SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A
Amendment No. 1

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

For the fiscal year ended: December 31, 2006

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

For the transition period from __________________ to __________________

Commission File No. 000-49608

CHINA AGRITECH, INC. (Exact Name Of Registrant As Specified In Its Charter)

Delaware	75-2955368
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

A# Room 0706-0707, The Spaces International Center
No. 8, Dongdaqiao Road
Chaoyang District, Beijing 100020
People's Republic of China
(Address of principal executive office, including zip code)

(86) 10-58702123
(Registrant's telephone number, including area code)

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes □     No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes □     No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes 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, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  □ Accelerated filer  □ Non-accelerated filer  x

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

The number of shares and aggregate market value of common stock held by non-affiliates as of the last business day of the registrant's most recently completed second fiscal quarter was 11,486,470 and $37,331,027, respectively.

There were 19,143,615 shares of common stock outstanding as of December 31, 2006.

DOCUMENTS INCORPORATED BY REFERENCE: None.

EXPLANATORY NOTES

China Agritech, Inc., or the Company, is filing this Amendment No. 1 on Form 10-K/A to its Annual Report on Form 10-K for the year ended December 31, 2006, or the 2006 Form 10-K, originally filed with the U.S. Securities and Exchange Commission on April 2, 2007, to amend the cover page, Item 6. “Selected Financial Data,” Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Item 8. “Financial Statements and Supplementary Data,” Item 14. “Principal Accountant Fees and Services” and Item 15. “Exhibits and Financial Statement Schedules” as more specifically described in the Explanatory Notes 1-3 below.  The remainder of the information contained in the 2006 Form 10-K is not amended hereby and remains as set forth in the original filing.

Explanatory Note 1.

The 2006 Form 10-K contained a typographical error on its cover page which incorrectly stated that “Portions of the Registrant’s Definitive Proxy Statement for its 2007 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days after the close of the Registrant’s fiscal year are incorporated by reference into Part III of this Annual Report on Form 10-K.”  In actuality, all information required by Part III of Form 10-K was included in the Company’s Form 10-K filed on April 2, 2007.

Explanatory Note 2.

The Company’s 2006 Form 10-K is amended by this Form 10-K/A to correct certain errors in the version of the audited financial statements of the Company for the fiscal years ended December 31, 2004 and December 31, 2005, included in the 2006 Form 10-K.  In particular, the financial statements included in the 2006 Form 10-K erroneously included certain reclassifications in the audited financial statements for the fiscal years ended December 31, 2004 and December 31, 2005.  In particular, the line items entitled “payments to shareholders / related parties,” “minority interest,” “Prepayments and other receivables,” “net cash provided by (used in) operating activities,” and “net cash provided by (used in) financing activities” in the Statement of Cash Flows have been corrected in the audited financial statements filed herewith.  These line item corrections had no effect on the Company’s net cash and cash equivalents.   Statement of Income and conforming changes have been made to Item 6. “Selected Financial Data” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Explanatory Note 3.

  The 2006 Form 10-K contained typographical errors in the dates in Item 14. “Principal Accountant Fees and Services” under the headings “— Audit Fees,” “— Audit Related Fees,” “— Tax Fees,” and “— All Other Fees.”  The aggregate fees which were reflected the Company’s Form 10-K filed on April 2, 2007 as having been paid in 2004 are actually the amounts that were paid in 2005 and the amounts reflected as having been paid in 2005 are actually the amounts that were paid in 2006.

PLEASE NOTE THAT THE INFORMATION CONTAINED IN THIS FORM 10-K/A, INCLUDING THE FINANCIAL STATEMENTS AND THE NOTES THERETO, DOES NOT REFLECT EVENTS OCCURRING AFTER THE DATE OF THE 2006 FORM 10-K OR MODIFY OR UPDATE THOSE DISCLOSURES AFFECTED BY SUBSEQUENT EVENTS.

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INTRODUCTORY NOTE

Except as otherwise indicated by the context, references in this Form 10-K/A to "China Agritech," "we," "us," or "our," are references to the combined business of China Agritech, Inc. and its consolidated subsidiaries.  References to "Tailong" are references to our wholly-owned subsidiary, China Tailong Holdings Company Limited, references to "Pacific Dragon" are references to Tailong’s 90% owned subsidiary, Pacific Dragon Fertilizers Co. Ltd., references to “CAI” are to our wholly owned subsidiary, CAI Investment Inc., references to “Beijing Agritech” are to our wholly-owned indirect subsidiary, Beijing Agritech Fertilizer Ltd. and references to Anhui Agritech are to our wholly-owned subsidiary, Anhui Agritech Development Co. Ltd. References to "China" or "PRC" are references to the People's Republic of China.  References to "RMB" are to Renminbi, the legal currency of China, and all references to "$" and dollar are to the U.S. dollar, the legal currency of the United States.

Special Note Regarding Forward Looking Statements

In addition to historical information, this Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  We use words such as "believe," "expect," "anticipate," "project," "target," “plan,” "optimistic," "intend," "aim," "will" or similar expressions to identify forward-looking statements. Such statements include, among others, those concerning our expected financial performance, liquidity and capital resources and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, as well as assumptions, that, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements.  Such risks and uncertainties include the risks identified in Item 1A. “Risk Factors,” included in the Company’s Form 10-K which was filed on April 2, 2007.

All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including statements regarding new and existing products, technologies and opportunities; statements regarding market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China; any statements of belief or intention; any of the factors mentioned in the "Risk Factors" section of the Company included in the Company’s Form 10-K filed on April 2, 2007; and any statements or assumptions underlying any of the foregoing.  We assume no obligation and do not intend to update these forward-looking statements, except as required by law.

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Item 6.

  Selected Financial Data

The following table sets forth selected financial data on an historical basis for China Agritech. This data should be read in conjunction with the consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 10-K/A.

		Year ended December 31,
		2002		2003		2004		2005		2006
		(Unaudited)		(Unaudited)
Statement of operations data:
Net revenue	$	6,411,015	$	12,179,847	$	15,850,044	$	25,335,316	$	29,525,577
Cost of revenue		(2,673,176)		(6,450,245)		(8,153,463)		(12,848,958)		(14,161,358)
Gross profit		3,737,839		5,729,602		7,696,581		12,486,358		15,364,219
Operating expenses
Selling expenses		(710,569)		(1,867,311)		(1,443,943)		(2,372,151)		(2,983,756)
Operating and administrative expenses		(553,559)		(835,715)		(517,831)		(2,633,522)		(2,015,252)
Total operating expenses		(1,264,128)		(2,703,026)		(1,961,774)		(5,005,673)		(4,999,008)
Income from operations		2,473,711		3,026,576		5,734,807		7,480,685		10,365,211
Other income (expense)
Other (expense) income		-		-		933		-		98,617
Finance costs		(3,111)		(3,269)		(115)		(160)		(3,590)
Total other income (expense)		(3,111)		(3,269)		818		(160)		95,027
Income before income taxes and
minority interests		2,470,600		3,023,307		5,735,625		7,480,525		10,460,238
Provision for income taxes		(792,637)		(1,016,577)		(1,982,252)		(3,173,533)		(4,248,144)
Income before minority interests		1,677,963		2,006,730		3,753,373		4,306,992		6,212,094
Minority interests		-		-		-		(631,113)		(862,756)
Net income		1,677,963		2,006,730		3,753,373		3,675,879		5,349,338
Other comprehensive income
Foreign currency translation adjustment		-		-		-		228,566		372,722
Other comprehensive income	$	1,677,963	$	2,006,730	$	3,753,373	$	3,904,445	$	5,722,060
Basic and diluted weighted
average shares outstanding		n/a		13,435,143		13,435,143		13,945,937		18,735,944
Basic and diluted net earnings
per share	$	n/a	$	0.15	$	0.28	$	0.26	$	0.29
Cash flow data:
Net cash flows provided by (used in)
operating activities	$	(454,171)	$	3,118,414	$	1,131,974	$	163,382	$	(3,336,862)
Net cash provided by (used in) investing
activities		456,539		(2,920,296)		(11,584)		(283,238)		(1,366,840)
Net cash provided by (used in) financing
activities		(2,093)		(188,269)		(1,092,926)		323,154		11,028,393
						December 31,
		2002		2003		2004		2005		2006
Balance sheet data:		(Unaudited)		(Unaudited)
Cash and cash equivalents	$	752	$	10,601	$	38,065	$	255,831	$	6,430,009
Working capital		2,863,702		3,679,137		4,249,430		10,230,715		26,502,571
Total assets		4,372,281		7,299,449		7,582,971		12,646,305		31,026,914
Total current liabilities		1,374,897		2,364,010		2,205,089		1,350,444		2,010,220
Long term liabilities		68,675		-		-		-		-
Total liabilities		1,443,572		2,364,010		2,205,089		1,350,444		2,010,220
Total stockholders' equity		2,028,709		4,935,439		5,377,882		10,057,951		26,856,119

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Item 7.

 Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a holding company whose direct and indirect subsidiaries, primarily Pacific Dragon and Beijing Agritech, manufacture and sell organic liquid compound fertilizers and related agricultural products.

China is the principal market for our products. Our products are primarily sold to farmers in 12 provinces in China. Our revenues are derived primarily from the sale of our organic liquid compound fertilizers and related agricultural products to our customers.

Background

We were originally incorporated on January 5, 1925 under the laws of the State of Nevada as Argyle Mining Company for the development of mining claims. Over the years, we changed our business model several times and, presently, we engage in the business of manufacturing and selling agricultural products.  On August 10, 2004, we merged with and into a newly formed wholly-owned Delaware subsidiary for the purpose of changing our corporate domicile from Nevada to Delaware. The new entity maintained the same name and capital structure. On February 3, 2005, we completed a reverse acquisition transaction with Tailong whereby we issued 10,606,158 shares of our restricted common stock to the stockholders of Tailong in exchange for all of the issued and outstanding capital stock of Tailong. Tailong thereby became our wholly owned subsidiary and the former stockholders of Tailong became our controlling stockholders. In May 2005, following completion of the reverse acquisition transaction, we changed our name to China Agritech, Inc.

In September 2006, we organized our Beijing operations, which operate primarily as our research and development center.  Our business operations are conducted through our wholly owned subsidiary, Beijing Agritech, and Tailong’s 90% owned operating subsidiary, Pacific Dragon.

Recent Developments

Corporate Income Tax Law.  On March 16, 2007, the National People’s Congress of the PRC determined to adopt a new corporate income tax law in its fifth plenary session. The new corporate income tax law unifies the application scope, tax rate, tax deduction and preferential policy for both domestic and foreign-invested enterprises and will become effective on January 1, 2008.  Under to the new corporate income tax law, the applicable income tax rate for our PRC subsidiaries is subject to change.  As the implementation detail has not yet been announced, we cannot be sure of the potential impact of such new corporate income tax law on our financial position and operating results.

Industry Wide Factors that are Relevant to Our Business

The fertilizer industry in China is in the process of rapid and continuous development. China is the largest producer, importer and consumer of fertilizers in the world. In 2004, the total consumption of fertilizers in China amounted to approximately 46.4 million tons, an increase of 11.8% from 2000.  The total consumption of fertilizers is expected to increase to 51 million tons by 2010 and 56 millions by 2020. We believe this trend will impact favorably on the demand for our products, and this will result in growth in sales of fertilizers and increased revenue for us.

A related trend that affects our industry is the growing demand for compound fertilizers. The percentage of compound fertilizer consumption to the total fertilizer consumption in China rose from 2% in 1980 to 26% in 2004. We believe our revenue will grow as a result of the continuing increase of the demand of compound fertilizers.

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The Chinese government strongly encourages the development of the agriculture industry and encourages companies in the agriculture sector to become bigger and build name recognition. We plan to utilize this regulatory and political policy support to expand our operations in various parts of China and to improve our name recognition in the market.

Our industry faces increasing competition. See "Business — Competition" in the Company’s Form 10-K filed on April 2, 2007.  The increased level of competition puts pressure on the sales prices of our products, which may result in lower margins for us.

Results of Operations

Year Ended December 31, 2006 Compared with Year Ended December 31, 2005

(All amounts, other than percentages, in millions of U.S. dollars)

	December 31,		Increase	% Increase
Item	2006	2005	(Decrease)	(% Decrease)
Sales Revenue	29.5	25.3	4.2	17%
Costs of Goods Sold	(14.1)	(12.8)	1.3	10%
Selling Expenses	(3.0)	(2.4)	0.6	25%
Operating and
Administrative
Expenses	(2.0)	(2.6)	(0.6)	(23%)
Income from
Operations	10.4	7.5	2.9	39%
Other income
(expenses)	0.1	0	0.1	n/a
Income tax	(4.3)	(3.2)	1.1	34%
Minority interest	(0.9)	(0.6)	0.3	50%
Net income	5.3	3.68	1.6	43%

Sales Revenues.  Sales revenues increased $4,190,261, or 17 % to $29,525,577 for the year ended December 31, 2006 from $25,335,316 for the year in 2005.  This increase was mainly attributable to the change of delivery time as well as improvement of product mix. In 2005, some orders that had historically been delivered in the third quarter were delivered earlier in the second quarter of 2005, while in 2006, this did not happen. In addition, we increased the sales of Tailong I, which has a higher selling price than our other products, from 1,209 tons of 2005 to 1,544 tons of 2006.

Cost of Goods Sold.  Our cost of goods sold increase $1,312,400, or 10% to $14,161,358 for the year ended December 31, 2006 from $12,848,958 in the same period in 2005. The increase was primarily due to an increase in sales of our fertilizer products which required us to purchase more raw materials. This increase was due to the increase of the sales revenue.  As a percentage of net revenues, the cost of goods sold decreased to 47.8% during the year ended December 31, 2006 from 50.6% in the same period of 2005.  Such increase of gross margin was mainly attributable to the reduced material cost as a result of improved production cost control measures, as well as increased sales of higher margin products.

Gross Profit.  Our gross profit increased $2,877,861 million to $15,364,219 million for the year ended December 31, 2006 from $12,486,358 for the same period in 2005.  Gross profit as a percentage of net revenues was 52.2 % for the year ended December 31, 2006, as compared to 49.4% during the same period in 2005.  Such increase was due to reduced material cost as a result of improved production cost control measures, as well as increased sales of higher margin products.

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Administrative Expenses. Our administrative expenses decreased $618,270, or 23%, to $2,015,252 for the year ended December 31, 2006 from $2,633,522 for the same period in 2005. As a percentage of net revenues, administrative expenses decreased to 6.8% for the year ended December 31, 2006 from 10.4% for the same period in 2005. This percentage decrease was primarily attributable to more efficient controls of our administrative expenses.

Amortization and depreciation. Our amortization and depreciation expenses increase $52,391, or 50.9%, to $155,292 for the year ended December 31, 2006 from $102,901 for the same period in 2005. As a percentage of net revenues, expenses associated with amortization and depreciation increased to 0.5 % for the year ended December 31, 2006 from 0.4 % for the same period in 2005.

Selling expenses. Our selling expenses increased $611,605, or 25%, to $2,983,756 for the year ended December 31, 2006 from $2,372,151 for the same period in 2005. As a percentage of net revenues, our selling expenses increased to 10.2% for the year ended December 31, 2006 from 9.5 % for the same period in 2005. This increase was primarily attributable to the expansion of our distribution network from northern China to southern China and the increase in our advertising activities.

Total expenses. Our total expenses decreased $6,665, or 0.1%, to $4,999,008 for the year ended December 31, 2006 from $5,005,673 for the same period in 2005. As a percentage of net revenues, our total expenses decreased to 16.9% for the year ended December 31, 2006 from 19.8% for the same period in 2005. This decrease was primarily attributable to more efficient controls of our administrative expenses.

Income from operations before taxes. Income from operations before taxes increased $2,979,713, or 39.8%, to $10,460,238 during the year ended December 31, 2006 from $7,480,525 during the same period in 2005. Income from operations before taxes as a percentage of net revenues increased to 35.6% during the year ended December 31, 2006 from 29.6% during the same period in 2005.

Provision for income taxes. Provision for income taxes increased $1,074,611, or 34%, to $4,248,144 during the year ended December 31, 2006 from $3,173,533 during the same period in 2005. Our effective tax rate for the year ended December 31, 2006, was 33%. Our 2007 effective tax rate is expected to be 33%.

