**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form
      10-KSB/A**





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


FOR
      THE
      FISCAL YEAR ENDED: **December
      31, 2007**





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




**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


(Exact
      name of registrant as specified in its charter)





**Delaware**
            **000-04494**
            **13-5661446**(State
                or other jurisdiction of
              incorporation)
            (Commission
                File Number)
            (IRS
                Employer
              Identification
                Number)





**Wenyang
      Town**


**Feicheng
      City**


**Shandong,
      China 271603**


(Address
      of principal executive offices)


Registrant’s
      telephone number, including area code: **86
      538 3850 703**





Securities
                registered under Section 12(b) of the Exchange Act:
            NoneSecurities
                registered under Section 12(g) of the Exchange Act:
            Common
                Stock, par value $0.001





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





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will 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-KSB or any
      amendment to this Form 10-KSB. x





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





State
      issuer's revenues for its most recent fiscal year: $38,407,800





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such common equity, as of a
      specified date within the past 60 days. (See definition of affiliate in Rule
      12b-2 of the Exchange Act.) As of April 14, 2008 $11,276,150





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the latest practicable date: As of April 14, 2008, the Company had
      26,000,000 shares issued and outstanding.





Transitional
      Small Business Disclosure Format (Check one): Yes  ̈ ;  No x





**EXPLANATORY
      NOTE:**





This
      Form
      10-KSB/A amends and supplants the Form 10-KSB filed on April 15, 2008 by China
      RuiTai International Holdings Co., Ltd., a Delaware corporation.





**PART
      I**





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





**Business
      Development**





China
      RuiTai International Holdings Co., Ltd. (hereinafter referred to as “we”, “us”,
“our”, the “Company”, or the “Registrant”) was organized under the laws of the
      State of Delaware on November 15, 1955, under the name "Inland Mineral Resources
      Corp." We were formed for the purpose of engaging in all lawful businesses.
      Our
      initial authorized capital consisted of 2,000,000 shares of $0.01 par value
      common voting stock.





Currently,
      the Registrant, through its wholly-owned subsidiary, Pacific Capital Group
      Co.,
      Ltd., (“Pacific Capital Group”) a corporation incorporated under the laws of the
      Republic of Vanuatu and its majority-owned subsidiary, TaiAn RuiTai Cellulose
      Co., Ltd., (“TaiAn”) a Chinese limited liability company, is engaged in the
      production, sales, and exportation of deeply processed chemicals, with a primary
      focus on non-ionic cellulose ether products in the Peoples Republic of China
      (“PRC”).





**Charter
      Amendments and Re-capitalizations**




The
      following amendments and/or re-capitalizations were effected by us in accordance
      with the Delaware General Corporations Code:




*
      On May
      8, 1968 our authorized shares were increased to 5,000,000 shares of $0.01 par
      value common voting stock.




*
      On
      April 25, 1969, our name was changed to "Parker-Levitt Corporation," and we
      also
      increased our authorized capital to 20,000,000 shares, comprised of 15,000,000
      shares of $0.01 par value common voting stock, and 5,000,000 shares of $0.01
      par
      value preferred stock.




*
      On
      November 19, 1976, we changed our name to "Commercial Property Corp."




*
      On
      December 13, 1976, our name was changed back to "Parker-Levitt
      Corporation.”




*
      On June
      23, 1977, we changed our name to "Commercial Property Corporation.”




*
      On
      October 18, 1982, our authorized capital was reduced to 3,000,000 shares of
      $0.01 par value common voting stock only.




*
      On
      April 1, 1998 the Registrant effected a 1-for-100 reverse stock split of the
      Registrant’s outstanding common stock. The Board of Directors determined that no
      shareholder should have their share holdings reduced to less than 50 shares;
      therefore, an additional 56,632 shares of common stock were issued in
      conjunction with the reverse stock split.




*
      On
      December 23, 2004, we filed Amended and Restated Articles of Incorporation
      with
      the State of Delaware to: (i) authorize 10,000,000 shares of preferred stock
      with $0.001 par value; (ii) authorize 50,000,000 shares of common
      stock with $0.001 par value; (iii) change the common stock par value from $0.01
      par value to $0.001; (iv) allow for forward and reverse pro rata stock splits
      without stockholder approval; (v) allow the Board of Directors to change our
      name without stockholder approval; and (vi) to opt out of Delaware corporate
      law
      control share acquisition provisions.


2




*
      In
      March 2005, the Registrant effected a two for one dividend with a mandatory
      exchange of stock certificates resulting in a two for one forward stock split
      while retaining our authorized capital and par value, with appropriate
      adjustments in our stated capital and capital surplus accounts.




*
      On
      November 15, 2006, as reported on the Form 8-K Current Report filed with the
      Securities and Exchange Commission on November 20, 2006, we changed our name
      from “Commercial Property Corporation” to “Shandong Ruitai Chemical Co. Ltd.”
The change of the name was made pursuant to Section 253 of the Delaware General
      Corporation Law after the wholly-owned subsidiary of the Registrant merged
      with
      and into the Registrant with the Registrant surviving the merger.





*
      Effective, March 12, 2007, pursuant to Amended and Restated Articles of
      Incorporation filed with the State of Delaware, the Registrant changed its
      name
      from “Shandong RuiTai Chemical Co. Ltd.” to China RuiTai International Holdings
      Co., Ltd.




All
      computations herein take into account all of the foregoing
      re-capitalizations.





**Historical
      Business Operations**





Subsequent
      to our inception, we entered into several business acquisitions with
      subsidiaries and held various limited partnership interests related to real
      property development. These operations were not successful, and we discontinued
      the majority of our operations by 1981. We were dormant as the result of the
      revocation of our corporate charter by the State of Delaware due to our failure
      to pay the required franchise taxes from 1984 until 1997. In 1997, our corporate
      charter was reinstated. From 1997 until November 2007 we did not conduct any
      material business operations.





As
      disclosed on Forms 8-K filed with the Securities and Exchange Commission on
      September 5, 2007 and November 9, 2007, on August 29, 2007, the Registrant
      entered into a Share Exchange Agreement (the “Exchange Agreement”) with Pacific
      Capital Group, and the shareholders of Pacific Capital Group (the
“Shareholders”). Pursuant to the terms of the Exchange Agreement, the
      Shareholders agreed to transfer all of the issued and outstanding shares of
      common stock in Pacific Capital Group to the Registrant in exchange for the
      issuance of an aggregate of 22,645,348 shares of the Registrant’s common stock
      to the Shareholders, thereby causing Pacific Capital Group to become a
      wholly-owned subsidiary of the Registrant (the “Share Exchange”). Upon closing
      of the Share Exchange on November 8, 2007, the Shareholders of Pacific Capital
      Group delivered all of their equity capital in Pacific Capital Group to the
      Registrant in exchange for 22,645,348 shares of common stock of the Registrant.
      The Share Exchange resulted in Pacific Capital Group, and Pacific Capital
      Group’s operating subsidiary, TaiAn becoming wholly and majority owned
      subsidiaries, respectively, of the Registrant.





As
      a
      result of the Share Exchange described above, on November 8, 2007, Pacific
      Capital Group became a wholly-owned subsidiary of the Registrant. Pacific
      Capital Group was incorporated on November 23, 2006 under the laws of the
      Republic of Vanuatu as a holding company, for the purposes of seeking and
      consummating a merger or acquisition with a business entity. On April 26, 2007,
      following the approval by the relevant governmental authorities in the PRC,
      Pacific Capital Group acquired a 99% ownership interest in TaiAn, which was
      formed in the PRC on November 10, 1999. As a result of the transaction, TaiAn
      became a majority-owned subsidiary of Pacific Capital Group. Pacific Capital
      Group, through TaiAn, engages in the development,
      manufacturing, and distribution of cellulose ether.





Prior
      to
      the closing of the Share Exchange, the Registrant was a shell company with
      no or
      nominal business operations. As a result of the closing of the Share Exchange,
      the Registrant succeeded to the business of TaiAn as its sole line of business.
      TaiAn is based in Feicheng City, Shandong Province, PRC.




3


The
      Chart
      below depicts the corporate structure of the Registrant. As
      depicted below, the Registrant owns 100% of the capital stock of Pacific Capital
      Group and has no other subsidiaries. Pacific Capital Group owns 99% of the
      capital stock of TaiAn and has no other subsidiaries. TaiAn has no subsidiaries.










**Business
      of the Issuer**





As
      noted
      above, the Registrant does not directly carry on business operations. All of
      the
      business operations of the Registrant are conducted through its wholly-owned
      and
      majority owned subsidiaries. As used in this Form 10-KSB, unless otherwise
      specifically noted, from this point forward all references to the “Company,”
“we,” “our” and “us” refer to the Registrant, and its wholly owned subsidiaries,
      Pacific Capital Group and TaiAn.





The
      Registrant, through its wholly-owned subsidiary, Pacific Capital Group and
      its
      majority-owned subsidiary, TaiAn, is engaged in the production, sales, and
      exportation of deeply processed chemicals, with a primary focus on non-ionic
      cellulose ether products. Cellulose ether is an organic chemical that dissolves
      in water and other organic solvents. Due to the surface-active properties of
      cellulose ether, it acts as a thickener and stabilizer in aqueous solutions,
      making it a beneficial additive in a wide variety of commercial industries
      and
      products, including, but not limited to the pharmaceutical industry, the
      construction industry, PVC products, food and beverage products, petroleum,
      and
      cosmetics. Specific examples of applications in which cellulose ether products
      are used include: as a stabilizer and thickener in latex paint; in mortar dry
      mix for building materials; to improve the performance of resin in PVC
      production; as a membrane reagent, stabilizer, and thickener in pharmaceuticals;
      and to improve jam, ice cream, toothpaste and lipsticks in the food and cosmetic
      industries. TaiAn is one of the largest non-ionic cellulose ether producers
      in
      China.


4


**Products**




TaiAn
      has
      twelve major product lines which are marketed under its brand name “RuiTai.”
TaiAn’s product lines, which are all focused around and related to cellulose
      ether, include: 1) Hydroxypropyl Methyl Cellulose (HPMC); 2) Methyl Cellulose
      (MC); 3) Ethyl Cellulose Aqueous Dispersion (EAD); 4) Ethyl Cellulose (EC);
      5)
      Hydroxyethyl Cellulose (HEC); 6) CMC; 7) Microcrystalline Cellulose (MCC);
      8)
      HEMC; 9) Hypromellose Phthalate (HPMCP); 10) Hydroxypropyl Cellulose (HPC);
      and
      11) Film Coating Pre-Mixed Reagent. Cellulose ether is an organic chemical
      that
      dissolves in water and other organic solvents. Due to the surface-active
      properties of cellulose ether, it acts as a thickener and stabilizer in aqueous
      solutions, making it a beneficial additive in a wide variety of commercial
      industries and products, including, but not limited to the pharmaceutical
      industry, the construction industry, PVC products, food and beverage products,
      petroleum, and cosmetics. Specific examples of applications in which TaiAn’s
      products are used include: as a stabilizer and thickener in latex paint; in
      mortar dry mix for building materials; to improve the performance of resin
      in
      PVC production; as a membrane reagent, stabilizer, and thickener in
      pharmaceuticals; and to improve jam, ice cream, toothpaste and lipsticks in
      the
      food and cosmetic industries.




**Research
      and Development and New Products**





Research
      and development of new products and innovation has been emphasized throughout
      TaiAn’s corporate existence. TaiAn has a scientific research center equipped
      with sophisticated experimental facilities and testing instruments for
      conducting preliminary and pilot processes for the development of new products.
      New products that the Company has introduced over the last few years as a result
      of its research and development include HPMC, MC, HPC, and EAD.




**Distribution
      Methods**





TaiAn
      distributes its products through two primary methods of distribution: 1)
      directly to end-users who have ordered the product directly from the Company;
      and 2) through sales agents working at sales offices throughout the PRC. The
      end-user method of sales and distribution, accounts for 95% of TaiAn’s total
      sales volume. Additionally, TaiAn operates thirty sales offices throughout
      China. TaiAn currently operates four offices in both Beijing and Shanghai,
      and
      operates a single office in each of the following cities: Guangzhou, Qingdao,
      Nanjing, Chongqing, ChengDu, Shenyang, and Wurumuqi.





**Customers
      and Marketing**





**Customers**





TaiAn’s
      customers include the following companies, Sinopec Qilu Petrochemical, Shanghai
      Chlor-Alkali Chemical Co., Ltd., Beijing Huaer Co., Ltd., and Guangzhou
      Baiyunshan Pharmaceutical Co., Ltd. TaiAn is also a designated oil field
      material supplier for the Xinjiang Kelamayi Oil Field. TaiAn also exports
      approximately 1,700 tons of ether products, to foreign markets in the United
      States, Europe, India, the Middle East, and South East Asia.





**Marketing**





TaiAn
      employs a sales manager who is in charge of organizing and overseeing the
      Company’s marketing and advertising program which is designed to promote the
      RuiTai brand through commercial advertisements, sales record tracking, customer
      consultations, service quality improvements, pricing scheme decisions, and
      participation at industry conferences, all of which are designed to enhance
      the
      Company’s brand name recognition and popularity. In addition to the operation of
      its marketing department, TaiAn also focuses on customer
      service and has established internal controls and procedures as well as employee
      training focused on meeting its customers’ needs. In an effort to maximize its
      customer satisfaction, TaiAn maintains user profiles of its customers and
      compiles and responds to customer requests, suggestions, and complaints.
      Post-sales support is provided to TaiAn’s customers, and if necessary sales
      representatives will visit customers’ businesses to respond to and address any
      issues relating to the quality of TaiAn’s products.


5


**Sources
      and Availability of Raw Materials**




The
      two
      major raw materials required for the production of cellulose ether products
      are:
      1) purified cotton; and 2) etherifying epoxy propane. China is a predominantly
      agricultural country that produces significant amounts of purified cotton.
      TaiAn
      is located in Feicheng City in the Shandong Province, a region known for its
      cotton production. As a result of its location, it is convenient for TaiAn
      to
      obtain adequate supplies of high-quality cotton at competitive prices to
      facilitate the production of its products. In addition to our need for cotton,
      we also utilize large amounts of etherifying epoxy propane in the production
      of
      our products. Within the Shandong Province, Qilu Petrochemical Company, Shandong
      Insecticide Factory, and Shandong Dongda Company all produce large quantities
      of
      etherifying epoxy propane each year. Thus, the assurance of an adequate supply
      of this raw material is also expected for the near future.




**Intellectual
      Property**





The
      Company has registered the trademark “RuiTai” with the Trademark Bureau, State
      Administration for Industry and Commerce, People’s Republic of China. The
      Company does not own any other trademarks or patents.





Other
      parties are actively developing cellulose ether products. We expect these
      parties to continue to take steps to protect these technologies, including
      seeking patent protection. There may be patents issued or pending that are
      held
      by others and cover significant parts of our technology, business methods or
      services. We cannot be certain that our products do not or will not infringe
      on
      any valid patents, copyrights or other intellectual property rights held by
      third parties. We may be subject to legal proceedings and claims, from time
      to
      time, relating to the intellectual property of others in the ordinary course
      of
      our business.





In
      addition, we may license technology from third parties. The market is evolving
      and we may need to license additional technologies to remain competitive. We
      may
      not be able to license these technologies on commercially reasonable terms
      or at
      all. In addition, we may fail to successfully integrate any licensed technology
      into our services. Our inability to obtain any of these licenses could delay
      product and service development until alternative technologies can be
      identified, licensed and integrated.





**Government
      Regulation**


****


The
      Company is subject to regulation by both the PRC central government and local
      governmental agencies located in Feicheng City. In the ordinary course of its
      business, the Company is subject to numerous environmental laws and regulations
      covering compliance matters or imposing liability for the costs of, and damages
      resulting from, cleaning up sites, past spills, disposals and other releases
      of
      hazardous substances. Changes in environmental laws and regulations may have
      a
      material adverse effect on the Company’s financial position and results of
      operations. Any failure by the Company to adequately comply with such laws
      and
      regulations could subject the Company to significant future
      liabilities.





**Employees**




The
      Company currently employs 608 full time employees.


6


**Reports
      to Security Holders**





We
      are
      required to file reports with the SEC under section 13(a) of the Securities
      Act.
      The reports will be filed electronically. You may read copies of any materials
      we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE,
      Room 1580, Washington, D.C. 20549.  You may obtain information on the
      operation of the Public Reference Room by calling the SEC at
      1-800-SEC-0330.  The SEC also maintains an Internet site that will contain
      copies of the reports we file electronically.  The address for the SEC
      Internet site is http://www.sec.gov.





