SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

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

                  For the fiscal year ended September 30, 2008
                                       or

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

        For the transition period from _______________ to ______________

                        Commission file number: 000-22855

                        AMERICAN SOIL TECHNOLOGIES, INC.
           (Name of Small Business Issuer as specific in its Charter)

           Nevada                                                95-4780218
(State or Other Jurisdiction of                               (I.R.S. Employer
 Incorporation or Organization)                              Identification No.)

12224 Montague Street, Pacoima, California                         91331
(Address of Principal Executive Offices)                         (Zip Code)

         Issuer's telephone number, including area code: (818) 899 4686

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

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

                          Common Stock, $.001 par value
                                (Title of Class)

Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods 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 check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained herein, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. Yes [ ] No [X]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer [ ]                       Accelerated filer [ ]
Non-accelerated filer  [ ]                        Smaller reporting company  [X]
(Do not check if a smaller reporting company)

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

For the fiscal year ended September 30, 2008, our revenue was $561,702

As of January 12, 2009, the number of shares of common stock outstanding was
60,965,590. As of February 11, 2008, the aggregate market value of our common
stock held by non-affiliates was approximately $436,529 (based upon 21,826,469
shares at $0.02 per share).
<PAGE>
                       DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated herein by reference: (i) Registration
Statement on Form SB-2, filed on July 2, 1997, as amended (Registration No.
333-30583); (ii) Form 10-KSB for the fiscal year ended June 30, 1998, filed on
September 16, 1998; (iii) Form 10-QSB for the quarterly period ended March 31,
2000, filed on May 15, 2000; (iv) Form 10-KSB for the fiscal year ended June 30,
2000, filed on September 27, 2000 (File No. 000-22855); (v) Form 10-QSB for the
quarterly period ended March 31, 2004, filed on May 5, 2004; (vi) Form 10-QSB
for the quarterly period ended September 30, 2005, filed on November 14, 2005;
(vii) Form 10-KSB for the fiscal year ended September 30, 2006, filed on April
3, 2006; (viii) Form 10-QSB for the quarterly period ended March 30, 2006, filed
on May 17, 2006 ; (ix) Form 10-QSB for the quarterly period ended June 30, 2006,
filed on August 14, 2006; (x) Form 10-QSB for the quarterly period ended
September 30, 2006, filed on November 14, 2006; and (xi) Form 10-KSB for the
fiscal year ended December 31, 2006, filed on April 18, 2007; and (xii) Form 8-K
disclosing a change in Registered Certifying Accounts, filed on May 15, 2007;
and (xiii) Form 10-QSB for the quarterly period ended March 31, 2007 filed on
May 21, 2007 and filed as amended on June 8, 2007; and (xiv) Form 10-QSB for the
quarterly period ended June 30, 2007 and filed on August 20, 2007; and (xv) Form
10KT a Transition Report for the period January 1, 2007 to September 30, 2007
and filed on February 15, 2008 and amended and filed on February 25, 2008; and
(xvi) an S-8 Registration Statement filed on February 29, 2008; and (xvii) Form
10-QSB for the quarterly period ended March 31, 2008 filed on May 20, 2008; and
Form 10-QSB for the quarterly period ended June 30, 2008 are incorporated in
Part III, Item 13.
<PAGE>
                                TABLE OF CONTENTS
                                                                            Page
                                                                            ----

ITEM 1   DESCRIPTION OF BUSINESS ...........................................   1

ITEM 2   DESCRIPTION OF PROPERTY ...........................................   6

ITEM 3   LEGAL PROCEEDINGS .................................................   6

ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ...............   6

ITEM 5   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ..........   7

ITEM 6   SELECTED FINANCIAL DATA............................................   8

ITEM 7   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS ........................................   9

ITEM 8   FINANCIAL STATEMENTS ..............................................  16

ITEM 9   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURE .........................................  16

ITEM 9A  CONTROLS AND PROCEDURES ...........................................  17

ITEM 9B  OTHER INFORMATION .................................................  17

ITEM 10  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT ................  17

ITEM 11  EXECUTIVE COMPENSATION ............................................  19

ITEM 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          AND RELATED STOCKHOLDER MATTERS ..................................  24

ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ....................  25

ITEM 14  EXHIBITS ..........................................................  26

ITEM 15  PRINCIPAL ACCOUNTANT FEES AND SERVICES ............................  27

SIGNATURES .................................................................  28
<PAGE>
                                     PART I

ITEM 1. BUSINESS

DEVELOPMENT OF BUSINESS

American Soil Technologies, Inc., formerly Soil Wash Technologies, Inc., was
incorporated in California on September 22, 1993 in the soil remediation
business. In May 2002, we discontinued the soil remediation business.

BUSINESS OF ISSUER

We develop, manufacture and market cutting-edge technology that decreases the
need for water and improves the soil in the "Green Industry" consisting of
agriculture, turf and horticulture. Our products enhance growing environments
and reduce the environmental damage caused by common growing practices.

We manufacture three primary products: Agriblend(R), a patented soil amendment
developed for agriculture; Soil Medic, a patented slow release liquid
fertilizer; and NutrimoistL(R), developed for homes, parks, golf courses and
other turf related applications.

We market our products primarily in the United States. We are continually adding
sales representatives and distributors in both the agriculture and turf
industries. The following table shows the current distributors and sales
representatives of our products and products we license from others:

Distributor/Sales
 Representative                Product                   Territory
 --------------                -------                   ---------
Gigot Aqua Services         Agriblend(R)          Kansas, Oklahoma, Nebraska,
                            Nutrimoist(R)         Colorado, northern Texas,
                            Extend(TM)            northern New Mexico
                            Stockosorb(R)
                            Sircle Saver Sacks(R)

The Pacific Tree Company    Agriblend(R)          Exclusive distributor of our
                            Soil Medic            products for the Paulownia
                            Nutrimoist(R)         Megafolia  Tree in the United
                                                  States

Environmental Development   Nutrimoist            Kuwait and the UAE
Company                     Agriblend

Donald Weishuhn             Agriblend(R)          The state of Texas from south
                            Nutrimoist(R)         of Lubbock to Dallas
                            Extend(TM)
                            Stockosorb(R)
                            Stockopam(R)
                            Dust Contain

                                       1
<PAGE>
Turf Masters                Soil Medic(TM)        San Diego and Orange Counties
                            Soil Therapy(TM)      California and Northern Mexico

Ag Pro Tech, Inc.           Agriblend(R)          Eastern North Dakota and
                            Nutrimoist(R)         Western Minnesota
                            Extend(TM)
                            Stockosorb(R)
                            Stockopam(R)
                            Dust Contain

Reinke Pasco, Inc.          Agriblend(R)          Washington
                            Nutrimoist(R)
                            Extend(TM)
                            Stockosorb(R)
                            Stockopam(R)
                            Dust Contain
                            Sircle Saver Sack(R)

The Kern Company            Agriblend(R)          Washington
                            Nutrimoist(R)
                            Extend(TM)
                            Stockosorb(R)
                            Stockopam(R)
                            Canal Seal
                            Dust Contain
                            Anchor MP
                            Sircle Saver Sack(R)
                            Hydromulch

Pure Chemicals              Nutrimoist and
                            future products       Israel

Echo Trading Company        Agriblend             Country of Morocco
                            Nutrimoist

We also act as a distributor for products manufactured by others as follows:

<TABLE>
<CAPTION>
 Manufacturer                                   Product                            Territory
 ------------                                   -------                            ---------
<S>                              <C>                                          <C>
JT Water Management LLC           Extend(TM), a liquid linear polymer,         Western United States
                                  and Contain, a dust control
                                  technology

Richard Roos                      Sircle Saver Sack(R)                         Exclusive Worldwide
                                  Soil Saver Sack(TM)

Midwest Industrial Supply, Inc.   Soil-Sement(R)and Envirokleen(R),            Those areas where the
                                  environmentally certified dust and           manufacturer does not already
                                  erosion control products                     have an exclusive dealer or
                                                                               distributor
</TABLE>

                                       2
<PAGE>
On July 7, 2006, we acquired Smart World Organics, Inc. ("Smart World") as a
wholly-owned subsidiary. Smart World is a "C" corporation located in Hudson,
Florida. Smart World has developed organic and sustainable products through a
unique research approach. The products are sold directly to the end user and
through distributors on a worldwide basis.

Smart World provides next-generation organic and sustainable fertilizers to
commercial and residential customers worldwide. Smart World also provides
advanced, custom-formulated products built to suit unusual growing conditions
and environments. The product line includes homogenized fertilizers, non-toxic
insect controls, plant protectants, seed, soil and silage inoculants.

Smart World distributes products to many countries including China, Japan,
Taiwan, the United Arab Emirates, Turkey, Greece, Spain and Costa Rica. They
have also made major ties with cotton growers throughout the United States and
Argentina.

We issued 2,300,000 shares of common stock to the shareholders of Smart World in
exchange for 100% of the shares of common stock of Smart World and assumed
approximately $400,000 in notes and trade payables.

On December 20, 2006, we entered into an Intellectual Property Purchase
Agreement with Ray Nielsen whereby we purchased from Mr. Nielsen any and all
intellectual property of Mr. Nielsen, including all formulas developed by Mr.
Nielsen over the past 30 years, including but not limited to all formulas and
intellectual property used in the business of Smart World, including all
graphics and logos; all domain names and URL's; any proprietary software and its
source code; all existing content and HTML files; all branding and trademarks;
all trade names; all services marks; all copywritten material; all patents; and
all products and proceeds of the foregoing, in any form whatsoever and
wheresoever located (collectively the "Intellectual Property"), in exchange for
a convertible debenture in the amount of $1,500,000 and bearing an interest rate
of 8% per annum (the "Convertible Debenture").

The Convertible Debenture is secured by the Intellectual Property. The principal
of the Convertible Debenture and any unpaid accrued interest thereon is due and
payable on January 19, 2008. We were to make quarterly interest payments until
the maturity date. The Convertible Debenture is convertible at the option of Mr.
Nielsen at any time prior to the maturity sate into shares of our common stock
at a conversion price equal to the closing price of our common stock for the day
immediately proceeding the date of conversion. A dispute has arisen between Mr.
Nielsen and us regarding the Convertible Debenture and the uniqueness and value
of the Intellectual Property. See "Legal Proceedings."

COMPETITION

To the best knowledge of our management, there is no direct competition for our
Agriblend(R) product, however, earlier polymer based technology was very
expensive and the remembrance of its cost has a negative effect on marketing
Agriblend(R). Accordingly, educating the end user regarding the benefits of
using Agriblend(R) and gaining general acceptance of the new "micro grain"
technology are obstacles to marketing the product.

There is some competition to our straight polymer products by companies that
have been in business for a number of years.

                                       3
<PAGE>
There is some competition for Extend(TM) however we have not as yet found a
higher quality liquid linear polymer product.

We are not aware of any competition to Nutrimoist(R) L other than from our
manufacturer(s) who would have to use our polymer to manufacture the product
pursuant to our agreement.

The newly acquired slow release fertilizer Soil Medic does not seem to have
competition at this time.

There is competition for the organic products that we distribute and manufacture
through Smart World.

SOURCES AND AVAILABILITY OF RAW MATERIAL AND PRINCIPAL SUPPLIERS

Our products are proprietary blends that include cross-linked micro grain
polymer in the blend. Cross-linked polymer is manufactured by several chemical
companies that include Stockhausen, BASF; Ciba Specialties; and Floerger. All
other components of our products are readily available commercially throughout
the world. Agriblend(R) products are custom blended in accordance with our
specifications at a blending facility located near Truth or Consequences, New
Mexico. Our warehouse facilities are located in Phoenix, Arizona and Pacoima,
California. Nutrimoist(R) is blended by us through contract blenders and is a
combination of different formulations, which include our polymer products. Two
licensees under our patent manufacture our liquid slow release fertilizer.
Custom blending of Soil Medic, as needed, is performed by us through independent
blenders. Our organic products are manufactured at our Smart World plant in
Hudson, Florida. The Agro Tower is manufactured for us by Make-It Manufacturing
in Paso Robles, California.

DEPENDENCE ON MAJOR CUSTOMERS

We are not dependent on any one customer for a substantial portion of our sales
of any product.

INTELLECTUAL PROPERTY

We have six patents on the M-216 Polymer Injector machine designed to install
our Nutrimoist(R) product into mature turf.

On March 21, 2006, we acquired the U.S. patent on a slow release liquid
fertilizer through our acquisition of Advanced Fertilizer Technologies, Inc.

We have exclusive worldwide manufacturing/marketing rights to patented super
absorbent cross-linked polymer application technology. The underlying patents
include United States Patent number 5,649,495 and 5,868,087, commonly known and
described as "Agricultural Retention Mixture and Application Technique."

                                       4
<PAGE>
We have exclusive worldwide marketing rights to the patent pending linear
polymer product known as the Sircle Saver Sack(TM).

We own registered trademarks on the names, Agriblend(R), Nutrimoist(R) and
Prosper(R).

We have world wide marketing rights to a patented product known as the Agro
Tower.

We own the right to numerous formulas used to manufacture organic and
sustainable soil amendments, fertilizers and insecticides.

GOVERNMENT APPROVAL

Agriblend(R) and our other polymers are subject to regulatory standards
developed by the Environmental Protection Agency ("EPA") that are applicable to
maximum monomer concentrations in polymers. Polymer products cannot exceed
monomer concentrations of 200 mg/kg. All of the polymers we use are well below
the maximum monomer standard.

Many of our products are organically approved through the National Organic
Program ("NOP") and registered under EPA section 25B.

RESEARCH AND DEVELOPMENT COSTS

We spent $4,299 on research and development during the year ended September 30,
2008 as compared to $9,801 spent on research and development during the nine
months ended September 30, 2007.

COST AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS

We provide Material Safety Data Sheets on all components of our product line and
comply with labeling requirement for our products. In addition, we comply with
EPA regulations applicable to monomer content in its polymer additives (no
greater than five-hundredths percent (0.05%)). We believe that our operations
currently comply in all material respects with applicable federal, state and
local laws, rules, regulations and ordinances regarding the discharge of
materials into the environment. We do not believe that such compliance will have
a material impact on our capital expenditures, future earnings and competitive
position. No material capital expenditures for environmental control equipment
presently are planned.

EMPLOYEES

As of the date hereof, we have eight full-time employees. We hire independent
contractors on an "as needed" basis only. We have no collective bargaining
agreements with our employees. We believe that our employee relationships are
satisfactory.

ITEM 1A NON APPLICABLE

ITEM 1B NON APPLICABLE

                                       5
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY

On April 1, 2004, we entered into a Sublease Agreement to sublet 923.50 square
feet located at a facility in Pacoima, California. The majority shareholder of
the sublessor is a related party to us. All of our operations are conducted from
this facility, which requires monthly rental payments of approximately $554. The
Sublease Agreement terminates on December 31, 2008. We also rent storage space
in Tucson and Phoenix, Arizona for approximately $200 per month. On June 1, 2007
we entered into a one year Lease Agreement to lease 6,800 square feet located in
Hudson Florida for $2,914 per month. This facility is used for office and
manufacturing of our Smart World products.

ITEM 3. LEGAL PROCEEDINGS

On or about September 21, 2007, Stockhausen, Inc. ("Stockhausen") filed a
Complaint in the United States District Court, for the Middle District of North
Carolina, against us seeking damages. Stockhausen alleges that we breached an
agreement with them by failing to pay for goods purchased and failing to
purchase a minimum quantity of goods. We believe that Stockhausen provided
Defective products and waived any minimum purchase requirements. Stockhausen is
seeking a judgment in the amount of $188,180 plus interest and lost profits in
an unspecified amount, along with costs and attorneys fees. We filed an Answer
to the Complaint and a Cross-Complaint against Stockhausen on November 14, 2007.
Discovery has not been completed and settlement discussions are ongoing

On or about October 4, 2007, Raymond J. Nielsen and Cheryl K. Nielsen
(collectively, "Plaintiffs"), filed a Complaint in the Circuit Court in the
Sixth Judicial District of Pasco County, Florida, against us and Smart World
(collectively "Defendants") seeking damages, declaratory, and injunctive relief.
Plaintiffs allege that Defendants failed to pay interest when due on the
Convertible Debenture from Defendants to Plaintiffs and, thus, the entire amount
of the Convertible Debenture is accelerated and Plaintiffs are seeking a
judgment in the amount of $1,500,000 plus interest. We allege that jurisdiction
of this matter belongs in the California court system per the terms of the
documents. We have filed a Motion to Dismiss the lawsuit which has been denied.
We have filed an answer and affirmative defenses. It is our position that the
intellectual property we purchased from the Plaintiffs is not what it was
represented to be.

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

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

None.