Net income. Net income increased $1,673,459, or 46%, to $5,349,338 during the year ended December 31, 2006 from $3,675,879 during the same period in 2005, as a result of the factors described above.

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

(All amounts, other than percentages, in millions of U.S. dollars)

	December 31,		Increase	% Increase
Item	2005	2004	(Decrease)	(% Decrease)
Sales Revenue	25.3	15.8	9.4	60%
Costs of Goods Sold	(12.8)	(8.2)	4.6	56%
Selling Expenses	(2.4)	(1.4)	1.0	64%
Operating and
Administrative
Expenses	(2.6)	(0.5)	2.1	409%
Income from
Operations	7.5	5.7	1.8	32%
Other income
(expenses)	0	0	0	0
Income tax	(3.2)	(2.0)	1.2	60%
Minority interest	(0.6)	0	0.6	100%
Net income	3.68	3.75	(0.07)	(2%)

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Sales Revenue.

Our sales revenue in fiscal year 2005 was $25,335,316, which is approximately $9,485,272 or 60% more than that of fiscal year 2004, where we had revenue of $15,850,044. The increase in sales revenue is primarily the result of the expansion of our distribution network from northern China to southern China and the increase of our advertising activities. In 2005, sales to new customers amounted to approximately $2.2 million, representing 9% of the total revenue. In the meantime, we have also recorded increased sales to our existing customers. We plan to continue our efforts in expanding the markets for our products and we anticipate that our sales revenue will continue to grow.

Costs of Goods Sold.   Cost of goods sold, which consist of raw materials, direct labor and manufacturing overhead expenses, were $12,848,958 for the year ended December 31, 2005, a increase of $4,695,495 or 56%, as compared to $8,153,463 for the year ended December 31, 2004. The proportions of cost of sales to total revenues are 50.72% and 51.44% for the years of 2005 and 2004, respectively, a decrease of approximately 1%. The main reason for this decrease is an improvement in cost control measures.

Selling expenses.   Selling expenses, which consist primarily of sales commission, advertising and promotion expenses, freight charges and related compensation, were $2,372,151 in 2005, as compared to $1,443,943 in 2004, an increase of $925,208 or approximately 64%. We believe the increases in selling expenses were generally in line with the increase of sales revenue.

Operating and administrative expenses.   Our general and administrative expenses, which consist primarily of rental expenses, related salaries, business development, depreciation and traveling expenses, were $2,633,522 in 2005, as compared to $517,831 in 2004, an increase of $2,115,691 or approximately 409%.  This increase was mainly attributable to a one-time merger cost of $1,748,675, consisting of financial advisory fees, attorneys fees and other costs in connection with the reverse acquisition of Tailong in February 2005.  The increase is also attributable to an increase of $102,637 traveling expenses and an expense of $136,275 incurred by Tailong which had minimal operation before its acquisition of Pacific Dragon in October 2004. The traveling expenses increased because of our expanded marketing efforts.

Environmental Laws Compliance Costs.   We incurred no cost for environmental compliance in fiscal years 2005 and 2004.

Income From Operations.   Income from operations was $7,480,685 in 2005, as compared to $5,734,807 in 2004, an increase of $1,745,878 or approximately 32%. The increase was mainly attributable to the increased sales revenue.

Other income (expenses).    As we do not have any outstanding bank or other interest bearing borrowings, our financial expenses were approximately $160 and $115 in 2005 and 2004 respectively.

Income taxes.    Our Chinese subsidiaries are taxed at a rate of 33% of assessable profit. We incurred income taxes of $3,173,533 in 2005. This is an increase of $1,191,281or 60% from the taxes we incurred in 2004, which were $1,982,252. We paid more taxes in 2005 mostly because of higher income in 2005 compared to 2004.

Minority interest.    Our financial statements in 2005 reflect an adjustment to our consolidated group net income equal to $631,113, reflecting the 10% ownership of Pacific Dragon held by Yinlong. No minority interest was recorded in 2004.

On June 8, 2004, Tailong and the three owners of Pacific Dragon entered into a Capital Transfer Agreement whereby Tailong acquired 90% of the equity interest in Pacific Dragon. Before such acquisition, Pacific Dragon had effectively been controlled by Yinlong which was owned by the same stockholders as Tailong. As such, Tailong and Pacific Dragon were under common control. On such basis, the financial statements for the year ended December 31, 2004 are prepared by combining the accounts of Tailong and Pacific Dragon in a manner similar to the pooling of interest and no minority interest was recorded.

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In the financial statements for the year ended December 31, 2005, a minority interest was recorded because on February 3, 2005, China Agritech, a public company with numerous shareholders, acquired 100% of Tailong. As a result of such reverse acquisition, Yinlong, the 10% owner of Pacific Dragon, is no longer owned by the same stockholders as Tailong.

Net Income.   We earned net income of $3,675,879 in fiscal year of 2005. This is a decrease of $77,494 or approximately 2% from fiscal year 2004 which had a net income of $3,753,373. The decrease of our net income in 2005 was mainly attributable to the one-time merger cost of $1,748,675.

Foreign Currency Translation Gains

We had a foreign currency translation gain of $372,722 in fiscal year 2006 as compared with a foreign currency translation gain of $228,566 in 2005.

Liquidity and capital resources

As of December 31, 2006, we had cash and cash equivalents of $6,530,037. Our current assets were $28,512,791 and our current liabilities were $2,010,220 as of December 31, 2006 which results in a current ratio of approximately 14.2 Total stockholders' equity as of December 31, 2006, was $26,856,119.

We had no bank loans or other interest bearing borrowings as of December 31, 2006.

In fiscal year 2005, we raised a total of $1,350,000 from the sale of 590,283 (before the 1-for-1.14 forward stock split) and 235,516 (after the 1-for-1.14 forward stock split) shares of our common stock through private placement transactions. The proceeds from these private placement transactions were initially placed in an escrow account and are to be released upon the satisfaction of the conditions set out in certain Escrow Agreement we entered into pursuant to the stock purchase agreements with the private placement investors. As of December 31, 2005, $1,000,000 of the proceeds was released from the escrow account, the remaining $350,000 is held in escrow account for the purpose of disbursing expenses as set forth in the escrow agreements.

On January 13, 2006, we further sold 4,800,000 shares of our common stock to 22 investors for a total of $12,000,000. The shares were offered and sold to investors in reliance upon exemptions from the registration requirements of the Securities Act pursuant to Section 4(2) and Rule 506 thereunder.

We believe that our currently available working capital will be sufficient to maintain our operations at our current levels for the next twelve months. As of December 31, 2006 we did not have any material commitments for capital expenditures.

Critical Accounting Policies

The preparation of financial statements in conformity with U.S. GAAP requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any.  We consider our critical accounting policies to be those that require the more significant judgments and estimates in the preparation of financial statements, including the following:

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•

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 consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results. 

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Accounts Receivable: our policy is to maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. We had accounts receivable of $12,239,073 and $8,525,185, net of allowance of $170,236 and $164,739 as of December 31, 2006 and 2005, respectively. 

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Advances to suppliers: we permit advances to certain vendors for purchase of our material. The advances to suppliers amounted to $8,038,974 and $2,076,252 as of December 31, 2006 and 2005, respectively. 

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Inventories: inventories are valued at the lower of cost (determined on a first-in first-out basis) or net realizable value. The management compares the cost of inventories with the net realizable value and an allowance is made for writing down the inventories to their net realizable value, if lower than the cost. 

•

Impairment: we apply the provisions of Statement of Financial Accounting Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS No. 144"), issued by the Financial Accounting Standards Board ("FASB"). FAS No. 144 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

We test long-lived assets, including property, plant and equipment and intangible assets subject to periodic amortization, for recoverability at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater than its fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. We consider historical performance and future estimated results in our evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, we measure the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows as the rate we utilize to evaluate potential investments. We estimate fair value based on the information available in making whatever estimates, judgments and projections are considered necessary. There was no impairment of long-lived assets in the years ended December 31, 2006 and 2005.

•

Revenue Recognition: our revenue recognition policies are in compliance with Staff Accounting Bulletin (“SAB”) 104. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of our company exist and collectibility is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. Our revenue consists of invoiced value of goods, net of a value-added tax (“VAT”). No product return or sales discount allowance is made as products delivered and accepted by customers are normally not returnable and sales discount is normally not granted after products are delivered. All of our products that are sold in the PRC are subject to a Chinese value-added tax at a predetermined rate of 6% of the gross sales price. The total VAT paid for the year ended December 31, 2006 and 2005 were $1,749,001 and $1,532,000, respectively.