**ITEM
      2.**  **DESCRIPTION OF PROPERTY.**





TaiAn’s
      headquarters are located in Wenyang Town, in the Feicheng City in the Shandong
      Province of China. In the PRC, all land belongs to the State. Enterprises and
      Individuals can pay the State a fee to obtain the rights to use a parcel of
      land
      for either commercial or residential purposes for initial periods of either
      50
      or 70 years. The Company currently owns the use rights of two parcels of
      adjoining land, totaling approximately 56.76 acres, on which its manufacturing
      plant and office building are located. Specifically, the Company’s land use
      rights are for: i) approximately a 20 acre parcel for a 50 year period ending
      on
      December 2, 2055; and ii) a 36 acre parcel ending on June 5, 2054. The Company’s
      manufacturing plant encompasses approximately 40000 square meters of space
      and
      includes ten workshops with over 3,000 pieces of manufacturing equipment. The
      Company also maintains a 322,920 square foot office building on its property.





**ITEM
      3.**  **LEGAL
      PROCEEDINGS.**





The
      Company is not a party to any pending legal proceedings, and no such proceedings
      are known to be contemplated. No director, officer or affiliate of the Company,
      and no owner of record or beneficial owner of more than 5.0% of the securities
      of the Company, or any associate of any such director, officer or security
      holder is a party adverse to the Company or has a material interest adverse
      to
      the Company in reference to pending litigation.





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





No
      matters were submitted to a vote of the security holders of the Company during
      the fourth quarter of the fiscal year which ended December 31, 2007.





**PART
      II**





**ITEM
      5.**  **MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUERS
      PURCHASES OF EQUITY SECURITIES.**





**Market
      Information** **.**





The
      Company’s shares trade on the OTCBB under the symbol “CRUI.” On March 12, 2007
      the Company name change from Shandong Ruitai Chemical Co., Ltd. to China RuiTai
      International Holdings Co., Ltd. became effective and the stock ceased trading
      under the symbol "CPRY" and began trading under the symbol “CRUI.” Very limited
      trading activity has occurred during the past two years with our common stock;
      therefore, only limited historical price information is available. The following
      table sets forth the high and low bid
      prices of our common stock (USD) for the last two fiscal years and subsequent
      interim period, as reported by the National Quotation Bureau and represents
      inter dealer quotations, without retail mark-up, mark-down or commission and
      may
      not be reflective of actual transactions:


7





**(U.S.
                $)****2006**
            
            **HIGH**
            
            **LOW**Quarter
                Ended March 31
            
            
            N/A
            
            
            N/AQuarter
                Ended June 30
            
            
            N/A
            
            
            N/AQuarter
                Ended September 30
            
            
            N/A
            
            
            N/AQuarter
                Ended December 31
            
            
            N/A
            
            
            N/A**2007**
            
            
            **HIGH**
            
            
            **LOW**Quarter
                Ended March 31
            
            
            N/A
            
            
            N/AQuarter
                Ended June 30
            
            
            N/A
            
            
            N/AQuarter
                Ended September 30
            
            
            N/A
            
            
            N/AQuarter
                Ended December 31
            
            
            $4.70
            
            
            $2.50





**Holders** **.**





As
      of
      April 14, 2008 there were 26,000,000 shares of common stock issued and
      outstanding and 733 shareholders of record.





**Dividends** **.**





The
      Company has not declared or paid any cash dividends on its common stock during
      the fiscal years ended December 31, 2007 or 2006. There are no restrictions
      on
      the common stock that limit the ability of us to pay dividends if declared
      by
      the Board of Directors and the loan agreements and general security agreements
      covering the Company’s assets do not limit its ability to pay dividends. The
      holders of common stock are entitled to receive dividends when and if declared
      by the Board of Directors, out of funds legally available therefore and to
      share
      pro-rata in any distribution to the stockholders. Generally, the Company is
      not
      able to pay dividends if after payment of the dividends, it would be unable
      to
      pay its liabilities as they become due or if the value of the Company’s assets,
      after payment of the liabilities, is less than the aggregate of the Company’s
      liabilities and stated capital of all classes





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





**SPECIAL
      NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS**





CERTAIN
      STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION,
      ARE
      WHAT ARE KNOWN AS "FORWARD LOOKING STATEMENTS", WHICH ARE BASICALLY STATEMENTS
      ABOUT THE FUTURE. FOR THAT REASON, THESE STATEMENTS INVOLVE RISK AND UNCERTAINTY
      SINCE NO ONE CAN ACCURATELY PREDICT THE FUTURE. WORDS SUCH AS "PLANS,"
      "INTENDS," "WILL," "HOPES," "SEEKS," "ANTICIPATES," "EXPECTS "AND THE LIKE
      OFTEN
      IDENTIFY SUCH FORWARD LOOKING STATEMENTS, BUT ARE NOT THE ONLY INDICATION THAT
      A
      STATEMENT IS A FORWARD LOOKING STATEMENT. SUCH FORWARD LOOKING STATEMENTS
      INCLUDE STATEMENTS CONCERNING OUR PLANS AND OBJECTIVES
      WITH RESPECT TO THE PRESENT AND FUTURE OPERATIONS OF THE COMPANY, AND STATEMENTS
      WHICH EXPRESS OR IMPLY THAT SUCH PRESENT AND FUTURE OPERATIONS WILL OR MAY
      PRODUCE REVENUES, INCOME OR PROFITS. NUMEROUS FACTORS AND FUTURE EVENTS COULD
      CAUSE THE COMPANY TO CHANGE SUCH PLANS AND OBJECTIVES OR FAIL TO SUCCESSFULLY
      IMPLEMENT SUCH PLANS OR ACHIEVE SUCH OBJECTIVES, OR CAUSE SUCH PRESENT AND
      FUTURE OPERATIONS TO FAIL TO PRODUCE REVENUES, INCOME OR PROFITS. THEREFORE,
      THE
      READER IS ADVISED THAT THE FOLLOWING DISCUSSION SHOULD BE CONSIDERED IN LIGHT
      OF
      THE DISCUSSION OF RISKS AND OTHER FACTORS CONTAINED IN THIS REPORT ON FORM
      10-KSB AND IN THE COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE
      COMMISSION. NO STATEMENTS CONTAINED IN THE FOLLOWING DISCUSSION SHOULD BE
      CONSTRUED AS A GUARANTEE OR ASSURANCE OF FUTURE PERFORMANCE OR FUTURE
      RESULTS.


8


**Company
      Overview**





The
      Registrant was originally incorporated in Delaware on November 15, 1955, under
      the name "Inland Mineral Resources Corp." and was formed for the purpose of
      engaging in all lawful businesses. On March 12, 2007, the Registrant changed
      its
      name to China RuiTai International Holdings Co., Ltd. On November 8, 2007,
      the
      Registrant acquired Pacific Capital Group Co., Ltd., and its majority-owned
      subsidiary, TaiAn RuiTai Cellulose Co., Ltd., pursuant to the terms of the
      Exchange Agreement discussed above. This transaction was accounted for as a
      “reverse merger” with Pacific Capital Group deemed to be the accounting acquirer
      and the Registrant as the legal acquirer. Consequently, the assets and
      liabilities and the historical operations that are reflected in the financial
      statements for periods prior to the Share Exchange are those of Pacific Capital
      Group and its subsidiary and are recorded at the historical cost basis of
      Pacific Capital Group. For the period subsequent to the completion of the Share
      Exchange, the Registrant’s consolidated financial statements include the assets
      and liabilities of both the Registrant and Pacific Capital Group, the historical
      operations of Pacific Capital Group and the operations of the Registrant and
      its
      subsidiaries from the closing date of the Share Exchange.





The
      Registrant, through its wholly-owned subsidiary, Pacific Capital Group and
      its
      majority-owned subsidiary, TaiAn, is engaged in the production, sales, and
      exportation of deeply processed chemicals, with a primary focus on non-ionic
      cellulose ether products. Cellulose ether is an organic chemical that dissolves
      in water and other organic solvents. Due to the surface-active properties of
      cellulose ether, it acts as a thickener and stabilizer in aqueous solutions,
      making it a beneficial additive in a wide variety of commercial industries
      and
      products, including, but not limited to the pharmaceutical industry, the
      construction industry, PVC products, food and beverage products, petroleum,
      and
      cosmetics. Specific examples of applications in which cellulose ether products
      are used include: as a stabilizer and thickener in latex paint; in mortar dry
      mix for building materials; to improve the performance of resin in PVC
      production; as a membrane reagent, stabilizer, and thickener in pharmaceuticals;
      and to improve jam, ice cream, toothpaste and lipsticks in the food and cosmetic
      industries. TaiAn is one of the largest non-ionic cellulose ether producers
      in
      China.





**Results
      of Operations**





The
      following discussion and analysis provides information that we believe is
      relevant to an assessment and understanding of our results of operation and
      financial condition for the fiscal year ended December 31, 2007. The following
      discussion should be read in conjunction with the Financial Statements and
      related Notes appearing elsewhere in this Form 10-KSB.





Our
      financial statements are stated in US Dollars and are prepared in accordance
      with generally accepted accounting principals of the United States
      (“GAAP”).


9


***Consolidated
      Results of Operation for China RuiTai International Holdings Co., Ltd. and
      Subsidiaries for the Fiscal Year Ended December 31, 2007 Compared to the Fiscal
      Year Ended December 31, 2006.***




**Revenue**





Revenue .
      During
      the fiscal year ended December 31, 2007, the Company had revenues of $38,407,800
      as compared to revenues of $28,090,238 during the fiscal year ended December
      31,
      2006, an increase of approximately 36.7%. The increase in revenue experienced
      by
      the Company was primarily attributable to the following factors: i) *Changes
      in Sales Volume* - the
      sales volume of the Company’s products increased from 2006 to 2007 due to a
      greater demand for cellulose ether. For the fiscal year ended December 31,
      2007
      the Company sold a total of 7,200 tons of cellulose ether, as compared to 5,784
      tons of cellulose ether in the fiscal year ended December 31, 2006, an increase
      of approximately 25%; ii) *Changes
      in Sales Price* - the
      price per ton of cellulose ether increased from 2006 to 2007. For the fiscal
      year ended December 31, 2007, the average sales price of one ton of cellulose
      ether was $5,215, as compared to an average sales price of $4,764 per ton for
      the fiscal year ended December 31, 2006, an increase of $451 per ton, or
      approximately 9.5%; and iii) *Changes
      in Exchange Rates* - in
      addition to the foregoing, some of the growth in the Company’s revenue was
      attributable to changes in the foreign exchange rate, which increased from
      7.96
      RMB to $1.00 USD in 2006 to 7.61 RMB to $1.00 USD in 2007.





Cost
      of Sales. During
      the fiscal year ended December 31, 2007, the Company’s cost of sales was
      $26,489,964, as compared to Costs of Sales of $19,153,553 for the fiscal year
      ended December 31, 2006, an increase of approximately 38.3%. This increase
      in
      cost of sales experienced by the Company was primarily attributable to the
      increase in sales volume experienced by the Company as discussed above, and
      an
      increase in the price of raw materials that the Company uses for its
      manufacturing. For the fiscal year ended December 31, 2007 the price of raw
      materials utilized by the Company was $3,561 per ton, as compared to $3,218
      per
      ton for the fiscal year ended December 31, 2006, an increase of $343, or
      approximately 11%.




**Operating
      Expenses**





The
      operating expenses for the Company are divided into Selling Expenses and General
      and Administrative Expenses, both of which are discussed below:





Selling
      Expenses. Selling
      expenses which consist of sales commission, freight charges, advertising and
      promotion expenses totaled $2,189,488 for the fiscal year ended December 31,
      2007 as compared to $2,128,099 for the fiscal year ended December 31, 2006,
      an
      increase of approximately 3%. This minor increase is primarily attributable
      to
      expanding the Company’s sales team and the team’s activities, which are in turn
      reflected in increased sales.





General
      and Administrative Expenses. General
      and administrative expenses totaled $1,627,505 for the fiscal year ended
      December 31, 2007, as compared to $1,491,118 for the fiscal year ended December
      31, 2006, an increase of approximately 9.1%. This increase is primarily
      attributable to an increase in consultant fees and office expenses for the
      fiscal year ended December 31, 2007.





**Income
      From Operations**





For
      the
      fiscal year ended December 31, 2007, the Company had income from operations
      in
      the amount of $8,100,843 as compared to income from operations of $5,317,468
      for
      the fiscal year ended December 31, 2006, an increase of approximately 52.3%.
      The
      increase in income from operations experienced by the Company was primarily
      attributable to increased sales of the Company’s products during the fiscal year
      ended December 31, 2007.


10


**Interest
      Expense**





For
      the
      fiscal year ended December 31, 2007, the Company incurred interest expense
      in
      the amount of $1,996,479, as compared to interest expense of $1,159,076 for
      the
      fiscal year ended December 31, 2006, an increase of approximately 72%. The
      increase in interest expense incurred by the Company resulted from increase
      in
      interest expenses on bank loans and discount on bank checks received from
      customers. The interest expenses on bank loans increased by $299,433, or 34%.
      The increase in interest on bank loans was primarily a result of an increase
      of
      interest rates, which increased from an average monthly interest rate of 5.56
      %
      in 2006 to an average monthly interest rate of 7.30 % in 2007, an increase
      of
      approximately 31%. Our interest expenses on discount on bank checks increased
      from $277,686 in 2006 to $815,656 in 2007, an increase of $537,970, or
      approximately 194%. The increase in our interest expenses was due to the
      increase in amount of bank checks discounted as we needed additional cash
      resources for our business operations.





**Net
      Income**




The
      Company had a net income of $4,875,834 for the fiscal year ended December 31,
      2007 as compared to $3,005,998 for the fiscal year ended December 31, 2006,
      an
      increase of $1,869,836 or approximately 62%. The increase in net income is
      attributable to an increase in sales during the fiscal year ended December
      31,
      2007. Management believes that net income will continue to increase as the
      Company introduces new products, increases sales, and expands its production
      capacity.




**Inventories**




As
      of
      December 31, 2007, the Company had Inventories of $6,656,028, as compared to
      inventories of $5,209,747 as of December 31, 2006, $1,446,281 an increase of
      approximately 28%. The increase in inventories from 2006 to 2007 was the result
      of increased sales volume which required the Company to maintain a larger
      inventory of raw materials.





**Liquidity
      and Capital Resources**





The
      Company anticipates that the existing cash and cash equivalents on hand,
      together with the net cash flows generated from its business activities will
      be
      sufficient to meet the working capital requirements for its on-going projects
      and to sustain the business operations for the next twelve months.





**Total
      Current Assets & Total Assets**





As
      of
      December 31, 2007, our audited balance sheet (as restated) reflects that we
      have: i) total current assets of $37,787,747, as compared to total current
      assets of $40,448,410 at December 31, 2006, a decrease of $2,660,663, or
      approximately 6.6%; and ii) total assets of $65,165,337 as of December 31,
      2007,
      compared to $52,471,220 as of December 31, 2006, an increase of $12,694,117,
      or
      approximately 24% The Company’s total current assets decreased slightly because
      the Company experienced a decrease in its cash and cash equivalents from 2006
      to
      2007. The Company’s total assets increased substantially due to increases that
      the Company experienced in property and equipment, inventory, and amounts due
      from a related party, all of which are discussed below.





Cash
      and Cash Equivalents .
      As of
      December 31, 2007, our audited balance sheet reflects that we have cash and
      cash
      equivalents of $4,166,713, as compared to $6,286,289 at December 31, 2006,
      a
      decrease of $2,119,576, approximately 33.7%. The decrease in the Company’s cash
      and cash equivalents from 2006 to 2007 was primarily attributable to cash
      expenditures to acquire fixed assets and to increase in the Company’s inventory.


11


Bank
      Checks and Commercial Paper .
      As of
      December 31, 2007, our audited balance sheet reflects that we have bank checks
      and commercial paper of $621,204, as compared to bank checks and commercial
      paper of $1,191,451 at December 31, 2006, a decrease of $570,247, or
      approximately 47.9%. The decrease in the Company’s bank checks and commercial
      paper from 2006 to 2007 was primarily attributable to the fact that we
      discounted more bank checks and commercial paper as we needed cash to pay for
      additional fixed assets and to pay for raw materials, which increased in price
      during the course of the year.





Inventory .
      As of
      December 31, 2007, our audited balance sheet reflects that we have inventory
      of
      $6,656,028, as compared to inventory of $5,209,747 at December 31, 2006, an
      increase of $1,446,281, or approximately 27.8%. The increase in the Company’s
      inventory from 2006 to 2007 was primarily attributable to increases of finished
      goods and raw material due to the extension of our production capacity.