                                       6
<PAGE>
                                     PART II

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

MARKET FOR COMMON EQUITY

Our common stock is currently quoted on the Over-The-Counter Bulletin Board
under the Symbol "SOYL." Set forth below is the trading history of our common
stock without retail mark-up, mark-down or commissions:

                                               High          Low
                                               ----          ---
     2006
       First Quarter ......................    0.34          0.18
       Second Quarter .....................    0.95          0.22
       Third Quarter ......................    0.44          0.22
       Fourth Quarter .....................    0.40          0.17

     2007
       First Quarter ......................    0.35          0.19
       Second Quarter .....................    0.30          0.16
       Third Quarter ......................    0.25          0.09
       Fourth Quarter .....................    0.10          0.07

     2008
       First Quarter ......................    0.15          0.07
       Second Quarter .....................    0.12          0.05
       Third Quarter ......................    0.09          0.01
       Fourth Quarter .....................    0.09          0.01

On January 8, 2009, the closing stock price was $0.01.

The above quotations are inter-dealer quotations from market makers of our
common stock. At certain times the actual closing or opening quotations may not
represent actual trades that took place.

HOLDERS

As of January 9, 2009, there were 289 shareholders holding certificated
securities and approximately 539 shareholders currently listed in the Depository
Trust Company as holding shares in brokerage accounts. Our transfer agent is
Standard Registrar & Transfer Company 1528 South 1840 East, Draper, Utah 84020.

                                       7
<PAGE>
DIVIDENDS

We have paid no dividends on our common stock since inception and do not
anticipate or contemplate paying cash dividends in the foreseeable future.

RECENT SALES OF UNREGISTERED SECURITIES

On August 18, 2008, Ms. Visco converted $41,383 of notes into 1,379,4280 shares
of common stock at the current market price of $0.03 per share. We believe that
Ms Visco is an "accredited investor" under Rule 501 under Regulation D of the
Act and had adequate access to information about us.

On August 18,2008, Dr. Patrick Haydel converted a $30,000 of convertible
debenture into 300,000 shares of common stock at the stated conversion price of
$0.10 per share. Dr. Haydel also covertedaccrued interest in the amount of
$1,921 into 64,045 share. We believe that Dr. Haydel is an "accredited investor"
under Rule 501 Regulation D of the Act and had adequate access to information
about us.

ITEM 6 SELECTED FINANCIAL DATA

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

<TABLE>
<CAPTION>
                                                 Fiscal Year Ended            Nine Months Ended
                                                September 30, 2008           September 30, 2007
                                                ------------------           ------------------
                                                     (Audited)                    (Audited)
<S>                                                <C>                         <C>
STATEMENT OF OPERATIONS DATA:
  Revenue                                          $    561,704                $    764,591
  Loss From Continuing Operations                    (2,777,799)                 (3,111,230)
  Gain/(Loss) From Discontinued Operations                    0                           0
  (Net Loss)                                         (2,678,876)                 (3,111,030)
  (Continuing Operations) Loss Per Share           $      (0.05)               $      (0.07)
  (Net Loss) Per Share                             $      (0.05)               $      (0.07)

BALANCE SHEET DATA:
  Current Assets                                   $    232,687                $    378,904
  Property & Equipment, net                             151,728                     304,470
  Intangible Assets; net                              1,407,553                   2,760,100

Total Assets                                          2,374,324                   3,942,044
Total Current Liabilities                            (4,415,879)                 (3,143,953)
Accumulated Deficit                                 (22,984,490)                (20,305,614)
Stockholders' Deficit                              $ (2,068,072)              $   (482,455)
</TABLE>

                                       8
<PAGE>
ITEM 7. 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.

ThE following information contains certain forward-looking statements of OUR
management. 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 develop, manufacture and market cutting-edge technology that decreases the
need for water and improves the soil in the "Green Industry" consisting of
agriculture, turf and horticulture.

RESULTS OF OPERATIONS

We changed our fiscal year end from December 31 to September 30, effective for
the period ended September 30, 2007. As a result, the following discussion of
our financial results include the operating results for the nine month period
ended September 30, 2008, as compared to the twelve month period for the period
ended September 30, 2008.

YEAR ENDED SEPTEMBER 30, 2008 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2007

REVENUES

Revenues for the fiscal year-ended September 30, 2008 were $561,704 compared to
$764,591 for the nine months ended September 30, 2007, a decrease of 26.5%. This
decrease in revenue is directly related to the reduced revenues of Smart World
in the amount of $216,985 caused by severe weather conditions that impacted our
largest region for agriculture sales and competition from a former employee.

COST OF SALES

Cost of goods sold decreased to $344,884 for the fiscal year ended September 30,
2008 from $473,147 for the fiscal year ended September 30, 2007. The decrease in
the cost of sales is the result of the decrease in revenues during this period.
Our gross margins were 38.6% and 38% for the years ended September 30, 2008 and
September 30, 2007, respectively. The slight increase in our gross margins was
caused by a decrease in the cost of raw materials

                                       9
<PAGE>
OPERATING EXPENSES

Operating expenses increased approximately 22% for the fiscal year ended
September 30, 2008. This increase in operating expenses is a result of many
factors.

General and administrative expenses decreased approximately 2% for the fiscal
year ended September 30, 2008 due to a decreased in payroll expenses which was
slightly offset by an increase in accounting and legal fees.

Sales and marketing expenses decreased approximately 38% in that we reduced the
amount of trade shows we attended and reduced the amount of print advertising.

Research and development costs decreased approximately 57% because we have
basically completed our research and development on our existing products.

The amortization expense was $507,157 and $693,672 for the year ended September
30, 2008 and for the period ended September 30, 2007, respectively.

Impairment of intangible assets increased from $400,000 for the period ending
September 30, 2007 to $843,390 for theyear ended September 30, 2008.

INTEREST EXPENSE

Interest expense decreased 74% for the fiscal year ended September 30, 2008 from
the period ended September 30, 2007. The decrease resulted from the elimination
of higher average debt balances and non-cash interest expense relating to the
amortization of a debt discount as reported in the prior audited period.

CHANGE IN THE FAIR VALUE OF DERIVATIVE LIABILITY

The change resulting from a decrease in our stock price from September 30, 2007
to September 30, 2008.

NET LOSS

For the reasons detailed above, we experienced losses in the year ended
September 30, 2008 and the period ended September 30, 2007. We expect that as a
result of our efforts during the last three years to develop strategic
alliances, marketing agreements, and distribution networks, sales volume in
subsequent periods should increase. Revenues for the fiscal year-ended September
30, 2008 were $561,704 compared to $764,591 for the nine months ended September
30, 2007. However, since these arrangements are new and untested, it is
uncertain whether these actions will be sufficient to produce net operating
income for the fiscal year ending September 30, 2009. However, given the gross
margins of our new products in turf and our acquisition of Smart World, as well
as our joint venture in the retail market with Green Hippo future operating
results should improve.

                                       10
<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 $6,286 and $34,855 at September 30, 2008 and
September 30, 2007, respectively. Net cash used by operations was $667,937 for
the year ended ended September 30, 2008 as compared to $1,369,526 for the period
ended September 30, 2007. 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 September
30, 2008, the outstanding balance of all notes payable totaled $2,874,013. At
September 30, 2008, convertible debentures consisted of one $1,500,000 of 8%
debenture convertible at the closing price on the day immediately preceding the
day of conversion, which is currently in default and in dispute among the
parties, $50,000 of 8% per annum debentures at a rate of $0.50 per share,
$60,000 of 8% debenture convertible at $0.10 per share, $30,000 of 8% per annum
debentures at a rate of $0.25 per share, $75,000 of 8% per annum debentures at a
rate of $0.19 per share, and $177,024 of 10% per annum convertible at a rate of
$3.00 per share. If the remaining debt is converted today, we would issue an
additional 1,273,745 shares.

Interest expense for the year ended ended September 30, 2008 was $71,842 and
interest expense for the period ended September 30, 2007 was $164,683.

As of September 30, 2008 we had a working capital deficit (current assets less
current liabilities) of $4,183,192 compared to a deficit of $2,765,049 as of
September 30, 2007. The increase in the working capital deficit has been caused
by an increase in our current liabilities caused by a lack of funding in debts
which have been reclassified as current.

As shown in the accompanying financial statements, we have incurred an
accumulated deficit of $22,984,490 and a working capital deficit of $4,183,192
as of September 30, 2008. This working capital deficit is directly related to
the increase in the current portion of our liabilities. 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.

                                       11
<PAGE>
We will consider both the public and private sale of securities and debt
instruments for expansion of our operations if such expansion would benefit our
overall growth and income objectives. Should sales growth not materialize, we
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. Our Auditors issued a statement in their report that there is
sunstantial doubt about the Company's ability to continue as a going concern.

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the U.S., which requires us to make estimates
and assumptions in certain circumstances that affect amounts reported. In
preparing these financial statements, management has made its best estimates and
judgments of certain amounts, giving due consideration to materiality. We
believe that of our significant accounting policies (more fully described in
notes to the consolidated financial statements), the following are particularly
important to the portrayal of our results of operations and financial position
and may require the application of a higher level of judgment by our management,
and as a result are subject to an inherent degree of uncertainty.

ESTIMATES

Our discussion and analysis of our financial condition and results of operations
are based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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 consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. By their nature, these estimates and judgments are subject
to an inherent degree of uncertainty. We review our estimates on an on-going
basis, including those related to the allowance for doubtful accounts,
inventories and related reserves, long-lived assets, income taxes, litigation
and stock-based compensation. We base our estimates on our historical
experience, knowledge of current conditions and our beliefs of what could occur
in the future considering available information. Actual results may differ from
these estimates, and material effects on our operating results and financial
position may result. We believe the following critical accounting policies
involve our more significant judgments and estimates used in the preparation of
our consolidated financial statements.

REVENUE RECOGNITION

We generate our revenues from the sale of products and services and recognize
revenue when the following fundamental criteria are met:

     *    persuasive evidence that an arrangement exists;
     *    the products and services have been delivered;
     *    selling prices are fixed and determinable and not subject to refund or
          adjustment; and
     *    collection of amounts due is reasonably assured.

                                       12
<PAGE>
Delivery occurs when goods are shipped and title and risk of loss transfer to
the customer, in accordance with the terms specified in the arrangement with the
customer. Revenue recognition is deferred in all instances where the earnings
process is incomplete. We provide for sales returns and allowances in the same
period as the related revenues are recognized. We base these estimates on our
historical experience or the specific identification of an event necessitating a
reserve. To the extent actual sales returns differ from our estimates; our
future results of operations may be affected. Should changes in conditions cause
management to determine that these criteria are not met for certain future
transactions, revenue recognized for any reporting period could be adversely
affected.

ACCOUNTS RECEIVABLE

We perform ongoing credit evaluations of our customers and adjust credit limits
based upon payment history and the customer's current credit worthiness, as
determined by our review of their current credit information. We continuously
monitor collections and payments from our customers and maintain an allowance
for doubtful accounts based upon our historical experience and any specific
customer collection issues that we have identified. While our credit losses have
historically been within our expectations and the allowance established, we may
not continue to experience the same credit loss rates as we have in the past.
Our accounts receivable are concentrated in a relatively few number of
customers. Therefore, a significant change in the liquidity or financial
position of any one customer could make it more difficult for us to collect our
accounts receivable and require us to increase our allowance for doubtful
accounts, which could have a material adverse impact on our consolidated
financial position, results of operations and cash flows.

INVENTORIES

We seek to purchase and maintain raw materials at sufficient levels to meet lead
times based on forecasted demand. If forecasted demand exceeds actual demand, we
may need to provide an allowance for excess or obsolete quantities on hand. We
also review our inventories for changes in the market prices of our products and
provide reserves as deemed necessary. If actual market conditions are less
favorable than those projected by management, additional inventory reserves may
be required. We state our inventories at the lower of cost, using the first-in,
first-out method on an average costs basis, or market.

We adopted SFAS No. 151, "Inventory Costs, an amendment of Accounting Research
Bulletin (ARB) No. 43, Chapter 4" beginning January 1, 2006, with no material
effect on our financial condition or results of operations. Abnormal amounts of
idle facility expense, freight, handling costs, and wasted materials (spoilage)
are recognized as current-period charges. Fixed production overhead is allocated
to the costs of conversion into inventories based on the normal capacity of the
production facilities. We utilize an expected normal level of production units,
based on our plant capacity. To the extent we do not achieve a normal expected
production levels, we charge such under-absorption of fixed overhead to
operations.

We account for goodwill and acquired intangible assets in accordance with SFAS
No. 142 "Goodwill and Other Intangible Assets", whereby goodwill is not
amortized, and is tested for impairment at the reporting unit level annually or
when there are any indications of impairment. A reporting unit is an operating
segment for which discrete financial information is available and is regularly
reviewed by management. We have one reporting unit,.

SFAS No. 142 requires a two-step approach to test goodwill for impairment for
each reporting unit. The first step tests for impairment by applying fair
value-based tests to a reporting unit. The second step, if deemed necessary,
measures the impairment by applying fair value-based tests to specific assets
and liabilities within the reporting unit. Application of the goodwill
impairment tests require judgment, including identification of reporting units,
assignment of assets and liabilities to each reporting unit, assignment of
goodwill to each reporting unit, and determination of the fair value of each
reporting unit. The determination of fair value for a reporting unit could be
materially affected by changes in these estimates and assumptions.

                                       13
<PAGE>
LONG-LIVED ASSETS

We continually monitor and review long-lived assets, including fixed assets,
goodwill and intangible assets, for impairment whenever events or changes in
circumstances indicate that the carrying amount of any such asset may not be
recoverable. The determination of recoverability is based on an estimate of the
cash flows expected to result from the use of an asset and its eventual
disposition. The estimate of cash flows is based upon, among other things,
certain assumptions about expected future operating performance, growth rates
and other factors. If the sums of the cash flows are less than the carrying
value, we recognize an impairment loss, measured as the amount by which the
carrying value exceeds the fair value of the asset.

We evaluated the Soil Medic intangible asset totaling $1,325,966 net, consisting
of the slow release patent, undiscounted cash flows, and recently identified
customers that we believe will sublicense our patent and pay us royalties of
$1.50 per gallon on certain products. We estimate that sublicense fees will be
generated in the middle of fiscal 2009 and continue through 2014, at which time
the patent expires. The marketing plan will be further developed to include
overseas opportunities as it is being expanded throughout the country.

We also evaluated the Smart World intangible assets, consisting of the formulas,
trade secrets and goodwill, aggregating $696,319 net. We evaluated undiscounted
cash flows for definite lived intangible assets and fair value related to
goodwill. We believe that with the entrance into the retail market with a major
retailer beginning in 2009, that no impairment of the Smart World intangible
assets is required, as future expected cash flows should recover such assets.
The retail market is designed to meet the needs of the consumer to be used in
home gardens and lawns.

ACCOUNTING FOR INCOME TAXES

We account for income taxes under the provisions of SFAS No. 109, "Accounting
for Income Taxes". Under this method, we determine deferred tax assets and
liabilities based upon the difference between the financial statement and tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to affect taxable income. The tax
consequences of most events recognized in the current year's financial
statements are included in determining income taxes currently payable. However,
because tax laws and financial accounting standards differ in their recognition
and measurement of assets, liabilities, equity, revenues, expenses, gains and
losses, differences arise between the amount of taxable income and pre-tax
financial income for a year and between the tax bases of assets or liabilities
and their reported amounts in the financial statements. Because it is assumed
that the reported amounts of assets and liabilities will be recovered and
settled, respectively, a difference between the tax basis of an asset or a
liability and its reported amount on the consolidated balance sheet will result
in a taxable or a deductible amount in some future years when the related
liabilities are settled or the reported amounts of the assets are recovered. We
then assess the likelihood that our deferred tax assets will be recovered from
future taxable income and unless we believe that recovery is more likely than
not, we must establish a valuation allowance.

In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109"
("FIN48"). FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's financial statements in accordance with SFAS No.
109, "Accounting for Income Taxes". FIN 48 describes a recognition threshold and
measurement attribute for the recognition and measurement of tax positions taken
or expected to be taken in a tax return and also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. FIN 48 is effective for fiscal years
beginning after December 15, 2006. Therefore, FIN 48 was effective for us
beginning July 1, 2007. The adoption of FIN 48 on July 1, 2007 did not have a
material impact to our consolidated financial statements.

                                       14
<PAGE>
We have provided a full valuation allowance against our U.S federal and state
deferred tax assets. If sufficient evidence of our ability to generate future
U.S federal and/or state taxable income becomes apparent, we may be required to
reduce our valuation allowance, resulting in income tax benefits in our
statement of operations. We evaluate the realizability of our deferred tax
assets and assess the need for a valuation allowance quarterly.

