaled $25,825 and $17,219 at June 30, 2006 and 2005,
respectively. Net cash used by operations was $(796,385) for the period ended
June 30, 2006 compared to net cash used by operations of $(831,645) for the
comparable period ended June 30, 2005. We have historically relied upon one of
our officers and significant shareholders to provide cash to meet short term
operating cash requirements.

In March 2000, we authorized the issuance of an aggregate of $1,325,000 of
convertible debentures with interest payable quarterly at 10% per annum. The
convertible debentures are convertible to our common stock at a rate of one
share for each three dollars converted. The debentures matured in the first
calendar quarter of 2002. All of the debentures were subscribed and at June 30,
2006, the outstanding balance of the debentures was $969,710 and at June 30,
2005, the outstanding balance of the debentures was $984,898. At June 30, 2006,
convertible debentures consisted of $770,000 of 8% per annum debentures at a
rate of $0.50 per share and $199,710 of 10% per annum convertible at a rate of
$3.00 per share. If the remaining debt is converted, we would issue an
additional 1,606,577 shares. Interest expense for the six months ended June 30,
2006 was $145,133 and interest expense for the six months ended June 30, 2005
was $90,776.

We have working capital deficit (current assets less current liabilities) of
$(160,670) as of June 30, 2006 compared to working capital of $4,713 as of June
30, 2005. Our increase in current liabilities is directly related to the cost of
our inventory.

As shown in the accompanying financial statements, we have incurred an
accumulated deficit of $(15,244,552) and working capital deficit of
approximately $(160,670) as of June 30, 2006. Our ability to continue as a going
concern is dependent on obtaining additional capital and financing and operating
at a profitable level. We intend to seek additional capital either through debt
or equity offerings and to increase sales volume and operating margins to
achieve profitability. Our working capital and other capital requirements during
the next fiscal year and thereafter will vary based on the sales revenue
generated by the recent accumulation of additional products and the distribution
and sales network we have created and will continue to grow.

We will consider both the public and private sale of securities and/or debt
instruments for expansion of our operations if such expansion would benefit our
overall growth and income objectives. Should sales growth not materialize, we

                                       22
<PAGE>
may look to these public and private sources of financing. There can be no
assurance, however, that we can obtain sufficient capital on acceptable terms,
if at all. Under such conditions, failure to obtain such capital likely would at
a minimum negatively impact our ability to timely meet our business objectives.

Beginning in July 2004, we undertook a Regulation S offering up to a maximum of
$3,500,000. We sold 8,061,494 shares of our common stock to 148 non-United
States residents for gross proceeds of $2,710,921 in that offering. These
transactions are exempt from registration under Regulation S of the Securities
Act of 1933 as no sales efforts were made in the United States. All proceeds
were used for operating capital.

CRITICAL ACCOUNTING ESTIMATES

The preparation of our financial statements in conformity with accounting
principles generally accepted in the United States of America requires our
management to make certain 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. As such, in accordance with
the use of accounting principles generally accepted in the United States of
America, our actual realized results may differ from management's initial
estimates as reported. A summary of our significant accounting policies are
detailed in the notes to the financial statements which are an integral
component of this filing.

We have capitalized approximately $380,000 less accumulated depreciation of
$185,619 associated with the construction of a demonstration injection machine.
We placed the machine in service in the fiscal year ended December 31, 2004.
Management believes that although the capitalized costs exceed a value at which
the unit could be sold, we will derive several years of benefits from the unit
by using it in sales demonstrations and as a loaner unit.

On December 31, 1999, we purchased exclusive license rights to patented polymer
application techniques. The acquisition price of these rights was approximately
$679,000. Management periodically evaluates the carrying value of these assets
for impairment. The application techniques are critical to the process by which
we based our plan of operations. The carrying value of these licensing rights
was $374,735 at June 30, 2006.

On March 14, 2006 we purchased Advanced Fertilizer Technologies, Inc. including
patent 5,443,613 "A Method for Producing Suspension Fertilizer:. The acquisition
for this patent was approximately $1,950,000. Management periodically evaluates
the carrying value of this asset for impairment. The patent is critical to the
process by which we based our plan of operations. The carrying value of this
patent was $1,889,064 at June 30, 2006.

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<PAGE>
ITEM 3. CONTROLS AND PROCEDURES

Our Chief Executive Officer, President, and Chief Financial Officer (the
"Certifying Officers") are responsible for establishing and maintaining
disclosure controls and procedures for the Company. The Certifying Officers have
designed such disclosure controls and procedures to ensure that material
information is made known to them, particularly during the period in which this
report was prepared. The Certifying Officers have evaluated the effectiveness of
the Company's disclosure controls and procedures within 90 days of the date of
this report and believe that the Company's disclosure controls and procedures
are effective based on the required evaluation. There have been no significant
changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

                                       24
<PAGE>
                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

To the best knowledge of management, there are no legal proceedings pending or
threatened against us.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On May 19, 2006 we sold 72,449 shares of our common stock to FLD Corporation, a
company in which one of our directors and principal shareholders, Louie Visco is
an owner and director, for $0.52 per share to satisfy accrued interest due on
one of the debentures held by FLD Corporation. We relied on the exemption from
registration relating to transactions by an issuer that do not involve any
public offering pursuant to Section 4(2) under the Securities Act of 1933 (the
"Act") and/or Rule 506 of Regulation D promulgated pursuant thereto. We believe
that, at the time of the sale, the investor was an "accredited investor" under
Rule 501 of Regulation D of the Act and had adequate access to information about
us.

On May 19, 2006 we sold 43,595 shares of our common stock, to an employee in
exchange for $16,000 in equipment used in our operation. We relied on the
exemption from registration relating to transactions by an issuer that do not
involve any public offering pursuant to Section 4(2) under the Act and/or Rule
506 of Regulation D promulgated pursuant thereto. We believe that, at the time
of the sale, the investor was an "accredited investor" under Rule 501 of
Regulation D of the Act and had adequate access to information about us.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION

None.

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<PAGE>
ITEM 6. EXHIBITS

The following Exhibits are filed herein:

 No.                                    Title
 ---                                    -----
10.1     Acquisition Agreement for Smart World Organics, dated July 7, 2006

31.1     Certification of Chief Executive Officer Pursuant to the Securities
         Exchange Act of 1934, Rules 13a-14 and 15d-14, as adopted pursuant to
         Section 302 of the Sarbanes-Oxley Act of 2002

31.2     Certification of Chief Financial Officer Pursuant to the Securities
         Exchange Act of 1934, Rules 13a-14 and 15d-14, as adopted pursuant to
         Section 302 of the Sarbanes-Oxley Act of 2002

32       Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002

                                       26
<PAGE>
                                   SIGNATURES

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

DATED: August 14, 2006                  AMERICAN SOIL TECHNOLOGIES, INC.


                                        By: /s/ Carl P. Ranno
                                           -------------------------------------
                                             Carl P. Ranno
                                        Its: President, Chief Executive Officer,
                                             Chief Financial Officer
                                             (Principal Executive Officer,
                                             Principal Financial Officer
                                             and Principal Accounting Officer)

                                       27