Property
      and Equipment .
      As of
      December 31, 2007, our audited balance sheet reflects that we have property
      and
      equipment of $11,306,271, as compared to property and equipment of $6,592,792
      at
      December 31, 2006, an increase of $4,713,478, or approximately 71.5%. The
      increase in the Company’s property and equipment from 2006 to 2007 was primarily
      attributable to additions made to our production equipment and changes in the
      foreign exchange rate, which increased from 7.80 RMB to $1.00 USD as of December
      31, 2006 to 7.31 RMB to $1.00 USD as of December 31, 2007, or an increase of
      RMB
      0.49, or approximately 6.7%





Due
      From Related Party .
      As of
      December 31, 2007, our audited balance sheet (as restated) reflects that we
      have
      an amount due from related party of $14,829,593, as compared to an amount due
      from related party of $8,804,112 at December 31, 2006, an increase of
      $6,025,481. The increase in the amount due from related party from 2006 to
      2007
      was primarily attributable to the additional loans that we made to the related
      party, Shandong Ruitai Chemicals Co., Ltd., which pledged its thermal plant
      as
      collateral for these loans, and promised to gradually payback these loans within
      the next three years.





“Due
      from
      a related party" represents loans to Shandong Ruitai Chemicals Co., Ltd.
      ("Shandong Ruitai"), a former majority owner of TaiAn. Shandong Ruitai had
      owned
      75% equity ownership interest of TaiAn from January 2000 through February 2007.
      On March 20, 2007, Shandong sold a 74% equity ownership interest of TaiAn to
      Pacific Capital Group Co., Ltd. Mr. Xingfu Lu, our President, and Mr. Dianmin
      Ma, our CEO, collectively own 100% of equity ownership interest in Shandong
      Ruitai.





TaiAn
      has
      been extending loans to Shangdong Ruitai and the balance amounted to $14,738,564
      and $12,244,755 as of December 31, 2007 and 2006, respectively. These loans
      were
      unsecured, non-interest bearing and have no fixed terms of repayment, therefore,
      deemed payable on demand. Cash flows from due from a shareholder are classified
      as cash flows from investing activities. The total loans to the shareholder
      was
      $111,429,218, and $82,904,688 for the year ended December 31, 2007 and 2006,
      respectively.





As
      TaiAn
      became the only operating subsidiary of a public company, TaiAn signed loan
      agreement with Shandong Ruitai in December 2007. Pursuant to the loan agreement,
      Shandong will pay 7‰ interest on the outstanding balance monthly. The Management
      believes that the interest rate approximates the fair market interest rate
      as
      compared to the Company's bank loans. Shandong Ruitain pledges its electricity
      generation plant as collateral for the loans and Mr. Lv and Mr. Ma guarantee
      the
      loans. Also, Shandong Ruitai will gradually pay off these loans in a three-year
      period ended December 31, 2010, with 30% in 2008, 30% in 2009, and the rest
      of
      40% in 2010.”





Restricted
      Cash .
      As of
      December 31, 2007, our audited balance sheet (as restated) reflects that we
      have
      restricted cash of $14,738,564, as compared to restricted cash of $12,244,750
      at
      December 31, 2006, an increase of $2,493,814, or approximately 20.4%. The
      increase in restricted cash from 2006 to 2007 was primarily attributable to
      the
      increase in the percentage of compensation balance used to secure bank
      checks.


12


**Total
      Current Liabilities**





As
      of
      December 31, 2007, our audited balance sheet reflects that we have total current
      liabilities of $55,361,171, as compared to total current liabilities of
      $48,087,430 at December 31, 2006, an increase of $7,273,741, or approximately
      15.1%. The increase in the Company’s total current liabilities from 2006 to 2007
      was primarily attributable to changes in the Company’s bank loan which increased
      by $3,059,709 from 2006 to 2007, accounts payable and accrued expenses which
      increased by $2,114,725 from 2006 to 2007, taxes payable which increased by
      $1,338,948 from 2006 to 2007, and due to employees which increased by $374,914
      from 2006 to 2007.





Bank
      Loans .
      As of
      December 31, 2007, our audited balance sheet reflects that we have a bank loan
      of $19,269,317, as compared to a bank loan of $16,209,608 as of December 31,
      2006, an increase of $3,059,709, or approximately 18.9%. The increase in our
      bank loan was attributable to additional funds that we needed to borrow to
      purchase fixed assets and raw materials due to our increased production capacity
      during the fiscal year ended 2007.





Accounts
      Payable and Accrued Expenses .
      As of
      December 31, 2007, our audited balance sheet (as restated) reflects that we
      have
      accounts payable and accrued expenses of $7,567,437, as compared to accounts
      payable and accrued expenses of $5,542,712 as of December 31, 2006, an increase
      of $2,024,725, or approximately 36.5%. The increase in our accounts payable
      and
      accrued expenses was attributable to our addition of fixed assets and raw
      materials.





**Operating
      Activities**





Net
      cash
      of $7,142,071 was provided by operating activities during the fiscal year ended
      December 31, 2007, compared to net cash provided by operating activities of
      $11,471,920 during the fiscal year ended December 31, 2006, representing a
      decrease of $4,329,849 or approximately 37.7%. The decrease in net cash provided
      by our operating activities was primarily attributable to increases in inventory
      and a decrease in bank checks payable.





**Investing
      Activities**





During
      the fiscal year ended December 31, 2007, the net cash used in investing
      activities was $9,989,901, as compared to $8,869,934 for the fiscal year ended
      December 31, 2006, an increase of $1,119,967, or approximately 12%. The increase
      in net cash used in investing activities was primarily attributable to the
      purchase of fixed assets and additional loans made to a related
      party.





**Financing
      Activities**





During
      the fiscal year ended December 31, 2007, the net cash provided by financing
      activities was $593,503, as compared to net cash used in financing activities
      of
      $474,319 for the fiscal year ended December 31, 2006, an increase of $119,184,
      or approximately 25%. The change in net cash provided by financing activities
      was primarily attributable to a decrease in restricted cash used to secure
      bank
      checks.





**Off
      Balance Sheet Arrangements**





The
      Company does not have any off-balance sheet arrangements.


13


**ITEM
      7.**  **FINANCIAL
      STATEMENTS.**




**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD. AND SUBSIDIARIES**





**FINANCIAL
      REPORT**





**At
      December 31, 2007 and 2006, and**


**For
      the Year Ended December 31, 2007 and 2006**


14


**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**INDEX**





**PAGE****REPORT
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
            **16****CONSOLIDATED
                BALANCE SHEETS**
            **17****CONSOLIDATED
                STATEMENTS OF OPERATIONS**
            **18****CONSOLIDATED
                STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                (DEFICIT)**
            **19****CONSOLIDATED
                STATEMENTS OF CASH FLOWS**
            **20****NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS**
            **21-50**


15


*KEITH
      K. ZHEN, CPA*


*CERTIFIED
      PUBLIC ACCOUNTANT*


*2070
      WEST 6TH STREET - BROOKLYN, NY 11223 - TEL (347) 408-0693 - FAX (347)
      602-4868-*


*EMAIL
      :KEITHZHEN@GMAIL.COM*





REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





Board
      of
      Directors


China
      Ruitai International Holdings Co., Ltd.





We
      have
      audited the accompanying consolidated balance sheets of China Ruitai
      International Holdings Co., Ltd. and subsidiaries as of December 31, 2007 and
      2006, and the related statements of income, stockholders' equity and
      comprehensive income, and cash flows for each of the years in the two-year
      period ended December 31, 2007. China Ruitai International Holdings Co., Ltd’s
      management is responsible for these financial statements. Our responsibility
      is
      to express an opinion on these financial statements based on our
      audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audit included consideration of internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, assessing the accounting principles used and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





As
      discussed in Note 1 to the consolidated financial statements, the accompanying
      consolidated balance sheets as of December 31, 2006 and 2007, and the related
      consolidated statements of cash flows for the years ended December 31, 2007
      and
      2006 have been restated.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of China Ruitai International Holdings
      Co., Ltd. and subsidiaries as of December 31, 2007 and 2006, and the results
      of
      its operations and its cash flows for each of the years in the two-year period
      ended December 31, 2007 in conformity with accounting principles generally
      accepted in the United States of America.





/s/
      Keith
      K. Zhen, CPA


Keith
      K.
      Zhen, CPA


Brooklyn,
      New York


April
      10,
      2008 (Except for Note 1, July 27, 2008)


16


**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**CONSOLIDATED
      BALANCE SHEETS**


**(restated)**





December
            
            December2007
            
            2006ASSETSCurrent
                Assets:Cash
                and cash equivalents
            
            $
            4,166,713
            
            $
            6,286,289Bank
                checks and commercial paper
            
            
            621,204
            
            
            1,191,451Accounts
                receivable, net (Note 5)
            
            
            3,053,295
            
            
            3,364,632Due
                from unaffiliated suppliers (Note 6)
            
            
            1,112,948
            
            
            930,213Prepaid
                expenses (Note 7)
            
            
            2,876,820
            
            
            2,360,481Inventory
                (Note 8)
            
            
            6,656,028
            
            
            5,209,747Advance
                to employees (Note 14)
            
            
            113,297
            
            
            56,735Restricted
                cash (Note 11)
            
            
            14,738,564
            
            
            12,244,750Due
                from a related party-current portion (Note 14)
            
            
            4,448,878
            
            
            8,804,112Total
                current assets
            
            
            37,787,747
            
            
            40,448,410Property
                and Equipment, net (Note 9)
            
            
            11,306,271
            
            
            6,592,796Land
                use right, net (Note 10)
            
            
            4,859,620
            
            
            4,650,814Long-term
                investment
            
            
            830,984
            
            
            779,200Due
                from a related party-long-term portion (Note 14)
            
            
            10,380,715
            
            
            *-*Total
                Assets
            
            $
            65,165,337
            
            $
            52,471,220LIABILITIES
                AND OWNERS' EQUITYCurrent
                Liabilities:Bank
                loan (Note 13)
            
            $
            19,269,317
            
            $
            16,209,608Bank
                checks payable (Note 12)
            
            
            22,059,772
            
            
            22,050,400Accounts
                payable and accrued expenses
            
            
            7,657,437
            
            
            5,542,712Taxes
                payable
            
            
            3,560,918
            
            
            2,221,970Deferred
                revenue
            
            
            737,027
            
            
            493,807Due
                to employees (Note 14)
            
            
            1,265,898
            
            
            890,984Employee
                security deposit
            
            
            810,802
            
            
            677,949Total
                Current Liabilities
            
            
            55,361,171
            
            
            48,087,430Minority
                Interest
            
            
            98,053
            
            
            43,847Owners'
                Equity:Preferred
                stock, par value $0.001, 10,000,000 shares authorized, authorized,
                no
                shares outstanding
            
            
            -
            
            
            -Common
                stock, par value $0.001, 50,000,000 shares authorized, 22,645,348
                shares
                issued and outstanding as of December 31, 2006 26,000,000 shares
                issued
                and outstanding as of December 31, 2007
            
            
            26,000
            
            
            22,745Additional
                paid-in capital
            
            
            2,366,171
            
            
            2,369,426Statutory
                Reserves
            
            
            1,042,355
            
            
            272,979Retained
                earnings
            
            
            5,700,875
            
            
            1,594,417Accumulated
                other comprehensive income
            
            
            570,712
            
            
            80,376Owners'
                Equity
            
            
            9,706,113
            
            
            4,339,943Total
                Liabilities and Owners' Equity
            
            $
            65,165,337
            
            $
            52,471,220





**See
      Notes to Consolidated Financial Statements**


17


**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**CONSOLIDATED
      STATEMENTS OF OPERATIONS**





For
                the Year EndedDecember
                31,2007
            
            2006RevenuesSales
            
            $
            38,407,800
            
            $
            28,090,238Costs
                of Sales
            
            
            26,489,964
            
            
            19,153,553Gross
                Profit
            
            
            11,917,836
            
            
            8,936,685Operating
                ExpensesSelling
                expensesSales
                commission
            
            
            670,364
            
            
            738,526Freight-out
            
            
            893,530
            
            
            856,850Adverting
            
            
            188,761
            
            
            30,093Travel
                and entertainment
            
            
            250,230
            
            
            385,360Other
                selling expenses
            
            
            186,603
            
            
            117,270Total
                selling expenses
            
            
            2,189,488
            
            
            2,128,099General
                and administrative expensesPayroll
                and employees benefits
            
            
            267,673
            
            
            209,242Insurance
            
            
            151,437
            
            
            139,989Professional
                fees
            
            
            86,303
            
            
            105,206Consultant
                fees
            
            
            134,011
            
            
            -Bad
                debt expenses
            
            
            -
            
            
            88,176Office
                expenses
            
            
            364,906
            
            
            195,843Repair
                and maintenance
            
            
            167,014
            
            
            525,176Travel
                and entertainment
            
            
            206,675
            
            
            148,569Other
                general and administrative
            
            
            249,486
            
            
            78,917Total
                Operating Expenses
            
            
            1,627,505
            
            
            1,491,118Total
                Operating Expenses
            
            
            3,816,993
            
            
            3,619,217Income
                (Loss) from Operation
            
            
            8,100,843
            
            
            5,317,468Other
                Income (Expense)Interest
                income
            
            
            267,989
            
            
            331,259Interest
                expense
            
            
            (1,996,479
            )
            
            (1,159,076
            )Government
                subsidies
            
            
            556,627
            
            
            -Other
                income (expense)
            
            
            106,855
            
            
            (151,992
            )Total
                other income (expense)
            
            
            (1,065,008
            )
            
            (979,809
            )Income
                (Loss) before ProvisionIncome
                Tax and Minority Interest
            
            
            7,035,835
            
            
            4,337,659Provision
                for Income Tax
            
            
            2,110,750
            
            
            1,301,297Income
                before Minority Interest
            
            
            4,925,085
            
            
            3,036,362Minority
                Interest
            
            
            (49,251
            )
            
            (30,364
            )Net
                Income
            
            
            4,875,834
            
            
            3,005,998Other
                Comprehensive Income (Loss) Effects of Foreign Currency
                Conversion
            
            
            490,336
            
            
            104,608Comprehensive
                Income (Loss)
            
            $
            5,366,170
            
            $
            3,110,606Basic
                and Fully Diluted Earnings per Share
            
            $
            0.23
            
            $
            0.14Weighted
                average shares outstanding
            
            
            23,204,457
            
            
            22,645,348





**See
      Notes to Consolidated Financial Statements.**


18




**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD. AND SUBSIDIARIES**





**CONSOLIDATED
      STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)**





**FOR
      THE YEARS ENDED DECEMBER 31, 2007 AND 2006**





AccumulatedCommon Stock
            
            Additional
            
            
            
            
            
            Other
            
            Total$0.001 Par Value
            
            Paid-in
            
            Retained
            
            Statutory
            
            Comprehensive
            
            Owners'Shares
            
            Amount
            
            Capital
            
            Earnings
            
            Reserve
            
            Income
            
            EquityBalances
                atJanuary
                1, 2006
            
            
            100
            
            $
            100
            
            $
            2,392,071
            
            $
            (1,138,602
            )
            $
            -
            
            $
            (24,232
            )
            $
            1,229,337Common
                stock issued for acquisition of Pacific Capital Group (reverse
                merger)
            
            
            22,645,348
            
            
            22,645
            
            
            (22,645
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Pacific
                Capital Group share exchange
            
            
            (100
            )
            
            100
            
            
            (100
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                Income (Loss)
            
            
            -
            
            
            -
            
            
            -
            
            
            3,005,998
            
            
            -
            
            
            -
            
            
            3,005,998Appropriation
                to statutory reserves
            
            
            -
            
            
            -
            
            
            -
            
            
            (272,979
            )
            
            272,979
            
            
            -
            
            
            -Other
                comprehensive income effects of exchange rates
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            104,608
            
            
            104,608Balances
                at December 31, 2006
            
            
            22,645,348
            
            
            22,845
            
            
            2,369,326
            
            
            1,594,417
            
            
            272,979
            
            
            80,376
            
            
            4,339,943Reverse
                merger adjustment*
            
            
            3,354,652
            
            
            3,255
            
            
            (3,255
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                Income (Loss)
            
            
            -
            
            
            -
            
            
            -
            
            
            4,875,834
            
            
            -
            
            
            -
            
            
            4,875,834Other
                comprehensive income effects of exchange rates
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            490,336
            
            
            490,336Balances
                at December 31, 2007
            
            
            26,000,000
            
            $
            26,100
            
            $
            2,366,071
            
            $
            6,470,251
            
            $
            272,979
            
            $
            570,712
            
            $
            9,706,113





*
      The
      reverse merger adjustment represents the recording of the minority shareholders’
shares outstanding at the time of the reverse merger.