STOCK-BASED COMPENSATION

We account for stock-based compensation in accordance with SFAS No. 123R,
"Share-Based Payment." SFAS 123R requires that we account for all stock-based
compensation transactions using a fair-value method and recognize the fair value
of each award as an expense, generally over the service period. The fair value
of stock options is based upon the market price of our common stock at the grant
date. We estimate the fair value of stock option awards, as of the grant date,
using the Black-Scholes option-pricing model. The use of the Black-Scholes model
requires that we make a number of estimates, including the expected option term,
the expected volatility in the price of our common stock, the risk-free rate of
interest and the dividend yield on our common stock. If our expected option term
and stock-price volatility assumptions were different, the resulting
determination of the fair value of stock option awards could be materially
different and our results of operations could be materially impacted.

ACCOUNTING FOR NON-EMPLOYEE STOCK-BASED COMPENSATION

We measure compensation expense for its non-employee stock-based compensation
under the Financial Accounting Standards Board (FASB) Emerging Issues Task Force
(EITF) Issue No. 96-18, " ACCOUNTING FOR EQUITY INSTRUMENTS THAT ARE ISSUED TO
OTHER THAN EMPLOYEES FOR ACQUIRING, OR IN CONJUNCTION WITH SELLING, GOODS OR
SERVICES ". The fair value of the option issued or expected to be issued is used
to measure the transaction, as this is more reliable than the fair value of the
services received. The fair value is measured at the value of our common stock
on the date that the commitment for performance by the counterparty has been
reached or the counterparty's performance is complete. In the case of the
issuance of stock options, we determine the fair value using the Black-Scholes
option pricing model. The fair value of the equity instrument is charged
directly to stock-based compensation expense and credited to additional paid-in
capital.

ACCOUNTING FOR CONVERSION FEATURES AND WARRANTS ISSUED WITH CONVERTIBLE DEBT

Our derivative financial instruments consisted of embedded derivatives related
to the issuance of our $1.5 million convertible note payable to Ray Nielsen.
These embedded derivatives included the conversion feature that was not
considered conventional as defined in EITF 05-2, "The Meaning of Conventional
Convertible Debt Instruments" in issue No. 00-19). The accounting treatment of
derivative financial instruments require that we record the derivative at its
fair value and record it at fair value as of each subsequent balance sheet date.
Changes in fair value is recorded as non-operating, non-cash income or expense
at each reporting date. The derivatives were valued using the Black-Scholes
Option Pricing Model

On December 31, 1999, we purchased exclusive license rights to patented polymer
application techniques. The licenses are being amortized using the straight line
method over the life of the licenses, which is 14 1/2 years. The carrying value
of these assets is periodically evaluated for impairment. The amortization
expense was $103,833 and $35,133 and for the years ended September 30, 2008 and
September 30, 2007, respectively.

On March 15, 2006, the Company acquired a patent and $300,000 of cash from
Advanced Fertilizer Technologies, Inc. ("AFT") in exchange for 4,500,000 shares
of Series B preferred stock with a stated value of $0.50 per share, or
$2,250,000. The Company recorded an intangible asset of $1,950,000. AFT had no
operations and owned the intellectual property, including patents 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 eight years left to expiration.
Amortization expense of the patent rights was $252,565 and $182,813 and for the
year ended September 30, 2008 and September 30, 2007, respectively. Our
intangible asset were impaired because we experienced a problem in manufacturing
our product and we did not have sufficient funds to properly market this asset
subsequent to correcting the manufacturing problem.

We have capitalized approximately $380,199 less accumulated depreciation of
$356,217 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.

We had constructed equipment with a carrying value of approximately $134,000. In
February 2006, we entered into the sale-leaseback transaction. We recorded an
impairment loss for the equipment in fiscal 2005 on the basis that it was
evident that the carrying value at September 30, 2006 was impaired due to the
valuation received as part of the sale-leaseback transaction. We received
proceeds of $75,000 in February 2006. Since the equipment was written down to
the present value of lease arrangement in 2005, there was no gain or loss
recorded or deferred in connection with this transaction in 2006.

                                       15
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued Statement of SFAS No. 157, "Fair Value
Measurements" ("SFAS 157"). SFAS 157 provides a common definition of fair value
and establishes a framework to make the measurement of fair value in generally
accepted accounting principles more consistent and comparable. SFAS 157 also
requires expanded disclosures to provide information about the extent to which
fair value is used to measure assets and liabilities, the methods and
assumptions used to measure fair value, and the effect of fair value measures on
earnings. SFAS 157 is effective for fiscal years beginning after November 15,
2007, although early adoption is permitted. We are currently assessing the
potential effect; however, believe the adoption will not have a material impact
to our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities -- Including an amendment of FASB
Statement No. 115" ("SFAS 159"). SFAS 159 permits an entity to elect fair value
as the initial and subsequent measurement attribute for many financial assets
and liabilities. Entities electing the fair value option would be required to
recognize changes in fair value in earnings. Entities electing the fair value
option are required to distinguish, on the face of the statement of financial
position, the fair value of assets and liabilities for which the fair value
option has been elected and similar assets and liabilities measured using
another measurement attribute. SFAS 159 is effective for fiscal years beginning
after November 15, 2007. The adjustment to reflect the difference between the
fair value and the carrying amount would be accounted for as a cumulative-effect
adjustment to retained earnings as of the date of initial adoption. We are
currently evaluating the impact, if any, of SFAS 159 on our consolidated
financial statements.

In December 2007, the FASB issued SFAS No. 141(R) Business Combinations (SFAS
141(R)), which replaces FAS No. 141. SFAS No. 141(R) establishes principles and
requirements for how an acquirer in a business combination recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any controlling interest; recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain purchase;
and determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. SFAS No. 141(R) is to be applied prospectively to business
combinations.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51" ("SFAS 160").
This statement amends ARB 51 to establish accounting and reporting standards for
the noncontrolling interest (minority interest) in a subsidiary and for the
deconsolidation of a subsidiary. Upon its adoption, effective for us in the
fiscal year beginning July 1, 2009, noncontrolling interests will be classified
as equity in the Company's balance sheet and income and comprehensive income
attributed to the noncontrolling interest will be included in the Company's
income and comprehensive income, respectively. The provisions of this standard
must be applied prospectively upon adoption except for the presentation and
disclosure requirements. We do not expect the adoption of SFAS 160 to have an
impact on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities, an amendment of SFAS No. 133". SFAS 161
amends and expands the disclosure requirements of SFAS 133 for derivative
instruments and hedging activities. SFAS 161 requires qualitative disclosure
about objectives and strategies for using derivative and hedging instruments,
quantitative disclosures about fair value amounts of the instruments and gains
and losses on such instruments, as well as disclosures about credit-risk
features in derivative agreements. We do not expect the adoption of SFAS 161 to
have a significant impact on our consolidated financial statements.

In April 2008, The FASB issued FASB Staff Position FSP No. 142-3, "Determination
of the Useful Life of Intangible Assets" ("FSP 142-3"). FSP 142-3 amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under SFAS
No. 142, Goodwill and Other Intangible Assets. FSP 142-3 is effective for us in
the fiscal year beginning July 1, 2009. We are currently evaluating the impact
of the adoption of FSP 142-3 on our consolidated financial statements.

In May 2008, the FASB issued SFAS 162, "The Hierarchy of Generally Accepted
Accounting Principles" ("SFAS 162"). SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (the GAAP
hierarchy). SFAS will become effective 60 days following the Security and
Exchange Commission's approval of the Public Company Accounting Oversight Board
amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles". We do not expect the adoption of SFAS
162 to have a significant impact on our consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT FINANCIAL RISKS

Not Applicable

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required to be filed pursuant to this Item 8 begin on
page F-1 of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

None

                                       16
<PAGE>
ITEM 9A  CONTROLS AND PROCEDURES

Our President and Chief Financial Officer (the "Certifying Officers") is
responsible for establishing and maintaining our disclosure controls and
procedures. The Certifying Officer have designed such disclosure controls and
procedures to ensure that material information is made known tohim, particularly
during the period in which this report was prepared. The Certifying Officer has
evaluated the effectiveness of our disclosure controls and procedures and has
determined that our projections and impairment analysis need to be improved. We
have hired a financial expert to assist us in improving our disclosure controls
and procedures. We believe that the changes to be implemented will enable the
Company to improve its timely reporting of the rquired impairment analysis.

ITEM 9A(T). CONTROLS AND PROCEDURES

Not Applicable

ITEM 9B. OTHER INFORMATION

None.

                                    PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS

Our directors and executive officers are as follows:

Name                      Age                     Position
----                      ---                     --------
Carl P. Ranno             68       Director, Chief Executive Officer, President,
                                   Chief Financial Officer

Neil C. Kitchen           60       Director, Vice President

Diana Visco               49       Secretary

Scott Baker               50       Director

Johnny Dickinson          67       Vice President - Marketing

Donette Lamson            43       Vice President - Turf and Horticulture

                                       17
<PAGE>
MR. CARL P. RANNO, DIRECTOR, CHIEF EXECUTIVE OFFICER, PRESIDENT, CHIEF FINANCIAL
OFFICER, received a degree in Economics from Xavier University in Cincinnati,
Ohio and his Juris Doctor from the University of Detroit School of Law. Mr.
Ranno became a Director in September 2001 and Chief Executive Officer and
President in May 2002. For the five years prior to becoming the President/CEO of
the Company, he has acted as an advisor in strategic planning, mergers and
acquisitions and as a securities attorney to numerous public companies. He has
served as president and CEO of public and private companies. He is also a member
of the board of directors of Central Utilities Production Company.

MR. NEIL C. KITCHEN, DIRECTOR, VICE PRESIDENT, has over 20 years experience in
business management in the environmental sector including management of
companies involved in general engineering, toxicology, and environmental
cleanup. Prior to joining us in 1994, he was Vice President of a publicly-held
environmental cleanup company. He holds a B.S. in Business Management from San
Diego State University and a class "A" General Engineering license with
Hazardous Material Certification from the State of California.

MS. DIANA VISCO, SECRETARY, Diana Visco, Secretary, has worked with us since
January 1999. Prior to that, she worked for 21 years with the Americana
Leadership College, Inc., traveling to all of its offices and conferences across
the USA and Caribbean in addition to Australia, New Zealand, Canada and Europe.
Ms Visco spent several years as a traveling administrator and as International
Administrator handling all aspects of finance, administration as well as
marketing and promotion in addition to being assistant to the President of that
company. She is the daughter of Mr. Louie Visco, a former director who passed
away on January 3, 2008

MR. SCOTT BAKER, DIRECTOR, has practiced law in Arizona for the past 19 years.
He graduated from the University of Arizona with a B.S. in business in 1978 and
obtained his J.D. from the University of Arizona in 1981. As a general
practitioner, he has appeared before the U.S. District Tax Court and the U.S.
District Court.

MR. JOHNNY DICKINSON, VICE PRESIDENT MARKETING, prior to joining us, Mr.
Dickinson served for more than 30 years at John Deere, most recently as Division
Manager of Worldwide Marketing for the past ten years. He received his B.A.
degree in Finance and Marketing from Eastern New Mexico University.

Ms. DONETTE LAMSON, VICE PRESIDENT TURF and HORTICULTURE obtained her Bachelor
of Science Degree in Horticulture with a Business Management Concentration from
Colorado State University (C.S.U.). She has been a Horticulture Extension Agent
and served as a manger of one of the nations largest Certified Master Gardener
Programs. Additionally, Ms. Lamson has over 20 years of regional, national and
international turf, horticulture and landscape products manufacturing,
distribution and sales experience with Lesco, Helena, SAJ Turf Products
(currently United Horticultural Supply) and Golf Enviro Systems.

Directors serve until the next annual meeting or until their successors are
qualified and elected. Officers serve at the discretion of the Board of
Directors.

                                       18
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our
directors and certain officers, as well as persons who own more than 10% of a
registered class of our equity securities, ("Reporting Persons") to file reports
of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities
and Exchange Commission.

Based solely upon a review of the copies of such forms, we believe that all
Reporting Persons have complied on a timely basis with all filing requirements
applicable to them, except that Louie Visco filed one late report on Form 4
disclosing his conversion of debt to equity.

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

Set forth below is a summary of compensation for our principal executive officer
and our two most highly compensated officers other than our principal executive
officer (collectively, the "named executive officers") for our last two fiscal
years. There have been no annuity, pension or retirement benefits ever paid to
our officers, directors or employees.

With the exception of reimbursement of expenses incurred by our named executive
officers during the scope of their employment and unless expressly stated
otherwise in a footnote below, none of the named executive officers received
other compensation, perquisites and/or personal benefits in excess of $10,000.

<TABLE>
<CAPTION>
      Name and                                                                   Non-Equity
      Principal                                            Stock      Option    Incentive Plan     All Other
      Position          Year    Salary ($)    Bonus($)   Awards($)   Awards($)  Compensation($)  Compensation($)  Total($)
      --------          ----    ----------    --------   ---------   ---------  ---------------  ---------------  --------
<S>                      <C>    <C>            <C>       <C>          <C>           <C>              <C>          <C>

Carl P. Ranno, CEO,     2008     $120,000        $0         $0          $0            $0               $0         $120,000
President, CFO          2007     $120,000        $0         $0          $0            $0               $0         $120,000
(Principal Executive
Officer)

Neil C. Kitchen,        2008     $79,484         $0         $0          $0            $0               $0          $79,484
Vice President          2007     $79,484         $0         $0          $0            $0               $0          $79,484

Donette Lamson, Vice    2008     $75,000         $0         $0          $0            $0               $0          $75,000
President (1)           2007     $75,000         $0         $0          $0            $0               $0          $75,000

Johnny Dickinson,       2008     $75,000         $0         $0          $0            $0               $0          $75,000
VP - Marketing          2007     $75,000         $0         $0          $0            $0               $0          $75,000

Diana Visco             2008     $52,000         $0         $0          $0            $0               $0          $52,000
Secretary               2007     $52,000         $0         $0          $0            $0               $0          $52,000
</TABLE>

----------
1. Joined us in January 2006.

                                       19
<PAGE>
                           GRANTS OF PLAN-BASED AWARDS

We did not grant any plan-based awards during this fiscal year ended September
30, 2008:

                  OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table sets forth information for the named executive officers
regarding the number of shares and underlying shares both exercisable and
unexercisable stock options, as well as the exercise prices and expiration dates
thereof, as of September 30, 2008.

<TABLE>
<CAPTION>
                                                 Option Awards                                           Stock Awards
                 -------------------------------------------------------------------------  -----------------------------------
                                                                                                                       Equity
                                                                                                                      Incentive
                                                                                                                        Plan
                                                                                                          Equity       Awards
                                                                                                         Incentive     Market
                                                                                                           Plan          or
                                                                                                          Awards:      Payout
                                                Equity                                                  Number of     Value of
                                              Incentive                                       Market     Unearned     Unearned
                                             Plan Awards:                        Number of   Value of     Shares,      Shares,
                 Number of      Number of     Number of                          Shares of    Shares     Units or     Units of
                securities     securities     Securities                          Units of   or Units      other       other
                Underlying     Underlying     Underlying                           Stock     of Stock     rights       rights
                Unexercised    Unexercised    Unexercised   Option     Option    that have     that      that have      that
                  Options(#)    Options(#)     Unearned    Exercise  Expiration     not      have not       not       have not
Name            Exercisable   Unexercisable   Options(#)   Price($)     Date      vested(#)  vested($)    vested(#)   vested($)
----            -----------   -------------   ----------   --------     ----      ---------  ---------    ---------   ---------
<S>               <C>               <C>            <C>        <C>        <C>     <C>        <C>          <C>         <C>
Carl P. Ranno,    150,000           0              0        $0.50      6/30/12        0          0            0           0
CEO, President,
CFO (Principal
Executive
Officer)

Neil C. Kitchen,  150,000           0              0        $0.50      6/30/12        0          0            0           0
Vice President

Donette Lamson,         0            0              0         N/A          N/A        0         N/A           0           0
Vice President
</TABLE>

EMPLOYMENT AGREEMENTS

We have an employment agreement Carl P. Ranno as our Chief Executive Officer and
President. The Agreement is for a term of five years, commencing on May 23, 2008
and expiring on May 22, 2013 with automatic one-year extensions unless either
the Company or Mr. Ranno provides written notice of their intention not to renew
the Agreement at least 30 days prior to the expiration of the then current term.
The Agreement provides that, in addition to receiving paid vacation in
accordance with the Company's policies as well as other customary benefits and
provisions, Mr. Ranno shall receive an annual base salary of $200,000. If, at

                                       20
<PAGE>
any time during the term of the Agreement, Mr. Ranno is terminated "without
cause," he will be entitled to receive a cash payment equal to the aggregate
compensation payable to Mr. Ranno during the remaining term of the Agreement.
This Agreement has not been implemented.