10

•

Foreign currency translation: we use U.S. dollars for financial reporting purposes. Our subsidiaries maintain their books and records in their functional currency, being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, we translate the subsidiaries' assets and liabilities into U.S. dollars using the applicable exchange rates prevailing at the balance sheet date, and the statement of income is translated at average exchange rates during the reporting period. Gain or loss on foreign currency transactions are reflected on the income statement. Gain or loss on financial statement translation from foreign currency are recorded as a separate component in the equity section of the balance sheet, as component of comprehensive income. The functional currency of our Company is Chinese Renminbi.

In particular, Renminbi is the functional currency of our operating subsidiary Pacific Dragon. Until July 21, 2005, RMB had been pegged to the U.S. dollar at the rate of RMB 8.28 : $1.00. On July 21, 2005, the PRC government reformed the exchange rate system into a managed floating exchange rate system based on market supply and demand with reference to a basket of currencies. In addition, the exchange rate of RMB to U.S. dollars was adjusted to RMB 8.11 : $1.00 as of July 21, 2005. The People's Bank of China announces the closing price of a foreign currency such as U.S. dollar traded against RMB in the inter-bank foreign exchange market after the closing of the market on each working day, which will become the unified exchange rate for the trading against RMB on the following working day. The daily trading price of U.S. dollars against RMB in the inter-bank foreign exchange market is allowed to float within a band of 0.3% around the unified exchange rate published by the People's Bank of China. This quotation of exchange rates does not imply free convertibility of RMB to other foreign currencies. All foreign exchange transactions continue to take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People's Bank of China. Approval of foreign currency payments by the People’s Bank of China or other institutions required submitting a payment application form together with invoices, shipping documents and signed contracts.

The rates used to translate Pacific Dragon's assets and liabilities at December 31, 2006 and its statement of income are RMB 1 : $0.128 and RMB 1 : $0.125, respectively. No representation is made that RMB amounts have been, or could be, converted into U.S. dollars at these rates.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Inflation

We believe that inflation has not had a material impact on our results of operations for the years ended December 31, 2006 and 2005. See also Item 1A of the Company’s Form 10-K filed on April 2, 2007 under “Risk Factors — Risks related to doing business in China — Future inflation in China may inhibit our ability to conduct business in China.”

Seasonality

We may experience seasonal variations in our future revenues and our operating costs due to seasonality, however, we do not believe that these variations will be material. However, weather may have a significant impact on our business as discussed under Item 1A of the Company’s Form 10-K filed on April 2, 2007 under the heading “Risk Factors — Risks related to our industry — Adverse weather conditions could reduce demand for our products.”

11

Item 8. Financial Statements and Supplementary Financial Data

The full text of our audited consolidated financial statements as of December 31, 2006 and 2005 begins on page F-1 of this Report.

Item 14. Principal Accountant Fees and Services

Kabani & Co. LLP, Certified Public Accountants, was the Company's independent registered public accounting firm engaged to examine the Company's consolidated financial statements for the fiscal year ended December 31, 2006 and 2005. Weinberg & Co., P.A. was the Company's independent registered public accounting firm engaged to examine the financial statements of the Registrant for the fiscal years ended January 31, 2004, 2003 and 2002.

Fees for the fiscal years ended December 31, 2006 and 2005

Audit Fees

The aggregate fees billed for each of the fiscal years ended December 31, 2006 and 2005 for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements and review of the financial statements included in the registrant's Form 10-QSB or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were approximately $81,311 and $227,688, respectively.  The fees for 2006 were paid to Kabani & Company, Inc. while fees for 2005 included payments to Kabani & Company, Inc. as well as to Weinberg & Company, P.A.

Audit Related Fees

The aggregate fees billed in the fiscal years ended December 31, 2006 and 2005 for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the registrant's financial statements and are not reported under the paragraph captioned "Audit Fees" above are $0 and $0, respectively.

Tax Fees

The aggregate fees billed in the fiscal years ended December 31, 2006 and 2005 for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning were approximately $1,100 and $1,000, respectively.

All Other Fees

The aggregate fees billed in the fiscal years ended December 31, 2006 and 2005 for products and services provided by the principal accountant, other than the services reported above under other captions of this Item 14 are $0 and $0, respectively.

12

Board of Directors Pre-Approval Policies and Procedures

Our Board of Directors has not adopted a policy to pre-approve audit and permissible non-audit services provided by our independent auditors.

PART IV

Item 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

2.1**

Agreement and Plan of Reorganization, dated as of December 25, 2004,  as amended,  by and among China  Agritech,  Inc. (then named Basic Empire Corp), Tailong Holdings and Tailong Holding Stockholders.

3.1**

Amended and Restated  Certificates of  Incorporation  of China Agritech, Inc.;

3.2**

Bylaws of China Agritech, Inc. adopted on 2005.

3.3**

Bylaws of Tailong adopted on October 21, 2003.

3.4**

Articles of  Association  of Pacific Dragon adopted on June 9, 2004.

10.1**

Transfer Agreement,  dated as of June 8,  2004,  by and among shareholders of Pacific Dragon

10.2**

Escrow Agreement dated January 25, 2005 by and among the Company, Chinamerica Fund, LLP, Gary Evans, and the Securities Transfer Corporation.

10.3**

Stock Purchase  Agreement dated February 3, 2005, by and among Chinamerica Fund, LLP, Gary Evans and the Company

10.4**

License Agreement between Chang Yu and Pacific Dragon dated January 6, 2005.

10.5**

Employment Contract between Chang Yu and Pacific Dragon.

10.6**

Lease between Pacific Dragon and Yinlong dated December 30, 2003.

10.7**

Transfer of Capital Contribution and Profit  Agreement dated June 8, 2004, by and among Tailong Holdings, Harbing Yinlong Co. Ltd., Beijing Taiming Applied Technology Institute, and Cathay-Pacific Enterprises Ltd.

10.8**

Joint Venture Contract of Sino-foreign Contractual Joint Venture Pacific Dragon dated June 9, 2004.

10.9**

Stock Purchase Agreement dated June 13, 2005 by and among Chinamerica Fund, LLP, Steven S. Taylor, Jr. and the Company.

10.12**

Amendment to the Lease Agreement, dated June 28, 2005, by and between Pacific Dragon Fertilizers Co. Ltd. and Yinlong Industrial Co. Ltd.

10.13**

Lease Agreement, dated May 31, 2004, by and between China Tailong Holdings Company Limited and Upgrade International Trading Co., Ltd.

10.14**

Lease Agreement, dated May 15, 2005, by and between China Tailong Holdings Company Limited and Beijing Guangxin Long'An Real Estate Brokerage Co., Ltd.

13

10.16**

Permanent License Agreement, dated December 3, 2005, by and between Yu Chang and Pacific Dragon Fertilizers Co. Ltd.

14**

Code of Ethics

21.1**

Subsidiaries of the Registrant

31.1*

Certification of Chief Executive Officer, pursuant to Rule 13a – 14(a)

31.2*

Certification of Chief Financial Officer, pursuant to Rule 13a – 14(a)

32.1*

Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*

Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Filed herewith

** Previously filed

 

14

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.  

	CHINA AGRITECH, INC.
April 19, 2007	By:/s/  Yu Chang
(Date Signed)	Yu Chang, Chief Executive Officer, President, and Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.  

Signature	Capacity	Date
/s/ Yu Chang Yu Chang	Chief Executive Officer, President, Secretary and Director	April 19, 2007
/s/ Li Jun Peng Li Jun Peng	Chief Financial Officer and Controller	April 19, 2007
/s/ Xiaorong Teng Xiaorong Teng	Vice President of Sales and Director	April 19, 2007
/s/ Tao Liang Tao Liang	Director	April 19, 2007

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders of
China Agritech and Subsidiaries
 

We have audited the accompanying consolidated balance sheet of China Agritech Inc. and Subsidiaries as of December 31, 2006, and the related consolidated statements of income, stockholders' deficit, and cash flows for the two year periods ended December 31, 2006. 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 audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of China Agritech Inc. and Subsidiaries as of December 31, 2006, and the consolidated results of their operations and their consolidated cash flows for the two year periods ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.
 