**See
      Notes to Consolidated Financial Statements**


19


**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(restated)**





For the Year EndedDecember 31,2007
            
            2006Operating
                ActivitiesNet
                income (loss)
            
            $
            4,875,834
            
            $
            3,005,998Adjustments
                to reconcile net income (loss) to net cash provided (used) by operating
                activities:Minority
                interest
            
            
            49,251
            
            
            30,364Depreciation
            
            
            726,969
            
            
            584,801Amortization
            
            
            95,940
            
            
            27,673Changes
                in operating assets and liabilities:(Increase)/Decrease
                in bank checks and commercial paper
            
            
            623,589
            
            
            335,215(Increase)/Decrease
                in accounts receivable
            
            
            513,661
            
            
            (1,437,788
            )(Increase)/Decrease
                in prepaid expenses
            
            
            (345,162
            )
            
            (1,271,877
            )(Increase)/Decrease
                in inventory
            
            
            (1,056,278
            )
            
            (21,340
            )(Increase)/Decrease
                in advance to employees
            
            
            (50,691
            )
            
            64,672Increase/(Decrease)
                in accounts payable and accrued expenses
            
            
            1,676,877
            
            
            (416,997
            )Increase/(Decrease)
                in bank checks payable
            
            
            (1,398,132
            )
            
            9,055,200Increase/(Decrease)
                in taxes payable
            
            
            1,143,879
            
            
            1,293,536Increase/(Decrease)
                in deferred revenue
            
            
            202,030
            
            
            69,992Increase/(Decrease)
                in employee security deposit
            
            
            84,304
            
            
            152,471Net
                cash provided (used) by operating activities
            
            
            7,142,071
            
            
            11,471,920Investing
                ActivitiesPurchase
                of fixed assets
            
            
            (4,649,895
            )
            
            (1,698,011
            )Purchase
                of land use rights
            
            
            -
            
            
            (3,376,077
            )Loans
                to unaffiliated suppliers
            
            
            (116,103
            )
            
            (414,451
            )Loans
                to a related party
            
            
            (5,223,903
            )
            
            (3,381,395
            )Net
                cash (used) by investing activities
            
            
            (9,989,901
            )
            
            (8,869,934
            )Financing
                ActivitiesBank
                loans
            
            
            1,903,560
            
            
            4,623,048Decrease
                (Increase) in restricted cash to secure bank checks
            
            
            (1,613,196
            )
            
            (5,114,130
            )Loans
                from employees
            
            
            303,139
            
            
            16,763Net
                cash provided (used) by financing activities
            
            
            593,503
            
            
            (474,319
            )Increase
                (decrease) in cash
            
            
            (2,254,327
            )
            
            2,127,667Effects
                of exchange rates on cash
            
            
            134,751
            
            
            128,352Cash
                at beginning of period
            
            
            6,286,289
            
            
            4,030,270Cash
                at end of period
            
            $
            4,166,713
            
            $
            6,286,289Supplemental
                Disclosures of Cash Flow Information:Cash
                paid (received) during year for:Interest
            
            $
            1,996,479
            
            $
            824,897Income
                taxes
            
            $
            1,004,871
            
            $
            503,447





**See
      Notes to Consolidated Financial Statements.**


20


**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      1- RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS**





The
      Company’s previously issued financial statements were reviewed by the United
      States Securities and Exchange Commission (the "Commission"). During the course
      of the Commission’s review, the Commission issued comment letters to which we
      provided responses and amended our financial statements per such
      comments.





**Restatement
      to balance sheets**





1.
            In
                the previously issued report, we classified “Restricted cash" as other
                assets. Since these are compensation balances to secure the Company's
                bank
                checks and have a maturity of 180 days or less, we now have concluded
                that
                we should classify restricted cash as current
                assets.





2.
            In
                the previously issued report, we classified the entire amount of
                due from
                a related party as other assets. Since 30% of such amount is due
                in one
                year per the loan agreement, we now have concluded that we should
                classify
                30% of the outstanding balance as current
                assets.





**Restatement
      to statements of cash flows**





In
      the
      previously issued report, we classified change of "bank checks payable" as
      cash
      flows from financing activities. Since the changes of bank check payable
      constitute the completion / deferral of cash payments to suppliers, we now
      have
      concluded that we should classify changes of “bank checks payable” as cash flows
      from operating activities.





These
      adjustments had no effect in the shareholders' equity as of December 31, 2007
      and 2006, respectively.





These
      adjustments had no effect in the statements of operations and the statements
      of
      changes in shareholders' equity in the years ended December 31, 2007 and 2006,
      respectively.




21


**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      1- RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
      (continued)**





The
      following tables present the impact of the adjustments and restatements on
      a
      condensed basis:





Amount PreviouslyReported
            
            As AdjustedBalance
                Sheet as of December 31, 2007Other
                current assets
            
            
            18,600,305
            
            
            18,600,305Restricted
                cash - current asset
            
            
            -
            
            
            14,738,564Due
                from a related party-current portion
            
            
            -
            
            
            4,448,878Other
                long-term assets
            
            
            16,996,875
            
            
            16,996,875Restricted
                cash - long-term asset
            
            
            14,738,564
            
            
            -Due
                from a related party-long-term portion
            
            
            14,829,593
            
            
            10,380,715Current
                liabilities
            
            
            55,361,171
            
            
            55,361,171Minority
                interest
            
            
            98,053
            
            
            98,053Common
                stock
            
            
            26,000
            
            
            26,000Additional
                paid-in capital
            
            
            2,366,171
            
            
            2,366,171Statutory
                Reserves
            
            
            1,042,355
            
            
            1,042,355Retained
                earnings
            
            
            5,700,875
            
            
            5,700,875Accumulated
                other comprehensive income
            
            
            570,712
            
            
            570,712Balance
                Sheet as of December 31, 2006Other
                current assets
            
            
            19,399,548
            
            
            19,399,548Restricted
                cash - current asset
            
            
            -
            
            
            12,244,750Due
                from a related party-current portion
            
            
            -
            
            
            8,804,112Other
                long-term assets
            
            
            12,022,810
            
            
            12,022,810Restricted
                cash - long-term asset
            
            
            12,244,750
            
            
            -Due
                from a related party-long-term portion
            
            
            8,804,112
            
            
            -Current
                liabilities
            
            
            48,087,430
            
            
            48,087,430Minority
                interest
            
            
            43,847
            
            
            43,847Common
                stock
            
            
            22,745
            
            
            22,745Additional
                paid-in capital
            
            
            2,369,426
            
            
            2,369,426Statutory
                Reserves
            
            
            272,979
            
            
            272,979Retained
                earnings
            
            
            1,594,417
            
            
            1,594,417Accumulated
                other comprehensive income
            
            
            80,376
            
            
            80,376


22


**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      1- RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
      (continued)**





Amount PreviouslyReported
            
            As AdjustedStatement
                of cash flows for the year ended December 31, 2007Net
                income (loss)
            
            $
            4,875,834
            
            $
            4,875,834Adjustments
                to reconcile net income (loss) to net cash provided (used) by operating
                activities:Minority
                interest
            
            
            49,251
            
            
            49,251Depreciation
            
            
            726,969
            
            
            726,969Amortization
            
            
            95,940
            
            
            95,940Changes
                in operating assets and liabilities:(Increase)/Decrease
                in assets
            
            
            (314,881
            )
            
            (314,881
            )Increase/(Decrease)
                in bank checks payable
            
            
            -
            
            
            (1,398,132
            )Increase/(Decrease)
                in other liabilities
            
            
            3,107,090
            
            
            3,107,090Net
                cash provided (used) by operating activities
            
            
            8,540,203
            
            
            7,142,071Investing
                ActivitiesNet
                cash provided (used) by investing activities
            
            
            (9,989,901
            )
            
            (9,989,901
            )Financing
                ActivitiesPayback
                of banks checks commercial paper
            
            
            (1,398,132
            )
            
            -Cash
                flows from other financing activities
            
            
            593,503
            
            
            593,503Net
                cash provided (used) by financing activities
            
            
            (804,629
            )
            
            593,503Increase
                (decrease) in cash
            
            
            (2,254,327
            )
            
            (2,254,327
            )Effects
                of exchange rates on cash
            
            
            134,751
            
            
            134,751Cash
                at beginning of period
            
            
            6,286,289
            
            
            6,286,289Cash
                at end of period
            
            $
            4,166,713
            
            $
            4,166,713




23


**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      1- RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
      (continued)**





Amount PreviouslyReported
            
            As AdjustedStatement
                of cash flows for the year ended December 31, 2006Net
                income (loss)
            
            $
            3,005,998
            
            $
            3,005,998Adjustments
                to reconcile net income (loss) to net cash provided (used) by operating
                activities:Minority
                interest
            
            
            30,364
            
            
            30,364Depreciation
            
            
            584,801
            
            
            584,801Amortization
            
            
            27,673
            
            
            27,673Changes
                in operating assets and liabilities:(Increase)/Decrease
                in assets
            
            
            (2,331,118
            )
            
            (2,331,118
            )Increase/(Decrease)
                in bank checks payable
            
            
            -
            
            
            9,055,200Increase/(Decrease)
                in other liabilities
            
            
            1,099,002
            
            
            1,099,002Net
                cash provided (used) by operating activities
            
            
            2,416,720
            
            
            11,471,920Investing
                ActivitiesNet
                cash provided (used) by investing activities
            
            
            (8,869,934
            )
            
            (8,869,934
            )Financing
                ActivitiesPayback
                of banks checks commercial paper
            
            
            9,055,200
            
            
            -Cash
                flows from other financing activities
            
            
            (474,319
            )
            
            (474,319
            )Net
                cash provided (used) by financing activities
            
            
            8,580,881
            
            
            (474,319
            )Increase
                (decrease) in cash
            
            
            2,127,667
            
            
            2,127,667Effects
                of exchange rates on cash
            
            
            128,352
            
            
            128,352Cash
                at beginning of period
            
            
            4,030,270
            
            
            4,030,270Cash
                at end of period
            
            $
            6,286,289
            
            $
            6,286,289




24


**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      2- ORGANIZATION AND BUSINESS BACKGROUND**





China
      Ruitai International Holdings Co., Ltd. ("China Ruitai" or the "Company") was
      initially organized under the laws of the State of Delaware on November 15,
      1955
      as Inland Mineral Resources Corp. The Company subsequently changes its name
      to
      Parker-Levitt Corporation, and in 1997 changed its name to Commercial Property
      Corporation, and in 2006 changed its name to Shangdong Ruitai Chemical Co.,
      Ltd.
      on March 12, 2007, the Company changed its name to China Ruitai International
      Holdings Co., Ltd. On February 26, 2007, the Company changed its fiscal year
      end
      from October 31 to December 31.





The
      Company was engaged in various real estate and development projects. The Company
      was not successful and discontinued the majority of its operations by 1981.
      On
      November 19, 1997, the Company issued common stock that resulted in a change
      in
      control and entered into a new development stage as defined in Statement of
      Financial Accounting Standards No. 7, "Accounting and Reporting by Development
      Stage Enterprises".





On
      August
      29, 2007, the Company entered into a Share Exchange Agreement with Pacific
      Capital Group Co., Ltd., (“Pacific Capital Group”) a corporation incorporated
      under the laws of the Republic of Vanuatu, and the stockholders of Pacific
      Capital Group (the “Stockholders”). Pursuant to the terms of the Share Exchange
      Agreement, the Stockholders agreed to transfer all of the issued and outstanding
      shares of common stock in Pacific Capital Group to the Company in exchange
      for
      the issuance of an aggregate of 22,645,348 shares of the Company’s common stock
      to the Stockholders, thereby causing Pacific Capital Group's and Pacific Capital
      Group’s majority-owned operating subsidiary, TaiAn RuiTai Cellulose Co., Ltd.
      (“TaiAn”), a Chinese limited liability company, to become wholly-owned and
      majority owned-subsidiaries, respectively of the Company. The parties closed
      the
      share exchange contemplated by the Share Exchange Agreement on November 8,
      2007.





The
      Share
      Exchange is being accounted for as a “reverse merger,” since the stockholders of
      Pacific Capital Group own a majority of the outstanding shares of the Company’s
      common stock immediately following the Share Exchange. Pacific Capital Group
      is
      deemed to be the acquirer in the reverse merger. Consequently, the assets and
      liabilities and the historical operations that will be reflected in the
      financial statements for periods prior to the Share Exchange will be those
      of
      Pacific Capital Group and its subsidiary and will be recorded at the historical
      cost basis. After completion of the Share Exchange, the Company’s consolidated
      financial statements will include the assets and liabilities of both China
      Ruitai and Pacific Capital Group, the historical operations of Pacific Capital
      Group and the operations of the Company and its subsidiaries from the closing
      date of the Share Exchange.





Pacific
      Capital Group was incorporated on November 23, 2006 under the laws of the
      Republic of Vanuatu as a holding company, for the purposes of seeking and
      consummating a merger or acquisition with a business entity. On April 26, 2007,
      following the approval by the relevant governmental authorities in the PRC,
      Pacific Capital Group acquired a 99% ownership interest in TaiAn, which was
      formed in the PRC on November 10, 1999. As a result of the transaction, TaiAn
      became a majority-owned subsidiary of Pacific Capital Group.





TaiAn
      is
      the only one of these affiliated companies that is engaged in business
      operations. China RuiTai and Pacific Capital Group are holding companies, whose
      business is to hold an equity ownership interest in TaiAn. TaiAn is engaged
      in
      the production, sales, and exportation of deeply processed chemicals, with
      a
      primary focus on non-ionic cellulose ether products. TaiAn's assets exist solely
      in the PRC, and its revenues are derived from its operations
      therein.


25





**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      2- ORGANIZATION AND BUSINESS BACKGROUND (continued)**





China
      Ruitai, Pacific Capital Group, and TaiAn are hereafter referred to as the
      Company.





**Note
      3- CONTROL BY PRINCIPAL OWNERS**





The
      directors, executive officers, their affiliates, and related parties own,
      directly or indirectly, beneficially and in the aggregate, the majority of
      the
      voting power of the outstanding capital of the Company. Accordingly, directors,
      executive officers and their affiliates, if they voted their shares uniformly,
      would have the ability to control the approval of most corporate actions,
      including approving significant expenses, increasing the authorized capital
      and
      the dissolution, merger or sale of the Company's assets.





**Note
      4- SIGNIFICANT ACCOUNTING POLICIES**





**Basis
      of Presentation**





The
      consolidated financial statements include the accounts of the Company and all
      its majority-owned subsidiaries which require consolidation. Inter-company
      transactions have been eliminated in consolidation.





The
      consolidated financial statements are prepared in accordance with generally
      accepted accounting principles in the United States of America ("US GAAP").
      This
      basis of accounting differs from that used in the statutory accounts of the
      Company, which are prepared in accordance with the "Accounting Principles of
      China” ("PRC GAAP"). Certain accounting principles, which are stipulated by US
      GAAP, are not applicable in the PRC GAAP. The difference between PRC GAAP
      accounts of the Company and its US GAAP financial statements is
      immaterial.





**Foreign
      Currencies Translation**





The
      Company maintains its books and accounting records in PRC currency "Renminbi"
      ("RMB"), which is determined as the functional currency. Transactions
      denominated in currencies other than RMB are translated into RMB at the exchange
      rates quoted by the People’s Bank of China (“PBOC”) prevailing at the date of
      the transactions. Monetary assets and liabilities denominated in currencies
      other than RMB are translated into RMB using the applicable exchange rates
      quoted by the PBOC at the balance sheet dates. Exchange differences are included
      in the statements of changes in owners' equity. Gain and losses resulting from
      foreign currency transactions are included in operations.





The
      Company’s financial statements are translated into the reporting currency, the
      United States Dollar (“US$”). Assets and liabilities of the Company are
      translated at the prevailing exchange rate at each reporting period end.
      Contributed capital accounts are translated using the historical rate of
      exchange when capital is injected. Income and expense accounts are translated
      at
      the average rate of exchange during the reporting period. Translation
      adjustments resulting from translation of these financial statements are
      reflected as accumulated other comprehensive income (loss) in the owners’
equity.


26


**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      4- SIGNIFICANT ACCOUNTING POLICIES (continued)**





**Foreign
      Currencies Translation (continued)**





Translation
      adjustments resulting from this process are included in accumulated other
      comprehensive income (loss) in the consolidated statement of changes in
      shareholders’ equity and amounted to $570,712 and $80,376 as of December 31,
      2007 and 2006, respectively. The balance sheet amounts with the exception of
      equity at December 31, 2007 were translated at 7.31 RMB to $1.00 USD as compared
      to 7.80 RMB at December 31, 2006. The equity accounts were stated at their
      historical rate. The average translation rates applied to income statement
      accounts for the years ended December 31, 2007 and 2006 were 7.61 RMB and 7.96
      RMB, respectively.