On May 23, 2008 the Company entered into an Employment Agreement with Neil C.
Kitchen to act as the Company's Vice President and Chief Technical Officer (the
"Agreement").

The Agreement is for a term of five years, commencing on May 23, 2008 and
expiring on May 22, 2013 with automatic one-year extensions unless either the
Company or Mr. Kitchen provides written notice of their intention not to renew
the Agreement at least 30 days prior to the expiration of the then current term.
The Agreement provides that, in addition to receiving paid vacation in
accordance with the Company's policies as well as other customary benefits and
provisions, Mr. Kitchen shall receive an annual base salary of $130,000. If, at
any time during the term of the Agreement, Mr. Kitchen is terminated "without
cause," he will be entitled to receive a cash payment equal to the aggregate
compensation payable to Mr. Kitchen during the remaining term of the Agreement.
This Agreement has not been implemented.

On May 23, 2008, and effective the same date, the Company entered into an
Employment Agreement with Diana Visco to act as the Company's Secretary and
Administrative Assistant to the President (the "Agreement").

The Agreement is for a term of five years, commencing on May 23, 2008 and
expiring on May 22, 2013 with automatic one-year extensions unless either the
Company or Ms. Visco provides written notice of their intention not to renew the
Agreement at least 30 days prior to the expiration of the then current term. The
Agreement provides that, in addition to receiving paid vacation in accordance
with the Company's policies as well as other customary benefits and provisions,
Ms. Visco shall receive an annual base salary of $85,000. If, at any time during
the term of the Agreement, Ms. Visco is terminated "without cause," she will be
entitled to receive a cash payment equal to the aggregate compensation payable
to Ms. Visco during the remaining term of the Agreement. This Agreement has not
been implemented.

We have an employment agreement Donette Lamson as our Vice President in charge
of the Turf, Horticulture and Landscape Division. The agreement has a term of
three years from January 2006. Per the terms of the agreement, Ms. Lamson is to
receive a salary of $75,000 per year, bonus compensation based upon sales in her
division, and standard employee benefits. If we terminate Ms. Lamson without
cause, we shall continue to pay her salary and all other benefits for the
remainder of the term of the agreement.

2002 STOCK OPTION PLAN

Our shareholders adopted a Stock Option Plan on November 8, 2002 (the "2002
Plan"). Under the 2002 Plan, 2,000,000 shares of common stock have been
authorized for issuance as Incentive Stock Options or Nonstatutory Stock
Options. Under the 2002 Plan, options may be granted to our 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 the grant of an

                                       21
<PAGE>
Incentive Stock Option to a principal stockholder, not less that 110% of fair
market value of such common stock at the time such option is granted. The
purchase price of the common stock subject to each Nonstatutory Stock Option
shall be determined at the time such option is granted, but in no case less than
100% of the fair market value of such shares of common stock at the time such
option is granted.

The 2002 Plan shall terminate ten years from the date of its adoption by our
shareholders, and no option shall be granted after termination of the 2002 Plan.
Subject to certain restrictions, the 2002 Plan may at any time be terminated and
from time to time be modified or amended by the affirmative vote of the holders
of a majority of the outstanding shares of our capital stock present, or
represented, and entitled to vote at a meeting duly held in accordance with the
applicable laws of the State of Nevada.

As of the date hereof, 1,310,000 options have been issued pursuant to the 2002
Plan.

2005 STOCK OPTION/STOCK ISSUANCE PLAN

GENERAL

On January 31, 2005, our Board of Directors adopted our 2005 Stock Option/Stock
Issuance Plan (the "2005 Plan") and directed that it be presented to the
stockholders for their approval and adoption.

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.

Our 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 2005 Plan has two separate components: the option grant program and the
stock issuance program. To date, 498,240 shares of common stock have been issued
pursuant to the 2005 Plan.

OPTION GRANT PROGRAM

Incentive stock options (those stock options that qualify under Section 422 of
the Internal Revenue Code of 1986 ("the "Code")) may be granted to any
individual who is, at the time of the grant, our employee. Non-qualified stock
options (those options that do not qualify under Section 422 of the Code) may be
granted to employees and other people, including our directors and officers.

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 us, 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.

                                       22
<PAGE>
Each option is to have a maximum term of ten years, subject to earlier
termination in the event the optionee leaves our service. The optionee will have
up to a three month period following termination of service (for reasons other
than death or disability) in which to exercise the option. This period will be
extended to 12 months if the optionee's service terminates by reason of
disability, and in the event of the optionee's death, the personal
representative of the optionee's estate (or the person inheriting the option)
will have up to a 12 month period following the optionee's death in which to
exercise the option.

To exercise the option, the optionee must execute a stock purchase agreement and
pay the exercise price for the purchased shares. Payment is to be made in cash;
however, the Plan Administrator may also permit the optionee to deliver a
full-recourse interest-bearing promissory note for the purchased shares payable
in one or more installments. Provided that our shares remain publicly traded,
the exercise price may be paid in shares of common stock or, alternatively,
through the optionee's participation in a same-day sale program. Under such
program, the option shares are sold immediately following the exercise of the
option, and a portion of the sale proceeds is applied to the payment of the
exercise price and all applicable withholding taxes.

In the event we are acquired by merger or asset sale, the option shares will
immediately vest, and the option may be exercised for any or all of those vested
shares prior to the effective date of such acquisition. However, such
accelerated vesting will not occur if our repurchase rights with respect to the
unvested option shares are assigned to the acquiring entity. The Plan
Administrator will have the discretion to structure one or more option grants
under the Plan so that the shares subject to those options will immediately vest
in the event the optionee's service is involuntarily terminated within 18 months
following an acquisition in which our repurchase rights are so assigned, and the
optionee would then have a one-year period to exercise the accelerated options
for fully-vested shares. It is anticipated that this special vesting
acceleration provision would be made available only on a limited case-by-case
basis.

The stock purchase agreement will provide us with the right to repurchase, at
the original exercise price paid per share, any unvested shares held by the
optionee at the time of his or her termination of service. The applicable
vesting schedule will be set forth in the Notice of Grant. Full and immediate
vesting of all the option shares will occur upon an acquisition by merger or
asset sale, unless the repurchase right applicable to those shares is assigned
to the successor company. One or more repurchase rights outstanding under the
Plan may be structured so that those rights will subsequently lapse (and the
option shares will immediately vest) upon an involuntary termination of the
optionee's service within 18 months following the effective date of an
acquisition in which the repurchase rights are assigned to the successor
company.

STOCK ISSUANCE PROGRAM

Shares of common stock may be issued to employees and other people, including
our directors and officers.

                                       23
<PAGE>
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 stock issuance component is structured as a stock purchase transaction, with
the purchase price for the shares to be paid in cash or by promissory note at
the time of issuance of the shares. The same repurchase rights summarized above
for the "Stock Purchase Agreement" under the option grant program will apply to
the purchased shares, namely, our right to repurchase, at the original purchase
price, any unvested shares held by the participant at the time of his or her
termination of service.

It is anticipated that any issued shares will vest either immediately or in a
series of installments over the participant's period of service. Full and
immediate vesting of all the shares will occur upon an acquisition by merger or
asset sale, unless the repurchase right applicable to those shares is assigned
to the successor company. The assigned repurchase rights may be structured so
that they will subsequently lapse (and the shares will immediately vest) upon an
involuntary termination of the participant's service within 18 months following
the effective date of the acquisition.

COMPENSATION OF DIRECTORS

Our Directors do not receive any cash compensation, but are entitled to
reimbursement of their reasonable expenses incurred in attending directors'
meetings.

We do not have any audit, nominating, compensation or other committee of our
Board of Directors.

Scott Baker is our only independent director.

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

The following table sets forth certain information regarding our shares of
outstanding common stock beneficially owned as of the date hereof by (i) each of
our directors and executive officers, (ii) all directors and executive officers
as a group, and (iii) each other person who is known by us to own beneficially
more than 5% of our common stock based upon 60,965,590issued shares of common
stock.

                                       24
<PAGE>
<TABLE>
<CAPTION>
   Name and Address                               Amount and Nature of         Percent
 of Beneficial Owners (1)                         Beneficial Ownership       Ownership (2)
 ------------------------                         --------------------       -------------
<S>                                                <C>                       <C>
Carl P. Ranno, CEO, President, CFO, Director            1,602,900 (3)            2.6%
Neil C. Kitchen, Vice President, Director               1,551,455 (4)            2.5%
Diana Visco, Secretary                                  2,131,678 (6)            3.4%
Scott Baker, Director                                     504,818 (5)              *
Johnny Dickinson, Vice President                          174,000 (6)              *
Donette Lamson, Vice President                             75,000                  *
All executive officers and directors as a group
(6 persons)                                             6,039,851                9.9%

The Benz Group                                          2,819,061 (7)            4.6%
FLD Corporation                                        17,907,003 (8)           29.3%
UTEK Corporation                                        6,409,345               10.5%
</TABLE>

----------
*    Less than 1%.
1.   C/o our address, 12224 Montague Street Pacoima, CA 91331, unless otherwise
     noted.
2.   Except as otherwise indicated, we believe that the beneficial owners of
     common stock listed above, based on information furnished by such owners,
     have sole investment and voting power with respect to such shares, subject
     to community property laws where applicable. Beneficial ownership is
     determined in accordance with the rules of the SEC and generally includes
     voting or investment power with respect to securities. Shares of common
     stock subject to options or warrants currently exercisable, or exercisable
     within 60 days, are deemed outstanding for purposes of computing the
     percentage of the person holding such options or warrants, but are not
     deemed outstanding for purposes of computing the percentage of any other
     person.
3.   Includes options to purchase 150,000 shares of common stock at an exercise
     price of $0.50 expiring June 30, 2012.
4.   Includes options to purchase 150,000 shares of common stock at an exercise
     price of $0.50 expiring June 30, 2012.
5.   Includes options to purchase 150,000 shares of common stock at an exercise
     price of $0.50 expiring June 30, 2012.
6.   Includes options to purchase 252,000 shares of common stock at an exercise
     price of $0.50 expiring June 30, 2012.
7.   The Visco family which includes the Secretary of the Company Diana Visco
     owns the controlling shares of FLD.
8.   The Visco family which includes the Secretary of the Company Diana Visco
     owns the controlling shares of Benz Group.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The Visco Family is an owner and director of FLD Corporation, which holds a
warrant exercisable for 334,000 shares of common stock expiring on October 15,
2009 and 17,907,003 shares of common stock.

The Visco Family is an owner and director of Benz Group, the holder of 2,819,061
shares of common stock.

On April 1, 2004, we entered into a Sublease Agreement to sublet 923.50 square
feet located at a facility in Pacoima, California. The majority shareholder of
the sublessor is a related party to us. All of our operations are conducted from
this facility, which requires monthly rental payments of approximately $554. The
Sublease Agreement has been continued beyond December 31, 2008.

                                       25
<PAGE>
ITEM 14. EXHIBITS

3.1    Articles of Incorporation of New Directions Manufacturing, Inc., a Nevada
       corporation, dated January 9, 1997 (1)
3.2    Amendment to Articles of Incorporation of New Directions Manufacturing,
       Inc., a Nevada corporation, dated May 29, 1997 (1)
3.3    Amendment to Articles of Incorporation of New Directions Manufacturing,
       Inc., dated January 4, 2000 (2)
3.4    Amendment to Articles of Incorporation of American Soil Technologies,
       Inc., dated August 4, 2003 (3)
3.4    Bylaws of New Directions Manufacturing, Inc., dated May 29, 1997 (1)
3.5    Amended and Restated Bylaws of New Directions Manufacturing, Inc., dated
       July 20, 1998 (4)
3.6    Amendment to Articles of Incorporation, dated November 30, 2006
4.1    Convertible Debenture - Lump Sum Contribution (Form) (5)
4.2    Convertible Debenture - Incremental (Form) (5)
10.1   License Agreement between Ron Salestrom, American Soil Technologies,
       Inc., and Polymers Plus, L.L.C., dated January 4, 2000 (2)
10.2   Sublease Agreement with The Customized Box Company, dated April 1, 20046
10.8   Employment Contract with Donette Lamson, dated January 18, 2006 (7)
10.12  Acquisition Agreement for Smart World Organics, dated July 7, 2006 (8)
10.14  Intellectual Property Purchase Agreement with Ray Nielsen, dated December
       20, 2006 (9)

----------
1.   Incorporated by reference from our Registration Statement on Form SB-2,
     filed on July 2, 1997, as amended (Registration No. 333-30583).
2.   Incorporated by reference from our Form 10-KSB for the fiscal year ended
     June 30, 2000, filed on September 27, 2000 (File No. 000-22855).
3.   Incorporated by reference from our Form 10-KSB for the fiscal year ended
     December 31, 2005, filed on April 3, 2006.
4.   Incorporated by reference from our Form 10-KSB for the fiscal year ended
     June 30, 1998, filed on September 16, 1998.
5.   Incorporated by reference from our Form 10-QSB for the quarterly period
     ended March 31, 2000, filed on May 15, 2000.
6.   Incorporated by reference from our Form 10-QSB for the quarterly period
     ended March 31, 2004, filed on May 5, 2004.
7.   Incorporated by reference from our Form 10-QSB for the quarterly period
     ended March 31, 2006, filed on May 17, 2006.
8.   Incorporated by reference from our Form 10-QSB for the quarterly period
     ended June 30, 2006, filed on August 14, 2006.
9.   Incorporated by reference from our Form 10-KSB for the fiscal year ended
     December 31, 2006, filed on April 18, 2007.
10.  Incorporated by reference from our Form 10-KSB for the fiscal year ended
     December 31, 2006, filed on April 18, 2007.
11.  Incorporated by reference from our Form 10-KSB for the fiscal year ended
     December 31, 2006, filed on April 18, 2007.
12.  Incorporated by reference from our Form 10-KSB for the transition period
     ended September 30, 2007, filed on February 15, 2008.

                                       26
<PAGE>
10.15  Security Agreement with Ray Nielsen, dated December 22, 2006 (9)
10.16  Purchase and Sale Agreement and Joint Escrow Instructions for Silver
       Terrace Nurseries, dated November 27, 2007 (12)
10.17  Employment Contract with Carl Ranno, dated May 23, 2008
10.18  Employment Contract with Neil Kitchen, dated May 23, 2008
10.19  Employment Contract with Diana Visco, dated May 23, 2008
21     Subsidiaries: Smart World Organics Inc. a Florida corporation
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

ITEM 15. PRINCIPAL ACCOUNTANT FEES AND SERVICES

MCKENNON, WILSON & MORGAN, LLP ("MCKENNON")

McKennon was our independent auditor and examined our financial statements for
the fiscal years ending September 30, 2008 and September 30, 2007. McKennon
performed the services listed below and was paid the fees listed below for the
fiscal years ended September 30, 2008.

AUDIT FEES

McKennon was paid aggregate fees of approximately $182,532 during the fiscal
year ended September 30, 2008 for professional services rendered for the audits
of our annual financial statements for the periods ended September 30, 2008 and
2007 and for the reviews of the financial statements included in our quarterly
reports on Form 10-QSB included these two periods.

AUDIT RELATED FEES

McKennon was not paid additional fees for either of the fiscal years ended
September 30, 2008 or September 30, 2007 for assurance and related services
reasonably related to the performance of the audit or review of our financial
statements.

TAX FEES

McKennon was paid aggregate fees of approximately $7,232 for the fiscal year
ended September 30, 2008 and or professional services rendered for tax
compliance, tax advice and tax planning during this fiscal year.

ALL OTHER FEES

McKennon was not paid any other fees for professional services during the fiscal
years ended September 30, 2008 and September 30, 2007.

AUDIT COMMITTEE

We do not have an audit committee.

                                       27
<PAGE>
                                   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, duly
authorized.

                            AMERICAN SOIL TECHNOLOGIES, INC.


DATED: January 12, 2009     By: /s/ Carl P. Ranno
                               -------------------------------------------------
                               Carl P. Ranno
                               Director, Chief Executive Officer, President,
                               and Chief Financial Officer
                               (Principal Executive Officer, Principal Financial
                               Officer and Principal Accounting Officer)

                                       28
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Shareholders and Board of Directors American Soil Technologies, Inc.

We have audited the  accompanying  consolidated  balance sheets of American Soil
Technologies,  Inc. and subsidiary  (the "Company") as of September 30, 2008 and
2007,  and the related  consolidated  statements  of  operations,  stockholders'
deficit and cash flows for the year ended September 30, 2008, and the nine-month
period ended September 30, 2007. 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. The Company
is not  required  to  have,  nor were we  engaged  to  perform,  an audit of its
internal control over financial reporting.  Our audits included consideration of
internal  control  over  financial  reporting  as a basis  for  designing  audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the  effectiveness  of the Company's  internal  control
over  financial  reporting.  Accordingly,  we express no such opinion.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position of American  Soil
Technologies,  Inc. and  subsidiary as of September  30, 2008 and 2007,  and the
results of their  operations  and their cash flows for the year ended  September
30, 2008, and the nine-month period ended September 30, 2007, in conformity with
accounting principles generally accepted in the United States.

