SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

                                       or

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

    For the transition period from January 1, 2007 to September 30, 2007

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

For the nine months ended September 30, 2007, our revenue was $764,591.

As of February 11, 2008, the number of shares of common stock outstanding was
55,752,717. As of February 11, 2008, the aggregate market value of our common
stock held by non-affiliates was approximately $1,342,030 (based upon 13,429,030
shares at $0.10 per share).

                       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 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................   7

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

ITEM 6   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS.........................................   9

ITEM 7   FINANCIAL STATEMENTS...............................................  17

ITEM 8   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURE..........................................  17

ITEM 8A  CONTROLS AND PROCEDURES............................................  18

ITEM 8B  OTHER INFORMATION..................................................  18

ITEM 9   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.................  18

ITEM 10  EXECUTIVE COMPENSATION.............................................  20

ITEM 11  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          AND RELATED STOCKHOLDER MATTERS...................................  25

ITEM 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................  26

ITEM 13  EXHIBITS...........................................................  26

ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES.............................  27

SIGNATURES..................................................................  29
<PAGE>
                                     PART I

ITEM 1. DESCRIPTION OF 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        Israel
                            future products

Pure Chemicals              Nutrimoist and
                            future products       Israel

Echo Trading Company        Agriblend             Country of Morocco
                            Nutrimoist

Hydroponic Organic          Hydroponic organic     Southern portion of the State
Partners                    growing of vegetables  of California below a line
                            and other produce      running east and west along
                                                   the northern boundary of the
                                                   City of Bakersfield,
                                                   California to the Mexican
                                                   border (excluding al lands
                                                   owned by the Native American
                                                   Tribes located in the State
                                                   of California)

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

<TABLE>
<CAPTION>
 Manufacturer                                   Product                            Territory
 ------------                                   -------                            ---------
<S>                              <C>                                          <C>
Stockhausen, Inc.                 Stockhausen products which are of            Western United States
                                  the highest quality cross-link and
                                  linear polymer products available
                                  for water and nutrient retention
                                  in the Agricultural industry
</TABLE>
                                       2
<PAGE>
<TABLE>
<CAPTION>
<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>

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

                                       3
<PAGE>
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.

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, our exclusive supplier; 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
at our facility in Valley Springs, California. 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.

                                       4
<PAGE>
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."

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 $9,801 on research and development during the nine months ended
September 30, 2007 as compared to $18,329 spent on research and development
during the year ended December 31, 2006.

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

                                       5
<PAGE>
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 eleven full-time employees and one part-time
employee. 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 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 February 20,
2006, we assumed a commercial lease on 2,000 square feet of industrial property
in Valley Springs, California. This facility is used to store equipment and the
special blend, Soil Medic. This is a month-to-month lease with payments of
approximately $2,100 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.
The parties are currently engaging in settlement discussions.

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 we anticipate
will be scheduled for hearing on February 21, 2008. It is our position that the
intellectual property we purchased from the Plaintiffs is not what it was
represented to be and we may file a counterclaim against the Plaintiffs.

                                       6
<PAGE>
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.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

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
                                                    ----         ---
2005
     First Quarter.............................     0.85         0.36
     Second Quarter............................     0.55         0.35
     Third Quarter.............................     0.63         0.30
     Fourth Quarter............................     0.40         0.21

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............................     0.15         0.06

On February 11, 2008, the closing sale price was $0.10.

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.

                                       7
<PAGE>
HOLDERS

As of February 11, 2007, there were 292 shareholders holding certificated
securities and approximately 430 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.

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 July 14, 2007, we issued 100,000 shares of common stock to Grosvenor
Financial Partners for consulting services rendered. We relied on the exemption
from registration relating to offerings that do not involve any public offering
pursuant to Section 4(2) under the Securities Act of 1933 (the "Act") and/or
Rule 506 of Regulation D of the Act. We believe that the investor had adequate
access to information about us through the investor's relationship with us.

On September 28, 2007, we issued 162,197 shares of common stock to a former
employee for services rendered. We relied on the exemption from registration
relating to offerings that do not involve any public offering pursuant to
Section 4(2) under the Act and/or Rule 506 of Regulation D of the Act. We
believe that the investor had adequate access to information about us through
the investor's relationship with us.

On December 7, 2007, we issued 500,000 shares of common stock to a creditor as
consideration for a short-term loan in the amount of $150,000 which has since
been paid in full. We relied on the exemption from registration relating to
offerings that do not involve any public offering pursuant to Section 4(2) under
the Act and/or Rule 506 of Regulation D of the Act. We believe that the investor
had adequate access to information about us through the investor's relationship
with us.

From December 21, 2007 through January 22, 2008, we sold 646,000 shares of our
common stock to four non-United States residents for gross proceeds of $39,510.
These transactions are exempt from registration under Regulation S of the Act as
no sales efforts were made in the United States. All proceeds were used for
operating capital.

                                       8
<PAGE>
ITEM 6. 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. Our main revenue has been historically
generated through the sale of our polymer product used in agriculture
irrigation. During the nine months ended September 30, 2007, we lost $100,000 in
sales because of defective product received from our supplier.

Our patented Soil Medic slow release fertilizer developed a market in southern
California during the fiscal year-end December 31, 2006. However, a problem in
the manufacturing of the product resulted in the loss of the anticipated sales.
We believe the problem has been resolved and we are launching a new marketing
plan that will be expanded on a national basis over the next few years.

RESULTS OF OPERATIONS

On September 21, 2007, our Board adopted a resolution amending our bylaws for
the purpose of changing our fiscal year. The amendment serves to change our
fiscal year end from December 31 to September 30. This is a transition report
and includes information for the transitional nine-month period from January 1,
2007 through September 30, 2007.

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

                                       9
<PAGE>
<TABLE>
<CAPTION>
                                                Nine Months Ended      Fiscal Year Ended
                                                September 30, 2007     December 31, 2006
                                                ------------------     -----------------
                                                  (Audited)              (Restated and
                                                                            Audited)
<S>                                               <C>                    <C>
STATEMENT OF OPERATIONS DATA:
Revenue                                           $    764,591           $    586,002
(Net Loss)                                          (3,122,030)            (3,203,173)

(Net Loss) Per Share                                     (0.07)                 (0.11)

BALANCE SHEET DATA:
Current Assets                                    $    378,904           $    592,878

Property & Equipment, net                              304,470                401,862
Intangible Assets net, including goodwill            3,124,700              4,233,772

Total Assets                                         3,942,044              5,693,584
Total Current Liabilities                            2,672,426                975,230
Accumulated Deficit                                (20,305,614)           (17,561,850)
Stockholders' Decifit                                 (482,455)            (1,758,299)
</TABLE>

NINE MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
2006 (AS RESTATED)

REVENUES

Revenues for the nine months ended September 30, 2007 were $764,591 compared to
$586,002 for the fiscal year ended December 31, 2006, an increase of 30.4%. This
increase in revenue is directly related to revenues of Smart World in the amount
of $400,955.

COST OF SALES

Cost of goods sold increased to $473,147 for the nine months ended September 30,
2007 from $412,720 for the fiscal year ended December 31, 2006. The increase in
the cost of sales is the result of the increase revenues during this period. Our
gross margins were 38% and 30% for the nine months ended September 30, 2007 and
the fiscal year ended December 31,2006, respectively. The increase in our gross
margins was due to a combination of a decrease in operating expenses and
increased margins for our Smart World products.

                                       10
<PAGE>
OPERATING EXPENSES

Operating expenses decreased approximately 40.3% for the nine months ended
September 30, 2007. This decrease in operating expenses is a result of this
shorter transitional period, as well as other factors.

General and administrative expenses increased approximately 3% for the nine
months ended September 30, 2007 due to increased rent and payroll expenses
associated with Smart World.

Sales and marketing expenses decreased approximately 57.6% because we reduced
the number of trade shows we attended and reduced our print advertising.

Research and development costs decreased approximately 46.5% because we have
substantially completed our research and development on our existing products.

Amortization of intangible assets was $693,672 for the nine months ended
September 30, 2007 from $2,123,834 for the year ended December 31, 2006. During
the nine months ended September 30, 2007 and the fiscal year ended December 31,
2006, we recorded an impairment charge of $400,000 and $1,100,000 relating to
the viability of certain intellectual property acquired from Ray Nielsen.

INTEREST EXPENSE

Interest expense increased 63% for the nine months ended September 30, 2007 from
the year ended December 31, 2006. The increase primarily resulted from non-cash
interest expense relating to the amortization of a debt discounts, and a on-time
accretion of a discount totaling $894,083 as a result of the default on the
convertible 8% promissory note totaling $1,500,000.

CHANGE IN THE FAIR VALUE OF DERIVATIVE LIABILITY

There was an unrealized gain resulting from a decrease in our stock price from
December 31, 2006 to September 30, 2007.

NET LOSS

For the reasons detailed above, we experienced losses in the nine months ended
September 30, 2007 and the fiscal year ended December 31, 2006. 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. Revenue from the sale of products increased
from $586,002 during our prior fiscal year to $764,591 in the nine month period
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, 2008. However,
given the gross margins of our new products in turf and our acquisition of Smart
World, future operating results should improve.