**Statement
      of Cash Flows**





In
      accordance with SFAS No. 95, “Statement of Cash Flows,” cash flows from the
      Company’s operations is calculated based upon the functional currency. 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.





**Revenue
      Recognition (restated)**





The
      Company recognizes revenue when the earnings process is complete. This generally
      occurs when products are shipped to unaffiliated customer or picked up by
      unaffiliated customers in the Company's warehouse, title and risk of loss have
      been transferred, collectibility is reasonably assured and pricing is fixed
      or
      determinable. The corresponding freight-out and handling costs are included
      in
      the selling expenses.





The
      Company does not provide an unconditional right of return, price protection
      or
      any other concessions to our customers. Sales returns and other allowances
      have
      been immaterial in our operation.





**Deferred
      Revenue**





Deferred
      revenue consists of prepayments to the Company for products that have not yet
      been delivered to the customers. Payments received prior to satisfying the
      Company’s revenue recognition criteria are recorded as deferred
      revenue.





**Use
      of Estimates**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements, and the reported amounts of revenue and expenses
      during the reporting period. Actual results when ultimately realized could
      differ from those estimates.




27


**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      4- SIGNIFICANT ACCOUNTING POLICIES (continued)**





**Cash
      and Cash Equivalents**





Cash
      and
      cash equivalents include cash on hand, deposits in banks with maturities of
      three months or less, and all highly liquid investments which are unrestricted
      as to withdrawal or use, and which have original maturities of three months
      or
      less at the time of purchase.





**Bank
      checks and commercial paper**





Bank
      checks and commercial paper include bank checks and commercial paper with
      original maturities of approximately 180 days or less at the time of issuance.
      Book value approximates fair value because of the short maturity of those
      instruments. The Company receives these financial instruments as payments from
      its customers in the ordinary course of business. The Company totally received
      $20,210,828 and $21,250,459 in the year ended December 31, 2007 and 2006,
      respectively.





**Accounts
      Receivable (restated)**





Accounts
      receivable are recorded at the invoiced amount and do not bear interest. We
      generally grant new customers a one-month period in which to pay for goods
      that
      we have delivered to them, and we grant existing customers a two to three month
      period in which to pay for goods that we have delivered to them. We used an
      indirect method of accounting to write off any accounts receivable which
      exceeded the allotted three month time period which we provide to our customers.
      In circumstances in which we receive payment for accounts receivable which
      have
      previously been written off, we reverse the allowance and bad debt
      expenses.





**Concentrations
      of Credit Risk**





Financial
      instruments that subject the Company to concentrations of credit risk consist
      primarily of cash and cash equivalents. The Company maintains its cash and
      cash
      equivalents with high-quality institutions. Deposits held with banks may exceed
      the amount of insurance provided on such deposits. Generally these deposits
      may
      be redeemed upon demand and therefore bear minimal risk.





**Fair
      Value of Financial Instruments**





The
      carrying value of financial instruments including cash and cash equivalents,
      bank checks and commercial paper, receivables, accounts payable and accrued
      expenses, approximates their fair value due to the relatively short-term nature
      of these instruments.





**Inventory**





Inventories
      are stated at the lower of cost or market value. Actual cost is used to value
      raw materials and supplies. Finished goods and work-in-progress are valued
      on
      the weighted-average-cost method. Elements of costs in finished good and
      work-in-progress include raw materials, direct labor, and manufacturing
      overhead.





28


**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      4- SIGNIFICANT ACCOUNTING POLICIES (continued)**





**Due
      from unaffiliated suppliers (restated)**





The
      Company has been extending temporary short-term loans to some unaffiliated
      suppliers. These loans are unsecured, non-interest bearing and have no fixed
      terms of repayment, therefore, they are deemed payable on demand. Cash flows
      from due from unaffiliated suppliers are classified as cash flows from investing
      activities.





The
      Management believes the loans can help theses suppliers run their business,
      and
      in turn these suppliers can provide raw materials and services to the Company
      in
      a stable price. The Management periodically evaluates the financial resources
      of
      the borrowers to make sure the suppliers have the capability to pay back these
      loans. Also, the Company has never had any bad debt with these suppliers.
      Therefore, the Management believes that these loans are
      collectable.





**Long-term
      investment**





The
      long-term investment represents monetary investments in the Wenyang Xinyong
      Bank, a local state owned bank in Wenyang County, Shandong Province, PRC. The
      investments are transferable in accordance with the laws of the PRC. The
      investments are carried at cost which approximates fair value. The Company
      did
      not purchase any such long-term investment in the year ended December 31, 2007
      and 2006, respectively. Dividend income on this investment is recorded when
      received. There were no dividend received in the year ended December 31, 2007
      and 2006, respectively. The Company may sell these investments back to the
      bank
      at the book **** value.





**Impairment
      of Long-life Assets**





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





**Restricted
      cash, and Bank checks payable (restated)**




The
      Company pays its suppliers with bank checks in its ordinary business
      transactions. Generally, the Company deposits 40% to 100% of the bank check
      amount into a restricted bank account, the bank then issues a bank check payable
      to a supplier in 180 days or less. The Company delivers the bank check as
      payment to the supplier, who can discount the bank check before its maturity.
      When the bank check reaches maturity, the bank takes the deposit in the
      restricted bank accounts and the balance, if any, from other bank account(s)
      that the Company has with the bank. While the bank does not charge interest
      expenses on the balance, the bank pays interest on the deposit in the restricted
      bank account to the Company. The bank generally charges 0.0005% of the bank
      check amount as service fee for issuance of the bank check.





29





**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      4- SIGNIFICANT ACCOUNTING POLICIES (continued)**





**Restricted
      cash, and Bank checks payable (restated) (continued)**





The
      Company took out bank checks to pay our suppliers as well as to make loans
      to
      Shandong Ruitai. In 2007, we took out bank checks totaling $45,940,123, of
      which, approximately $16,000,000 was paid to our suppliers and the rest,
      approximately $29,940,000 was used to make loans to Shandong Ruitai. In 2006,
      we
      took out bank checks totaling $42,624,736, of which, approximately $17,000,000
      was paid to our suppliers and the rest, approximately $25,600,000 was used
      to
      make loans to Shandong Ruitai.





**Property,
      Plant and Equipment**





Property,
      plant and equipment are carried at cost. Maintenance, repairs and minor renewals
      are expensed as incurred; major renewals and improvements that extend the lives
      or increase the capacity of plant assets are capitalized.





Depreciation
      is calculated on a straight-line basis over the estimated useful life of the
      assets without residual value. The percentages or depreciable life applied
      are:





Building
                and warehouses
            
            
            20
                yearsMachinery
                and equipment
            
            
            7
                to 10 yearsOffice
                equipment and furniture
            
            
            5
                yearsMotor
                vehicles
            
            
            5
                years





**Land
      Use Right**





All
      land
      belongs to the State in PRC. Enterprises and individuals can pay the State
      a fee
      to obtain a right to use a piece of land for commercial purpose or residential
      purpose for an initial period of 50 years or 70 years, respectively. The land
      use right can be sold, purchased, and exchanged in the market. The successor
      owner of the land use right will reduce the amount of time which has been
      consumed by the predecessor owner.





The
      Company owns the right to use a piece of land, approximately 23 acre, located
      in
      the Wenyang County, Shandong Province for a fifty-year period ended December
      2,
      2055; and a piece of land, approximately 36 acre, also located in the Wenyang
      County, Shanxi Province for a forty-eight-year period ended June 5, 2054. The
      costs of these land use rights are amortized over their prospective beneficial
      period, using the straight-line method with no residual value. The Company's
      production facilities and headquarters building are located in these two pieces
      of land.




30


**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      4- SIGNIFICANT ACCOUNTING POLICIES (continued)**





**Government
      Subsidies**





The
      Company records government grants as current liabilities upon reception. A
      government subsidy revenue is recognized only when there is reasonable assurance
      that the Company has complied with all conditions attached to the grant. The
      Company recognized government subsidiary of $556,627, and $0 in the year ended
      December 31, 2007 and 2006, respectively.





**Research
      and Development Costs**




Research
      and development costs relating to the development of new products and processes,
      including significant improvements and refinements to existing products, are
      expensed when incurred. The major components of these research and development
      costs include experimental materials and labor costs. The Research and
      development cost was immaterial for the Company in the year ended December
      31,
      2007 and 2006, respectively, and was included into general and administration
      expenses.





**Advertising
      Costs**




Advertising
      costs are expensed as incurred and included as part of selling and marketing
      expenses in accordance with the American Institute of Certified Public
      Accountants ("AICPA") Statement of Position 93-7, "Reporting for Adverting
      Costs". Advertising costs was $188,761 and $30,093 for the year ended December
      31, 2007 and 2006, respectively.





**Value-added
      Tax (VAT)**





Sales
      revenue represents the invoiced value of goods, net of a value-added tax (VAT).
      All of the Company’s products that are sold in PRC are subject to a Chinese
      value-added tax at a rate of 17% of the gross sales price or at a rate approved
      by the Chinese local government. This VAT may be offset by VAT paid on purchase
      of raw materials included in the cost of producing the finished
      goods.





**Comprehensive
      Income**





Statement
      of Financial Accounting Standards (SFAS) No. 130, “Reporting Comprehensive
      Income,” establishes standards for reporting and display of comprehensive
      income, its components and accumulated balances. Comprehensive income as defined
      includes all changes in equity during a period from non-owner sources.
      Accumulated comprehensive income, as presented in the accompanying statements of
      changes in owners' equity consists of changes in unrealized gains and losses
      on
      foreign currency translation. This comprehensive income is not included in
      the
      computation of income tax expense or benefit.




31


**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      4- SIGNIFICANT ACCOUNTING POLICIES (continued)**





**Segment
      Reporting (restated)**





SFAS
      No.
      131 “Disclosures about Segments of an Enterprise and Related Information”
establishes standards for reporting information about operating segments on
      a
      basis consistent with the Company’s internal organization structure as well as
      information about geographical areas, business segments and major customers
      in
      financial statements. The Company currently operates in one principal business
      segment.





**Related
      parties**





For
      the
      purposes of these financial statements, parties are considered to be related
      if
      one party has the ability, directly or indirectly, to control the party or
      exercise significant influence over the party in making financial and operating
      decisions, or vice versa, or where the Company and the party are subject to
      common control or common significant influence. Related parties may be
      individuals or other entities.





**Pension
      and Employee Benefits**





Full
      time
      employees of the PRC entities participate in a government mandated
      multi-employer defined contribution plan pursuant to which certain pension
      benefits, medical care, unemployment insurance, employee housing fund and other
      welfare benefits are provided to employees. Chinese labor regulations require
      the Company to accrue for these benefits based on certain percentages of the
      employees' salaries. The Management believes full time employees who have passed
      the probation period are entitled to such benefits. The total provisions for
      such employee benefits was $110,578, and $67,618 for the year ended December
      31,
      2007 and 2006, respectively.





**Statutory
      Reserves**





Pursuant
      to the applicable laws in PRC, PRC entities are required to make appropriations
      to three non-distributable reserve funds, the statutory surplus reserve,
      statutory public welfare fund, and discretionary surplus reserve, based on
      after-tax net earnings as determined in accordance with the PRC GAAP, after
      offsetting any prior years’ losses. Appropriation to the statutory surplus
      reserve should be at least 10% of the after-tax net earnings until the reserve
      is equal to 50% of the Company's registered capital. Appropriation to the
      statutory public welfare fund is 5% to 10% of the after-tax net earnings. The
      statutory public welfare fund is established for the purpose of providing
      employee facilities and other collective benefits to the employees and is
      non-distributable other than in liquidation. No appropriations to the
      discretionary surplus reserve are made at the discretion of the Board of
      Directors.





In
      2007,
      the Company contributes $512,917 to the statutory surplus reserve fund, and
      $256,459 to the statutory public welfare fund. In 2006, $181,986 was contributed
      to the statutory surplus reserve fund, and $90,993 was contributed to the
      statutory public welfare fund.




32


**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      4- SIGNIFICANT ACCOUNTING POLICIES (continued)**





**Statutory
      Reserves (continued)**





Statutory
      reserves consist of the following:





December 31,
            
            December 31,2007
            
            2006Statutory
                surplus reserve fund
            
            $
            694,903
            
            $
            181,986Statutory
                public welfare fund
            
            
            347,452
            
            
            90,993Total
                statutory reserves
            
            $
            1,042,355
            
            $
            272,979





**Income
      Taxes**




The
      Company accounts for income tax using SFAS No. 109 “Accounting for Income
      Taxes”, which requires the asset and liability approach for financial accounting
      and reporting for income taxes. Under this approach, deferred income taxes
      are
      provided for the estimated future tax effects attributable to temporary
      differences between financial statement carrying amounts of assets and
      liabilities and their respective tax bases, and for the expected future tax
      benefits from loss carry-forwards and provisions, if any. Deferred tax assets
      and liabilities are measured using the enacted tax rates expected in the years
      of recovery or reversal and the effect from a change in tax rates is recognized
      in the statement of operations in the period of enactment. A valuation allowance
      is provided to reduce the amount of deferred tax assets if it is considered
      more
      likely than not that some portion of, or all of the deferred tax assets will
      not
      be realized.





**Earnings
      (Loss) Per Share**





The
      Company reports earnings per share in accordance with the provisions of SFAS
      No.
      128, “Earnings Per Share.” SFAS No. 128 requires presentation of basic and
      diluted earnings per share in conjunction with the disclosure of the methodology
      used in computing such earnings per share. Basic earnings (loss) per share
      is
      computed by dividing income (loss) available to common shareholders by the
      weighted-average number of common shares outstanding during the period. Diluted
      earnings per share is computed similar to basic earnings per share except that
      the denominator is increased to include the number of additional common shares
      that would have been outstanding if the potential common shares had been issued
      and if the additional common shares were dilutive. There are no potentially
      dilutive securities outstanding (options and warrants) for the years ended
      December, 2007 and 2006, respectively.





**Recent
      Accounting Pronouncements**





In
      December 2007, the FASB issued Statements of Financial Accounting Standards
      No.
      141 (revised 2007), “Business Combinations” (“SFAS 141R”) and No. 160,
“Noncontrolling Interests in Consolidated Financial Statements - an amendment
      to
      ARB No. 51” (“SFAS 160”). Both SFAS 141R and SFAS 160 are to be adopted
      effective January 1, 2009. SFAS 141R requires the application of several new
      or
      modified accounting concepts that, due to their complexity, could introduce
      a
      degree of volatility in periods subsequent to a material business combination.
      SFAS 141R requires that all business combinations result in assets and
      liabilities acquired being recorded at their fair value, with limited
      exceptions. Other areas related to business combinations that will require
      changes from current GAAP include: contingent consideration, acquisition costs,
      contingencies, restructuring costs, in process research and development and
      income taxes, among others. SFAS 160 will primarily impact the presentation
      of
      minority or noncontrolling interests within the Balance Sheet and Statement
      of
      Operations as well as the accounting for transactions with noncontrolling
      interest holders. Management does not expect that the adoption of SFAS No.
      141
      (revised 2007) and SFAS No. 160 would have a material effect on the Company’s
      financial position and results of operations.




33


**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      4- SIGNIFICANT ACCOUNTING POLICIES (continued)**





**Recent
      Accounting Pronouncements**





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159, “The Fair Value Option for Financial Assets and Financial Liabilities -
      Including an amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159
      provides an option to report certain financial assets and liabilities at fair
      value primarily to reduce the complexity and level of volatility in the
      accounting for financial instruments resulting from measuring related financial
      assets and liabilities differently under existing GAAP. SFAS 159 is effective
      January 1, 2008. The Company does not anticipate SFAS 159 having a material
      impact on its financial statements.





In
      September 2006, the SEC issued SAB No. 108, which provides guidance on the
      process of quantifying financial statement misstatements. In SAB No. 108, the
      SEC staff establishes an approach that requires quantification of financial
      statements errors, under both the iron-curtain and the roll-over methods, based
      on the effects of the error on each of the Company’s financial statements and
      the related financial statement disclosures. SAB No. 108 is generally effective
      for annual financial statements in the first fiscal year ending after November
      15, 2006. The transition provisions of SAB No. 108 permits existing public
      companies to record the cumulative effect in the first year ending after
      November 15, 2006 by recording correcting adjustments to the carrying values
      of
      assets and liabilities as of the beginning of that year with the offsetting
      adjustment recorded to the opening balance of retained earnings. Management
      does
      not expect that the adoption of SAB No. 108 would have a material effect on
      the
      Company’s financial position or results of operations.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      158, "Employer's Accounting for Defined Benefit Pension and Other Postretirement
      Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R)" ("SFAS
      158"). SFAS 158 requires 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. The standard also
      requires 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.