/s/ Kabani & Company, Inc.
Certified Public Accountants
 

Los Angeles, California
April 19, 2007

CHINA AGRITECH, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2006 AND 2005

		2006		2005
ASSETS
Current Assets
Cash and cash equivalents	$	6,430,009	$	255,831
Restricted cash		100,028		275,000
Accounts receivable, net		12,239,073		8,525,185
Inventories		1,322,244		72,827
Advances to suppliers		8,038,974		2,076,252
Prepayments and other receivables		382,463		376,064
Total Current Assets		28,512,791		11,581,159
Property, Plant and Equipment, net		2,514,123		1,065,146
Total Assets	$	31,026,914	$	12,646,305
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	108,886	$	115,024
Accrued expenses and other payables		871,495		616,363
Amount due to related parties		954		56,702
Tax payables		1,028,885		562,355
Total Current Liabilities		2,010,220		1,350,444
Minority Interests		2,160,575		1,237,910
Commitments		-		-
Stockholders' Equity
Common stocks; $0.001 par value, 100,000,000 shares
authorized, shares issued and outstanding 19,143,615
and 14,343,615		19,144		14,344
Additional paid-in capital		12,619,049		1,547,741
Statutory reserves		2,790,916		1,731,067
Accumulated other comprehensive income		601,288		228,566
Retained earnings		10,825,722		6,536,233
Total Stockholders' Equity		26,856,119		10,057,951
Total Liabilities and Stockholders' Equity	$	31,026,914	$	12,646,305

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

F-1

CHINA AGRITECH, INC. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004

		2006		2005		2004
Net revenue	$	29,525,577	$	25,335,316	$	15,850,044
Cost of revenue		(14,161,358)		(12,848,958)		(8,153,463)
Gross profit		15,364,219		12,486,358		7,696,581
Operating expenses
Selling expenses		(2,983,756)		(2,372,151)		(1,443,943)
Operating and administrative
expenses		(2,015,252)		(2,633,522)		(517,831)
Total operating expenses		(4,999,008)		(5,005,673)		(1,961,774)
Income from operations		10,365,211		7,480,685		5,734,807
Other income (expense)
Other (expense) income		98,617		-		933
Finance costs		(3,590)		(160)		(115)
Total other income
(expense)		95,027		(160)		818
Income before income
taxes and minority
interests		10,460,238		7,480,525		5,735,625
Provision for income taxes		(4,248,144)		(3,173,533)		(1,982,252)
Income before minority
interests		6,212,094		4,306,992		3,753,373
Minority interests		(862,756)		(631,113)		-
Net income		5,349,338		3,675,879		3,753,373
Other comprehensive
income
Foreign currency translation
adjustment		372,722		228,566		-
Other comprehensive
		5,722,060		3,904,445		3,753,373
income	$		$		$
Basic and diluted weighted
average shares outstanding		18,735,944		13,945,937		13,435,143
Basic and diluted net
earnings per share	$	0.29	$	0.26	$	0.28

Baisc and diluted weighted average shares outstanding are the same as there is no antidilutive effect.

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

F-2

CHINA AGRITECH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004

	Common stock
							Additional				Other
	Number of				Partners'		paid-in-		Statutory	comprehensive			Retained
	shares		Amount		capital		capital		reserves		income		earnings		Total
Balance at January 1,
2004	241,833	$	242	$	450,575	$	(241)	$	-	$	21,714	$	4,463,150	$	4,935,440
Stock issued for cash	11,849,796		11,850		-		(11,838)		-		-		-		12
Changes due to merger
between entities under
common control	-		-		(450,575)		276,131		-		797		-		(173,647)
Net income for the year	-		-		-		-		-		-		3,753,373		3,753,373
Dividend paid during the
year	-		-		-		-		-		-		(3,137,297)		(3,137,297)
Transfer to statutory
reserves	-		-		-		-		870,531		-		(870,531)		-
Balance at December 31,
2004	12,091,629		12,092		-		264,052		870,531		22,511		4,208,695		5,377,881
Recapitalization on
reverse acquisition	1,343,514		1,344		-		(1,344)		-		-		-		-
Stock issued for cash	908,472		908		-		1,349,092		-		-		-		1,350,000
Reclassification and
adjustment to minority
interest	-		-		-		(64,059)		(89,895)		(49,207)		(397,910)		(601,071)
Foreign currency
translation	-		-		-		-		-		255,262		-		255,262
Net income for the year	-		-		-		-		-		-		3,675,879		3,675,879
Transfer to statutory
reserves	-		-		-		-		950,431		-		(950,431)		-
Balance at December 31,
2005	14,343,615		14,344		-		1,547,741		1,731,067		228,566		6,536,233		10,057,951
Stock issued for cash	4,800,000		4,800		-		11,074,905		-		-		-		11,079,705
Stock option expenses	-		-		-		(3,597)		-		-		-		(3,597)
Foreign currency
translation	-		-		-		-		-		372,722		-		372,722
Net income for the year	-		-		-		-		-		-		5,349,338		5,349,338
Transfer to statutory
reserves	-		-		-		-		1,059,849		-		(1,059,849)		-
Balance at December 31,
2006	19,143,615	$	19,144	$	-	$	12,619,049	$	2,790,916	$	601,288	$	10,825,722	$	26,856,119

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

F-3

CHINA AGRITECH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004

		2006		2005		2004
Cash flows from operating activities:
Net income	$	5,349,338	$	3,675,879	$	3,753,373
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Stock based compensation		(3,597)		-		-
Minority Interest		862,756		631,113		-
Depreciation		155,292		102,901		103,679
Loss on disposal of fixed assets		-		-		36,141
Delivery charges		-		-		(387)
Decrease / (Increase) in current assets:
Accounts receivable		(3,357,026)		(2,759,236)		(3,581,853)
Other receivables		55,024		(65,730)		103,886
Inventory		(1,502,205)		487,630		431,537
Advances to suppliers		(5,769,071)		(1,914,346)		-
Prepayments		(62,887)		100,289		232,500
Other assets		2,024		(226,162)		-
(Decrease) / Increase in current liabilities:
Accounts payable		262,020		(281,234)		127,299
Tax payables		365,731		131,998		(50,489)
Accrued expenses and other payables		305,739		280,280		(23,712)
Net cash provided by (used in) operating activities		(3,336,862)		163,382		1,131,974
Cash flows from investing activities:
Acquisition of property & equipment		(1,541,812)		(8,238)		(11,789)
Restricted cash		174,972		(275,000)		-
Proceeds from disposal of fixed assets		-		-		205
Net cash used in investing activities		(1,366,840)		(283,238)		(11,584)
Cash flows from financing activities:
Repayment of instalment loan		-		-		(9,639)
Payments to shareholders / related parties		(51,312)		(1,026,846)		2,053,998
Capital contributed		11,079,705		1,350,000		12
Dividend paid		-		-		(3,137,297)
Net cash provided by (used in) financing activities		11,028,393		323,154		(1,092,926)
Net increase in cash and cash equivalents		6,324,691		203,298		27,464
Effect of exchange rate change on cash and cash equivalents		(150,513)		14,468		-
Cash and cash equivalents, beginning of year		255,831		38,065		10,601
Cash and cash equivalents, end of year	$	6,430,009	$	255,831	$	38,065
Supplement disclosure of cash flow information:
Interest expense paid	$	3,590	$	160	$	115
Income taxes paid	$	3,760,570	$	3,043,223	$	2,066,497
Cash from issue of common stock placed in escrow account	$	11,079,705	$	1,350,000	$	12

F-4

CHINA AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION AND DESCRIPTION OF BUSINESS

China Agritech, Inc. (the "Company") was originally incorporated on January 5, 1925 under the laws of the State of Nevada as Argyle Mining Company for the development of mining claims. Throughout our existence we have changed our business model several times, and conducted no substantive business from 1986 until February 2005 as discussed below.

On August 10, 2004, we merged with and into a newly formed wholly-owned Delaware subsidiary of the same name for the purpose of changing our corporate domicile from Nevada to Delaware.

We have experienced several corporate name changes as follows: Argyle Corporation in January 1960, Basic Empire in November 1963, Basic Empire Corp in December 1976 and China Agritech, Inc. in May 2005.