                                       11
<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 $34,855 and $80,388 at September 30, 2007 and
December 31, 2006, respectively. Net cash used by operations was $1,369,526 for
the nine months ended September 30, 2007 as compared to $1,662,935 for the year
ended December 31, 2006. 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, 2007, the outstanding balance of the debentures was $2,824,300 and at
December 31, 2006, the outstanding balance of the debentures was $2,681,610. At
September 30, 2007, 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, $770,000 of 8% per annum debentures at a rate of $0.50 per
share, $130,000 of 8% debenture convertible at $0.28 per share, $30,000 of 8%
per annum debentures at a rate of $0.30 per share, $60,000 of 8% per annum
debentures at a rate of $0.25 per share, and $178,508 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 17,403,788 shares. Interest expense for the
nine months ended September 30, 2007 was $164,683 and interest expense for the
year ended December 31, 2006 was $191,598.

As of September 30, 2007, we had a working capital deficit (current assets less
current liabilities) of $2,293,522 compared to a deficit of $382,352 as of
December 31, 2006. The increase in the working capital deficit has been caused
by a decrease in our current assets and an increase of the current portion of a
debenture payable to a related party. On October 29, 2007, FLD Corporation
converted $700,000 of its debentures to common stock at $0.50 per share and
$100,000 of its remaining debenture to common stock at $0.28 per share.

As shown in the accompanying financial statements, we have incurred an
accumulated deficit of $20,305,614 and a working capital deficit of $2,293,522
as of September 30, 2007. This working capital deficit is directly related to
the current portion of debentures payable to related parties in the amount of
$1,788,997. 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

                                       12
<PAGE>
increase sales volume and operating margins to achieve profitability. Our
working capital and other capital requirements during the next fiscal year and
thereafter will vary based on the sales revenue generated by the recent
accumulation of additional products and the distribution and sales network we
have created and will continue to grow.

We will consider both the public and private sale of securities and 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.

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:

                                       13
<PAGE>
     *    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.

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

                                       14
<PAGE>
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.

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 $1,578,531, 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 2008 and continue through 2014,
at which time the patent expires. The marketing plan will be further developed
and we anticipate it being expanded throughout the country.

We also evaluated the Smart World intangible assets, consisting of the formulas,
trade secrets and goodwill, aggregating $1,200,183, 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 2008, 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 Statement of Financial
Accounting Standards (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

                                       15
<PAGE>
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.

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 requires that we record the derivative at its
fair value and record it at fair value as of each subsequent balance sheet date.

                                       16
<PAGE>
Changes in fair value are 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 $35,133 and $46,844 for the nine months ended September 30, 2007 and
the fiscal year ended December 31, 2006, respectively.

On March 15, 2006, we 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. We
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. We will collect royalty revenues
from two existing licenses and plan to sell products derived from the patents
directly to our customers including qualified distributors. The patent has
approximately eight years left to expiration. Amortization expense of the patent
rights was $693,672 and $243,834 for the nine months ended September 30, 2007
and the fiscal year ended December 31, 2006, respectively.

We have capitalized approximately $380,199 less accumulated depreciation of
$276,444 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.

ITEM 7. FINANCIAL STATEMENTS

The financial statements required to be filed pursuant to this Item 7 begin on
page F-1 of this report.

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

Effective September 4, 2007, KMJ/Corbin and Company, LLP ("KMJ") resigned as our
independent registered public accounting firm for the fiscal year ended December
31, 2007 because of an internal risk review KMJ did in August which revealed
that KMJ had to reduce the number of public company clients KMJ serviced, and we
ended up being one of the clients that KMJ resigned from as its auditor.

                                       17
<PAGE>
We engaged KMJ on May 1, 2007. KMJ's services to us were limited to a review of
our Quarterly Reports on Form 10-QSB for the quarter ended March 31, 2007 and
the quarter ended June 30, 2007. Therefore, KMJ never issued a report on our
financial statements. During their engagement, there were no disagreements with
KMJ on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which, if not resolved to the
satisfaction of KMJ would have caused KMJ to make reference to the matter in
their reports.

Effective September 21, 2007, our Board of Directors appointed McKennon, Wilson
& Morgan, LLP ("McKennon") as our new registered independent certified public
accounting firm. McKennon is located at 2020 Main Street, Suite 500, Irvine,
California 92614.

ITEM 8A CONTROLS AND PROCEDURES

Our President and Chief Financial Officer (the "Certifying Officers") are
responsible for establishing and maintaining our disclosure controls and
procedures. The Certifying Officers have designed such disclosure controls and
procedures to ensure that material information is made known to them,
particularly during the period in which this report was prepared. The Certifying
Officers have evaluated the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this report and believe that
our disclosure controls and procedures are effective based on the required
evaluation. During the period covered by this report, there were no changes in
internal controls that materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

ITEM 8B OTHER INFORMATION

None.

                                    PART III

ITEM 9. 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             67       Director, Chief Executive Officer, President,
                                   Chief Financial Officer
Neil C. Kitchen           59       Director, Vice President
Diana Visco               48       Secretary
Scott Baker               49       Director
Johnny Dickinson          65       Vice President Marketing
Donette Lamson            42       Vice President Turf and Horticulture

                                       18
<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. 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.

                                       19
<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 our former director, Louie Visco, who has since
passed away, filed one late report on Form 4 disclosing his conversion of debt
to equity.

ITEM 10. 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,     2007     $120,000        $0         $0          $0            $0               $0         $120,000
President, CFO          2006     $120,000        $0         $0          $0            $0               $0         $120,000
(Principal Executive
Officer)

Neil C. Kitchen,        2007     $79,484         $0         $0          $0            $0               $0          $79,484
Vice President          2006     $79,484         $0         $0          $0            $0               $0          $79,484

Donette Lamson, Vice    2007     $75,000         $0         $0          $0            $0               $0          $75,000
President (1)           2006     $75,000         $0         $0          $0            $0               $0          $75,000


Johnny Dickinson,       2007     $75,000         $0         $0          $0            $0               $0          $75,000
VP -Marketing           2006     $75,000         $0         $0          $0            $0               $0          $75,000

Diana Visco             2007     $52,000         $0         $0          $0            $0               $0          $52,000
Secretary               2006     $52,000         $0         $0          $0            $0               $0          $52,000
</TABLE>

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

                                       20
<PAGE>
GRANTS OF PLAN-BASED AWARDS

We did not grant any plan-based awards during the nine month period ended
September 30, 2007.

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, 2007.

<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>          <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.            150,000           0              0        $0.50       6/30/12        0            0            0            0
Kitchen, Vice
President

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

                                       21
<PAGE>
EMPLOYMENT AGREEMENTS

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
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").

                                       22
<PAGE>
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.

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.

                                       23
<PAGE>
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.

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.

                                       24
<PAGE>
ITEM 11. 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 55,752,717 issued shares of common
stock.

<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)             2.9%
Neil C. Kitchen, Vice President, Director              1,551,455 (4)             2.8%
Diana Visco, Secretary                                   712,000                 1.3%
Scott Baker, Director                                    504,818 (5)             1.0%
Johnny Dickinson, Vice President                         174,000 (6)               *
Donette Lamson, Vice President                            75,000                   *
All executive officers and directors
 as a group (six persons)                              4,620,173                 8.2%
Louie Visco (Estate of)                               24,302,921 (7)            43.3%
The Benz Group                                         2,819,061                 5.1%
FLD Corporation                                       21,483,860 (8)            38.3%
UTEK Corporation                                       6,889,390                12.4%
</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 60,000 shares of common stock at an exercise
     price of $0.50 expiring June 30, 2012.
7.   Consists of 2,819,061 shares of common stock held in the name of The Benz
     Group, a company in which Mr. Visco's estate owns a majority interest; and
     a warrant exercisable for 334,000 shares of common stock expiring on
     October 15, 2009, and 21,149,860 shares held in the name of FLD
     Corporation, a company in which Mr. Visco's estate owns a majority
     interest.
8.   Consists of a warrant exercisable for 334,000 shares of common stock
     expiring on October 15, 2009, and 21,149,860 shares of common stock.

                                       25
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Louie Visco, our former Director, was 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 21,149,860 shares of common stock.

Louie Visco, our former Director, was 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 terminates on December 31, 2008.

ITEM 13. 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, 2004
         (6)
10.3     Advertising and Marketing Agreement with Hortus, Ltd., dated October 3,
         2005 (7)
10.4     Promissory Note with Gary D. Willis and Cynthia A. Willis, dated
         December 15, 2005 (3)
10.5     Professional Services Agreement with Grosvenor with Financial Partners,
         LLC, dated March 6, 2006 (3)
10.6     Brokerage Services Agreement with Alchemy Alternatives, Inc., dated
         March 8, 2006 (3)
10.7     Agreement and Plan of Acquisition with UTEK Corporation and Advanced
         Fertilizer Technologies, Inc., dated March 14, 2006 (3)
10.8     Employment Contract with Donette Lamson, dated January 18, 2006 (8)
10.9     Assignment Agreement from Donette Lamson, dated January 18, 2006 (8)
10.10    Employment Contract with Woodrow Thorpe II, dated January 22, 2006 (8)
10.11    Assignment Agreement from Woodrow Thorpe II, dated February 20, 2006
         (8)
10.12    Acquisition Agreement for Smart World Organics, dated July 7, 2006 (9)

                                       26
<PAGE>
10.13    Land Lease with Zion Half Moon, L.P., dated November 3, 2006 (10)
10.14    Intellectual Property Purchase Agreement with Ray Nielsen, dated
         December 20, 2006 (11)
10.15    Security Agreement with Ray Nielsen, dated December 22, 2006 (11)
10.16    Purchase and Sale Agreement and Joint Escrow Instructions for Silver
         Terrace Nurseries, dated November 27, 2007
10.17    Lease Agreement, dated June 1, 2007
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

----------
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 September 30, 2005, filed on November 14, 2005.
8.   Incorporated by reference from our Form 10-QSB for the quarterly period
     ended March 31, 2006, filed on May 17, 2006.
9.   Incorporated by reference from our Form 10-QSB for the quarterly period
     ended June 30, 2006, filed on August 14, 2006.
10.  Incorporated by reference from our Form 10-QSB for the quarterly period
     ended September 30, 2006, filed on November 14, 2006.
11.  Incorporated by reference from our Form 10-KSB for the fiscal year ended
     December 31, 2006, filed on April 18, 2007.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

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

McKennon was our independent auditor and examined our financial statements for
the nine months ended September 30, 2007. McKennon performed the services listed
below and was paid the fees listed below for the nine months ended September 30,
2007.