The accompanying  consolidated  financial statements have been prepared assuming
the Company  will  continue as a going  concern.  As  discussed in Note 2 of the
consolidated  financial  statements,  the Company has incurred  losses in recent
history,  and has significant  working capital and accumulated  deficits.  These
factors raise  substantial  doubt about the  Company's  ability to continue as a
going  concern.  Management's  plans  with  respect  to these  matters  are also
discussed in Note 2. The  consolidated  financial  statements do not include any
adjustments that might result from the outcome of this uncertainty.



/s/ McKennon, Wilson & Morgan LLP
----------------------------------------
Irvine, California
January 13, 2009

                                      F-1
<PAGE>
                        American Soil Technologies, Inc.
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                     September 30,          September 30,
                                                                         2008                   2007
                                                                     ------------           ------------
<S>                                                                  <C>                    <C>
Assets:
  Current assets
    Cash and cash equivalents                                        $      6,286           $     34,855
    Accounts receivable, net of allowance of $38,738 and $61,128
     at September 30, 2008 and 2007, respectively                          50,954                 61,008
    Inventories                                                           139,324                250,066
    Prepaid expenses and other current assets                              36,123                 32,975
                                                                     ------------           ------------
      Total current assets                                                232,687                378,904
  Property and equipment, net                                             151,728                304,470
  Deposits and other assets                                               217,756                133,970
  Goodwill                                                                364,600                364,600
  Intangible assets                                                     1,407,553              2,760,100
                                                                     ------------           ------------
Total assets                                                         $  2,374,324           $  3,942,044
                                                                     ============           ============
Liabilities and Stockholders' Deficit:
  Current liabilities
    Accounts payable                                                 $    993,363           $    579,320
    Accrued liabilities                                                   529,104                195,148
    Notes payable                                                       1,947,862              1,788,997
    Capital lease obligations                                              16,358                 19,956
    Derivative liability                                                   11,580                471,527
    Notes payable to related parties                                      917,612                 89,005
                                                                     ------------           ------------
      Total current liabilities                                         4,415,879              3,143,953
Capital lease obligations                                                  22,788                 39,147
Notes payable                                                               3,729                206,096
Debentures payable - related parties                                           --              1,035,303
                                                                     ------------           ------------
Total liabilities                                                       4,442,396              4,424,499
                                                                     ------------           ------------
Stockholders' deficit:
  Series A preferred stock, $0.50 stated value, 25,000,000
   shares authorized, 2,763,699 shares issued and outstanding
   at September 30, 2008 and 2007, respectively                         1,381,849              1,381,849
  Common stock, $0.001 par value, 100,000,000 shares authorized,
   60,965,590 and 52,674,574 shares issued and outstanding at
   September 30, 2008 and 2007, respectively                               60,966                 52,674
  Additional paid-in capital                                           19,473,603             18,388,636
  Accumulated deficit                                                 (22,984,490)           (20,305,614)
                                                                     ------------           ------------
      Total stockholders' deficit                                      (2,068,072)              (482,455)
                                                                     ------------           ------------
Total liabilities and stockholders' deficit                          $ (2,374,324)          $  3,942,044
                                                                     ============           ============
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                      F-2
<PAGE>
                        American Soil Technologies, Inc.
                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                       Year Ended          Nine Months Ended
                                                                      September 30,          September 30,
                                                                          2008                   2007
                                                                      ------------           ------------
<S>                                                                   <C>                    <C>
Revenue                                                               $    561,704           $    764,591
Cost of goods sold (excluding amortization of intangible assets)           344,884                473,147
                                                                      ------------           ------------
Gross profit                                                               216,820                291,444
                                                                      ------------           ------------
Operating expenses:
  General and administrative                                             1,521,717              1,557,532
  Sales and marketing                                                      120,355                190,261
  Research and development                                                      --                  9,801
  Amortization of intangible assets                                        507,157                293,672
  Impairment of intangible assets                                          845,390                400,000
                                                                      ------------           ------------
Total operating expenses                                                 2,994,619              2,451,266
                                                                      ------------           ------------

Loss from operations                                                    (2,777,799)            (2,159,822)

Other (income) expense
  Interest expense                                                         347,337              1,328,291
  Interest income                                                               --                    (27)
  Change in fair value of derivative liability                            (459,947)              (371,179)
  Other                                                                     (8,907)               (17,226)
  Sale of equipment                                                         21,794                 11,549
                                                                      ------------           ------------
Loss before income taxes                                                (2,678,076)            (3,111,230)
Provision for income taxes                                                     800                    800
                                                                      ------------           ------------

Net loss                                                              $ (2,678,876)          $ (3,112,030)
                                                                      ============           ============

Net loss per share basic and diluted                                  $      (0.05)          $      (0.07)
                                                                      ============           ============

Weighted average common shares outstanding used
 in per share calculations                                              56,675,474             44,527,215
                                                                      ============           ============
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                      F-3
<PAGE>
                        American Soil Technologies, Inc.
                Consolidated Statements of Stockholders' Deficit

<TABLE>
<CAPTION>
                                                                    Series A Preferred                Common Stock
                                                                   ---------------------          ---------------------
                                                                   Shares         Amount          Shares         Amount
                                                                   ------         ------          ------         ------
<S>                                                               <C>            <C>             <C>             <C>
Balance at December 31, 2006 (as restated)                       2,763,699      $1,381,849      34,144,648      $34,145
  Conversion of debt into common stock                                  --              --       2,380,952        2,381
  Conversion of Series B preferred stock to common stock                --              --       7,031,250        7,031
  Fair value of warrants issued with convertible debt                   --              --              --           --
  Conversion of debt and accrued interest to common stock               --              --       8,855,527        8,855
  Common stock issued for services rendered                             --              --         262,197          262
  Net loss                                                              --              --              --           --
                                                                 ---------      ----------      ----------      -------
Balance at September 30, 2007                                    2,763,699       1,381,849      52,674,574       52,674
  Conversion of debt and accrued interest into common stock             --              --       3,540,616        3,542
  Sale of common stock                                                  --              --       4,075,400        4,075
  Common stock issued with debt                                         --              --         500,000          500
  Stock compensation expense                                            --              --         175,000          175
  Fair value of warrants issued with convertible debt                   --              --              --           --
  Net loss                                                              --              --              --           --
                                                                 ---------      ----------      ----------      -------
Balance at September 30, 2008                                    2,763,699      $1,381,849      60,965,590      $60,966
                                                                 =========      ==========      ==========      =======

                                                                   Paid-in         Accumulated
                                                                   Capital           Deficit             Total
                                                                   -------           -------             -----
Balance at December 31, 2006 (as restated)                       $14,387,558      $(17,193,584)      $(1,390,032)
  Conversion of debt into common stock                               497,620                --           500,001
  Conversion of Series B preferred stock to common stock           2,242,969                --         2,250,000
  Fair value of warrants issued with convertible debt                112,195                --           112,195
  Conversion of debt and accrued interest to common stock          1,107,092                --         1,115,947
  Common stock issued for services rendered                           41,202                --            41,464
  Net loss                                                                --        (3,112,030)       (3,112,030)
                                                                 -----------      ------------       -----------
Balance at September 30, 2007                                     18,388,636       (20,305,614)         (482,455)
  Conversion of debt and accrued interest into common stock          889,763                --           893,305
  Sale of common stock                                                86,059                --            90,134
  Common stock issued with debt                                       31,079                --            31,579
  Stock compensation expense                                          72,882                --            73,057
  Fair value of warrants issued with convertible debt                  5,184                --             5,184
  Net loss                                                                --        (2,678,876)       (2,678,876)
                                                                 -----------      ------------       -----------
Balance at September 30, 2008                                    $19,473,603      $(22,984,490)      $(2,068,072)
                                                                 ===========      ============       ===========
</TABLE>
                 See Notes to Consolidated Financial Statements.

                                      F-4
<PAGE>
                        American Soil Technologies, Inc.
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                Year Ended       Nine Months Ended
                                                                               September 30,       September 30,
                                                                                   2008                2007
                                                                               -----------         -----------
<S>                                                                             <C>                <C>
Cash flows from operating activities:
  Net loss                                                                     $(2,678,876)        $(3,112,030)
  Adjustments to reconcile net loss to net cash
    Provision for doubtful accounts                                                     --             (22,492)
    Loss on disposal of assets                                                      37,304              11,549
    Impairment of intangible assets                                                845,390             400,000
    Depreciation and amortization                                                  628,601             387,182
    Stock-based compensation                                                        73,057              41,464
    Change in derivative liabilities                                              (459,947)           (371,179)
    Amortization of debt discount                                                   44,401           1,074,828
  Changes in operating assets and liabilities:
    Accounts receivable                                                             10,054              33,964
    Inventory                                                                      110,742              86,270
    Prepaid expenses and other assets                                               (3,148)             37,249
    Accounts payable                                                               414,043             (47,205)
    Accrued expenses                                                               300,442             110,875
                                                                               -----------         -----------
       Net cash used in operating activities                                      (677,937)         (1,369,525)
                                                                               -----------         -----------
Cash flows from investing activities:
  Capital expenditures                                                             (17,168)             (7,665)
  Proceeds from sale of assets                                                      11,162                  --
  Deposit on real property                                                         (83,786)                 --
                                                                               -----------         -----------
       Net cash used in investing activities                                       (89,792)             (7,665)
                                                                               -----------         -----------
Cash flows from financing activities:
  Proceeds from related party notes                                                656,170           1,360,829
  Proceeds from the issuance of debt                                               150,000                  --
  Proceeds from the issuance of common stock                                        90,134                  --
  Payments on capital lease obligations                                            (19,957)            (16,020)
  Repayments on notes payable                                                     (137,187)            (13,102)
                                                                               -----------         -----------
       Net cash provided by financing activities                                   739,160           1,331,707
                                                                               -----------         -----------
Net decrease in cash and cash equivalents                                          (28,569)            (45,483)
Cash and cash equivalents at beginning of period                                    34,855              80,338
                                                                               -----------         -----------
Cash and cash equivalents at end of period                                     $     6,286         $    34,855
                                                                               ===========         ===========
Supplemental disclosure of cash flow information:
  Cash paid during the period for interest                                     $    67,992              78,977
                                                                               ===========         ===========
  Cash paid during the period for income taxes                                 $       800                 845
                                                                               ===========         ===========
Supplemental disclosure of non-cash investing and financing activities:
  Conversion of debt and accrued interest into common stock                    $   891,834         $ 1,710,694
                                                                               ===========         ===========
  Conversion of Series B preferred stock into common stock                     $        --         $ 2,250,000
                                                                               ===========         ===========
</TABLE>
                 See Notes to Consolidated Financial Statements.

                                      F-5
<PAGE>
                        American Soil Technologies, Inc.
                   Notes to Consolidated Financial Statements

1. ORGANIZATION AND BASIS OF PRESENTATION

ORGANIZATION
American  Soil   Technologies,   Inc.  (the   "Company"),   formerly  Soil  Wash
Technologies, Inc., was incorporated in the state of 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.  In 2006, the
Company acquired the patent to a slow release  fertilizer.  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.

The Company also expanded to provide next-generation and sustainable fertilizers
thru the acquisition of Smart World Organics,  Inc.  ("Smart World") on December
20, 2006.  Simultaneously,  the Company  entered into an  Intellectual  Property
Purchase Agreement with the founder of Smart World, Ray Nielsen ("Nielsen") that
included certain formulas originally believed to be proprietary and intellectual
properties  used in the business of Smart  World.  The  formulas  acquired  from
Nielsen were deemed not to be proprietary and subsequently deemed to have little
or no value (see Note 3). Smart World sells homogenized  fertilizers,  non-toxic
insect controls, plant protectants,  seed, and soil and silage inoculants. Smart
World also provides advanced,  custom-formulated  products built to suit unusual
growing conditions and environments.  Due to losses incurred in 2008, management
terminated  Smart World employees and seeks to operate through  commission-based
sales  representatives.  Additionally,  the Company has several debt obligations
that are past the  contractual  maturity  date or are due and payable due to non
payment of interest

GOING CONCERN AND MANAGEMENT'S PLANS
The Company has sustained  significant losses and has an accumulated  deficit of
$(22,984,490)  and negative  working capital of $(4,183,192) as of September 30,
2008.  The ability of the Company to  continue as a going  concern is  dependent
upon obtaining  additional capital and financing,  and generating  positive cash
flows 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.  Due  to  the  current  economic
environment and the Company's current financial condition,  management cannot be
assured there will be adequate  capital  available when needed and on acceptable
terms.  These factors  raise  substantial  doubt about the Company's  ability to
continue  as a going  concern.  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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CHANGE OF FISCAL YEAR END
The Company has changed  its fiscal year end from  December 31 to  September  30
effective for the period ended September 30, 2007. As a result, the accompanying
consolidated  statements of operations,  shareholders' deficit and of cash flows
for this  period  includes  operating  results for the nine month  period  ended
September  30, 2007 as compared to a  twelve-month  period ended  September  30,
2008.

USE OF ESTIMATES
The  preparation  of  consolidated   financial  statements  in  conformity  with
accounting  principles  generally  accepted  in the  United  States of  America,
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 periods.  Actual results could differ
from those  estimates.  The Company's  significant  estimates made in connection
with the  preparation  of the  accompanying  financial  statements  include  the
valuation  of  inventories,  impairment  of  goodwill,  carrying  value  of  the
intangible  assets,  valuation of stock options and warrants to purchase  common
stock and the valuation of the derivative liability.

                                      F-6
<PAGE>
Estimates are periodically reviewed in light of changes in circumstances,  facts
and experience.  The effects of material revisions in estimates are reflected in
the consolidated financial statements  prospectively from the date of the change
in estimate in  accordance  with  Statement  of Financial  Accounting  Standards
("SFAS") No. 154,  "Accounting  Changes and Error Corrections - A Replacement of
APB Opinion No. 20 and FASB Statement No. 3".

During the fourth quarter of fiscal 2007, the Company  changed the  amortization
period for the  American  Fertilizer  Technology,  Inc.  ("AFT") and Smart World
intangible  assets for patents and formulas from 15 years to a range of three to
seven years depending on the underlying intangible asset. Management's change in
these estimates  resulted from refining the underlying  formulas and reassesment
of the remaining period of future economic benefit.

CASH AND CASH EQUIVALENTS
Cash and cash equivalents 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.

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.

The Company  performs  ongoing credit  evaluations and continually  monitors its
collection of amounts due from its customers.  The Company adjusts credit limits
and payment terms granted to its  customers  based upon payment  history and the
customer's  current  creditworthiness.  The Company does not require  collateral
from its customers to secure  amounts due from them.  Reserves for uncollectible
amounts are provided  based on past  experience  and a specific  analysis of the
accounts which management believes is sufficient.

INVENTORIES
Inventories consist primarily of purchased polymer soil 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 three to 15 years.  Betterments,  renewals and
extraordinary  repairs  that  extend the lives of the  assets  are  capitalized.
Repairs and  maintenance  costs are expensed as  incurred.  The cost and related
accumulated  depreciation  applicable to assets  disposed or retired are removed
from the  accounts,  and the gain or loss on  disposition  is  recognized in the
respective period.

LONG-LIVED ASSETS
The Company  reviews its fixed assets and certain  identifiable  intangibles for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be recoverable.  Recoverability of assets to
be held and used is measured by a comparison of the carrying  amount of an asset
to the future  undiscounted  operating cash flow expected to be generated by the
asset.  If such assets are  considered  to be  impaired,  the  impairment  to be
recognized  is measured by the amount by which the carrying  amount of the asset
exceeds  the fair value of the asset.  Long-lived  assets to be  disposed of are
reported at the lower of carrying amount or fair value less costs to sell.

GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE LIVES
SFAS No. 141 "Business Combinations", requires that all business combinations be
accounted for under the purchase method. The statement further requires separate
recognition  of  intangible  assets that meet  certain  criteria.  SFAS No. 142,
requires that an acquired  intangible  asset meeting  certain  criteria shall be
initially  recognized,  and measured based on its fair value. The statement also
provides  that  goodwill  and  other  indefinite-lived   assets  should  not  be
amortized,  but shall be tested for impairment  annually or more frequently,  if
circumstances indicate potential impairment,  through a comparison of fair value
to their carrying amount.