On December 25, 2004, the Company, China Tailong Holdings Company Limited ("Tailong"), and the stockholders of Tailong (the "Tailong stockholders") entered into the Agreement and Plan of Reorganization ("Reorganization Agreement"), as amended and such Reorganization became effective on February 3, 2005. The Reorganization Agreement provided for the acquisition by the Company from the Tailong stockholders of all of the issued and outstanding Tailong shares in exchange for 10,606,158 shares of newly issued restricted common stock of the Company, whereby the Tailong stockholders obtained control of the Company. In this connection, Tailong became a wholly-owned subsidiary of the Company.

As a result of the acquisition of Tailong, the Company became a fertilizer manufacturer and conducts operations in the People's Republic of China (the "PRC") through its wholly-owned subsidiary, Tailong and Tailong's 90% owned subsidiary, Pacific Dragon Fertilizers Co. Ltd. ("Pacific Dragon").

Tailong was incorporated on October 27, 2003 under the laws of Hong Kong. On October 9, 2004, Tailong acquired 90% of Pacific Dragon, which conducts Tailong's only business operation. Pacific Dragon is a foreign investment joint venture and was incorporated in the PRC on May 20, 1994. Pacific Dragon is classified as a Foreign Invested Enterprise ("FIE") in the PRC and is subject to the FIE laws of the PRC. Its legal structure is similar to a limited liability company organized under state laws in the United States. The Articles of Associations provide for a term of 15 years with registered capital of $500,000. Pacific Dragon engages in the business of manufacturing and marketing a series of organic liquid compound fertilizers. These products are marketed and sold to farmers in 11 provinces of China. Pacific Dragon conducts ongoing research and development to enhance concentration of the organic liquid compound fertilizer and lower the manufacturing cost. The principal researchers in Pacific Dragon are Liu Shuhua and Liu Kangde. Our major products include "LvLingBao II", LvLingBao III" and "Tailong I".

Prior to the acquisition of Tailong, the Company was a non-operating public shell corporation. Pursuant to Securities and Exchange Commission rules, the merger or acquisition of a private operating company into a non-operating public shell corporation with nominal net assets is considered a capital transaction in substance, rather than a business combination. Accordingly, for accounting purposes, the transaction has been treated as a reverse acquisition and a recapitalization, and pro-forma information is not presented. Transaction costs incurred in the reverse acquisition have been charged to expense.

F-5

1.   ORGANIZATION AND DESCRIPTION OF BUSINESS (CONT’D)

On April 21, 2005, the Company filed a Form Definitive 14C - Information Statement pursuant to Section 14(c) of the Securities Exchange Act of 1934 giving notice that the Company received written consents in lieu of a meeting from the holders of a majority of the Company's issued and outstanding common stock of a proposal to amend and restate the Company's Certificate of Incorporation (the "Restatement") to effect, among other things, a forward stock split whereby each share of issued and outstanding common stock is converted into 1.14 shares of the Company's common stock. The Form Definitive 14C became effective on May 12, 2005 when the Company filed its amended and restated Certificate of Incorporation with the Secretary of the State of Delaware. The effect of this action is reflected in the Company's financial statements as of the first day of the first period presented.

On June 29, 2006, the Company established a wholly owned subsidiary, Anhui Agritech Agriculture Development Limited (“Anhui Agritech”). Anhui Agritech engages in the business of manufacturing and marketing in series of organic liquid compound fertilizers.

On November 1, 2006, the Company and the stockholders of CAI Investment, Inc (the “CAI stockholders”) entered into an equity transfer agreement.  The CAI stockholders shall transfer 100% equity interest in CAI Investment, Inc. (“CAI”) to the Company in exchange for USD1,000.

Prior to the equity transfer, CAI established a wholly owned subsidiary, Agritech Fertilizer Limited (“Agritech Fertilizer”). Agritech Fertilizer engages in the business of manufacturing and marketing in series of organic liquid compound fertilizers.

2.  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.   Principle of consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Tailong, Anhui Agritech, Agritech Fertilizer and its 90% owned subsidiary, Pacific Dragon (collectively "the Company"). All significant inter-company accounts and transactions have been eliminated in consolidation.

b.   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 consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.

c.   Cash and cash equivalents

For Statement of Cash Flows purposes, the Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.

d.   Accounts receivable

The Company's policy is to maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. As of December 31, 2006 and 2005, the Company had accounts receivable of $12,239,073 and $8,525,185, net of allowance of $170,236 and $164,739, respectively.

F-6

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

e.   Advances to suppliers

The Company advances to certain vendors for purchase of its material. As of December 31, 2006 and 2005, the advances to suppliers amounted to $8,038,974 and $ 2,076,252, respectively.

f.   Inventories

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

g.   Property, plant and equipment

Property, plant and equipment are recorded at cost. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extend the life of plant, property, and equipment are capitalized. These capitalized costs may include structural improvements, equipment, and fixtures. All ordinary repair and maintenance costs are expensed as incurred.

Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets: 5 to 15 years for machinery; 3 to 5 years for leasehold improvement, 5 to 10 years for office equipment; and 3 to 5 years for motor vehicles.

h.   Impairment

The Company applies the provisions of Statement of Financial Accounting Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS No. 144"), issued by the Financial Accounting Standards Board ("FASB"). FAS No. 144 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

The Company tests long-lived assets, including property, plant and equipment and intangible assets subject to periodic amortization, for recoverability at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater than its fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments. The Company estimates fair value based on the information available in making whatever estimates, judgments and projections are considered necessary. There was no impairment of long-lived assets for the years ended December 31, 2006 and 2005.

i.   Revenue recognition

The Company's revenue recognition policies are in compliance with Staff accounting bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectibility is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

F-7

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

The Company's revenue consists of invoiced value of goods, net of a value-added tax (VAT). No product return or sales discount allowance is made as products delivered and accepted by customers are normally not returnable and sales discount is normally not granted after products are delivered.

j.   Advertising costs

The Company expenses the cost of advertising as incurred or, as appropriate, the first time the advertising takes place. Advertising costs for the years ended December 31, 2006, 2005 and 2004 were $686,384, $428,040, and $246,840, respectively.

k.   Income taxes

The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for 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. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

The Company records a valuation allowance for deferred tax assets, if any, based on its estimates of its future taxable income as well as its tax planning strategies when it is more likely than not that a portion or all of its deferred tax assets will not be realized. If the Company is able to utilize more of its deferred tax assets than the net amount previously recorded when unanticipated events occur, an adjustment to deferred tax assets would increase the Company net income when those events occur. The Company does not have any significant deferred tax asset or liabilities in the PRC tax jurisdiction.

l.   Foreign currency translation

The Company uses the United States dollar ("U.S. dollars") for financial reporting purposes. The Company's subsidiaries maintain their books and records in their functional currency, being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, the Company translates the subsidiaries' assets and liabilities into U.S. dollars using the applicable exchange rates prevailing at the balance sheet date, and the statement of income is translated at average exchange rates during the reporting period. Gain or loss on foreign currency transactions are reflected on the income statement. Gain or loss on financial statement translation from foreign currency are recorded as a separate component in the equity section of the balance sheet, as component of comprehensive income. The functional currency of the Company is Chinese Renminbi.

In particular, Renminbi ("RMB"), the PRC's official currency, is the functional currency of Pacific Dragon. Until July 21, 2005, RMB had been pegged to US$ at the rate of RMB8.28: US$1.00. On July 21, 2005, the PRC government reformed the exchange rate system into a managed floating exchange rate system based on market supply and demand with reference to a basket of currencies. In addition, the exchange rate of RMB to US$ was adjusted to RMB8.11: US$1.00 as of July 21, 2005. The People's Bank of China announces the closing price of a foreign currency such as US$ traded against RMB in the inter-bank foreign exchange market after the closing of the market on each working day, which will become the unified exchange rate for the trading against RMB on the following working day. The daily trading price of US$ against RMB in the inter-bank foreign exchange market is allowed to float within a band of 0.3% around the unified exchange rate published by the People's Bank of China. This quotation of exchange rates does not imply free convertibility of RMB to other foreign currencies. All foreign exchange transactions continue to take place either through the Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People's Bank of China. Approval of foreign currency payments by the Bank of China or other institutions required submitting a payment application form together with invoices, shipping documents and signed contracts.