AUDIT FEES

McKennon was paid aggregate fees of approximately $105,000 for the nine months
ended September 30, 2007 for professional services rendered for the audit of our
annual financial statements and for the reviews of the financial statements
included in our quarterly reports on Form 10-QSB during these periods.

AUDIT RELATED FEES

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

                                       27
<PAGE>
TAX FEES

Mc Kennon was not paid fees for the nine months ended September 30, 2007 or
professional services rendered for tax compliance, tax advice and tax planning
during this fiscal year period.

ALL OTHER FEES

McKennon was not paid any other fees for professional services during the nine
months ended September 30, 2007 or the fiscal year ended December 31, 2006.

EPSTEIN WEBER & CONOVER, PLC, CERTIFIED PUBLIC ACCOUNTANTS ("EPSTEIN")

TAX FEES

Epstein was paid fees in the amount of $ 4,920 for the fiscal year ended
December 31, 2006 and no fees for the nine months ended September 30, 2007 for
professional services rendered for tax compliance, tax advice and tax planning
during these fiscal years.

AUDIT COMMITTEE

We do not have an audit committee.

                                       28
<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: February 13, 2008       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)

                                       29
<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  sheet of American Soil
Technologies,  Inc. (the  "Company")  as of September 30, 2007,  and the related
statements  of  operations,  stockholders'  deficit  and cash flows for the nine
months  then   ended.   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 audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audit provides 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. as of September 30, 2007, and the results of their operations
and their cash flows for the year then  ended,  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
February 14, 2008

                                      F-1
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board
of Directors of American Soil Technologies, Inc.:

We  have  audited  the  accompanying   consolidated  statements  of  operations,
stockholders'  deficit  and cash flows for the year ended  December  31, 2006 of
American  Soil   Technologies,   Inc.   These   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated results of operations and cash flows of
American  Soil  Technologies,  Inc. for the year ended  December  31,  2006,  in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying  consolidated  financial statements have been prepared assuming
the Company will continue as a going concern.  The Company incurred material net
losses for the year ended  December  31, 2006 and there was  negative  cash flow
from  operations  of  $1,662,935  for the year ended  December 31,  2006.  These
factors raise  substantial  doubt about the  Company's  ability to continue as a
going concern.  Management's plans with regard to these matters are discussed in
Note 1. 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.

As described in Note 3 to the  consolidated  financial  statements,  the Company
adopted a new principle of  accounting  for  share-based  payments in accordance
with  Financial  Accounting  Standards  Board  Statement  No. 123R,  SHARE-BASED
PAYMENT.

As discussed in Note 2, to the consolidated financial statements,  American Soil
Technologies,  Inc.  has restated its  financial  statements  for the year ended
December 31, 2006.


/s/ Epstein, Weber & Conover, PLC
-------------------------------------
Scottsdale, Arizona
April 13, 2007, except as to Note 2
which is as of February 13, 2008

                                      F-2
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2007
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S>                                                                              <C>
Assets:
Current assets
  Cash and cash equivalents                                                      $     34,855
  Accounts receivable, net of allowance of doubtful accounts of $61,128                61,008
  Inventories                                                                         250,066
  Prepaid expenses and other current assets                                            32,975
                                                                                 ------------
      Total current assets                                                            378,904
Property and equipment, net                                                           304,470
Deposits and other assets                                                             133,970
Goodwill                                                                              364,600
Intangible assets                                                                   2,760,100
                                                                                 ------------
Total assets                                                                     $  3,942,044
                                                                                 ============
Liabilities and Stockholders' Deficit:
Current liabilities
  Accounts payable                                                               $    579,320
  Accrued liabilities                                                                 195,148
  Notes payable to related parties                                                     89,005
  Capital lease obligations                                                            19,956
  Notes payable                                                                     1,788,997
                                                                                 ------------
      Total current liabilities                                                     2,672,426
Capital lease obligations                                                              39,147
Notes payable                                                                         206,096
Notes payable to related parties                                                    1,035,303
Derivative liability                                                                  471,527
                                                                                 ------------
Total liabilities                                                                   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                              1,381,849
  Common stock, $0.001 par value, 100,000,000 shares authorized,
   52,674,574 shares issued and outstanding                                            52,674
  Paid in capital                                                                  18,388,636
  Accumulated deficit                                                             (20,305,614)
                                                                                 ------------
      Total stockholders' deficit                                                    (482,455)
                                                                                 ------------
Total liabilities and stockholders' deficit                                      $  3,942,044
                                                                                 ============
</TABLE>
                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                      F-3
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                        Nine Months
                                                           Ended               Year Ended
                                                        September 30,          December 31,
                                                            2007                  2006
                                                        -----------           -----------
                                                                             (as restated)
<S>                                                     <C>                   <C>
Revenue                                                 $   764,591           $   586,003
Cost of goods sold                                          473,147               412,720
                                                        -----------           -----------
Gross profit                                                291,444               173,283
                                                        -----------           -----------
Operating expenses:
  General and administrative                              1,557,532             1,513,888
  Sales and marketing                                       190,261               448,799
  Research and development                                    9,801                18,329
  Amortization of intangible assets                         293,672             1,023,834
  Impairment of intangible assets and goodwill              400,000             1,100,000
                                                        -----------           -----------
Total operating expenses                                  2,451,266             4,104,850
                                                        -----------           -----------

Loss from operations                                     (2,159,822)           (3,931,567)

Other (income) expense
  Interest expense                                        1,328,291               402,025
  Interest income                                               (27)               (1,383)
  Change in fair value of derivative liability             (371,179)              (51,377)
  Other                                                     (17,226)               66,941
  Loss on sale of property and equipment                     11,549                    --
                                                        -----------           -----------
Loss before income taxes                                 (3,111,230)           (4,347,773)
Income tax provision (benefit)                                  800            (1,144,600)
                                                        -----------           -----------

Net loss                                                $(3,112,030)          $(3,203,173)
                                                        ===========           ===========

Net loss per share basic and diluted                    $     (0.07)          $     (0.11)
                                                        ===========           ===========

Weighted average common shares outstanding
 used in per share calculations                          44,527,215            28,338,775
                                                        ===========           ===========
</TABLE>

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

                                      F-4
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                           Series A Preferred                        Common
                                                                        Shares            Amount            Shares           Amount
                                                                        ------            ------            ------           ------
<S>                 <C> <C>                                            <C>              <C>               <C>               <C>
Balance at December 31, 2005                                           2,763,699        $1,381,849        25,436,174        $25,436
  Conversion of debt to common stock                                          --                --         1,204,000          1,204
  Common stock issued for trade secrets                                       --                --           150,000            150
  Unvested shares as paid-in capital                                          --                --            29,715             --
  Common stock issued for cash                                                --                --           250,000            250
  Conversion of debt and accrued into common stock                            --                --            72,449             72
  Common stock issued in exchange for assets of an acquired company           --                --            43,595             44
  Conversion of debt to common stock                                          --                --           600,000            600
  Conversion of accounts payable into common stock                            --                --            45,828             45
  Conversion of debt and accounts payable into common stock                   --                --         4,042,602          4,044
  Common stock issued in exchange for shares of acquired company              --                --         2,300,000          2,300
  Fair value of warrants issued with convertible debt                         --                --                --             --
  Discount on Series B preferred stock                                        --                --                --             --
  Net loss                                                                    --                --                --             --
                                                                       ---------        ----------        ----------        -------
Balance at December 31, 2006 (as restated)                             2,763,699         1,381,849        34,144,648         34,145
  Conversion of debt to 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
  Issued common stock for services rendered                                   --                --           262,197            262
  Net loss                                                                    --                --                --             --
                                                                       ---------        ----------        ----------        -------
Balance at September 30, 2007                                          2,763,699        $1,381,849        52,674,574        $52,674
                                                                       =========        ==========        ==========        =======