34


**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      4- SIGNIFICANT ACCOUNTING POLICIES (continued)**





**Recent
      Accounting Pronouncements (continued)**





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 September 15, 2007. The adoption of SFAS 158 did not have a material
      effect on the Company's financial position or results of
      operations.





In
      September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements”. SFAS No.
      157 defines fair values, establishes a framework for measuring fair value,
      and
      expands disclosures about fair value measurements. This Statement shall be
      effective for financial statements issued for fiscal years beginning after
      November 25, 2007, and interim periods within those fiscal years. Earlier
      application is encouraged provided that the reporting entity has not yet issued
      financial statements for that fiscal year, including financial statements for
      an
      interim period with that fiscal year. The provisions of this statement should
      be
      applied, except in some circumstances where the statement shall be applied
      retrospectively. Management does not expect that the adoption of SFAS No. 157
      would have a material effect on the Company’s financial position and results of
      operations.





In
      July
      2006, the FASB issued FASB Interpretation (“FIN”) No. 48, “Accounting for
      Uncertainty in Income Taxes,” which prescribes a comprehensive model for how a
      company should recognize, measure, present and disclose in its financial
      statements uncertain tax positions that the company has taken or expects to
      take
      on a tax return (including a decision whether to file or not to file a return
      in
      a particular jurisdiction). The accounting provisions of FIN No. 48 are
      effective for fiscal years beginning after December 15, 2006. The adoption
      of
      FIN No. 48 did not have a material effect on the Company's financial position
      or
      results of operations.





In
      March
      2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial
      Assets" ("FAS 156"), which amends SFAS No. 140. FAS 156 specifically provides
      guidance addressing the recognition and measurement of separately recognized
      servicing assets and liabilities, common with mortgage securitization
      activities, and provides an approach to simplify efforts to obtain hedge
      accounting treatment. FAS 156 is effective for all separately recognized
      servicing assets and liabilities acquired or issued after the beginning of
      an
      entity's fiscal year that begins after September 15, 2006, with early adoption
      being permitted. The adoption of SFAS No. 156 did not have a material effect
      on
      the Company's financial position or results of operations.





In
      February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid
      Financial Instruments-an amendment of FASB Statements No. 133 and 140." SFAS
      No.
      155 amends SFAS No. 133, "Accounting for Derivative Instruments and Hedging
      Activities", to permit fair value remeasurement for any hybrid financial
      instrument with an embedded derivative that otherwise would require bifurcation,
      provided that the whole instrument is accounted for on a fair value basis.
      SFAS
      No. 155 amends SFAS No. 140, "Accounting for the Impairment or Disposal of
      Long-Lived Assets", to allow a qualifying special-purpose entity (SPE) to hold
      a
      derivative financial instrument that pertains to a beneficial interest other
      than another derivative financial instrument. SFAS No. 155 applies to all
      financial instruments acquired or issued after the beginning of an entity's
      first fiscal year that begins after September 15, 2006, with earlier application
      allowed. The adoption of SFAS No. 155 had no impact on the Company's financial
      position or results of operations.




35


**CHINA
      RUITAI INTERNATIONAL HOLDINGS CO., LTD.**


**AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      5- ACCOUNTS RECEIVABLE**





Accounts
      receivable consists of the following:





December
                31,
            
            December
                31,2007
            
            2006Accounts
                receivable
            
            $
            4,397,598
            
            $
            4,702,915Less:
                Allowance for doubtful accounts
            
            
            (1,344,303
            )
            
            (1,338,283
            )Accounts
                receivable, net
            
            $
            3,053,295
            
            $
            3,364,632





Bad
      debt
      expense charged to operations was $0 and $88,176 for the year ended December
      31,
      2007 and 2006, respectively.





**Note
      6- DUE FROM UNAFFILIATED SUPPLIERS**





Due
      from
      unaffiliated suppliers consist of following:





December 31,
            
            December 31,2007
            
            2006Feicheng
                Kaiyuan Chemicals Co., Ltd.
            
            $
            169,533
            
            $
            57,690Fencheng
                Sanying Spin and Weave Co., Ltd.
            
            
            150,392
            
            
            256,400Shangdong
                Taipeng Shiye Co., Ltd.
            
            
            273,440
            
            
            -Shangdong
                Jinzhengyuan Co., Ltd.
            
            
            66,993
            
            
            -Fengcheng
                Yingbo Food Co., Ltd.
            
            
            273,440
            
            
            -Taian
                Dongyue Co., Ltd.
            
            
            136,720
            
            
            -Other
                companies
            
            
            42,430
            
            
            616,123$
            1,112,948
            
            $
            930,213





36




**CHINA
        RUITAI INTERNATIONAL HOLDINGS CO., LTD.**
 **AND
        SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **Note
        7- PREPAID EXPENSES**
 
 Prepaid
        expenses consist of following:
 
 December 31,
              
              December 31,2007
              
              2006Machinery
                  and parts
              
              $
              366,753
              
              $
              256,587Raw
                  materials and supplies
              
              
              2,146,958
              
              
              1,682,166Packing
                  and supply materials
              
              
              300,665
              
              
              166,163Freight-out
              
              
              5,196
              
              
              2,588Adverting
              
              
              6,457
              
              
              128,200Consultancy
                  fees
              
              
              205
              
              
              118,047Office
                  expenses
              
              
              27,344
              
              
              6,730Utility
              
              
              23,242
              
              
              -$
              2,876,820
              
              $
              2,360,481
 
 **Note
        8- INVENTORIES**
 
 Inventories
        consist of following:
 
 December 31,
              
              December 31,2007
              
              2006Finished
                  goods
              
              $
              4,414,633
              
              $
              3,257,549Raw
                  materials
              
              
              2,157,685
              
              
              1,892,158Supplies
                  and packing materials
              
              
              83,710
              
              
              60,040$
              6,656,028
              
              $
              5,209,747
  37
  **CHINA
        RUITAI INTERNATIONAL HOLDINGS CO., LTD.**
 **AND
        SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **Note
        9- PROPERTY, PLANT AND EQUIPMENT**
 
 The
        following is a summary of property, plant and equipment:
 
 December 31,
              
              December 31,2007
              
              2006Building
                  and warehouses
              
              $
              4,209,954
              
              $
              3,100,660Machinery
                  and equipment
              
              
              6,699,636
              
              
              4,373,519Office
                  equipment and furniture
              
              
              53,175
              
              
              47,552Motor
                  vehicles
              
              
              425,169
              
              
              342,04311,387,934
              
              
              7,863,774Less:
                  Accumulated depreciation
              
              
              (2,989,099
              )
              
              (2,270,925
              )Add:
                  Construction in progress
              
              
              2,907,436
              
              
              999,947Total
              
              $
              11,306,271
              
              $
              6,592,796
 
 Depreciation
        expense charged to operations was $726,969 and $584,801 for the year ended
        December 31, 2007 and 2006, respectively.
 
 **Note
        10- LAND USE RIGHT**
 
 The
        following is a summary of land use right, less amortization:
 
 December 31,
              
              December 31,2007
              
              2006Land
                  use right
              
              $
              5,050,290
              
              $
              4,735,571Less:
                  Amortization
              
              
              (190,670
              )
              
              (84,757
              )Land
                  use right, net
              
              $
              4,859,620
              
              $
              4,650,814
 
 Amortization
        expense charged to operations was $95,940 and $27,673 for the year ended
        December 31, 2007 and 2006, respectively.
  38
  **CHINA
        RUITAI INTERNATIONAL HOLDINGS CO., LTD.**
 **AND
        SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **Note
        11- RESTRICTED CASH**
 
 Restricted
        cash consists of following:
 
 December 31,
              
              December 31,Financial
                  Institutions
              
              2007
              
              2006Jinan
                  Branch of Shanghai Pudong Development Bank
              
              $
              2,734,400
              
              $
              1,923,000Taian
                  Branch of Bank of China
              
              
              -
              
              
              1,282,000Feicheng
                  Branch of Bank of China
              
              
              1,503,920
              
              
              1,410,200Wenyang
                  Branch of Feichang Credit Bank
              
              
              -
              
              
              705,741Wenyang
                  Branch of Agriculture Bank
              
              
              1,640,788
              
              
              1,539,409Wenyang
                  Credit Bank
              
              
              4,757,856
              
              
              3,461,400Taian
                  Branch of Transportation Bank
              
              
              -
              
              
              1,923,000Feicheng
                  Branch of Construction Bank
              
              
              1,367,200
              
              
              -Feicheng
                  Branch of Transportation Bank
              
              
              2,734,400
              
              
              -$
              14,738,564
              
              $
              12,244,750
  **Note
        12- BANK CHECKS PAYABLE**
 
 Bank
        checks payable consists of following:
 
 December 31,
              
              December 31,Financial
                  Institutions
              
              2007
              
              2006Feicheng
                  Branch of Bank of China
              
              $
              3,007,840
              
              $
              5,384,400Feicheng
                  Branch of Transportation Bank
              
              
              4,101,600
              
              
              3,846,000Wenyang
                  Credit Bank
              
              
              7,929,760
              
              
              8,333,000Jinan
                  Branch of Shanghai Pudong Development Bank
              
              
              2,734,400
              
              
              1,923,000Feicheng
                  Branch of Construction Bank
              
              
              1,551,772
              
              
              -Wenyang
                  Branch of Agriculture Bank
              
              
              2,734,400
              
              
              2,564,000$
              22,059,772
              
              $
              22,050,400
  39
  **CHINA
        RUITAI INTERNATIONAL HOLDINGS CO., LTD.**
 **AND
        SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **Note
        13- BANK LOANS**
 
 **Bank
        loans consist of the following as of December 31, 2007:**
 
 Loan
              
              
              
              Monthly
              
              GuaranteedFinancial Institutions
              
              Amount
              
              Duration
              
              Interest Rate
              
              ByFeicheng
                  Branch of Bank of China
              
              $
              410,160
              
              
              02/2/2007-02/1/2008
              
              
              7.344
              ‰Feicheng
                  Branch of Bank of China
              
              
              1,367,200
              
              
              02/27/2007-02/26/2008
              
              
              7.344
              ‰Feicheng
                  Branch of Bank of China
              
              
              656,256
              
              
              03/16/2007-03/15/2008
              
              
              7.344
              ‰Feicheng
                  Branch of Bank of China
              
              
              574,224
              
              
              03/16/2007-03/15/2008
              
              
              7.344
              ‰
              
              Shangdong
                AshideFeicheng
                  Branch of Bank of China
              
              
              820,320
              
              
              3/27/2007-3/26/2008
              
              
              7.668
              ‰
              
              Chemicals
                Co.,
                  Ltd.Feicheng
                  Branch of Bank of China
              
              
              1,367,200
              
              
              04/25/2007-04/24/2008
              
              
              7.668
              ‰Feicheng
                  Branch of Bank of China
              
              
              957,040
              
              
              06/15/2007-06/14/2008
              
              
              7.227
              ‰Feicheng
                  Branch of Bank of China
              
              
              1,230,480
              
              
              6/26/2007-06/25/2008
              
              
              7.227
              ‰Feicheng
                  Branch of Bank of China
              
              
              1,367,200
              
              
              12/20/2007-11/19/2008
              
              
              8.019
              ‰Taian
                  Branch of Transportation Bank
              
              
              683,600
              
              
              08/22/2007-08/22/2008
              
              
              7.722
              ‰
              
              Shandong
                RuifuWenyang
                  Branch of Feicheng Credit Bank
              
              
              751,960
              
              
              05/24/2007-05/24/2008
              
              
              6.57
              ‰
              
              Chemicals
                Co.,
                  Ltd.Wenyang
                  Branch of Feicheng Credit Bank
              
              
              1,203,136
              
              
              01/31/2007-01/31/2008
              
              
              6.372
              ‰
              
              Shandong
                ZhuiyuanWenyang
                  Branch of Feicheng Credit Bank
              
              
              1,044,541
              
              
              01/31/2007-01/31/2008
              
              
              6.372
              ‰
              
              Mining
                  Group
                Co.,
                  LtdWenyang
                  Branch of Feicheng Credit Bank
              
              
              1,367,200
              
              
              01/31/2007-01/31/2008
              
              
              6.372
              ‰Jinan
                  Branch of Shanghai Pudong Bank
              
              
              2,734,400
              
              
              08/28/2007-08/28/2008
              
              
              6.435
              ‰
              
              Shangdong
                AshideWenyang
                  Branch of Agriculture Bank
              
              
              1,367,200
              
              
              11/23/2007-11/23/2008
              
              
              8.748
              %
              
              Chemicals
                Co.,
                  Ltd.Wenyang
                  Branch of Agriculture Bank
              
              
              1,367,200
              
              
              12/23/2007-11/24/2008
              
              
              8.964
              %
              
              Feicheng
                Shuolide
                  Co., Ltd.Total
              
              $
              19,269,317
  40
  **CHINA
        RUITAI INTERNATIONAL HOLDINGS CO., LTD.**
 **AND
        SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **Note
        13- BANK LOANS (continued)**
 
 Interest
        expense charged to operations for these bank loans was $1,180,823 for the
        year
        ended December 31, 2007.
 
 **Bank
        loans consist of the following as of December 31,
        2006:**
 Loan
                
                
                
                Monthly
                
                GuaranteedFinancial Institutions
                
                Amount
                
                Duration
                
                Interest Rate
                
                ByFeicheng
                    Branch of Bank of China
                
                $
                384,600
                
                
                01/28/2006-01/27/2007
                
                
                5.58‰Feicheng
                    Branch of Bank of China
                
                
                1,282,000
                
                
                02/21/2006-02/20/2007
                
                
                5.58‰Feicheng
                    Branch of Bank of China
                
                
                615,360
                
                
                03/07/2006-03/06/2007
                
                
                5.58‰Feicheng
                    Branch of Bank of China
                
                
                538,440
                
                
                03/14/2006-03/13/2007
                
                
                5.58‰Feicheng
                    Branch of Bank of China
                
                
                769,200
                
                
                03/28/2006-03/27/2007
                
                
                5.58‰
                
                
                Feicheng
                  DeltaFeicheng
                    Branch of Bank of China
                
                
                1,282,000
                
                
                04/24/2006-04/23/2007
                
                
                5.58‰
                
                
                Chemicals
                  Co.,
                    Ltd.Feicheng
                    Branch of Bank of China
                
                
                897,400
                
                
                06/13/2006-06/12/2007
                
                
                5.85‰Feicheng
                    Branch of Bank of China
                
                
                1,153,800
                
                
                11/22/2006-11/21/2007
                
                
                6.12‰Feicheng
                    Branch of Bank of China
                
                
                1,282,000
                
                
                12/21/2006-12/20/2007
                
                
                6.12‰Taian
                    Branch of Transportation Bank
                
                
                641,000
                
                
                03/16/2006-03/15/2007
                
                
                5.115‰Wenyang
                    Branch of Feicheng Credit Bank
                
                
                769,200
                
                
                05/24/2005-05/23/2006
                
                
                4.65‰
                
                
                Shandong
                    Feicheng**(a)**
                
                
                Wenyang
                    Branch of Feicheng Credit Bank
                
                
                1,128,160
                
                
                07/27/2005-07/26/2006
                
                
                5.31‰
                
                
                Chemicals
                    Co. Ltd.**(a)**
                
                
                Wenyang
                    Branch of Feicheng Credit Bank
                
                
                979,448
                
                
                07/27/2005-07/26/2006
                
                
                5.31‰**(a)**
                
                
                Wenyang
                    Branch of Feicheng Credit Bank
                
                
                1,282,000
                
                
                07/27/2005-07/26/2006
                
                
                5.31‰Jinan
                    Branch of Shanghai Pudong Development Bank
                
                
                1,923,000
                
                
                06/13/2006-03/12/2007
                
                
                4.875‰
                
                
                Feicheng
                    DeltaWenyang
                    Branch of Agriculture Bank
                
                
                1,282,000
                
                
                12/23/2006-12/22/2007
                
                
                6.975‰
                
                
                Chemicals
                    Co., LtdTotal
                
                $
                16,209,608
  41
  **CHINA
        RUITAI INTERNATIONAL HOLDINGS CO., LTD.**
 **AND
        SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **Note
        13- BANK LOANS (continued)**
 
 **(a)** The
        Company was defaulted on these bank loans, totaling $3,389,608, July 27,
        2006
        through January 30, 2007. The Company paid interest during such period. On
        January 31, 2007, the bank extent these loans for a one-year period January
        31,
        2007 through January 31, 2008.
 