F-8

The rates used to translate subsidiaries' assets and liabilities at December 31, 2006 and its statement of income are RMB1:US$0.128138 and RMB1:US$0.125434, respectively. No representation is made that RMB amounts have been, or could be, converted into US$ at these rates.

F-9

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

m.   Fair values of financial instruments

Statement of Financial Accounting Standard No. 107, "Disclosures about Fair Value of Financial Instruments", requires that the Company disclose estimated fair values of financial instruments.

The Company's financial instruments primarily consist of cash and cash equivalents, accounts receivable, other receivables, advances to suppliers, accounts payable, other payable, tax payable, and related party advances and borrowings.

As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheet. This is attributed to the short maturities of the instruments and that interest rates on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profile at respective balance sheet dates.

n.   Earning per share (EPS)

Earnings per share is calculated in accordance with the Statement of financial accounting standards No. 128 (SFAS No. 128), “Earnings per share”. SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15). Earnings per share for all periods presented has been restated to reflect the adoption of SFAS No. 128. Basic earnings per share is based upon the weighted average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

Basic and diluted earning per share were $0.29, $0.26, and $0.28 for the years ended December 31, 2006, 2005 and 2004.

o.   Segment reporting

Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure About Segments of an Enterprise and Related Information" requires use of the "management approach" model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

SFAS No. 131 has no effect on the Company's consolidated financial statements as the Company operates in one reportable business segment – manufacture and marketing of fertilizers in China.

p.   Statement of cash flows

In accordance with Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows," cash flows from the Company's operations is calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.

F-10

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

q.   Recent accounting pronouncements

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

In March 2006 FASB issued SFAS 156 'Accounting for Servicing of Financial Assets' this Statement amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. This Statement:

1.    Requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract.

2.    Requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable.

3.    Permits an entity to choose 'Amortization method' or Fair value measurement method' for each class of separately recognized servicing assets and servicing liabilities.

4.    At its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under Statement 115, provided that the available-for-sale securities are identified in some manner as offsetting the entity's exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value.

5.    Requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities. An entity should adopt this Statement as of the beginning of its first fiscal year that begins after September 15, 2006. Management believes that this statement will not have a significant impact on the financial statement.

In September 2006, FASB issued SFAS 157 ‘Fair Value Measurements’.  This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements.  However, for some entities, the application of this Statement will change current practice.  This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The management is currently evaluating the effect of this pronouncement on the consolidated financial statements.

F-11

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

In September 2006, FASB issued SFAS 158 ‘Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)’ This Statement improves financial reporting by requiring an employer to recognize the over funded or under funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. An employer without publicly traded equity securities is required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007. However, an employer without publicly traded equity securities is required to disclose the following information in the notes to financial statements for a fiscal year ending after December 15, 2006, but before June 16, 2007, unless it has applied the recognition provisions of this Statement in preparing those financial statements:

1.    A brief description of the provisions of this Statement

2.    The date that adoption is required

3.    The date the employer plans to adopt the recognition provisions of this Statement, if earlier.

The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The management is currently evaluating the effect of this pronouncement on the consolidated financial statements.

In February 2007, FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. FAS 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted subject to specific requirements outlined in the new Statement. Therefore, calendar-year companies may be able to adopt FAS 159 for their first quarter 2007 financial statements.

The new Statement allows entities to choose, at specified election dates, to measure eligible financial assets and liabilities at fair value that are not otherwise required to be measured at fair value. If a company elects the fair value option for an eligible item, changes in that item's fair value in subsequent reporting periods must be recognized in current earnings. FAS 159 also establishes presentation and disclosure requirements designed to draw comparison between entities that elect different measurement attributes for similar assets and liabilities.

r.   Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

3.   RESTRICTED CASH

Proceeds amounting $1,350,000 from the issuance of shares during the year 2005 were deposited in an escrow account. The purchase price was to be released from escrow. In accordance with the terms of the stock purchase agreement, $600,000 of the proceeds was kept in a trust account for certain corporate communication program. At December 31, 2006 and 2005, the Company had $100,028 and $275,000 in this account for the corporate communication program.

F-12

4.   INVENTORIES

Inventories consist of the following as of December 31, 2006 and 2005:

		2006		2005
Raw materials	$	483,100	$	18,980
Packing materials		46,133		18,968
Finished goods		791,380		34,879
Work-in-progress		1,631		-
	$	1,322,244	$	72,827

5.   PREPAYMENTS AND OTHER RECEIVABLE

As of December 31, 2006 and 2005, Company had prepayments and other receivable was amounted to $382,463 and $376,064, respectively and include mainly prepaid rent and advanced travel expenses to employees.

6.   PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following as of December 31, 2006 and 2005:

		2006		2005
Manufacturing machinery	$	2,388,716	$	1,171,266
Leasehold improvements		57,706		1,471
Office equipment		228,172		84,155
Motor vehicles		342,570		142,095
		3,017,164		1,398,987
Less: Accumulated depreciation		(503,041)		(333,841)
	$	2,514,123	$	1,065,146

Depreciation expenses for the years ended December 31, 2006, 2005 and 2004 were $155,292, $102,901 and $103,679, respectively.

7.   AMOUNT DUE TO RELATED PARTIES

The amount due to related parties were the advances to the Company’s officers and shareholders, and was unsecured, non-interest bearing and due on demand. As of December 31, 2006 and 2005, due to related parties amounted to $954 and $56,702, respectively.

8.   ACCOUNTS PAYABLE

Accounts payable consist of the following as of December 31, 2006 and 2005:

		2006		2005
Accounts payable are mainly payable to vendors	$	108,886	$	115,024

F-13

9.   ACCRUED EXPENSES AND OTHER PAYABLES

Accrued expenses and other payables of the following as of December 31, 2006 and 2005:

As of December 31, 2006, accrued expenses include $577,571 accrued commission payables, $90,000 accrued professional expenses, and $17,678 other accrued expenses. Other payables include $148,395 vendor deposits and $37,851 payables to other parties.

As of December 31, 2005, accrued expenses include $310,683 accrued commission payables, $60,000 accrued professional expenses, and $219,757 other accrued expenses. Other payables include $25,923 vendor deposits and payable to other parties.

10.  TAX PAYABLES

Tax payables consist of the following as of December 31, 2006 and 2005:

		2006		2005
Income tax payable	$	880,716	$	544,215
VAT tax payable		144,641		18,140
Individual income tax payable		1,002		-
Others		2,526		-
	$	1,028,885	$	562,355

11.  OTHER INCOME (EXPENSES)

Other income (expenses) consists of the following as of December 31, 2006, 2005 and 2004:

		2006		2005		2004
Interest income	$	115,162	$	-	$	933
Listing fees		(2,852)		-		-
Exchange gain (loss)		(13,693)		-		-
Financial cost		(3,590)		(160)		(115)
	$	95,027	$	(160)	$	818

12.   INCOME TAXES

The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

F-14

The Company is subject to PRC Enterprise Income Tax at a rate of 33% on the net income. The income tax expenses for the years ended December 31, 2006, 2005 and 2004 are $4,248,144, $3,173,533 and $1,982,252 respectively.

	2006	2005	2004
Tax at statutory rate	34%	34%	34%
Foreign tax rate difference	-1%	-1%	-1%
	33%	33%	33%

Net operating loss carry forward for the US and Hong Kong tax jurisdictions amounted to $1,460,000, $2,004,000 and $0, for the years ended December 31, 2006, 2005, and 2004, respectively. A 100% valuation allowance has been recorded for the deferred tax asset of $746,400 due to uncertainty of its realization. There were no other significant book and tax basis difference.

13.   MAJOR CUSTOMERS AND VENDORS

There were no major customers which accounting over 10% of the total net revenue for the year ended December 31, 2006 and 2005. Ten major customers accounted for 34% and 49% of the net revenue for the years ended December 31, 2006 and 2005, respectively. The Company had $2,982,820 and $2,736,378 accounts receivable to theses customers as of December 31, 2006 and 2005, respectively.

Three vendors provided 76% of the Company’s purchase of raw materials for the year ended December 31, 2006 with each vendor individually accounting for about 34%, 27% & 15%. Three vendors provided 79% of the Company’s purchase of raw material for the year ended December 31, 2005 with each individually accounting for about 65%, 18% and 8%. The Company had $74,785 and $53,922 accounts payable to these vendors as of December 31, 2006 and 2005, respectively.