                                                                         Paid-in           Accumulated
                                                                         Capital             Deficit               Total
                                                                         -------             -------               -----
Balance at December 31, 2005                                           $12,000,411        $(13,990,411)        $  (582,715)
  Conversion of debt to common stock                                       299,796                  --             301,000
  Common stock issued for trade secrets                                     33,600                  --              33,750
  Unvested shares as paid-in capital                                        29,715
  Common stock issued for cash                                              49,750                  --              50,000
  Conversion of debt and accrued into common stock                          37,600                  --              37,672
  Common stock issued in exchange for assets of an acquired company         16,087                  --              16,131
  Conversion of debt to common stock                                       149,400                  --             150,000
  Conversion of accounts payable into common stock                          11,411                  --              11,456
  Conversion of debt and accounts payable into common stock              1,006,608                  --           1,010,652
  Common stock issued in exchange for shares of acquired company           411,700                  --             414,000
  Fair value of warrants issued with convertible debt                      116,480                  --             116,480
  Discount on Series B preferred stock                                     225,000                  --             225,000
  Net loss                                                                      --          (3,203,173)         (3,203,173)
                                                                       -----------        ------------         -----------
Balance at December 31, 2006 (as restated)                              14,387,558         (17,193,584)         (1,390,032)
  Conversion of debt to 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
  Issued common stock 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)
                                                                       ===========        ============         ===========
</TABLE>
                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                      F-5
<PAGE>
AMERICAN SOIL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                           Nine Months
                                                                              Ended              Year Ended
                                                                           September 30,         December 31,
                                                                              2007                  2006
                                                                           -----------           -----------
                                                                                                 (restated)
<S>                                                                        <C>                   <C>
Cash flows from operating activities:
  Net loss                                                                 $(3,112,030)          $(3,203,173)
  Adjustments to reconcile net loss to net cash
    Provision for doubtful accounts                                            (22,492)               65,200
    Loss on disposal of assets                                                  11,549                11,968
    Impairment of goodwill                                                          --             1,880,000
    Impairment of intangible assets                                            400,000                    --
    Depreciation and amortization                                              387,182               362,427
    Stock-based compensation                                                    41,464               (22,013)
    Change in derivative liabilities                                          (371,179)                   --
    Deferred income taxes                                                           --            (1,144,000)
    Amortization of debt discount                                            1,074,828               281,377
  Changes in operating assets and liabilities:
    Accounts receivable                                                         33,964                67,027
    Inventory                                                                   86,270               (90,776)
    Prepaid expenses and other assets                                           37,249              (108,118)
    Accounts payable                                                           (47,205)              266,614
    Accrued expenses                                                           110,875               (29,468)
                                                                           -----------           -----------
        Net cash used in operating activities                               (1,369,525)           (1,662,935)
                                                                           -----------           -----------
Cash flows from investing activities:
  Capital expenditures                                                          (7,665)              (37,466)
  Investments                                                                       --              (150,000)
  Purchase of intellectual property                                                 --                (4,200)
  Cash acquired in business acquisition                                             --                 2,172
                                                                           -----------           -----------
        Net cash used in investing activities                                   (7,665)             (189,494)
                                                                           -----------           -----------
Cash flows from financing activities:
  Proceeds from related party notes                                          1,360,829             1,372,841
  Proceeds from the issuance of convertible debentures                              --               220,000
  Repayament on convertible debentures                                              --               (15,968)
  Payments on capital lease obligations                                        (16,020)              (21,018)
  Repayments on issued notes payable                                           (13,102)             (320,736)
  Proceeds from the issuance of common stock                                        --                50,000
  Proceeds from the issuance of preferrred stock                                    --               300,000
  Proceeds from sale-leaseback                                                      --                75,000
                                                                           -----------           -----------
        Net cash provided by (used in) financing activities                  1,331,707             1,660,119
                                                                           -----------           -----------
        Net increase (decrease) in cash and cash equivalents                   (45,483)             (192,310)
Cash and cash equivalents at beginning of period                                80,338               272,648
                                                                           -----------           -----------
Cash and cash equivalents at end of period                                 $    34,855           $    80,338
                                                                           ===========           ===========
Supplemental disclosure of cash flow information:
  Cash paid during the period for interest                                 $    78,977                72,708
  Cash paid during the period for income taxes                             $       845           $       800
Supplemental disclosure of non-cash investing and financing activities:
  Stock issued for intellectual property                                   $        --           $ 1,983,750
  Stock issued for business acquisition                                    $        --           $   564,000
  Issuance of common stock for equipment                                   $        --           $    16,128
  Issuance of convertible debtenture for business acquisition              $        --           $ 1,500,000
  Conversion of accrued interest into notes payable                        $    96,746           $        --
  Conversion of debt and accrued interest into common stock                $ 1,615,948           $ 1,510,782
  Conversion of Series B preferred stock into common stock                 $ 2,250,000           $        --
</TABLE>
                 The accompanying notes are an integral part of
                    these consolidated financial statements.

                                      F-6
<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 California on September 22, 1993. On
November  24,  1999,  the Company  entered  into an exchange  agreement  for the
reverse  acquisition of New Directions  Manufacturing,  Inc., a publicly  traded
Nevada corporation  incorporated on January 9, 1997 ("New Directions"),  wherein
New  Directions  would  acquire the assets of the Company and change its name to
American Soil Technologies, Inc. This exchange agreement was effective as of the
close of business on December 31, 1999.

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

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.Simulataneously,  the Company  entered into an  Intellectual  Property
Purchase  Agreement with the founder of Smart World, Ray Nielsen,  that included
certain  formulas   originally  believed  to  be  proprietary  and  intellectual
properties  used in the  business of Smart World  Organics,  Inc..  The formulas
acquired from Nielsen were deemed not to be proprietary and subsequently  deemed
to be on  little  or no  value  (see  Note 4).  Smart  World  sells  homogenized
fertilizers, non-toxic insect controls, plant protectants, seed, soil and silage
inoculants. Smart World also provides advanced, custom-formulated products built
to suit unusual growing conditions and environments.

GOING CONCERN AND MANAGEMENT'S PLANS

The Company has sustained  significant  losses and has a working capital deficit
of $2,293,522 and accumulated deficit of $20,305,614. 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.  There are no assurances  that such financing will be obtained by
management. 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. RESTATEMENT

The financial statements for the year ended December 31, 2006 are being restated
to reflect changes in the accounting for the following:

                                      F-7
<PAGE>
     *    Accounting for  $1,500,000 of convertible  debt issued on December 20,
          2006.  The Company has  reevaluated  its accounting and determined the
          embedded  conversion  feature  did not meet the  criteria  for  equity
          classification  as the Company cannot determine whether the issued and
          outstanding  shares  authorized at the date issuance are sufficient to
          cover  the  conversion  of the debt into  common  stock as there is no
          floor on the  conversion  price of the stock as  defined in EITF 00-19
          "Accounting  for  Derivative  Financial  Instruments  Indexed  to, and
          Potentially   Settled  in,  a  Company's   Own  Stock"  and  SFAS  133
          "Accounting for Derivative  Instruments and Hedging Activities".  As a
          result, the Company was required to record discount on the convertible
          note of $894,083  equal to the fair value of the  embedded  conversion
          feature on the date of issuance (see Note 9 for the  accounting).  The
          Company was also  required to record a derivative  liability  equal to
          $894,083 on the date of issuance.

     *    Classification  of 4,500,000  shares  Series B  convertible  preferred
          stock ("Series B Preferred") with a stated value of $2,250,000  issued
          on March 16, 2006.  The Company has  reevaluated  its  accounting  and
          determined  that  since the  number  of  shares of common  stock to be
          issued  upon  conversion  is based  on the  closing  bid  price of the
          Company's common stock on the date of conversion,  it was more akin to
          debt  than  equity  as  defined  in  paragraph  12  of  SFAS  No.  150
          "Accounting for Certain Financial  Instruments with Characteristics of
          both Liabilities and Equity". In addition,  the Series B Preferred did
          not have a stated  interest  rate and the  Company  did not  impute an
          interest rate. As a result of this restatement, the Series B Preferred
          has been  reclassified from equity to debt, a discount on the note has
          been recorded from the original issuance date and is being accreted to
          its face value over the conversion date.

     *    Purchase  accounting related to the acquisition of Advanced Fertilizer
          Technologies,   Inc.   ("AFTI").   The  Company  has  reevaluated  its
          accounting for the fair value of the assets acquired.  The acquisition
          was not deemed a  business,  and no  goodwill  resulted.  Because  the
          acquisition was  specifically  agreed to be a tax-free  exchange,  the
          Company is required to record a deferred  income tax  liability  in an
          amount equal to the  effective  tax totaling  approximately  $780,000.
          Accordingly,  the  Company  recorded  a  charge  to the  statement  of
          operations on the date of acquisition for the excess of purchase price
          over the fair  value of the  assets.  This  resulted  in an income tax
          benefit and deferred  income tax assets totaling  $780,000,  since the
          deferred tax asset will be recovered  through the establishment of the
          deferred income tax liability discussed above.

     *    Purchase   accounting  related  to  the  acquisition  of  Smart  World
          Organics,  Inc. The Company has  reevaluated  its  accounting  for the
          non-deductibility of intangible assets and goodwill.  As a result, the
          Company has recorded a deferred tax  liability of $364,600 on the date
          of acquisition.

     *    Purchase   accounting  related  to  the  acquisition  of  intellectual
          property  from Raymond  Nielsen.  After  further  analysis of the fair
          value of the intellectual  property  acquired,  the Company recorded a
          "day  one"  impairment  of  $1,100,000  due  to  the  validity  of the
          application of the underlying formulas and the related cash flows.