 Interest
        expense for these bank loans was $881,390 for the year ended December 31,
        2006.
 
 **Note
        14- RELATED PARTY TRANSACTIONS**
 
 **Advance
        to employees**
 
 “Advance
        to employee” are advances to employees who are working on projects on behalf of
        the Company. After the work is finished, they will submit expense reports
        with
        supporting documents to the accounting department. Then, the expenses are
        debited into the relevant accounts and the advances are credited out. Cash
        flows
        from these activities are classified as cash flows from operating
        activities.
 
 **Due
        from a related party**
 
 “Due
        from
        a related party" represents loans to Shandong Ruitai Chemicals Co., Ltd.
        ("Shandong Ruitai"), then a majority owner of TaiAn. Shandong Ruitia had
        owned
        75% equity ownership interest of TaiAn January 2000 through February 2007.
        On
        March 20, 2007, Shandong sold 74% equity ownership interest of TaiAn to Pacific
        Capital Group Co., Ltd. Mr. Xingfu Lv, our President, and Mr. Dianming Ma,
        our
        CEO, collectively own 100% of equity ownership interest in Shandong
        Ruitai.
 
 TaiAn
        has
        been extending loans to Shangdong Ruitai and the balance amounted to $14,829,593
        and $8,804,112 as of December 31, 2007 and 2006, respectively. These loans
        were
        unsecured, non-interest bearing and have no fixed terms of repayment, therefore,
        deemed payable on demand. Cash flows from due from a shareholder are classified
        as cash flows from investing activities. The Managements periodically evaluates
        the financial resources of the borrower to make sure Shandong Ruitai has
        the
        capability to pay back these loans.
 
 As
        TaiAn
        became the only operating subsidiary of a public company, TaiAn signed loan
        agreement with Shangdong Ruitai in December 2007. Pursuant to the loan
        agreement, Shangdong will pay 7‰ interest on the outstanding balance monthly.
        The Management believes that the interest rate approximates the fair market
        interest rate as compared to the Company's bank loans. Shandong Ruitai pledges
        its electricity generation plant as collateral for the loans and Mr. Lv and
        Mr.
        Ma guarantee the loans. Also, Shandong Ruitai will gradually pay off these
        loans
        in a three-year period ended December 31, 2010, with 30% in 2008, 30% in
        2009,
        and the rest of 40% in 2010.
 42
  **CHINA
        RUITAI INTERNATIONAL HOLDINGS CO., LTD.**
 **AND
        SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **Note
        14- RELATED PARTY TRANSACTIONS (continued)**
 
 The
        following is a summary of due from Shandong Ruitai:
 
 December
                  31,
              
              December
                  31,2007
              
              2006Due
                  from Shangdong Ruitai-current portion
              
              $
              4,448,878
              
              $
              8,804,112Due
                  from Shangdong Ruitai-long-term portion
              
              
              10,380,715
              
              
              -Total
                  due from Shandong Ruitai
              
              $
              14,829,593
              
              $
              8,804,112
 
 **Due
        to employees**
 
 Due
        to
        Employees represents loans from employees to finance the Company’s operations
        due to a lack of cash resources. There are no formal loan agreements for
        these
        loans, therefore, these loans were unsecured, and have no fixed terms of
        repayment. The employees can inject or withdraw funds as they wish. The Company
        pays 6‰ interest on these loans monthly beginning from July 1, 2007. Cash flows
        from these activities are classified as cash flows from financing activities.
        The Company paid interest of $31,008 and $0 for the year ended December 31,
        2007
        and 2006, respectively.
 
 **Land
        use right transaction**
 
 On
        October 25, 2006, the Company purchase the use right of a piece of land,
        approximately 36 acre, located in Wenyang County, Shandong Province, from
        its
        majority shareholder, Shandong Ruitai, for $3,352,840. The local government
        approved the transaction and certified that the purchase price is at the
        fair
        market value. The consideration has been paid to the seller, and the title
        transferal is under going. The Management believes the transaction is on
        terms
        no less favorable to the Company than those reasonably obtainable from third
        parties.
 
 **Advisory
        Agreement**
 
 On
        June
        11, 2007, the Company entered into an advisory agreement with Mid-Continental
        Securities Corp., (“Mid-Continental”) its agents and/or assigns, which in
        essence requires that varying consulting services be rendered during a one
        year
        period. The Company made payment of these services in advance through the
        issuance of 1,300,000 shares valued at $0.20 per share, totaling $260,000.
        Since
        this issuance occurred to the shell company before reverse merger, the
        transaction has no affect on the consolidated financial statements
        presented.
  43
  **CHINA
        RUITAI INTERNATIONAL HOLDINGS CO., LTD.**
 **AND
        SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **Note
        14- RELATED PARTY TRANSACTIONS (continued)**
 
 **Advances
        from Stockholder**
 
 During
        the nine-month period ended September 30, 2007, Mid-Continental paid expenses
        and liabilities of the Company in the amount of $47,738. These payments are
        considered capital contributions inasmuch as the Company will not repay these
        amounts to the stockholder. Since these payments occurred to the shell company
        before reverse merger, the transaction has no affect on the consolidated
        financial statements presented.
 
 **Note
        15- INCOME TAX (restated)**
 
 All
        Chinese enterprises are governed by the PRC Income Tax Law and various local
        income tax laws, pursuant to which a company generally is subject to an income
        tax at an effective rate of 33% (30% national income tax and 3% local income
        tax) on income as reported in its statutory financial statements after
        appropriate tax adjustments. Beginning from January 1, 2008, the effective
        national income tax rate reduces to 25%.
 
 The
        PRC
        Income Tax Law provides tax benefits to foreign-invested enterprises, pursuant
        to which a qualified company is exempt from national income tax for its first
        three fiscal years since it records net profit, and is eligible to half of
        the
        national income tax rate for the subsequent two fiscal years.
 
 The
        Company was qualified as a foreign-invested company in 2001, as such, it
        was
        exempted from national income tax for the fiscal years ended December 31,
        2001,
        2002, and 2003; and was eligible for half of the national income tax rate
        (15%)
        in the fiscal years ended December 31, 2004, and 2005. Since 2006, the Company
        is subject to the regular national income tax rate (30%). Pursuant to the
        tax
        regulations established by the Shandong Province Tax Authority, the Company
        is
        eligible to be exempt from local income tax as part of the incentive program
        to
        encourage local economic.
 
 The
        provision for income taxes consisted of the following:
 
 For
                  the Year EndedDecember
                  31,2007
              
              2006Provision
                  for US Income Tax
              
              $
              -
              
              $
              -Provision
                  for PRC national income tax
              
              
              2,110,750
              
              
              1,301,297Provision
                  for PRC local income tax
              
              
              -
              
              
              -Total
                  provision for income taxes
              
              $
              2,110,750
              
              $
              1,301,297
  44
  **CHINA
        RUITAI INTERNATIONAL HOLDINGS CO., LTD.**
 **AND
        SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **Note
        15- INCOME TAX (restated) (continued)**
 
 The
        following table reconciles the PRC statutory rates to the Company’s effective
        tax rate:
 
 For
                  the Year EndedDecember
                  31,2007
              
              2006U.S.
                  Statutory rate
              
              
              34.00
              %
              
              34.00
              %Foreign
                  income not recognized in USA
              
              
              -34.00
              %
              
              -34.00
              %PRC
                  national income tax rate
              
              
              30.00
              %
              
              30.00
              %PRC
                  local income tax rateEffective
                  income tax rate
              
              
              30.00
              %
              
              30.00
              %
 
 At
        December 31, 2007 and 2006, the Company had net operating losses of
        approximately $1,138,602 carried from prior years. Although the PRC Income
        Tax
        Law allows the enterprises to offset their future net income with operating
        losses carried forward, enterprise need approval from local tax authority
        before
        they can claim such tax benefit, and the outcome of the application is generally
        uncertain. Therefore, the Managements established a 100% valuation allowance
        for
        the operation losses carried forward and no deferred tax assets have been
        recorded.
 
 **Note
        16- COMMON STOCK**
 
 In
        December 2004, the Company amended its articles of incorporation to authorize
        50,000,000 shares of common stock at a par value of $.001 per share. Previous
        thereto, the authorized shares consisted of 3,000,000 at $0.01 par value
        per
        share.
 
 On
        June
        11, 2007, the Company issued 1,300,000 shares of common stock to a related
        party
        as more fully disclosed in NOTE 13 to these consolidated financial
        statements.
 
 On
        November 8, 2007, as more fully disclosed in Note 2, the Company issued
        22,645,348 shares of restricted shares of common stock to the stockholders
        of
        Pacific Capital Group pursuant to the terms of the Share Exchange
        Agreement.
  45
  **CHINA
        RUITAI INTERNATIONAL HOLDINGS CO., LTD.**
 **AND
        SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **Note
        17- SEGMENT REPORTING**
 
 The
        major
        products consist of following
 
 For
                    the Years EndedDecember
                    31,2007
                
                2006**Revenue**1
                
                
                Methyl
                    Cellulose (MC)
                
                
                7,089,619
                
                
                5,326,4112
                
                
                Hydroxypropyl
                    Methyl Cellulose (HPMC)
                
                
                25,730,461
                
                
                18,188,2823
                
                
                Hydroxypropyl
                    Cellulose (HPC)
                
                
                336,943
                
                
                441,6814
                
                
                Ethyl
                    Cellulose (EC)
                
                
                1,613,099
                
                
                1,056,8965
                
                
                Hydroxyethyl
                    Cellulose (HEC)
                
                
                1,511,773
                
                
                1,133,5816
                
                
                HEMC
                
                
                495,989
                
                
                589,9767
                
                
                Hydroxypropyl
                    Cellulose (HPC)
                
                
                11,989
                
                
                18,9898
                
                
                HP
                
                
                143,897
                
                
                284,7559
                
                
                Microcrystalline
                    Cellulose (MCC)
                
                
                31,719
                
                
                29,47910
                
                
                CMC
                
                
                1,753
                
                
                -11
                
                
                Film
                    Coating Pre-Mixed Reagent.
                
                
                580,725
                
                
                485,09012
                
                
                Raw
                    materials
                
                
                859,833
                
                
                535,098**Cost
                    of Sales**1
                
                
                Methyl
                    Cellulose (MC)
                
                
                5,529,505
                
                
                3,975,9112
                
                
                Hydroxypropyl
                    Methyl Cellulose (HPMC)
                
                
                17,137,659
                
                
                12,152,3753
                
                
                Hydroxypropyl
                    Cellulose (HPC)
                
                
                143,134
                
                
                214,4694
                
                
                Ethyl
                    Cellulose (EC)
                
                
                896,085
                
                
                627,8445
                
                
                Hydroxyethyl
                    Cellulose (HEC)
                
                
                1,191,506
                
                
                874,3556
                
                
                HEMC
                
                
                440,333
                
                
                442,6657
                
                
                Hydroxypropyl
                    Cellulose (HPC)
                
                
                13,616
                
                
                29,7818
                
                
                HP
                
                
                62,342
                
                
                110,1099
                
                
                Microcrystalline
                    Cellulose (MCC)
                
                
                32,937
                
                
                30,11910
                
                
                CMC
                
                
                1,459
                
                
                -11
                
                
                Film
                    Coating Pre-Mixed Reagent.
                
                
                189,124
                
                
                154,10012
                
                
                Raw
                    materials
                
                
                852,262
                
                
                541,824
  46
  **CHINA
        RUITAI INTERNATIONAL HOLDINGS CO., LTD.**
 **AND
        SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **Note
        17- SEGMENT REPORTING (continued)**
 
 **Gross
                  Profit**1
              
              
              Methyl
                  Cellulose (MC)
              
              
              1,560,114
              
              
              1,350,5002
              
              
              Hydroxypropyl
                  Methyl Cellulose (HPMC)
              
              
              8,592,802
              
              
              6,035,9073
              
              
              Hydroxypropyl
                  Cellulose (HPC)
              
              
              193,809
              
              
              227,2124
              
              
              Ethyl
                  Cellulose (EC)
              
              
              717,014
              
              
              429,0525
              
              
              Hydroxyethyl
                  Cellulose (HEC)
              
              
              320,267
              
              
              259,2266
              
              
              HEMC
              
              
              55,656
              
              
              147,3117
              
              
              Hydroxypropyl
                  Cellulose (HPC)
              
              
              (1,627
              )
              
              (10,792
              )8
              
              
              HP
              
              
              81,555
              
              
              174,6469
              
              
              Microcrystalline
                  Cellulose (MCC)
              
              
              (1,218
              )
              
              (640
              )10
              
              
              CMC
              
              
              294
              
              
              -11
              
              
              Film
                  Coating Pre-Mixed Reagent.
              
              
              391,601
              
              
              330,99012
              
              
              Raw
                  materials
              
              
              7,571
              
              
              (6,726
              )
 
 Geographic
        Areas Information
 
 While
        all
        of the Company’s assets are located in the PRC, the Company sells products to
        customers located in the United Statets, Finland, and other countries, as
        summarized in the following chart:
 
 For the Years Ended December 31,
              
              For the Years Ended December 31,2007
              
              2006Geographic
              
              
              
              Percentage of
              
              
              
              Percentage ofAreas
              
              Revenue
              
              Total Revenue
              
              Revenue
              
              Total RevenuePRC
              
              
              31,982,437
              
              
              83.27
              %
              
              22,469,015
              
              
              79.99
              %United
                  States
              
              
              2,584,310
              
              
              6.73
              %
              
              2,584,925
              
              
              9.20
              %Finland
              
              
              1,992,816
              
              
              5.19
              %
              
              1,656,825
              
              
              5.90
              %Other
                  Countries
              
              
              1,848,237
              
              
              4.81
              %
              
              1,379,473
              
              
              4.91
              %Total
              
              
              38,407,800
              
              
              100.00
              %
              
              28,090,238
              
              
              100.00
              %
 
 Major
        Customers
 
 The
        Company has a diversified customer base. There was one major customer who
        made
        sales over 5% of the Company’s total sales as summarized in the following
        chart:
  47
  **CHINA
        RUITAI INTERNATIONAL HOLDINGS CO., LTD.**
 **AND
        SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **Note
        17- SEGMENT REPORTING (continued)**
 
 For the Years Ended December 31,
              
              For the Years Ended December 31,2007
              
              2006Major
              
              
              
              Percentage of
              
              
              
              Percentage ofCustomer
              
              Revenue
              
              Total Revenue
              
              Revenue
              
              Total RevenueCustomer
                  A
              
              
              1,992,816
              
              
              5.19
              %
              
              1,656,825
              
              
              5.90
              %Total
              
              
              1,992,816
              
              
              5.19
              %
              
              1,656,825
              
              
              5.90
              %
 
 
 **Note
        18- ASSET RETIREMENT OBLIGATIONS**
 
 The
        Company operates within the requirements of numerous regulations at the local,
        province, and national levels regarding issues such as the handling and disposal
        of hazardous chemicals, waste-water treatment and effluent and emissions
        limitations among others. From a practical standpoint, certain environmental
        contamination cannot be reasonably determined until a facility or asset is
        retired or an event occurs that otherwise requires the facility to be tested
        and
        monitored. In the absence of such requirements to test for environmental
        contamination prior to an asset or facility retirement, the Company has
        concluded that it cannot reasonably estimate the cost associated with such
        environmental-related asset retirement obligations (“ARO”).
 
 In
        addition, the Company anticipates operating its manufacturing facilities
        indefinitely into the future thereby rendering the potential range of settlement
        dates as indeterminate. Therefore, the Company has not recorded any AROs
        to
        recognize legal obligations associated with the retirement of tangible
        long-lived assets, as contemplated by the Statement of Financial Accounting
        Standards No. 143, “Accounting for Asset Retirement Obligations” (“SFAS 143”)
        and FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement
        Obligations - an interpretation of FASB Statement No. 143” (“FIN
        47”).
 