The Company extends credit to its customers based upon its assessment of their credit worthiness and generally does not require collateral. Credit losses have not been significant.

14. RELATED PARTY TRANSACTIONS

On January 6, 2005, Pacific Dragon entered into a License Agreement with Mr. Chang Yu, director of the Company. Under this License Agreement, Mr. Chang Yu authorized Pacific Dragon to use the know-how in manufacturing organic liquid compound fertilizer owned by him for free until December 31, 2009.

The Company's PRC subsidiary, Pacific Dragon, has entered into a tenancy agreement with Harbin Yinlong Enterprise Co. Ltd. ("Yinlong"), the joint venture partners holding 10% equity interest in Pacific Dragon to lease two factory plants and one office building with a total floor area of 7,018 sq. meters for a term of 10 years from January 1, 2004 to December 31, 2013 at an annual rent of RMB1,200,000 (equivalent to $144,578). The tenancy agreement was revised by increasing the annual rent to RMB3,600,000 (equivalent to $442,800) effective from July 1, 2005. During the years ended December 31, 2006 and 2005, the Company paid RMB 3,600,000 (equivalent to $451,562) and RMB2,400,000 (equivalent to $295,200) to Yinlong respectively.

15. MINORITY INTEREST

The amounts of $2,160,575 and $1,237,910, as of December 31, 2006 and 2005, represent the minority shareholder, Harbin Yinlong Enterprise Co., Ltd., a related party of the Company, interest in Pacific Dragon, a 90% subsidiary.

F-15

16. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS

Pacific Dragon's operations are all carried out in the PRC. Accordingly, Pacific Dragon's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC's economy.

Pacific Dragon's operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in the North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. Pacific Dragon's results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

17. STOCKHOLDERS’ EQUITY

Pursuant to the Reorganization Agreement (as defined in Note 1 "Organization and Description of Business" above), the Company issued 10,606,158 shares of newly issued restricted common stock in exchange for all of the issued and outstanding common stock of Tailong.

On February 3, 2005, and following the combination with Tailong, the Company completed the sale of 590,283 shares of its restricted common stock ("Private Placement Shares") for $1.6941 per share for a total of $1,000,000 to accredited investors pursuant to the stock purchase agreement dated February 3, 2005.

On May 12, 2005, the Company made a forward stock split whereby each share of issued and outstanding common stock is converted into 1.14 shares of the Company's common stock. As a result, the common stock amount has been increased proportionately based on the forward stock split ratio and the additional paid-in capital has been reduced by the same amount.

On June 13, 2005, the Company entered into a stock purchase agreement for the sale of 235,516 shares of the Company's common stock for $1.4861 per share for a total of $350,000. Out of the amount of $350,000 received, $275,000 was held in escrow at December 31, 2005 for the purpose of disbursing expenses as set forth in the escrow agreement. The funds shall be released subject to the fulfillment of the conditions set out in the escrow agreement entered into by the Company pursuant to the stock purchase agreements.

On January 13, 2006, the Company entered into a stock purchase agreement for the sale of 4,800,000 shares of the Company's common stock for $2.50 per share for a total of $12,000,000. The proceeds have been received in March, 2006. The direct costs related to this stock sale, including legal and professional fees, were deducted from the related proceeds and the net amount in excess of par value was recorded as additional paid-in capital.

18. STOCK OPTIONS

The Company adopted SFAS No. 123 (Revised 2004), Share Based Payment ("SFAS No. 123R"), under the modified-prospective transition method on January 1, 20066. SFAS No. 123R requires companies to measure and recognize the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value. Share-based compensation recognized under the modified-prospective transition method of SFAS No. 123R includes share-based compensation based on the grant-date fair value determined in accordance with the original provisions of SFAS No. 123, Accounting for Stock-Based Compensation, for all share-based payments granted prior to and not yet vested as of January 1, 2006 and share-based compensation based on the grant-date fair-value determined in accordance with SFAS No. 123R for all share-based payments granted after January 1, 2006. SFAS No. 123R eliminates the ability to account for the award of these instruments under the intrinsic value method proscribed by Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and allowed under the original provisions of SFAS No. 123. Prior to the adoption of SFAS No. 123R, the Company accounted for our stock option plans using the intrinsic value method in accordance with the provisions of APB Opinion No. 25 and related interpretations.

F-16

Primarily as a result of adopting SFAS No. 123R, the Company recognized $3,597 in share-based compensation expense for the year ended December 31, 2006 and $0 for the year ended December 31, 2005 as there was no stock options issued in year 2005. The impact of this share-based compensation expense on the Company's basic and diluted earnings per share was $0.00 per share. The fair value of our stock options was estimated using the Black-Scholes option pricing model.

On May 10, 2006, the Company granted an unrelated party 125,000 stock options vesting over 5 years proportionately.  The option exercise price is $3.50. The fair value of the shares at the time of granting of the options was $3.00. Following is a summary of the stock option activity:

	Options outstanding	Weighted Average Exercise Price	Aggregate Intrinsic Value
Outstanding, December 31, 2005	0	$0.00	$0.00
Granted	125,000	$3.50	$0.00
Forfeited	-	-	-
Exercised	-	-	-
Outstanding, December 31, 2006	125,000	$3.50	$0.00

Following is a summary of the status of options outstanding at December 31, 2006:

Outstanding Options			Exercisable Options
Exercise Price	Number	Average Remaining Contractual Life	Average Exercise Price	Number	Average Exercise Price
$3.50	125,000	4.25	$3.50	125,000	$3.50

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

Risk-free interest rate	6.0%
Expected life of the options	5.00 years
Expected volatility	80%
Expected dividend yield	0

19. STATUTORY RESERVES

As stipulated by the Company Law of the People's Republic of China (PRC), net income after taxation can only be distributed as dividends after appropriation has been made for the following:

i)    Making up cumulative prior years' losses, if any;

ii)   Allocations to the "Statutory surplus reserve" of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital;

iii) Allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company's "Statutory common welfare fund", which is established for the purpose of providing employee facilities and other collective benefits to the Company's employees; and

iv) Allocations to the discretionary surplus reserve, if approved in the shareholders' general meeting.

F-17

In accordance with the Chinese Company Law, the company has allocated 10% of its net income to surplus. The amount included in the statutory reserves as of December 31, 2006 and 2005 amounted to $1,860,610 and $1,169,455, respectively.

The Company established a reserve for the annual contribution of 5% of net income to the common welfare fund. The amount included in the statutory reserves as of December 31, 2006 and 2005 amounted to $930,306 and $561,612, respectively.

20.  COMMITMENTS AND LEASES

The Company incurred rent expenses $621,106 and $461,580 for the years ended December 31, 2006 and 2005. The rent expenses for the next five years after December 31, 2006 are as follows:

Year 2007	$	635,515
Year 2008		557,918
Year 2009		546,892
Year 2010		546,892
Year 2011		524,941
Year 2012 and thereafter		992,434
	$	3,804,592

F-18

Exhibit 31.1

CERTIFICATION

I, Yu Chang, the Chief Executive Officer and President of China Agritech, Inc. certify that:

1.     I have reviewed this annual report on Form 10-K/A of China Agritech, Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)     designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)     evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)     disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)     all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)     any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ Yu Chang
	Yu Chang
	Chief Executive Officer, President and Secretary
April 19, 2007

Exhibit 31.2

CERTIFICATION

I, Li Jun Peng, the Chief Financial Officer of China Agritech, Inc. certify that:

1.     I have reviewed this annual report on Form 10-K/A of China Agritech, Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)     designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)     evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)     disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)     all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)     any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/s/ Li Jun Peng
	Li Jun Peng
	Chief Financial Officer and Controller
April 19, 2007

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of China Agritech, Inc. (the "Company") on Form 10-K/A for the period ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Yu Chang, the Chief Executive Officer, President and Secretary of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)     The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)     The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Yu Chang

Yu Chang

Chief Executive Officer, President and Secretary

April 19, 2007

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of China Agritech, Inc. (the "Company") on Form 10-K for the period ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Li Jun Peng, the Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)     The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)     The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Li Jun Peng

Li Jun Peng

Chief Financial Officer and Controller

April 19, 2007