In accordance with SFAS No. 142 "Goodwill and Intangible  Assets",  the goodwill
impairment test has two steps.  The first step of the impairment test identifies
potential impairment by comparing the fair value with the carrying amount of the
reporting unit, including goodwill. If the carrying amount of the reporting unit
exceeds  its  fair  value,  the  second  step of the  impairment  test  shall be
performed to measure the amount of the impairment loss, if any. Intangibles with
indefinite  useful  lives are  measured  for  impairment  by the amount that the
carrying  value exceeds the  estimated  fair value of the  intangible.  The fair
value is calculated using the income approach.  Intangible  assets with definite
useful lives will continue to be amortized  over their  estimated  useful lives.
Any impairment is recorded at the date of determination.

                                      F-7
<PAGE>
ACCOUNTING FOR CONVERTIBLE DEBT
Convertible debt is accounted for under the guidelines established by Accounting
Principles  Board ("APB") Opinion No. 14 "Accounting  for  Convertible  Debt and
Debt issued with Stock Purchase Warrants" under the direction of Emerging Issues
Task  Force  98-5,   "Accounting  for  Convertible  Securities  with  Beneficial
Conversion Features or Contingently Adjustable Conversion Ratios", ("EITF 98-5")
EITF 00-27  "Application  of Issue No 98-5 to Certain  Convertible  Instruments"
("EITF 00-27"),  and EITF 05-8 "Income Tax  Consequences of Issuing  Convertible
Debt with  Beneficial  Conversion  Features".  The Company  records a beneficial
conversion feature ("BCF") related to the issuance of convertible debt that have
conversion  features at fixed or  adjustable  rates that are  in-the-money  when
issued and records the fair value of warrants issued with those instruments. The
BCF for the  convertible  instruments is recognized and measured by allocating a
portion of the proceeds to warrants and as a reduction to the carrying amount of
the  convertible  instrument  equal to the  intrinsic  value  of the  conversion
features, both of which are credited to paid-in-capital.  The Company calculates
the fair value of warrants  issued with the  convertible  instruments  using the
Black-Scholes  valuation  method,  using the same  assumptions  used for valuing
employee  options for purposes of SFAS No. 123R "Share Based  Payments",  except
that the contractual  life of the warrant is used. Under these  guidelines,  the
Company  allocates the value of the proceeds  received  from a convertible  debt
transaction between the conversion feature and any other detachable  instruments
(such as warrants) on a relative fair value basis.  The allocated  fair value is
recorded as a debt  discount or premium and is amortized  over the expected term
of the convertible debt to interest expense.

DERIVATIVE FINANCIAL INSTRUMENTS
Derivative  financial  instruments,  as defined in SFAS No. 133, "Accounting for
Derivative  Instruments",  consist of financial  instruments or other  contracts
that contain a notional amount and one or more underlying  (e.g.  interest rate,
security price or other variable),  require no initial net investment and permit
net  settlement.  Derivative  financial  instruments  may  be  free-standing  or
embedded  in  other  financial   instruments.   Further,   derivative  financial
instruments are initially, and subsequently, measured at fair value and recorded
as liabilities or, in rare instances, assets.

The Company does not use derivative financial  instruments to hedge exposures to
cash-flow,  market or foreign-currency  risks.  However,  the Company has issued
financial  instruments  including  convertible  dent  that  are  either  (i) not
afforded  equity  classification,  (ii)  embody  risks not  clearly  and closely
related to host contracts, or (iii) may be net-cash settled by the counterparty.
As  required  by SFAS No.  133,  in certain  instances,  these  instruments  are
required  to be  carried  as  derivative  liabilities,  at  fair  value,  in the
Company's consolidated financial statements.

The Company  estimates the fair values of its  derivative  financial  instrument
using the  Black-Scholes  option valuation  technique because it embodies all of
the requisite  assumptions  (including trading  volatility,  estimated terms and
risk free rates)  necessary  to fair value these  instruments.  Estimating  fair
values  of  derivative   financial   instruments  requires  the  development  of
significant  and  subjective  estimates that may, and are likely to, change over
the duration of the  instrument  with  related  changes in internal and external
market  factors.  In addition,  option-based  techniques are highly volatile and
sensitive to changes in the trading market price of our common stock,  which has
a  high-historical  volatility.   Since  derivative  financial  instruments  are
initially  and  subsequently  carried at fair values,  the  Company's  operating
results reflect the volatility in these estimate and assumption  changes in each
reporting period.

INTELLECTUAL PROPERTY
Intellectual  property  includes the exclusive  licenses to the patented polymer
application  techniques  and certain  acquired  intellectual  property which are
being amortized  using the  straight-line  method over the respective  estimated
useful lives.

ADVERTISING
The Company  expenses  advertising  costs as incurred.  Advertising  expense was
$17,952 and $78,475, for year ended September 30, 2008 and the nine-month period
ended September 30, 2007, respectively.

REVENUE RECOGNITION
Revenue is recognized in accordance with Staff  Accounting  Bulletin ("SAB") No.
101, "Revenue Recognition in Financial  Statements",  as revised by SAB No. 104.
The Company  recognizes  revenue when products are shipped to a customer and the
risks and rewards of ownership have passed based on the terms of the sale.

SHIPPING AND HANDLING COST
Shipping  and handling  fees  charged to customers  are included in net sales in
accordance  with EITF 00-10,  "Accounting  for Shipping  and  Handling  Fees and
Costs." The shipping and handling  costs incurred by the Company are included in
cost of sales.

                                      F-8
<PAGE>
INCOME TAXES
Deferred  tax  assets  and   liabilities  are  recognized  for  the  future  tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and  liabilities  of a change in tax rates is recognized in income in the
period that includes the enactment date. A valuation  allowance is recorded when
recovery is doubtful.

In July 2006,  the FASB  issued  FASB  Interpretation  No. 48,  "Accounting  for
Uncertainty in Income Taxes-- an  interpretation of FASB Statement No. 109 ("FIN
48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized
in an  enterprise's  financial  statements  in  accordance  with  SFAS No.  109,
"Accounting  for Income  Taxes".  FIN 48 describes a  recognition  threshold and
measurement attribute for the recognition and measurement of tax positions taken
or  expected  to  be  taken  in a tax  return  and  also  provides  guidance  on
derecognition,  classification,  interest and  penalties,  accounting in interim
periods,  disclosure  and  transition.  FIN 48 is  effective  for  fiscal  years
beginning  after December 15, 2006. The cumulative  effect of adopting FIN 48 is
required  to be  reported as an  adjustment  to the opening  balance of retained
earnings  (or other  appropriate  components  of equity) for that  fiscal  year,
presented  separately.  The  adoption  of FIN 48 on July 1,  2007 did not have a
material impact to the Company's consolidated financial statements.

FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial  instruments  are recorded on the  consolidated  balance  sheets.  The
carrying amount for cash and cash  equivalents,  accounts  receivable,  accounts
payable,  accrued  expenses  approximates  fair  value due to the  immediate  or
short-term maturity of these financial instruments.  The fair value of long-term
debt  approximates the carrying  amounts based upon our expected  borrowing rate
for debt with similar  remaining  maturities and comparable risk. The fair value
of notes payable to related parties cannot readily be determined.

RESEARCH AND DEVELOPMENT EXPENSES
The Company expenses research and development costs as incurred.

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.

CONCENTRATION OF CREDIT RISK
Accounts  receivable from individual  customers  representing 10% or more of the
net accounts receivable balance consists of the following as of September 30:

                                      2008           2007
                                      ----           ----
Percent of accounts receivable         69%            81%
Number of customers                     4              6


Sales from individual customers representing 10% or more of sales consist of the
following customers for the years ended September 30:

                                      2008           2007
                                      ----           ----
Percent of sales                       10%            15%
Number of customers                     1              2

As a result of the Company's  concentration  of its customer  base,  the loss or
cancellation of business from, or significant changes in scheduled deliveries of
product  sold to the above  customers  or a change in their  financial  position
could  materially  and  adversely  affect the Company's  consolidated  financial
position, results of operations and cash flows.

LONG-LIVED ASSETS
The Company  reviews its fixed assets and certain  identifiable  intangibles for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be recoverable.  Recoverability of assets to

                                      F-9
<PAGE>
be held and used is measured by a comparison of the carrying  amount of an asset
to the future  undiscounted  operating cash flow expected to be generated by the
asset.  If such assets are  considered  to be  impaired,  the  impairment  to be
recognized  is measured by the amount by which the carrying  amount of the asset
exceeds  the fair value of the asset.  Long-lived  assets to be  disposed of are
reported at the lower of carrying amount or fair value less costs to sell.

STOCK-BASED COMPENSATION
Effective  January 1, 2006,  the Company  adopted SFAS No. 123  (revised  2004),
"Share-Based Payment" ("SFAS No. 123R"). SFAS No. 123R requires that the Company
account for all stock-based compensation using a fair-value method and recognize
the fair value of each award as an expense over the service period.

ACCOUNTING FOR STOCK OPTIONS ISSUED TO CONSULTANTS
The  Company  measures  compensation  expense for its  non-employee  stock-based
compensation  under EITF No. 96-18  "Accounting for Equity  Instruments that are
Issued to Other Than  Employees for Acquiring,  or in Conjunction  with Selling,
Goods or  Services".  The fair value of the  option  issued or  committed  to be
issued is used to measure the  transaction,  as this is more  reliable  than the
fair value of the services received.  The fair value is measured at the value of
the Company's  common stock on the date that the commitment  for  performance by
the counterparty has been reached or the counterparty's performance is complete.
The fair  value of the equity  instrument  is charged  directly  to  stock-based
compensation expense and credited to additional paid-in capital.

NET LOSS PER SHARE
Basic loss per share is calculated by dividing net loss by the weighted  average
common shares outstanding during the period. Diluted net loss per share reflects
the potential dilution to basic EPS that could occur upon conversion or exercise
of  securities,  options or other such items to common shares using the treasury
stock  method,  based upon the weighted  average fair value of our common shares
during the period.  For each period presented,  basic and diluted loss per share
amounts are identical as the effect of potential common shares is antidilutive.

The following is a summary of  outstanding  securities  which have been excluded
from the calculation of diluted net loss per share because the effect would have
been antidilutive for the following periods:

                                                      2008               2007
                                                   ----------         ----------
Convertible debt                                   50,000,000          9,466,668
Series A convertible preferred stock                2,763,699          2,763,699
                                                   ----------         ----------
                                                   52,763,699         12,230,367
                                                   ==========         ==========

RECENT ACCOUNTING PRONOUNCEMENTS
In  September  2006,  the FASB issued SFAS No.  157,  "Fair Value  Measurements"
("SFAS No.  157").  SFAS No. 157 provides a common  definition of fair value and
establishes  a  framework  to make the  measurement  of fair value in  generally
accepted accounting principles more consistent and comparable. SFAS No. 157 also
requires expanded  disclosures to provide  information about the extent to which
fair  value  is  used  to  measure  assets  and  liabilities,  the  methods  and
assumptions used to measure fair value, and the effect of fair value measures on
earnings.  SFAS No. 157 is effective for fiscal years  beginning  after November
15,  2007,  although  early  adoption is  permitted.  The  Company is  currently
assessing  the  potential  effect,  if any, of SFAS No. 157 on its  consolidated
financial statements.

In February  2007,  the FASB issued  SFAS No.  159,  "The Fair Value  Option for
Financial  Assets and  Financial  Liabilities  -- Including an amendment of FASB
Statement  No. 115 ("SFAS No.  159")".  SFAS No. 159  permits an entity to elect
fair  value  as the  initial  and  subsequent  measurement  attribute  for  many
financial assets and liabilities.  Entities electing the fair value option would
be required to recognize  changes in fair value in earnings.  Entities  electing
the fair value option are required to distinguish,  on the face of the statement
of financial  position,  the fair value of assets and  liabilities for which the
fair value option has been elected and similar assets and  liabilities  measured
using another measurement attribute.  SFAS No. 159 is effective for fiscal years
beginning  after  November 15, 2007.  The  adjustment to reflect the  difference
between  the fair value and the  carrying  amount  would be  accounted  for as a

                                      F-10
<PAGE>
cumulative-effect  adjustment  to  retained  earnings  as of the date of initial
adoption.  The Company is currently  evaluating the impact,  if any, of SFAS No.
159 on its consolidated financial statements.

In December  2007,  the FASB issued SFAS No.  141(R),  "Business  Combinations",
which  replaces  SFAS  No.  141.  SFAS No.  141(R)  establishes  principles  and
requirements  for how an  acquirer  in a  business  combination  recognizes  and
measures in its financial  statements  the  identifiable  assets  acquired,  the
liabilities assumed, and any controlling  interest;  recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain purchase;
and  determines  what  information  to disclose to enable users of the financial
statements  to  evaluate  the  nature  and  financial  effects  of the  business
combination.  SFAS  No.  141(R)  is  to be  applied  prospectively  to  business
combinations.

In December  2007,  the FASB issued SFAS No. 160,  "Noncontrolling  Interests in
Consolidated  Financial Statements,  an amendment of ARB No. 51". This statement
amends Accounting Research Bulletin No. 51 to establish accounting and reporting
standards for the noncontrolling  interest  (minority  interest) in a subsidiary
and for the deconsolidation of a subsidiary. Upon its adoption, effective for us
in the fiscal year  beginning  July 1, 2009,  noncontrolling  interests  will be
classified as equity in the Company's balance sheet and income and comprehensive
income  attributed  to the  noncontrolling  interest  will  be  included  in the
Company's income and comprehensive income, respectively.  The provisions of this
standard must be applied prospectively upon adoption except for the presentation
and  disclosure  requirements.  We do not expect the adoption of SFAS No. 160 to
have an impact on our consolidated financial statements.

In March  2008,  the FASB issued SFAS No.  161,  "Disclosures  about  Derivative
Instruments and Hedging Activities,  an amendment of SFAS No. 133". SFAS No. 161
amends and expands the  disclosure  requirements  of SFAS No. 133 for derivative
instruments and hedging activities. SFAS No. 161 requires qualitative disclosure
about  objectives and strategies for using  derivative and hedging  instruments,
quantitative  disclosures  about fair value amounts of the instruments and gains
and  losses  on  such  instruments,  as well as  disclosures  about  credit-risk
features in derivative agreements. We do not expect the adoption of SFAS No. 161
to have a significant impact on our consolidated financial statements.

In April 2008, the FASB issued FASB Staff Position FSP No. 142-3, "Determination
of the Useful Life of  Intangible  Assets" ("FSP  142-3").  FSP 142-3 amends the
factors that should be considered in developing renewal or extension assumptions
used to determine  the useful life of a recognized  intangible  asset under SFAS
No. 142. FSP 142-3 is effective  for us in the fiscal year  beginning  September
30, 2009. We are currently evaluating the impact of the adoption of FSP 142-3 on
our consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally  Accepted
Accounting  Principles".  SFAS No. 162  identifies  the  sources  of  accounting
principles  and the framework  for  selecting  the  principles to be used in the
preparation  of  financial  statements  of  nongovernmental  entities  that  are
presented in conformity with generally accepted accounting  principles (the GAAP
hierarchy).  SFAS will become  effective  60 days  following  the  Security  and
Exchange  Commission's approval of the Public Company Accounting Oversight Board
amendments to AU Section 411, "The Meaning of Present Fairly in Conformity  with
Generally Accepted Accounting Principles". We do not expect the adoption of SFAS
No. 162 to have a significant impact on our consolidated financial statements.

3. ACQUISITIONS

In March 2006, the Company  acquired the issued and outstanding  common stock of
AFTI in a tax-free  stock-for-stock exchange for a purchase price of $1,950,000.
AFTI has patent  rights to products  under the name of Soil  Medic.  The Company
also  acquired  the  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.
Because the  exchange was  specifically  agreed to be a tax-free  exchange,  the
Company  recorded a  deferred  income tax  liability  in an amount  equal to the
effective tax totaling approximately  $780,000. The acquisition was not deemed a
business, and no goodwill resulted.  Accordingly,  the Company recorded a charge
to the  statement of operations  for the excess of purchase  price over the fair
value of the assets of $1,950,000.  This resulted in an income tax benefit and a
deferred tax asset totaling $780,000.

                                      F-11
<PAGE>
Effective  December 31, 2006, the Company acquired 100% of the outstanding stock
of Smart World for an aggregate  purchase  price of  $564,000.  The Company also
purchased  intellectual  property  from  Raymond J. Nielsen  ("Nielsen  IP") for
$1,500,000,  a  stockholder  of Smart  World.  The  acquisition  of the  Nielsen
intellectual property did not constitute a business.

The purpose of this  acquisition was to enhance the Company's  product lines and
intellectual portfolios.