The  following  table  reflects  the  effect of the  restatement  on each of the
financial  statement  line items for the year ended  December  31,  2006 and the
quarters ended March 31, 2007 and June 30, 2007:

                                      F-8
<PAGE>
<TABLE>
<CAPTION>
                                                                          Year Ended December 31, 2006
                                                                -----------------------------------------------
                                                                As Filed          Adjustment        As Restated
                                                                --------          ----------        -----------
<S>                                                           <C>                <C>                <C>
Consolidated Statement of Operations:
  Impairment of goodwill                                      $         --       $  1,100,000       $  1,100,000
  Excess purchase price over fair value of assets (AFTI)                --            780,000            780,000
  Change in fair value of derivative liabilities                        --            (51,377)           (51,377)
  Amortization of debt discount                                         --             28,841             28,841
  Interest expense                                                 191,598            178,125            369,723
  Income tax benefit                                                    --         (1,144,000)        (1,144,000)

Net loss                                                        (2,311,945)          (891,589)        (3,203,534)
Net loss per share, basic and diluted                         $      (0.08)                         $      (0.11)

Consolidated Balance Sheet:
  Intangible assets                                              4,553,772         (1,100,000)         3,453,772
  Goodwill                                                              --            364,600            364,600
  Deferred tax asset                                                    --          1,144,000          1,144,000
  Notes payable                                                  2,443,969           (865,241)         1,578,728
  Series B preferred stock (liability)                                  --          2,203,125          2,203,125
  Series B preferred stock (equity)                              2,250,000         (2,250,000)                --
  Deferred tax liability                                                --          1,144,600          1,144,600
  Derivative liability - embedded conversion feature                    --            842,705            842,705
  Additional paid in capital                                    14,162,558            225,000         14,387,558
  Accumulated deficit                                          (16,302,356)          (891,589)       (17,193,945)

Consolidated Statement of Cash Flows                               192,310                 --            192,310

Consolidated Statement of Stockholders' Equity (Deficit)      $  1,526,196       $ (2,916,589)      $ (1,390,393)

                                                                              Three Months Ended
                                                                                March 31, 2007
                                                                -----------------------------------------------
                                                                As Filed         Adjustment         As Restated
                                                                --------         ----------         -----------
Consolidated Statement of Operations:
  Impairment of goodwill                                      $         --       $        --       $         --
  Excess purchase price over fair value of assets (AFTI)                --                --                 --
  Change in fair value of derivative liabilities                        --          (100,349)          (100,349)
  Amortization of debt discount                                         --           235,975            235,975
  Interest expense                                                 102,590            46,875            149,465
  Income tax benefit                                                    --                --                 --

Net loss                                                          (639,566)         (182,501)          (822,067)
Net loss per share, basic and diluted                         $      (0.02)                        $       0.02)

Consolidated Balance Sheet:
  Intangible assets                                              4,440,689        (1,100,000)         3,340,689
  Goodwill                                                              --           364,600            364,600
  Deferred tax asset                                                    --         1,144,000          1,144,000
  Notes payable                                                  4,107,206          (629,266)         3,477,940
  Series B preferred stock (liability)                                  --                --                 --
  Series B preferred stock (equity)                                     --                --                 --
  Deferred tax liability                                                --         1,144,600          1,144,600
  Derivative liability - embedded conversion feature                    --           742,356            742,356
  Additional paid in capital                                    17,003,146           225,000         17,228,146
  Accumulated deficit                                          (16,967,462)       (1,074,090)       (18,041,552)

Consolidated Statement of Cash Flows                                44,133                --             44,133

Consolidated Statement of Stockholders' Equity (Deficit)      $  1,461,090       $  (849,090)      $    612,000

                                                                                  Three Months Ended
                                                                                     June 30, 2007
                                                                 ----------------------------------------------
                                                                 As Filed          Adjustment       As Restated
                                                                 --------          ----------       -----------
Consolidated Statement of Operations:
  Impairment of goodwill                                       $         --       $        --       $         --
  Excess purchase price over fair value of assets (AFTI)                 --                --                 --
  Change in fair value of derivative liabilities                         --          (110,340)          (110,340)
  Amortization of debt discount                                          --           235,975            235,975
  Interest expense                                                  162,042                --            162,042
  Income tax benefit                                                     --                --                 --

Net loss                                                           (725,507)         (125,635)          (851,142)
Net loss per share, basic and diluted                          $      (0.02)                        $      (0.02)

Consolidated Balance Sheet:
  Intangible assets                                               4,327,608        (1,100,000)         3,227,608
  Goodwill                                                               --           364,600            364,600
  Deferred tax asset                                                     --           780,000            780,000
  Notes payable                                                     956,967          (393,291)           563,676
  Series B preferred stock (liability)                                   --                --                 --
  Series B preferred stock (equity)                                      --                --                 --
  Deferred tax liability                                                 --         1,144,600          1,144,600
  Derivative liability - embedded conversion feature                     --           632,017            632,017
  Additional paid in capital                                     17,652,175           225,000         17,877,175
  Accumulated deficit                                           (17,693,124)       (1,199,725)       (18,892,849)

Consolidated Statement of Cash Flows                                 80,338                --             80,338

Consolidated Statement of Stockholders' Equity (Deficit)       $  1,338,165       $  (974,725)      $    363,440
</TABLE>

The  restatement  has no effect on our cash flows from  operating,  investing or
financing activities, and none of the adjustments resulting from the restatement
has any impact on cash balances for any period.

                                      F-9
<PAGE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

On September  17, 2007 the Company  changed its (YEAR END) from  December 31, to
September 30.

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.  At times cash  deposits  may exceed  government  insured
limits.

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

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.  Historically,  the Company
has not experienced collection issues.  Reserves for uncollectible amounts, were
approximately  $61,128  as of  September  30,  2007 are  provided  based on past
experience and a specific analysis of the accounts which management believes are
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.  Depreciation  expense was
$93,509 and  $118,593,  for the year ended  September  30, 2007 and December 31,
2006, respectively.

Betterments,  renewals  and  extraordinary  repairs that extend the lives of the
assets are  capitalized:  other repairs and maintenance  charges are expensed as
incurred.  The cost and related  accumulated  depreciation  applicable to assets
retired are removed from the accounts,  and the gain or loss on  disposition  is
recognized in current operations.

GOODWILL AND OTHER INTANGIBLE ASSETS
SFAS No. 141 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, 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.

ACCOUNTING FOR CONVERTIBLE DEBT
Convertible  debt is  accounted  for under  the  guidelines  established  by 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)

                                      F-10
<PAGE>
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,  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.
For a  conversion  price  change of a  convertible  debt issue,  the  additional
intrinsic  value of the debt  conversion  feature,  calculated  as the number of
additional  shares issuable due to a conversion  price change  multiplied by the
previous conversion price, is recorded as additional debt discount and amortized
over the remaining life of the debt.

DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial  instruments,  as defined in SFAS 133, 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 preferred stock, as debt financing
arrangements  and  freestanding  stock purchase  warrants with features 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 133, in certain instances,  these instruments
are  required to be carried as  derivative  liabilities,  at fair value,  in our
financial statements.

The Company  estimates the fair values of its derivative  financial  instruments
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 will reflect the volatility in these estimate and assumption changes.

ACCOUNTING FOR STOCK OPTIONS ISSUED TO NON-EMPLOYEES
The  Company  measures  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 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.

INTELLECTUAL  PROPERTY  Intellectual property includes the exclusive licenses to
the patented  polymer  application  techniques  purchased  December 31, 1999 and
certain  intellectual  property  purchased  on  December  20,  2006,  are  being
amortized using the straight-line  method with estimated  remaining useful lives
ranging from 3 to 7 years at September  30,  2007.  The carrying  value of these
assets is periodically evaluated for impairment.

ADVERTISING
The Company  expenses  advertising  costs as incurred.  Advertising  expense was
$78,475 and $243,834, for the nine-month period ended September 30, 2007 and the
year ended December 31, 2006, respectively.

                                      F-11
<PAGE>
REVENUE RECOGNITION
Revenue is  recognized  in  accordance  with  Staff  Accounting  Bulletin  ("SAB
No.101), Revenue Recognition in Financial Statements, as revised by SAB 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.

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

NET LOSS PER SHARE
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 years ended:

                                             September 30,        December 31,
                                                 2007                2006
                                              ----------          ----------
Series A convertible preferred stock           2,763,699           2,763,699

Series B convertible preferred stock                  --          10,714,285
Common stock options                           4,010,840             680,000
Warrants                                       1,034,000           1,055,000
 Convertible debt                              9,466,668           9,551,013
                                              ----------          ----------
                                              17,275,207          24,763,997
                                              ==========          ==========

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.

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,  the carrying  value of the
intangible assets, the fair value options and warrants to purchase common stock.

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.

                                      F-12
<PAGE>
CONCENTRATION OF CREDIT RISK
The  Company  maintains  its cash  and  cash  equivalent  account  in  financial
institutions.  Accounts at these institutions are insured by the Federal Deposit
Insurance  Corporation  ("FDIC") up to  $100,000.  At September  30,  2007,  the
Company had no cash balances which were in excess of the FDIC  insurance  limit.
The Company  performs  ongoing  evaluations of these  institutions  to limit its
concentration risk exposure.

During  the  nine  months  ended  September  30,  2007  sales  to two  customers
aggregated to approximately 15% of total sales for the period. Approximately 81%
of the  accounts  receivable  balance at  September  30, 2007 was  comprised  of
balances due from six customers.

The Company has an agreement  with a supplier that grants the Company  exclusive
rights to sell and  distribute  the  supplier's  products in the western  United
States. This supplier's products represent  approximately 35% and 35% of product
in  inventory at September  30, 2007 and  December 31, 2006,  respectively,  and
represents  54% and 60% of the products sold in the nine months ended  September
30, 2007 and the year ended December 31, 2006, respectively.

The Company grants credit to those customers within the United States of America
and  to  a  limited  number  of  international  customers  and  do  not  require
collateral.  Sales to other  international  customers  are  secured  by  advance
payments,  letters of credit or cash against documents. The Company's ability to
collect receivables is affected by economic fluctuations in the geographic areas
and industries served by the Company.

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

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

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.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
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

                                      F-13
<PAGE>
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 will be effective for the
Company  beginning  October 1, 2007. 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.