The purchase price of Smart World consisted of $150,000 in cash and the issuance
of 2,300,000  shares of common stock. The value assigned to the common stock was
based  on  the  closing  stock  price  on  the  date  of  the  acquisition.  The
intellectual  property  acquired  from  Raymond  Nielsen  was paid  through  the
issuance of a $1,500,000  convertible  promissory  note.  The purchase  price of
Smart  World  and the  Nielsen  IP has been  allocated  to assets  acquired  and
liabilities   assumed  based  on  their  estimated  fair  values  determined  by
management as follows:

<TABLE>
<CAPTION>
                                              Smart World          Nielsen IP           Total
                                              -----------         -----------        -----------
<S>                                           <C>                 <C>                <C>
Purchase Price:
  Cash                                        $   150,000         $        --        $   150,000
  Issuance of common stock                        414,000                  --            414,000
  Issuance of convertible note payable                 --           1,500,000          1,500,000
                                              -----------         -----------        -----------
                                              $   564,000         $ 1,500,000        $ 2,064,000
                                              ===========         ===========        ===========

                                              Smart World          Nielsen IP           Total
                                              -----------         -----------        -----------
Assets Acquired (Liabilities Assumed):
  Cash                                        $    15,899         $        --        $    15,899
  Accounts receivable                               9,060                  --              9,060
  Inventory                                        32,853                  --             32,853
  Prepaid assets                                    1,375                  --              1,375
  Property, plant and equipment                    89,095                  --             89,095
  Intangible assets                               911,499             400,000          1,311,499
  Goodwill                                        364,600                  --            364,600
  Assumed liabilities                            (495,781)                 --           (495,781)
  Deferred tax liability                         (364,600)                 --           (364,600)
                                              -----------         -----------        -----------
                                              $   564,000         $   400,000        $   964,000
                                              ===========         ===========        ===========
</TABLE>

The purchase  price of the Nielsen IP  represented  a premium over its estimated
fair  value  resulting  in the  recognition  of an  impairment  on the  date  of
acquisition  of $1,100,000.  The purchase  price  represented a premium over the
fair value of the net assets of Smart  World's and the Nielsen IP  resulting  in
the recognition of $364,600 and $0 of goodwill, respectively.

4. INVENTORIES

Inventories consist of the following at September 30:

                                       2008            2007
                                     --------        --------
Raw materials                        $ 89,822        $ 95,970
                                     --------        --------
Finished goods                         49,502         154,095
                                     --------        --------
                                     $139,324        $250,065
                                     ========        ========

                                      F-12
<PAGE>
5. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following at September 30:

<TABLE>
<CAPTION>
                                              Estimated
                                             useful life
                                             (in years)        2008              2007
                                             ----------      ---------         ---------
<S>                                             <C>          <C>               <C>
Machinery                                       10           $ 599,946         $ 622,900
Vehicles                                         5              44,615            57,615
Office furnishings, fixtures and equipment       4              46,330            44,591
                                                             ---------         ---------
                                                               690,891           725,106
Less accumulated depreciation                                 (539,163)         (420,637)
                                                             ---------         ---------
                                                             $ 151,728         $ 304,469
                                                             =========         =========
</TABLE>

Depreciation  expense for the year ended  September  30, 2008 and for the period
ended September 30, 2007 was $121,444 and $93,509, respectively.

6. INTANGIBLE ASSETS AND GOODWILL

The  following  table  summarizes  the  components  of  intangible  assets as of
September 30:

<TABLE>
<CAPTION>
                                             Polymer                                     Smart World
                                           application    Turf trade     Soil Medic      patents and
                                             patents        secrets        patent          formulas         Total
                                             -------        -------        ------          --------         -----
<S>                                         <C>             <C>           <C>             <C>             <C>
Beginning balance at December 31, 1006      $ 352,876       $ 36,386      $1,761,344      $1,303,166      $3,453,772
  Additions                                        --             --              --              --              --
  Amortization                                (41,378)        (1,898)       (182,813)        (67,583)       (293,672)
  Impairment                                       --             --              --        (400,000)       (400,000)
                                            ---------       --------      ----------      ----------      ----------
Balance at September 30, 2007                 311,498         34,488       1,578,531         835,583       2,760,100
  Additions                                        --             --              --              --              --
  Amortization                               (103,833)       (11,496)       (252,565)       (139,264)       (507,157)
  Impairment                                       --             --        (845,390)             --        (845,390)
                                            ---------       --------      ----------      ----------      ----------
Balance at September 30, 2008               $ 207,665       $ 22,992      $  480,576      $  696,319      $1,407,553
                                            =========       ========      ==========      ==========      ==========
Weighted average remaining life at:
September 30, 2008                                                                                               5.8
September 30, 2007                                                                                               4.8
</TABLE>

The  above  intangible  assets,   excluding   goodwill,   have  definite  lives.
Accordingly,  they are amortized over the remaining periods to be benefited.  In
2007, management revised the amortization period of the patents and formulas for
Soil Medic and AFT because  management  was in the  process of refining  certain
formulas  for much  higher  sales  and  royalties  from its  products  which are
expected to be realized in future periods.  During 2007, the amortization period
was changed to three to seven years.  During  2007,  management  determined  the
Nielsen IP acquired that such formulas would not generate  sufficient cash flows
to recover these intangible  assets because the formulas were  misrepresented to
the Company's  management to be proprietary  and effective,  and would have wide
uses. Accordingly, management recorded an impairment of $400,000 during the year
ended September 30, 2007.

As of September  30,  2008,  the Company  evaluated  its  intangible  assets for
potential  impairment.  In connection with the Soil Medic patent rights acquired
in the Company's  acquisition of AFTI,  during fiscal 2007 and early into fiscal
2008 and the  management  experienced  a problem with the  manufacturing  of the
formulas. During 2008, the Company resolved the manufacturing problems and began
to remarket these products. During the fourth quarter of fiscal 2008, management
evaluated  the  carrying  value of these  formulas.  As a  result  of the  above
problems, management reduced its projected future sales and resulting cash flows
resulted in an impairment charge of $845,390 during the year ended September 30,
2008.

The amortization  expense was $507,157 and $693,672 for the year ended September
30, 2008 and for the period ended September 30, 2007, respectively.

                                      F-13
<PAGE>
Estimated  intangible  asset  amortization  expense for the  remaining  carrying
amount of intangible assets is as follows for the years ending September 30:

2009                              $ 346,131
2010                                346,131
2011                                230,802
2012                                230,802
2013                                230,802
Thereafter                           22,885
                                  ----------
                                  $1,407,553
                                  ==========

7. ACCRUED EXPENSES

Accrued expenses consisted of the following at September 30:

                                    2008              2007
                                  --------          --------
Interest                          $291,669          $178,162
Compensation and related           236,287            13,985
Other                               28,760             3,010
                                  --------          --------
                                  $556,716          $195,147
                                  ========          ========

8. NOTES PAYABLE

Notes payable consists of the following at September 30:

<TABLE>
<CAPTION>
                                                                  2008                  2007
                                                               -----------           -----------
<S>                                                             <C>                  <C>
Convertible  debenture  payable to FLD Corp., a related         $       --           $   250,000
party. Original balance of $250,000 bearing interest at
a rate of 8% per annum with interest payable quarterly.
The principal  was  converted  into common stock at the
original conversion price of $0.50 per share on October
29, 2008.

Convertible  debenture  payable  to FLD Corp.  Original                 --               250,000
balance of $250,000,  bearing  interest at a rate of 8%
per  annum  with  interest   payable   quarterly.   The
principal  was  converted  into  common  stock  at  the
original conversion price of $0.50 per share on October
29, 2008.

Convertible  debenture  payable  to  a  related  party.             25,000                25,000
Original  balance of $25,000 bearing interest at 8% per
annum with interest payable quarterly. The principal is
convertible  into common stock at a conversion price of
$0.50 per share.

Convertible   debenture  payable  to  a  related  party             25,000                25,000
bearing  interest at 8% per annum with interest payable
quarterly.  The  principal is  convertible  into common
stock at a  conversion  price of $0.50 per  share.  The
principal was due February 1, 2008.

Convertible  debenture payable to related party bearing                 --                20,000
interest  at a  rate  of 8%  per  annum  with  interest
payable  quarterly.  The principal  was converted  into
common stock at the original  conversion price of $0.50
per share on March 7, 2008.

Note payable to a related  party,  original  balance of             85,000                    --
$85,000 bearing interest at prime rate payable monthly.
Note is unsecured due August 31, 2009.
</TABLE>

                                      F-14
<PAGE>
<TABLE>
<CAPTION>
<S>                                                             <C>                  <C>
Note payable to a Diana Visco  bearing  interest at the            600,000                75,800
prime  rate of 5% and 7.25% at September 30, 2008 and 2007,
respectively and  is  payable  monthly.   The  note  is
unsecured and is due in September 2009.

Note payable to Carl Ranno. The note is due upon demand              5,587                    --
and is unsecured.

Convertible  debenture  payable  to  a  related  party.            177,024               178,508
Original balance of $250,000 bearing interest at a rate
of  10%  per  annum.  Monthly  principal  and  interest
payments of $3,000 are due through  2014.   The note is
in  default for  non-payment.  Principal is convertible
into common  stock at a  conversion  price of $3.00 per
share. The note is unsecured.

Convertible  debenture  payable  to FLD  Corp.  bearing                 --               200,000
interest  at a rate  of 8%  per  annum.  The  principal
balance was converted into common stock at the original
conversion  price of $0.50  per  share on  October  29,
2008.

Convertible  debenture to payable to FLD Corp.  bearing                 --               100,000
interest  at a rate  of 8%  per  annum.  The  principal
balance was converted into common stock at the original
conversion  price of $0.50  per  share on  October  29,
2008.

Convertible  debenture  payable to Ray Nielsen  bearing          1,500,000             1,500,000
interest  at a  rate  of 8%  per  annum  with  interest
payable quarterly. The principal balance is convertible
at the  proceeding  day's  rate for one share of common
stock. The note is secured by the intellectual property
acquired from the note holder. The principal was due on
January 19, 2008.

Convertible  debenture  payable to an  unrelated  party             30,000                30,000
bearing  interest  at a  rate  of  8%  per  annum  with
interest payable  quarterly.  The principal  balance is
convertible  into  common  stock at a rate of $0.25 per
share.  The note is unsecured.  The principal is due on
October 1, 2008.

Convertible  debenture  payable to an  unrelated  party                 --                30,000
bearing  interest  at a  rate  of  8%  per  annum  with
interest payable  quarterly.  The principal balance was
converted into common stock at the original  conversion
price of $0.30 per share on October 29, 2008.

Convertible  debenture  payable to an  unrelated  party             30,000                30,000
bearing  interest  at a  rate  of  8%  per  annum  with
interest   payable   quarterly.    The   principal   is
convertible  into  common  stock at a rate of $0.10 per
share.  The note is unsecured  and is due on October 1,
2008.

Convertible  debenture  payable to an  unrelated  party             30,000                30,000
bearing  interest  at a  rate  of  8%  per  annum  with
interest   payable   quarterly.    The   principal   is
convertible  into  common  stock at a rate of $0.10 per
share. Note is unsecured and is due October 1, 2008.

Note payable to finance  company,  original  balance of             12,320                19,220
$48,542  bearing  interest at a rate of 2.9% per annum.
Monthly principal and interest payments of $736 are due
through  2009.  The note is  collateralized  by vehicle
financed.
</TABLE>

                                      F-15
<PAGE>
<TABLE>
<CAPTION>
<S>                                                             <C>                  <C>
Note payable to finance  company,  original  balance of             19,817                36,433
$75,000 bearing  interest at a rate of 17.7% per annum.
Monthly  principal and interest  payments of $1,814 are
due through  2009.  The loan is  collateralized  by the
polymer injection machine being financed.

Note payable to finance  company,  original  balance of                 --                 8,271
$28,985 bearing  interest at a rate of 6.99% per annum.
The loan was repaid in full in January 2008.

Notes  payable to  various  individuals  with  interest            259,266               260,764
rates  ranging from 6% to 20%. The notes are  currently
in default.

Convertible  debenture  to an unrelated  party  bearing             75,000                75,000
interest  at a rate  of 10%  per  annum  with  interest
payable  quarterly.  The principal is convertible  into
common stock at a conversion  price of $0.19 per share.
Note is unsecured and due on July 18, 2009.
                                                               -----------           -----------
   Less: debt discounts                                          2,874,014             3,143,996
                                                                    (4,811)              (24,595)
                                                               -----------           -----------
                                                                 2,869,203             3,119,401

   Current portion                                              (2,865,474)           (1,878,001)
                                                               -----------           -----------
   Long-term portion                                           $     3,729           $ 1,241,400
                                                               ===========           ===========
</TABLE>

Maturities of notes payable consist of the following at September 30:

2009                                                           $2,865,747
2010                                                                8,540
Thereafter                                                             --
                                                               ----------
Total                                                          $2,874,014
                                                               ==========

CONVERTIBLE NOTES PAYABLE
On October  25,  2007,  the  Company  and  holders of an  aggregate  of $120,000
outstanding  convertible  notes agreed to extend the maturity of the outstanding
principal  balance  from  $0.30 to $0.10  while the  market  price was $0.09 per
share.  The Company  also granted to one holder,  a warrant to purchase  100,000
shares of the Company's  common stock.  The warrants vested  immediately have an
exercise  price of  $0.10  per  share  and  expire  two  years  from the date of
issuance.  The fair value of the warrants was approximately $6,267 as determined
by the Black-Scholes option pricing model using the following assumptions:

Estimated fair value of underlying common stock      $0.09
Exercise price                                       $0.10
Expected life (in years)                                 2
Risk-free interest rate                               3.69%
Expected volatility                                  146.9%
Dividend yield                                           0%

Since the notes had matured, the Company determined the extensions represent the
issuance  of  new  notes.  No  modification  or  extinguishment  accounting  was
required.  The proceeds were  allocated  between the  convertible  notes and the
warrant  based on their  relative  fair  values and  resulted  in $24,816  being
allocated  to the  convertible  notes  payable and $5,184 to the  warrants.  The
resulting  discount  related to the warrants is being amortized over the life of
the convertible notes.

                                      F-16
<PAGE>
NOTES PAYABLE
On December 7, 2007,  the Company  issued a $150,000 face value  non-convertible
note due January 15, 2008  together  with 500,000  shares of common  stock.  The
proceeds  from the  issuance  of the  note  and  underlying  common  stock  were
allocated  based on their relative fair value on the date of issuance.  The note
was assumed and repaid by Ms. Visco in January 2008.

8% CONVERTIBLE DEBENTURE
On December 20, 2006, the Company  purchased  exclusive soil additive  formulas,
proprietary software, trademarks and patents. The Company funded the acquisition
through the issuance of $1,500,000  of 8%  Convertible  Debenture  ("Convertible
Note") to Raymond Nielsen  ("Holder").  The Debenture is convertible into common

stock at the option of the Holder.  The conversion price is equal to the closing
price of the Company's  common stock for the day immediately  preceding the date
of the conversion.

The  Convertible  Note  contains  an  embedded  conversion  feature  ("ECF")  as
prescribed  in paragraph 12 of SFAS No. 133. The Company also  assessed  whether
bifurcation of the ECF from the debt host met certain criteria.  The ECF met all
three  criteria of paragraph 12: (1) the  conversion  feature is not clearly and
closely  related to the host component,  (2) the  convertible  instrument is not
accounted  for at  fair  value,  and  (3)  the ECF  meets  the  definition  of a
derivative in paragraph 6 of SFAS No. 133.

To assess whether or not the ECF would be classified as stockholders'  equity if
it  were  freestanding,   management  considered  the  guidance  in  EITF  00-19
"Accounting  for Derivative  Financial  Instruments  Indexed to, and Potentially
Settled in, a Company's Own Stock." In assessing  whether or not the  conversion
option would be  classified  as equity or a liability  if it were  freestanding,
management  determined  whether  or not  the  Convertible  Note  was  considered
"conventional."   EITF  00-19  and  EITF  05-2,  "The  Meaning  of  Conventional
Convertible  Debt   Instruments  in  issue  No.  00-19,"  defines   conventional
convertible  debt as debt  whereby  the holder  will,  at the  issuer's  option,
receive a fixed  amount of shares or the  equivalent  amount of cash as proceeds
when he  exercises  the  conversion  option.  As a result  of the ECF not  being
convertible  into a fixed  number of shares  of stock and that the  Company  not
ultimately  knowing  the  number  of common  shares  that  could be issued  upon
exercise (no floor on the ECF) management  determined the  Convertible  Note was
not  "conventional".  As of September 30, 2008,  based on the current  number of
outstanding  common  shares,  together with the number of shares of common stock
the  Convertible  Note may be converted  into,  the Company does not have enough
authorized   shares   available  for  issuance  to  permit  for  this  potential
conversion.

This caused the ECF to be classified as derivative  financial  instruments under
SFAS No. 133. The accounting treatment requires the Company to record the ECF as
a  derivative  liability  on the  balance  sheet at its fair  values  as of each
reporting  date. Any change in the Company's  stock price results in a change in
the  fair  value of the  derivative  liability  is  recorded  as  non-operating,
non-cash  income  or  expense  at  each  reporting  date  in  the   accompanying
consolidated  statement  of  operations.  The  derivative  was valued  using the
Black-Scholes  option pricing model and has been classified in the  consolidated
balance sheet as a short-term  liability as the underlying  note is past due and
in default for non-payment.

The fair value of the ECF was determined using the Black-Scholes  option pricing
model with the following assumptions at September 30:

                                              2008           2007
                                             -------        -------
Fair value of underlying common stock        $  0.03        $  0.23
Expected life (in years)                           0           1.08
Risk-free interest rate                         1.02%          4.96%
Expected volatility                           193.50%        156.70%
Dividend yield                                     0%             0%

                                      F-17
<PAGE>
9. INCOME TAXES

The provision for income taxes is comprised of the following for the years ended
September 30:

                                              2008           2007
                                             -------        -------
Federal                                      $   --         $   --
State                                          (800)          (800)
                                             ------         ------
Provision for income taxes                   $ (800)        $ (800)
                                             ======         ======

The provision for income taxes differs from the amount  computed by applying the
statutory  federal income tax rate to income before  provision for income taxes.
The differences  between the federal statutory tax rate of 34% and the effective
tax rates are primarily due to state income tax  provisions,  net operating loss
("NOL")  carry  forwards,   deferred  tax  valuation   allowance  and  permanent
differences as follows for the years ended September 30:

<TABLE>
<CAPTION>
                                                                 2008            2007
                                                                -------         -------
<S>                                                                <C>              <C>
Statutory rate                                                   (34.0)%         (34.0)%
Increase (decrease) in taxes resulting from the following:
   State income taxes, net of federal benefit                      2.9%             2.9%
   Amortization of debt discount                                   0.6%            10.3%
   Derivative liability                                           (5.8)%            0.0%
   Change in valuation allowance                                  36.3%            20.8%
                                                                ------           ------
                                                                    --%              --%
                                                                ======           ======
</TABLE>

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  value of assets and  liabilities  for financial  reporting
purposes and the amounts used for income tax purposes.

Significant  components  of the  Company's  deferred tax assets and  liabilities
consist of the following at September 30:

                                                 2008                  2007
                                              -----------           -----------
Deferred tax assets (liabilities):
Current:
   Reserves and accruals                      $   229,282           $   173,587
Non-current:
   Intangible assets                              237,935              (382,921)
   Net operating losses                         5,868,713             6,029,141
   Other                                           49,764                28,663
   Valuation allowance                         (6,385,694)           (5,918,519)
                                              -----------           -----------
                                              $        --           $        --
                                              ===========           ===========

At September 30, 2008 and 2007, the valuation allowance was increased by a total
of $467,175 and $889,000  respectively.  At September 30, 2008,  the Company had
federal net operating  loss  carryforwards  of  approximately  $17,811,203  that
expire  from  2009  through  2026 and state net  operating  carryforwards  of $5
million  expiring  from 2009 through  2012.  These net  operating  losses may be
suspended or limited due to changes in State and Federal legislation, as well as
a possible change in ownership as defined under Section 382 of the IRC.

                                      F-18
<PAGE>
10. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES
The Company leases real property  located in Pacoima,  California from an entity
owned by Ms. Visco.  The lease expired in December 2008.  The Company  currently
occupies this facility on a month-to-month  basis. Rent expense under this lease
for the year ended  September  30, 2008 and the period ended  September 30, 2007
was $7,061 and $5,124, respectively.

In connection with the acquisition Smart World, the Company assumed leases for a
warehouse  and office  space which  expired on April 30, 2008 and  November  30,
2007,  respectively.  The  Company  is  currently  renting  this  facility  on a
month-to-month basis for $2,914 per month.

CAPITAL LEASES
The Company  leases  certain  equipment  under capital  leases.  Minimum  annual
required  lease  payments  under  the  lease  agreements  are as  follows  as of
September 30:

2009                                                   $ 21,600
2010                                                     21,600
2011                                                      3,600
2012                                                         --
2012                                                         --
Thereafter                                                   --
                                                       --------
Total minimum lease payments                             46,800

Less amount representing interest                        (7,654)
                                                       --------
Present value of future minimum lease payments         $ 39,146
                                                       ========

Equipment  under capital leases included in machinery and equipment at September
30, 2008 are as follows:

Machinery and equipment                                $ 75,000
Less - accumulated depreciation                         (41,250)
                                                       --------
                                                       $ 33,750
                                                       ========

PENDING PROPERTY ACQUISITION
On November 27, 2007, the Company entered into a Purchase and Sale Agreement and
Joint Escrow Instructions to acquire real property in Pescadero,  California for
a  purchase   price  of   $5,400,000.   The  property  has  been  improved  with
approximately  700,000  square  feet of  greenhouses  and the  Company  plans to
continue to operate the property as a nursery. In connection with the agreement,
the  Company  deposited  $50,000  with  the  escrow  agent  of  which a  $10,000
non-refundable  deposit was released to the sellers.  In December  2007, per the
terms of the agreement, the Company was to have deposited an additional $100,000
into the escrow  account on or before  December  14, 2007 if the  Company's  due
diligence  had been  completed.  Said  due  diligence  has not  been  completed,
therefore  the deposit has not been made.  The remaining  $5,350,000  was due by
December 28, 2007, the original  closing date, and then extended to May 27, 2008
for additional  consideration of $50,000.  As of the current date, the remaining
amounts  have not been  paid and the  parties  have  verbally  agreed to set the
closing date as soon as possible after the completion of the due diligence

LITIGATION
On or about  September  21,  2007,  Stockhausen,  Inc.  ("Stockhausen")  filed a
Complaint in the United States District Court,  for the Middle District of North
Carolina,  against us seeking  damages.  Stockhausen  alleges  that the  Company
breached  an  agreement  with them by  failing  to pay for goods  purchased  and
failing to purchase a minimum  quantity of goods.  We believe  that  Stockhausen
provided  defective  products  and waived  any  minimum  purchase  requirements.
Stockhausen  is seeking a judgment in the amount of $188,180  plus  interest and
lost profits in an unspecified  amount,  along with costs and attorneys fees. We
filed an Answer to the Complaint and a  Cross-Complaint  against  Stockhausen on
November 14, 2007.  Discovery has not been completed and settlement  discussions
are ongoing

                                      F-19
<PAGE>
On or  about  October  4,  2007,  Raymond  J.  Nielsen  and  Cheryl  K.  Nielsen
(collectively,  "Plaintiffs"),  filed a Complaint  in the  Circuit  Court in the
Sixth  Judicial  District of Pasco County,  Florida,  against us and Smart World
(collectively "Defendants") seeking damages, declaratory, and injunctive relief.
Plaintiffs  allege  that  Defendants  failed  to pay  interest  when  due on the
Convertible Debenture from Defendants to Plaintiffs and, thus, the entire amount
of the  Convertible  Debenture  is  accelerated  and  Plaintiffs  are  seeking a
judgment in the amount of $1,500,000 plus interest.  We allege that jurisdiction
of this  matter  belongs  in the  California  court  system per the terms of the
documents.  We have filed a Motion to Dismiss the lawsuit which has been denied.
We have filed an answer and  affirmative  defenses.  It is our position that the
intellectual  property  we  purchased  from  the  Plaintiffs  is not what it was
represented to be.

11. PREFERRED STOCK

The Company has 10,000,000  preferred stock authorized of which 2,763,699 shares
of  $0.50  stated  value  Series  A  convertible   preferred  stock  ("Series  A
Preferred")  are issued and  outstanding  as of September 30, 2008. The Series A
Preferred have the following characteristics:

DIVIDENDS
Each holder is entitled to receive preferential quarterly dividends equal to the
prime interest rate as quoted in the Wall Street Journal when and if declared by
the Board of  Directors,  out of any assets that are legally  available.  If the
Board of Directors declares that such dividends may only be payable in shares of
common  stock for any  quarter,  holders  of Series A  preferred  stock have the
option of accepting  the dividend paid in shares of common stock of the Company,
or letting  the  dividend  accrue for a cash  payment.  No  dividends  have been
declared, accrued or paid.

CONVERSION
Each  holder  has the option to convert  each share of Series A  Preferred  into
common  stock at a rate of one share of common stock for each share of preferred
stock tendered

VOTING
The holders have no voting rights.

LIQUIDATION PREFERENCE
Each holder is entitled to be paid the stated value of their holdings out of the
assets of the Company,  prior and in preference  to any payment or  distribution
out of the assets of the Company to the holders  common stock or any other class
or series of capital stock.

12. COMMON STOCK

STOCK OPTIONS
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 for grant.  The purchase price of the common
stock  subject to each  Incentive  Stock  Option shall not be less than the fair
market  value  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  terminates  in
November 2012. The options are fully-vested when granted and are exercisable for
a period of ten years  from the date of grant and are  subject  to  cancellation
upon  termination  of  employment.  The Company has granted  options to purchase
1,010,000  shares and 300,000  shares with  exercise  prices of $0.50 and $0.25,
respectively.  The market price at the date of grant was $0.12. At September 30,
2008, 690,000 stock options are available for grant.

On January 6, 2005,  the Company  enacted the 2005 Stock  Option/Stock  Issuance
Plan  (the  "2005  Plan").  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.

                                      F-20
<PAGE>
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.

Upon stock option exercise, the Company issues new shares of common stock.

The  following  table  summarizes  stock option  activity  under the above stock
option plans:

<TABLE>
<CAPTION>
                                                                              Weighted-Average
                                                                                 Remaining
                                          Number of     Weighted-Average      Contractual Term
                                           Shares       Exercise Price           (in years)
                                           ------       --------------           ----------
<S>                                       <C>             <C>                      <C>
Outstanding at September 30, 2006           680,000          $0.50                   6.1
  Granted                                        --
  Exercised                                      --
  Cancelled                                      --
                                        -----------
Outstanding at September 30, 2007           680,000           0.50                   5.1
  Granted                                 3,330,840           0.11
  Exercised                                      --
  Cancelled                              (1,579,000)          0.17
                                        -----------
Outstanding at September 30, 2008         2,431,840          $0.18                   3.9
                                        ===========
</TABLE>

The fair value of stock options awarded during the year ended September 30, 2008
and the period  ended  September  30, 2007 were  estimated  at the date of grant
using the  Black-Scholes  option-pricing  model.  The  expected  option term was
estimated based upon the contractual  term of the underlying  stock option.  The
expected  volatility of the Company's  stock price was based upon the historical
daily changes in the price of the Company's common stock. The risk-free interest
rate was based upon the current yield on U.S. Treasury  securities having a term
similar to the expected option term. Dividend yield is estimated at zero because
the Company does not anticipate paying dividends in the foreseeable future.

The following table  summarizes the  weighted-average  assumptions  used and the
resulting fair value of options granted:

                                                    2008            2007
                                                    ----            ----
Weighed-average fair value of options granted       $0.11            n/a
Weighted-average assumptions:
  Expected volatility                                 145%           n/a
  Dividend yield                                        0%           n/a
  Expected option life                                5.0            n/a
  Risk-free interest rate                               4%           n/a

                                      F-21
<PAGE>
<TABLE>
<CAPTION>
                                     Outstanding                                        Exerciseable
                    ----------------------------------------------     -------------------------------------------
                                    Weighted      Weighted Average                   Weighted     Weighted Average
                                    Average          Remaining                       Average         Remaining
                    Number of       Exercise      Contractual Life     Number of     Exercise     Contractual Life
Exercise Prices       shares         Price           (in years)          shares       Price          (in years)
---------------       ------         -----           ----------          ------       -----          ----------
<S>                 <C>            <C>            <C>                 <C>            <C>
    $0.50             470,000        $0.50               4.1             470,000      $0.50             4.1
    $0.11           1,861,840        $0.11               4.0                  --        n/a
</TABLE>

WARRANTS TO PURCHASE COMMON STOCK
The following  tables  summarize the issuances of warrants to purchase shares of
the Company's common stock:

                                                     Number of
                                                      Shares
                                                      -------
Outstanding at September 30, 2006                     100,000
  Granted                                             734,000
  Exercised                                                --
  Cancelled                                                --
                                                      -------
Outstanding at September 30, 2007                     834,000
  Granted                                              50,000
  Exercised                                                --
  Cancelled                                                --
                                                      -------
Outstanding at September 30, 2008                     884,000
                                                      =======

<TABLE>
<CAPTION>

                                               As of September 30, 2008
                    -------------------------------------------------------------------------
                                     Outstanding                            Exerciseable
                    ----------------------------------------------     ----------------------
                                    Weighted      Weighted Average                   Weighted
                                    Average          Remaining                       Average
   Range of          Number of      Exercise      Contractual Life     Number of     Exercise
Exercise Prices       shares        Price           (in years)          shares       Price
---------------       ------         -----           ----------          ------       -----
<S>                 <C>            <C>            <C>                 <C>            <C>
 $0.07 - $0.30       884,000         $0.29              1.1             884,000       $0.29
</TABLE>

13. RELATED PARTY TRANSACTIONS

YEAR ENDED SEPTEMBER 30, 2008
On August 18, 2008, Ms. Visco  converted  $41,383 of  outstanding  notes payable
into  1,379,428  shares of common stock based on the closing  stock price on the
date of conversion.

On May 8, 2008, Ms. Visco loaned the Company an additional  $85,000 which is due
August 31, 2008. Interest is payable monthly based on the prime rate.

In August 2008, the Company  executed a promissory  note for all amounts due and
payable  at that time to Ms.  Visco in the amount of  $600,000,  which is due on
September 30, 2009;  interest is payable monthly based on the prime rate. Due to
the funding  status of the Company,  the  interest is  accruing,  however is not
being paid.

On March 9, 2008, Ms. Visco converted  $20,000 of convertible  notes into 40,000
shares of common  stock at the  original  stated  conversion  price of $0.50 per
share.

                                      F-22
<PAGE>
On October 29, 2007,  FLD  Corporation,  an entity  partially  controlled by Ms.
Visco converted  $800,000 of notes payable into 1,757,143 shares of common stock
at the original stated conversion prices ranging from $0.28 to $0.50 per share.

Rent expense incurred in connection with an entity  partially  controlled by Ms.
Visco was $7,061 for the year ended September 30, 2008.

Interest expense incurred in connection with outstanding loans and notes payable
to Ms.  Visco or entities  partially  controlled  was $30,344 for the year ended
September 30, 2008.

PERIOD ENDED SEPTEMBER 30, 2007

DIRECTORS AND OFFICERS
Diana Visco,  the  Company's  Corporate  Secretary,  has a $600,000 note payable
bearing interest at the "prime" rate, due September 20, 2009. In March 2008, Ms.
Visco  converted  $61,383  of  principle  debentures  into  common  stock at the
original  conversion  prices.  Interest incurred on this debenture and notes was
$3,087 and $9,277 during the periods  ended  September 30, 2007 and December 31,
2006, respectively.

The  holders  of  the  two  $25,000  convertible  debentures  and  the  $178,508
convertible  debenture are personally related to Louie Visco.  Interest incurred
on these debentures during the nine months ended September 30, 2007 and the year
ended December 31, 2006 were $16,890 and $24,032, respectively.

Louie  Visco,  a  former  director  of  the  Company  and  the  director  of FLD
Corporation is the holder of two $250,000,  one $200,000 debentures  convertible
at $0.50 per share with interest at 8%,  maturing in the first calendar  quarter
of 2009. In addition,  there is one $100,000 debenture  convertible at $0.50 per
share  with  interest  at 8% that  matures  in the third  quarter  of 2009 and a

$460,012  note  payable at 8.25% which  matures  December  2009.  During the six
months ended June 30 2007,  notes payable and accrued  interest and payables due
to this entity  totaling  $652,738 were  converted at a rate of $0.176 per share
for a total of 2,380,952  shares of common stock.  On June 1, 2007,  $628,012 of
outstanding  notes  together  with $23,473 of accrued  interest  into  3,708,740
shares of common  stock.  On September  28, 2007,  an  additional  $423,000 note
payable and  $40,211 of  interest  due to this  entity  totaling  $463,211  were
converted at a rate of $0.09 per share for a total of 5,146,787 shares of common
stock.  Interest  incurred on these  debentures and notes during the nine months
ended September 30, 2007 was $70,603 and $100,567.

Rent expense incurred in connection with an entity  partially  controlled by Ms.
Visco was $5,124.

Interest expense incurred in connection with outstanding loans and notes payable
to Ms. Visco or entities partially controller was $73,690.

14. SUBSEQUENT EVENTS

As described in Note 8, certain notes payable became due subsequent to September
30,  2008.  Such  amounts  have not been  repaid and  became in  default  due to
nonpayment subsequent to September 30, 2008.

                                      F-23