In September 2006, the FASB issued Statement of Financial  Accounting  Standards
No. 157, Fair Value  Measurements  ("SFAS 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 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.  The Company is
currently   assessing  the  potential  effect,  if  any,  of  SFAS  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 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.  The Company
is  currently  evaluating  the impact,  if any, of SFAS 159 on its  consolidated
financial statements.

In December 2007, the FASB issued SFAS No. 141(R),  Business Combinations ("SFAS
141(R)"),  which  replaces  FAS 141.  SFAS  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. FAS 141(R) is to be applied prospectively to business combinations.

4. ACQUISITIONS

In March 2006, the Company  acquired the issued and outstanding  common stock of
AFTI in a tax-free stock-for-stock exchange. AFTI owns patent rights to products
under  Soil Medic for a  purchase  price of  $1,950,000.  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.  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.

Effective  December 31, 2006,  the Company  acquired 100% of the  outstanding 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 Smart World has
been  accounted for using the purchase  method of accounting in accordance  with
Statement  of  Financial   Accounting  Standards  ("SFAS")  No.  141,  "Business
Combinations"  ("SFAS  141"),  whereby  the  estimated  purchase  price has been
allocated to tangible and intangible  net assets  acquired based upon their fair
values at the date of acquisition.  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

                                      F-14
<PAGE>
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 Smart
World's and the Nielsen IP resulted  in the  recognition  of $364,600  and $0 of
goodwill, respectively.

The  fixed  assets  are  being  depreciated  from the date of  acquisition  with
estimated useful lives ranging from 5 to 15 years. The intellectual property and
patents  are  considered  intangible  asset and are being  amortized  over their
respective  estimated useful lives,  ranging from 8 to 15 years from the date of
acquisition. The goodwill is not subject to amortization and the amount assigned
to goodwill is not deductible for tax purposes.

5. INVENTORIES

Inventories consist of the following at September 30, 2007:

Raw materials                                       $ 95,970
Finished goods                                       154,095
                                                    --------
Total                                               $250,065
                                                    ========

6. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following at September 30, 2007:

Machinery                                           $ 622,900
Vehicles                                               57,615
Office furnishings, fixtures and equipment             44,591
                                                    ---------
Total                                                 725,106
Less accumulated depreciation                        (420,637)
                                                    ---------
Property and equipment, net                         $ 304,469
                                                    =========

The Company constructed certain equipment with an original cost of approximately
$209,000 and carrying value of $134,000. The equipment was completed in 2006. In
February 2006, the Company entered into the sale-leaseback  transaction relating
to this  equipment  and received  proceeds of $75,000.  The Company  recorded an
impairment  loss of $134,000 for the  equipment in fiscal 2005 on the basis that
it was evident that the carrying  value at December 31, 2005 was impaired due to
the  valuation  received as part of the  sale-leaseback  transaction.  Since the
equipment was written down to the present value of the capital lease arrangement

                                      F-15
<PAGE>
in 2005,  there was no gain or loss recorded or deferred in connection with this
transaction in 2006.  The related  capital lease is for a term of 60 months at a
monthly cost of $1,949 (Note 11).

Depreciation  expense for the years ended  September  30, 2007 and  December 31,
2006 was $93,509 and $118,593, respectively.

7. GOODWILL AND INTANGIBLE ASSETS

On December 31, 1999, the Company purchased exclusive license rights to patented
polymer application techniques.

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  related to
patents held by AFT. 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
seven years left to expiration.

Amortization  expense of  intangible  assets  rights  including  impairment  was
$293,672 and $243,834 for the nine months ended  September 30, 2007 and the year
ended December 31, 2006, respectively.

The weighted average remaining life of these assets is approximately 6 years.

The  following  table  summarizes  the  components  of  intangible  assets as of
September 30, 2007:

                                        Gross
                                      Carrying      Accumulated
                                       Amount       Amortization          Net
                                     ----------     ------------      ----------
Polymer application                  $  679,217      $ (367,719)      $  311,498
patents
Turf trade secrets                       37,950          (3,462)          34,488
Soil Medic patent                     1,950,000        (371,469)       1,578,531
Smart World patents and
formulas                                911,499         (75,916)         835,583
                                     ----------      ----------       ----------

Total intangible assets,             $3,578,666      $ (811,566)      $2,760,100
                                     ==========      ==========       ==========

Goodwill                             $  364,600              --       $  364,600
                                     ==========      ==========       ==========

The  above  intangible  assets,   excluding   goodwill,   have  definite  lives.
Accordingly,  these  are  amortized  over the  periods  to be  benefited.  As of
September 30, 2007,  management evaluated the carrying value of these assets for
impairment, and they believe the above carrying values of intangible assets with
definite  lives will be  recovered  through  future cash flows from new customer
relationships  beginning in fiscal 2008. The  amortization  expense was $339,246
and  $243,834 for the nine months  ended  September  30, 2007 and the year ended
December 31, 2006, respectively.

The following summarizes the estimated future annual amortization expense of the
intellectual property:

Years ending September 30:
     2008                                     $  507,157
     2009                                        507,157
     2010                                        507,157
     2011                                        391,829
     2012                                        391,829
     Thereafter                                  454,971
                                              ----------
     Total                                    $2,760,100
                                              ==========

                                      F-16
<PAGE>
8. ACCRUED EXPENSES

Accrued expenses consisted of the following at September 30, 2007:

Accrued interest                              $178,162
  Payroll liabilities                           13,985
  Other                                          3,010
                                              --------
Total                                         $195,147
                                              ========

9. NOTES PAYABLE

Notes payable at September 30, 2007 are comprised of the following:

Convertible  debenture to related party, original balance of          $ 250,000
$250,000,   interest  at  8%  per  annum,  interest  payable
quarterly.  Principal is  convertible at a rate of $0.50 for
one share of common stock. Balance was converted into common
stock on October 29, 2008.

Convertible  debenture to related party, original balance of            250,000
$250,000,   interest  at  8%  per  annum,  interest  payable
quarterly.  Principal is  convertible at a rate of $0.50 for
one share of common stock. Balance was converted into common
stock on October 29, 2008.

Convertible  debenture to related party, original balance of             25,000
$25,000,   interest  at  8%  per  annum,   interest  payable
quarterly.  Principal is  convertible at a rate of $0.50 for
one share of common stock. Principal due February 1, 2008.

Convertible  debenture to related party, original balance of             25,000
$25,000,   interest  at  8%  per  annum,   interest  payable
quarterly.  Principal is  convertible at a rate of $0.50 for
one share of common stock. Note is unsecured.  Principal due
February 1, 2008.

Convertible  debenture to related party, original balance of             20,000
$25,000,   interest  at  8%  per  annum,   interest  payable
quarterly.  Principal is  convertible at a rate of $0.50 for
one share of common stock. Note is unsecured.  Principal due
August 15, 2009.

Note  payable  to a related  party,  interest  at prime rate             75,800
payable  monthly.  Note is unsecured and due upon  September
2009.

Convertible  debenture to related party, original balance of            178,508
$250,000,  interest at 10% per annum.  Monthly principal and
interest payments of $3,000 are due through 2014.  Principal
is  convertible  at a rate of $3.00  for one share of common
stock. Note is unsecured.

Convertible  debenture to related party, original balance of            200,000
$200,000,   interest  at  8%  per  annum,  interest  payable
quarterly.  Principal is  convertible at a rate of $0.50 for
one share of common stock. Balance was converted into common
stock on October 29, 2008.

Convertible  debenture to related party, original balance of            100,000
$100,000,   interest  at  8%  per  annum,  interest  payable
quarterly.  Principal is  convertible at a rate of $0.28 for
one share of common stock. Balance was converted into common
stock on October 29, 2008.

Convertible  debenture to unrelated party,  original balance          1,500,000
of $1,500,000,  interest at 8% per annum,  interest  payable
quarterly.  Principal is convertible at the proceeding  days
rate for one share of common  stock.  Note is secured by the
intellectual   property   acquired   from  the   noteholder.
Principal  due  January  19,  2008.  Balance  includes  debt
discount.

                                      F-17
<PAGE>
Convertible   debenture  to  an  unrelated  party,  original             30,000
balance  of  $30,000,  interest  at 8% per  annum,  interest
payable  quarterly.  Principal is  convertible  at a rate of
$0.25  for one  share of common  stock.  Note is  unsecured.
Principal due October 1, 2008.

Convertible   debenture  to  an  unrelated  party,  original             30,000
balance  of  $30,000,  interest  at 8% per  annum,  interest
payable  quarterly.  Principal is  convertible  at a rate of
$0.30  for one  share of common  stock.  Note is  unsecured.
Principal due October 1, 2008.

Convertible   debenture  to  an  unrelated  party,  original             30,000
balance  of  $30,000,  interest  at 8% per  annum,  interest
payable  quarterly.  Principal is  convertible  at a rate of
$0.25  for one  share of common  stock.  Note is  unsecured.
Principal due October 1, 2008.

Convertible   debenture  to  an  unrelated  party,  original             30,000
balance  of  $30,000,  interest  at 8% per  annum,  interest
payable  quarterly.  Principal is  convertible  at a rate of
$0.28  for one  share of common  stock.  Note is  unsecured.
Principal due October 1, 2008.

Note  payable to lending  institution,  original  balance of             19,220
$48,542,  and interest at 2.9% per annum.  Requires  monthly
principal  and  interest  payments  of  $736  through  2009.
Collateralized by vehicle.

Note  payable  to  finance  company,   original  balance  of             36,433
$75,000,  and interest at 17.7% per annum.  Requires monthly
principal  and  interest  payments of $1,814  through  2009.
Collateralized by polymer injection machine.

Note  payable to lending  institution,  original  balance of              8,271
$28,985,  and interest at 6.99% per annum.  Requires monthly
principal  and  interest  payments  of  $576  through  2008.
Collateralized by vehicle.

Notes  payables by various  individuals  at rates from 6% to            260,764
20%, all due prior to the acquisition of Smart World

Convertible   debenture  to  an  unrelated  party,  original             75,000
balance of  $75,000,  interest  at 10% per  annum,  interest
payable  quarterly.  Principal is  convertible  at a rate of
$0.19  for one  share of common  stock.  Note is  unsecured.
Principal due July 18, 2009.
                                                                     ----------
   Total                                                              3,143,996

   Less debt discounts                                                  (24,595)
                                                                     ----------

   Total                                                              3,119,401

   Less: current portion                                             (1,878,001)
                                                                     ----------
   Total long-term portion                                           $1,241,400
                                                                     ==========

Future annual maturities of principal at September 30, 2007,  excluding $800,000
of notes payable to related  parties which were  converted  into common stock on
October 29, 2007, and classified as long-term portion, are follows:

                                      F-18
<PAGE>
         2008                         $1,878,001
         2009                            205,289
         2010                             25,391
         2011                             25,622
         2012                             28,306
         Thereafter                       61,387
                                      ----------
                  Total               $2,223,996
                                      ==========

In connection with the issuance of the four separate $30,000  convertible  notes
and one $100,000 convertible debenture issued to a related party during the year
ended December 31, 2006,  the Company  issued  734,000  warrants to purchase the
Company's  common stock at $0.30 per share. The warrants expire three years from
date of issuance.  The fair value of the warrants was  determined to be $216,480
using  the  Black-Scholes  option  pricing  model.  The  factors  used  in  this
calculation were: stock price $0.28, risk free interest rate 4.7% and volatility
of 187%.  This  value is a  component  of the total  discount  on the debt.  The
discount  takes  into  account  the  value  of the  warrants  and the  resulting
effective  beneficial  conversion  features.  The discount is being amortized as
additional  interest  expense  over  the life of the debt  using  the  effective
interest method.

During the nine months  ended  September  30,  2007,  notes  payable and accrued
interest of $1,517,061 and 98,887,  respectively  were converted into 11,236,479
shares  of  common  stock  based  on the  closing  stock  price  on the  date of
conversion.

Approximately $270,000 of notes payable acquired in connection with the purchase
of Smart  World are past due and  classified  as  currently  due in the  balance
sheet. These loans were generally acquired in connection with the acquisition of
Smart  World,  Inc.  Management  has  represented  that none of the  lenders has
commenced actions to collect these notes payable.

8% CONVERTIBLE DEBENTURE(RESTATED)
On December 20, 2 006, the Company purchased  exclusive soil additive  formulas,
proprietary   software,   trademarks  and  patents.   The  Company  funding  the
acquisition  through the  issuance of  $1,500,000  of 8%  Convertible  Debenture
("Convertible Note") to Raymond Nielsen ("Holder"). The Debenture is convertible
at any time prior to maturity 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  contained  an  embedded  conversion  feature  ("ECF") as
prescribed  in  paragraph  12  of  SFAS  No.  133,  "Accounting  for  Derivative
Instruments  and  Hedging   Activities."   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 Emerging Issues Task
Force ("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".

This caused the ECF of on the  Convertible  Note to be  classified as derivative
financial  instruments  under SFAS 133.  The  accounting  treatment  for the ECF
requires  that the  Company  record  the ECF as a  derivative  liability  on the
balance sheet at its fair values as of each  reporting  date. Any change in fair
value is recorded as non-operating, non-cash income or expense at each reporting
date. The derivative was valued using the Black-Scholes option pricing model has
been classified in the consolidated balance sheet as a long-term liability.

                                      F-19
<PAGE>
On the date of issuance of the Convertible Note, the estimated fair market value
of the ECF was $894,083.  The recording of the fair value of the ECF reduced the
carrying value of the Convertible Note to $605,917. Since the carrying amount of
the Convertible Note was reduced below its stated amount, the Company recorded a
discount.  The  accretion of the discount is being  charged to interest  expense
over the term of the Convertible  Note. The fair value of the ECF was determined
using the Black-Scholes  option pricing model with the following  assumptions at
September 30, 2007:

Fair value of underlying common stock         $ 0.23
Expected life (in years)                        1.08
Risk-free interest rate                         4.96%
Expected volatility                            156.7%
Dividend yield                                     0%

The fair value of the ECF was $471,527  and  $842,706 at September  30, 2007 and
December 31, 2006, respectively.

Since the carrying amount of the  Convertible  Note was reduced below its stated
amount, the Company recorded a discount. The accretion of the discount was being
charged to interest  expense  over the term of the  Convertible  Note until such
note was deemed in default in 2007. At the time  management  determined the note
was in default,  they  accreted the  remaining  discount on the note and charged
operations.

10. PROVISION FOR INCOME TAXES

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

Income  taxes for the nine months  ended  September  30, 2007 and the year ended
December 31, are summarized as follows:

                                              September 30,      December 31,
                                                  2007              2006
                                                ---------         ---------
Current provision                               $     800        $       800
Deferred provision (benefit)                           --        $(1,145,400)
                                                ---------        -----------

Net income tax provision (benefit)              $      --        $(1,144,600)
                                                =========        ===========

A reconciliation  of the differences  between the effective and statutory income
tax rates ended September 30, 2007 and December 31, 2005, is as follows:

<TABLE>
<CAPTION>
                                        September 30, 2007               December 31, 2006
                                    -------------------------        -------------------------
<S>                                 <C>               <C>            <C>                 <C>
Federal                             $(929,269)        (34.0)%       $ (765,380)          (34)%
State                                  78,242           2.86%         (135,067)           (6)%
Amortization of debt discount         280,825          10.27%               --            --
Derivative liability                    9,799           0.36%               --            --
Change in valuation allowance         557,070          20.38%          255,359          39.5%
Other                                  11,132            .15%           11,206          -0.5%
                                    ---------        -------        ----------       -------
Provision                           $     800              0%       $1,144,600             0%
                                    =========        =======        ==========       =======
</TABLE>

The major components of the deferred taxes are as follows at September 30, 2007:

                                      F-20
<PAGE>
Current:
  Reserves and accruals                173,587
Noncurrent:
  Intangible assets                    577,896
  Intangible assets                   (960,817)
  Net operating losses               5,653,403
  Other                                 28,663
  Valuation allowance               (5,472,732)
                                    ----------
Net deferred tax asset                      --
                                    ==========

The  acquisition  of AFT  described  in  Note  4 was  structured  as a  tax-free
acquisition.  Accordingly,  the difference between the recognized fair values of
the acquired net assets and their historical tax base are not deductible for tax
purposes.  As a result,  aggregate  deferred tax  liabilities  of $780,000  were
established  for  financial  reporting  purposes  for  an  amount  equal  to the
Company's  statutory tax rate multiplied by the difference between the allocated
book value of acquired non-goodwill assets and the tax bases of those assets. In
addition,  the  Company  recorded  a  deferred  tax  liability  of  $364,000  in
connection with the tax-free acquisition of Smart World.

At September  30,  2007,  deferred  income tax assets  totaling  $5,084,000  was
comprised of  $5,024,000  related to the tax effect of the federal and state net
operating  losses,  and $60,000 related to differences in the book and tax bases
of notes receivable,  accounts  receivable and intangible  assets. The valuation
allowance was increased by a total of $889,000  during the period ended December
31,  2006.  At December  31, 2006,  the Company had federal net  operating  loss
carryforwards  of  $15,868,000  that expire from 2008 through 2025 and state net
operating carryforwards of $5,535,000 expiring from 2008 through 2011.

11. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES
The Company leases real property  located in Pacoima,  California from an entity
owned by a member of its Board of Directors  who is also a majority  shareholder
under a long-term  operating lease. The lease began in April 2004 and expires in
December 2008.  Rent expense under this lease for the years ended  September 30,
2007 and December 31, 2006 was $17,855 and $24,449, respectively.

On November 3, 2006,  the Company  entered into a seven year  agreement to lease
approximately 100 acres of land in San Mateo,  California.  Per the terms of the
agreement,  the Company is required  to pay rent of  $100,000  per year  through
November 2013. The annual rent is due in advance each year of the agreement.

In connection with the acquisition Smart World, the Company assumed leases for a
warehouse  and office  space  which  expire on April 30, 2008 and  November  30,
2007., respectively. The monthly rental payment is $2,582.

Future annual  minimum lease  payments  under  operating  leases at September 30
include:

Years ending September 30:
     2008                              $118,537
     2009                               101,765
     2010                               100,000
     2011                               100,000
     Thereafter                          16,667
                                       --------
                                       $436,969
                                       ========

CAPITAL LEASES
The Company  leases certain  equipment  under capital leases that expire through
2011.  Minimum annual  required  lease  payments  under the lease  agreements at
September 30 are as follows:

                                      F-21
<PAGE>
Years ending September 30:
     2008                                               $ 27,999
     2009                                                 21,600
     2010                                                 21,600
     2011                                                  3,600
     Thereafter                                                0
                                                        --------
        Total                                             74,799
Less: amount representing interest                       (15,696)
                                                        --------
        Total payments, net of interest                   54,103
Less: current portion                                    (19,956)
                                                        --------
        Total long term minimum lease payments          $ 39,157
                                                        ========

Equipment  under capital leases included in machinery and equipment at September
30, 2007 are as follows:

Machinery and equipment                                 $ 107,000
Less - accumulated depreciation                           (38,500)
                                                        ---------
                                                        $  68,500
                                                        =========

LITIGATION

In September  2007, a former  vendor of the Company  filed a complaint  with the
United States  District  Court seeking a judgment in the amount of $188,180 plus
interest,  lost profits and attorneys' fees. The vendor 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. The Company believes the claim
to be without  merit as the vendor  provided  defective  products.  The  Company
believes the claim is without merit and will  vigorously  defend it. In November
2007,  the  Company  filed its  answer to the  complaint  and a cross  complaint
against the vendor.

In October  2007,  the  former  owners of Smart  World  Organics,  Inc.  filed a
complaint  with the Circuit Court in the Six Judicial  District of Pasco County,
Florida, against the Company seeking damages,  declaratory and injunctive relief
consisting relating to the $1,500,000  convertible  debenture and the associated
accrued interest  thereon.  The plaintiffs allege that the Company failed to pay
accrued  interest  when due and,  thus,  the  entire  amount of the  convertible
debenture  of  $1,500,000  is due and  payable.  The  Company  alleges  that the
jurisdiction of this matter belongs in the California court system per the terms
of the debenture agreement and thus has filed a motion to dismiss.

EMPLOYMENT AGREEMENTS

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.

12. PREFERRED STOCK

The Company has 10,000,000 preferred stock authorized.

At September 30, 2007,  the Company had  2,763,699  shares of $0.50 stated value
Series  A  convertible   preferred  stock  ("Series  A  Preferred")  issued  and
outstanding. The Series A Preferred has the following characteristics:

                                      F-22
<PAGE>
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  of  Series  B  convertible
preferred stock, common stock or any other class or series of capital stock.

The  Company  has  4,500,000  shares of  Series B  convertible  preferred  stock
("Series B Preferred")  authorized.  On March 16, 2006,  in connection  with the
acquisition of AFTI, the Company issued  4,500,000  shares of Series B Preferred
for the conversion of debt in the principal amount of $2,250,000.

On March 14, 2007,  the holders of 4,500,000  shares of the  Company's  Series B
Preferred  Stock were  converted  into  7,031,250  shares of common  stock.  The
closing price of the Company's common stock was $0.32.

While outstanding, the Series B Preferred has the following characteristics:

DIVIDENDS
The holders of Series B Preferred are not entitled to receive dividends.

CONVERSION
Each share of Series B Preferred will be automatically  converted into shares of
common  stock on the date  which is  twelve  months  after  the  acquisition  of
Advanced Fertilizer  Technologies,  Inc. The number of shares of common stock to
be  converted  into is equal to the stated  value of  $2,250,000  of the shares,
divided by the closing bid price of the  Company's  common  stock on the date of
conversion.

VOTING
The Series B Preferred is non-voting.

LIQUIDATION PREFERENCE
Each  holder of the Series B  Preferred  is  entitled  to receive a  liquidation
preference  equal to an amount equal to the assets available for distribution to
shareholders,  after  payment to the holders of Series A Preferred  at an amount
equal to $0.50  per  share.  Remaining  proceeds,  if any are to be  distributed
ratably  to the  holders  of  common  stock,  Series A  Preferred  and  Series B
Preferred on an as-if converted basis.

REDEMPTION
The Series B Preferred is non-redeemable.

The Company has accounted for the Series B Preferred in accordance with SFAS No.
150 "Accounting for Certain Financial  Instruments with  Characteristics of both
Liabilities and Equity" and  accordingly as a result of the conversion  feature,
classified the amount as a liability in the accompanying balance sheet.

                                      F-23
<PAGE>
13. COMMON STOCK

The Company has 100,000,000 shares of common stock authorized.  At September 30,
2007,  the  Company  had  52,674,574  shares of $0.001  par value  common  stock
outstanding.

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 10 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 at $0.50 and $0.25, respectively.  The market price at
the date of grant was $0.12.  At September  30, 2007,  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.  As of September 30, 2007, no shares of common stock or stock
options have been issued pursuant to the 2005 Plan.

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

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

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

During the year ended  September  30,  2007,  there were no stock  options  were
granted, and no options expired or were cancelled.

                                      F-24
<PAGE>
The following summarizes information at September 30, 2007:

<TABLE>
<CAPTION>
                  Options Outstanding                                     Options Exercisable
-------------------------------------------------------      -------------------------------------------
                      Number           Weighted Average      Weighted           Number          Weighted
                  outstanding at          Remaining          Average        Exercisable at      Average
    Range of       September 30,       Contractual Life      Exercise       September 30,       Exercise
Exercise Prices        2007               (in years)          Price              2007            Price
---------------        ----               ----------          -----              ----            -----
<S>                   <C>                    <C>              <C>               <C>              <C>
   $ 0.50             680,000                5.00             $ 0.50            680,000         $ 0.50
   $ 0.11           3,330,840                5.00             $ 0.11          3,380,840         $ 0.11

                  Warrants Outstanding                                    Warrants Exercisable
-------------------------------------------------------      -------------------------------------------
                      Number           Weighted Average      Weighted           Number          Weighted
                  outstanding at          Remaining          Average        Exercisable at      Average
    Range of       September 30,       Contractual Life      Exercise       September 30,       Exercise
Exercise Prices        2007               (in years)          Price              2007            Price
---------------        ----               ----------          -----              ----            -----
   $ 0.23             300,000                0.25             $ 0.23            300,000         $ 0.23
   $ 0.30             634,000                2.10             $ 0.30            634,000         $ 0.30
   $ 0.30             100,000                2.60             $ 0.30            100,000         $ 0.30
</TABLE>

On September 28, 2007, the board of directors approved the issuance of 2,968,840
stock options to certain  employees and members of the Board of Directors of the
Company at an exercise price of $0.11 per share; these options expire five years
from the date of approval.  The share were granted and  communicated  on October
10, 2007, the measurement date. See Note 15 for further discussion.  On the same
date,  the board of directors  approved the issuance of 362,000 stock options to
certain employees

14. RELATED PARTY TRANSACTIONS

During the years ended  September  30, 2007 and December  31, 2006,  the Company
conducted related party transactions with Board members, officers and affiliated
entities as described below:

DIRECTORS AND OFFICERS
Diana Visco,  the Company's  Corporate  Secretary,  has  outstanding  $20,000 of
convertible debenture with the Company,  which is convertible at $0.50 per share
with interest at 8%, maturing in the third calendar quarter of 2009 as well as a
$75,800  note  payable at prime rate due January 1, 2009.  Interest  incurred on
this debenture and notes was $3,087 and $9,277 during the years ended  September
30, 2007 and December 31, 2006, respectively.

The  holders of the two (2)  $25,000  convertible  debentures  and the  $187,300
convertible  debenture are personally related to Louie Visco.  Interest incurred
on these  debentures  during the years ended September 30, 2007 and 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 (2)  $250,000,  one (1)  $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 (1)  $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
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 monts ended September 30, 2007 and the year
ended December 31, 2006 was $70,603 and $100,567 respectively.

Employee  advances of $3,710 as of  September  30, 2007 are  included in prepaid
expenses and other current assets.

                                      F-25
<PAGE>
AFFILIATED ENTITIES
The Company also  entered  into an operating  lease in 2004 for its office space
with Customized Box Company,  an entity beneficially owned by Louie Visco. Rents
charged by this entity for the years ended  September  30, 2007 and December 31,
2006 were $8,127 and $16,089, respectively.

15. SUBSEQUENT EVENTS

On February 8, 2008, the Company and Diana Visco increased the face value of the
outstanding notes of $75,800 for an aggregate amount outstanding of $395,061.

On October 29, 2007, FLD  Corporation  converted all of its Debentures to stock,
$700,000  at  $0.50  cents a share  and  $100,000  at  $0.28  cents a share  for
1,757,143 shares of stock.

On  October  25,  2007,  the  Company  and  holders of  outstanding  convertible
debentures  totaling $120,000 agreed to extend the maturity date from October 1,
2007 to October 1, 2008. The Company also agreed to reduce the conversion  price
the outstanding principal balance is convertible into from $0.30 to $0.10.

On October 10, 2007,  the Company  granted  2,968,840  stock  options to certain
employees  and members of the Board of  Directors  of the Company at an exercise
price of $0.11 per share. The closing price of the Company's common stock on the
date of grant was $0.12.  The options  vest  ratably over four years and require
continued  employment with the Company.  The stock options expire ten years from
the date of grant.

On October 10, 2007, the Company granted  362,000  warrants to consultants at an
exercise  price of $0.11 per share.  The closing price of the  Company's  common
stock on the date of grant was $0.12.  The warrants vest ratably over four years
and  require  the  consultant  to provide  services  during  this  period to the
Company. The stock options expire ten years from the date of grant.

On November 27, 2007, the Company entered into a Purchase and Sale Agreement and
Joint  Escrow  Instructions  agreement 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  will
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 was not completed therefore the
deposit has not been made.  The remaining  $5,350,000  was due prior to December
28, 2007 the original closing date. As of the current date the remaining amounts
payable has not been paid in that the due diligence  has not been  completed and
the part ies have  verbally  agreed to set the closing  date as soon as possible
after the completion of the due diligence.

On December 7, 2007,  the Company  issued  500,000  shares of common  stock to a
creditor as consideration  for a short-term loan for $150,000 that has been paid
in full.

From December 21, 2007 through January 22, 2008, the Company sold 646,000 shares
of its common stock to four  non-United  States  residents for gross proceeds of
$39,510.

                                      F-26