 **Note
        19- COMMITMENTS AND CONTINGENCIES**
 
 **PRC's
        political and economic system**
 
 The
        Company faces a number of risks and challenges not typically associated with
        companies in North America and Western Europe, since its assets exist solely
        in
        the PRC, and its revenues are derived from its operations therein. The PRC
        is a
        developing country with an early stage market economic system, overshadowed
        by
        the state. Its political and economic systems are very different from the
        more
        developed countries and are in a state of change. The PRC also faces many
        social, economic and political challenges that may produce major shocks and
        instabilities and even crises, in both its domestic arena and in its
        relationships with other countries, including the United States. Such shocks,
        instabilities and crises may in turn significantly and negatively affect
        the
        Company's performance.
 48
 **CHINA
        RUITAI INTERNATIONAL HOLDINGS CO., LTD.**
 **AND
        SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **Note
        19- COMMITMENTS AND CONTINGENCIES (continued)**
 
 **Environmental
        (restated)**
 
 In
        the
        ordinary course of its business, the Company is subject to numerous
        environmental laws and regulations covering compliance matters or imposing
        liability for the costs of, and damages resulting from, cleaning up sites,
        past
        spills, disposals and other releases of hazardous substances. Currently,
        our
        environmental compliance costs principally include the costs to run our waste
        water treatment facility and routine inspection fees paid to the local
        environmental department. These amounts are immaterial to our operating costs.
        However, changes in these laws and regulations may significantly increase
        our
        environmental compliance costs and therefore have a material adverse effect
        on
        the Company’s financial position and results of operations. Also, any failure by
        the Company to adequately comply with such laws and regulations could subject
        the Company to significant future liabilities.”
 
 **Governmental
        control of currency conversion**
 
 The
        PRC
        government imposes controls on the convertibility of Renminbi into foreign
        currencies and, in certain cases, the remittance of currency out of the PRC.
        The
        Company receives most of its revenues in Renminbi, which is currently not
        a
        freely convertible currency. Shortages in the availability of foreign currency
        may restrict the Company’s ability to remit sufficient foreign currency to
        satisfy foreign currency dominated obligations. Under existing PRC foreign
        exchange regulations, payments of current account items, including profit
        distributions, interest payments and expenditures from the transaction, can
        be
        made in foreign currencies without prior approval from the PRC State
        Administration of Foreign Exchange by complying with certain procedural
        requirements. However, approval from appropriate governmental authorities
        is
        required where Renminbi is to be converted into foreign currency and remitted
        out of China to pay capital expenses such as the repayment of bank loans
        denominated in foreign currencies.
 
 The
        PRC
        government may also at its discretion restrict access in the future to foreign
        currencies for current account transactions. If the foreign exchange control
        system prevents the Company from obtaining sufficient foreign currency to
        satisfy its currency demands, the Company may not be able to pay certain
        of its
        expenses as they come due.
 
 **Contingent
        liabilities**
 
 Prior
        to
        the merger with Pacific Capital Group on November 8, 2007, the Company has
        not
        been active since discontinuing its real estate operations in 1981. Management
        believes that there are no valid outstanding liabilities from prior operations.
        If a creditor were to come forward and claim a liability, the Company has
        committed to contest such claim to the fullest extent of the law. No amount
        has
        been accrued in the financial statements for this contingent
        liability.
 49
 **CHINA
        RUITAI INTERNATIONAL HOLDINGS CO., LTD.**
 **AND
        SUBSIDIARIES**
 
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **Note
        19- COMMITMENTS AND CONTINGENCIES (continued)**
 
 **Guaranteed
        Loans (restated)**
 
 The
        Company has guaranteed certain loans for third-party enterprises, which,
        in
        turn, have guaranteed loans for the Company. These guarantees require payment
        from the Company in the event of default on payment by the respective debtor
        and, if the debtor defaults, the Company may be required to pay amounts
        outstanding under the related agreements in addition to the principal amount
        guaranteed, including accrued interest and related fees.
 
 The
        Company and these third-party enterprises have been guaranteeing loans for
        each
        other in the day-to-day operation. Both these enterprises and the Company
        are
        considered good reputation debtors by local banks. The banks allow these
        companies guarantee loans for each other instead of requiring the loans be
        secured by collateral. None of the enterprises, for which the Company has
        guaranteed loans, has defaulted on any loan repayments, and accordingly,
        the
        Company has not recorded any liabilities or losses on such
        guarantees.
 
 Bank
        loans that the Company has guaranteed for third-party enterprises consist
        of the
        following as of December 31, 2007:
 Loan
              
              
              
              Monthly
              
              GuaranteedBorrower
              
              Financial
                  Institutions
              
              Amount
              
              Duration
              
              Interest
                Rate
              
              ByShangdong
                  Lulong Group Co., Ltd.
              
              
              Feicheng
                  Branch of Agriculture Bank
              
              $
              1,367,200
              
              
              11/23/2007-11/23/2008
              
              
              10.026‰Shangdong
                  Ashide Chemical Co., Ltd.
              
              
              Feicheng
                  Branch of Bank of China
              
              
              328,128
              
              
              06/26/2007-06/25/2008
              
              
              7.884‰Shangdong
                  Ashide Chemical Co., Ltd.
              
              
              Feicheng
                  Branch of Bank of China
              
              
              1,093,760
              
              
              09/19/2007-9/18/2008
              
              
              8.748‰Shangdong
                  Ashide Chemical Co., Ltd.
              
              
              Feicheng
                  Branch of Bank of China
              
              
              1,093,760
              
              
              10/19/2007-10/18/2008
              
              
              8.748‰
              
              
              The
                CompanyShangdong
                  Ashide Chemical Co., Ltd.
              
              
              Feicheng
                  Branch of Bank of China
              
              
              1,500,000
              
              
              01/12/2007-01/08/2012
              
              
              8.34‰Shangdong
                  Ashide Chemical Co., Ltd.
              
              
              Feicheng
                  Branch of Bank of China
              
              
              800,000
              
              
              02/02/2007-01/08/2011
              
              
              8.41‰Shangdong
                  Ashide Chemical Co., Ltd.
              
              
              Feicheng
                  Branch of Bank of China
              
              
              890,000
              
              
              12/30/2006-01/08/2011
              
              
              8.32938‰Shangdong
                  Ashide Chemical Co., Ltd.
              
              
              Feicheng
                  Branch of Bank of China
              
              
              700,000
              
              
              12/30/2006-01/08/2011
              
              
              8.32938‰Total
              
              $
              7,772,848
  50
  **ITEM
        8.**  **CHANGES
        IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE**
 
 As
        reported on Form 8-K filed with the SEC on January 9, 2008, the Company changed
        auditors. For the fiscal year ended December 31, 2007, there were no
        disagreements with our accountants on accounting and financial
        disclosure.
 
 **ITEM
        8A.**  **CONTROLS
        AND PROCEDURES.**
 
 **Disclosure
        Controls and Procedures**
 
 The
        Securities and Exchange Commission defines the term “disclosure controls and
        procedures” to mean a company's controls and other procedures of an issuer that
        are designed to ensure that information required to be disclosed in the reports
        that it files or submits under the Securities Exchange Act of 1934 is recorded,
        processed, summarized and reported, within the time periods specified in
        the
        Securities and Exchange Commission’s rules and forms. Disclosure controls and
        procedures include, without limitation, controls and procedures designed
        to
        ensure that information required to be disclosed by an issuer in the reports
        that it files or submits under the Securities Exchange Act of 1934 is
        accumulated and communicated to the issuer’s management, including its principal
        executive and principal financial officers, or persons performing similar
        functions, as appropriate to allow timely decisions regarding required
        disclosure. The Company maintains such a system of controls and procedures
        in an
        effort to ensure that all information which it is required to disclose in
        the
        reports it files under the Securities Exchange Act of 1934 is recorded,
        processed, summarized and reported within the time periods specified under
        the
        SEC's rules and forms and that information required to be disclosed is
        accumulated and communicated to principal executive and principal financial
        officers to allow timely decisions regarding disclosure.
 
 As
        of the
        end of the period covered by this report, we carried out an evaluation, under
        the supervision and with the participation of our chief executive officer
        and
        chief financial officer, of the effectiveness of the design and operation
        of our
        disclosure controls and procedures. Based on this evaluation, our chief
        executive officer and chief financial officer concluded that our disclosure
        controls and procedures are designed to provide reasonable assurance of
        achieving the objectives of timely alerting them to material information
        required to be included in our periodic SEC reports and of ensuring that
        such
        information is recorded, processed, summarized and reported with the time
        periods specified. Our chief executive officer and chief financial officer
        also
        concluded that our disclosure controls and procedures were effective as of
        the
        end of the period covered by this report to provide reasonable assurance
        of the
        achievement of these objectives.
 
 **Internal
        Control Over Financial Reporting**
 
 The
        management of the Company is responsible for the preparation of the financial
        statements and related financial information appearing in this Annual Report
        on
        Form 10-KSB. The financial statements and notes have been prepared in conformity
        with accounting principles generally accepted in the United States of America.
        The management of the Company also is responsible for establishing and
        maintaining adequate internal control over financial reporting, as defined
        in
        Rules 13a-15(f) and 15d-15(f) under the Exchange Act. A company's internal
        control over financial reporting is defined as a process designed to provide
        reasonable assurance regarding the reliability of financial reporting and
        the
        preparation of financial statements for external purposes in accordance with
        generally accepted accounting principles. Our internal control over financial
        reporting includes those policies and procedures that (1) pertain to the
        maintenance of records that in reasonable detail accurately and fairly reflect
        the transactions and dispositions of the assets of the Company; (2) provide
        reasonable assurance that transactions are recorded as necessary to permit
        preparation of financial statements in accordance with generally accepted
        accounting principles, and that receipts and expenditures of the
        issuer are being made only in accordance with authorizations of management
        and
        directors of the Company; and (3) provide reasonable assurance regarding
        prevention or timely detection of unauthorized acquisition, use or disposition
        of the Company's assets that could have a material effect on the financial
        statements.
  51
  Management,
        including the Chief Executive Officer and Chief Financial Officer, does not
        expect that the Company's disclosure controls and internal controls will
        prevent
        all error and all fraud. Because of its inherent limitations, a system of
        internal control over financial reporting can provide only reasonable, not
        absolute, assurance that the objectives of the control system are met and
        may
        not prevent or detect misstatements. Further, over time control may become
        inadequate because of changes in conditions or the degree of compliance with
        the
        policies or procedures may deteriorate.
 
 With
        the
        participation of the Chief Executive Officer and Chief Financial Officer,
        our
        management evaluated the effectiveness of the Company's internal control
        over
        financial reporting as of December 31, 2007. Based on that evaluation, our
        management has concluded that, as of December 31, 2007, the Company's internal
        control over financial reporting was effective.
 
 This
        annual report does not include an attestation report of the Company's registered
        public accounting firm regarding internal control over financial reporting.
        Management's report was not subject to attestation by the Company's registered
        public accounting firm pursuant to temporary rules of the Securities and
        Exchange Commission that permit us to provide only management's report in
        this
        Annual Report on Form 10-KSB.
 
 **ITEM
        8B.     OTHER INFORMATION.**
 
 None.
 
 **PART
        III**
 
 **ITEM
        9.**  **DIRECTORS,
        EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
        16(A) OF THE EXCHANGE ACT.**
 
 **Directors
        and Executive Officers**
 
 The
        following table sets forth, as of April 14, 2008, the names and ages of the
        current directors and executive officers of the Registrant, the principal
        positions with the Registrant held by such persons and the date such persons
        became a director or executive officer. The executive officers are elected
        annually by the Board of Directors. The directors serve one year terms or
        until
        their successors are elected.
 
 The
        directors and executive officers currently serving the Company are as
        follows:
 
 **Name**
              
              **Age**
              
              **Position
                  Held and Tenure**Dian
                  Min Ma
              
              42
              
              Director
                  since August 2007; CEO, Secretary since November 2007Xing
                  Fu Lu
              
              56
              
              Director
                  August 2007; President since November 2007Gang
                  Ma
              
              35
              
              Chief
                  Financial Officer since November 2007Jin
                  Tian
              
              36
              
              Director
                  since November 2007
  52
  **Biographical
        Information**
 
 Dian
        Min Ma .
        Dian
        Min Ma has been a director of the Registrant since August 2007 and has been
        the
        CEO of the Registrant since November 8, 2007. His primary responsibilities
        are
        focused on the general management of the Company. In addition to his work
        with
        China RuiTai International Holdings Co., Ltd., Mr. Ma serves as the Finance
        Manager for TaiAn; he has served in this position since August 2004. Mr.
        Ma is a
        Professional Accountant with close to 20 years of experience. He has formerly
        served as Finance Manager for FeiCheng JinTai Company, FeiCheng Oil Chemical
        Plant, and FeiCheng RuiTai Fine Chemical Company, Ltd.
 
 Xing
        Fu Lu .
        Xing Fu
        Lu has been a director of the Registrant since August 2007 and has been the
        President of the Registrant since November 8, 2007. In addition to his work
        with
        China RuiTai International Holdings Co., Ltd., Mr. Lu is the Chief Executive
        Officer of TaiAn. Mr. Lu is a Professional Engineer with over 25 years of
        experience. Prior to accepting his position as CEO with TaiAn, he was General
        Manager in FeiCheng Oil Chemical Plant, and FeiCheng RuiTai Fine Chemical
        Company, Ltd.
 
 Gang
        Ma .
        Gang Ma
        has been the Chief Financial Officer of the Registrant since November 8,
        2007.
        In addition to his work with China RuiTai International Holdings Co., Ltd.,
        Mr.
        Ma works as the Director of the Financial Department for TaiAn, a position
        that
        he has held since July 1999. Prior to working for TaiAn, Mr. Ma worked for
        Shangdong GMB Company from August 1995 to July 1999 in the company’s financial
        and accounting department.
 
 Jin
        Tian .
        Jin
        Tian has been a director of the Registrant since November 8, 2007. In addition
        to his work with China RuiTai International Holdings Co., Ltd., Jin Tian
        works
        as an accountant for TaiAn, a position he has held since approximately October
        2002.
 
 **Family
        Relationships**
 
 There
        are
        no family relationships between any of the current directors or officers
        of the
        Company.
 
 **Involvement
        in Certain Legal Proceedings**
 
 None
        of
        our officers, directors, promoters or control persons has been involved in
        the
        past five (5) years in any of the following:
 
 (1)
              Any
                  bankruptcy petition filed by or against any business of which such
                  person
                  was a general partner or executive officer either at the time of
                  the
                  bankruptcy or within two years prior to that
                  time;
 
 (2)
              Any
                  conviction in a criminal proceedings or being subject to a pending
                  criminal proceeding (excluding traffic violations and other minor
                  offenses);
 
 (3)
              Being
                  subject to any order, judgment or decree, not subsequently reversed,
                  suspended or vacated, or any court of competent jurisdiction, permanently
                  or temporarily enjoining, barring,suspending
                  or otherwise limiting his involvement in any type of business,
                  securities
                  or banking activities; or
  53
  (4)
              Being
                  found by a court of competent jurisdiction (in a civil action),
                  the SEC or
                  the U.S. Commodity Futures Trading Commission to have violated
                  a federal
                  or state securities laws or commodities law, and the judgment has
                  not been
                  reversed, suspended, or vacated.
 
 **Directorships**
 
 None
        of
        the Company’s executive officers or directors is a director of any company with
        a class of equity securities registered pursuant to Section 12 of the Securities
        exchange Act of 1934 (the “Exchange Act”) or subject to the requirements of the
        Exchange Act or any company registered as an investment company under the
        Investment Company Act of 1940..
 
 **Compliance
        with Section 16(a) of the Exchange Act**
 
 Section
        16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's
        officers and directors, and persons who own more than ten percent of a
        registered class of the Company's equity securities, to file reports of
        ownership of Form 3 and changes in ownership on Form 4 or Form 5 with the
        Securities and Exchange Commission. Such officers, directors and 10%
        stockholders are also required by SEC rules to furnish the Company with copies
        of all Section 16(a) forms they file. Based solely on its review of the copies
        of such forms received by it, the Company believes that, during the fiscal
        year
        ended December 31, 2007, all Section 16(a) filing requirements applicable
        to its
        officers, directors and 10% stockholders were satisfied.
 
 **Code
        of Ethics**
 
 The
        Company has not yet adopted a code of ethics. The Company intends to adopt
        a
        code of ethics in the near future.
 
 **ITEM
        10.****EXECUTIVE
        COMPENSATION**.
 
 **Executive
        Compensation**
 
 The
        following table sets
        forth, for the years indicated, all compensation
        paid, distributed or accrued for services, including salary and bonus amounts,
        rendered in all capacities by the Company’s chief executive officer ,
        chief
        financial officer and all
        other executive officers who received or are entitled to receive remuneration
        in
        excess of $100,000 during the stated periods ;
        the
        information contained below represents compensation paid to the Registrant’s
        officers and directors for their work related to the Registrant’s subsidiary,
        TaiAn. These
        officers are referred to herein as the “named executive officers.”
  54
  **Summary
        Compensation Table**
  Non-Equity
              
              Non-qualifiedIncentive
              
              DeferredStock
              
              Option
              
              Plan
              
              Compensation
              
              All
                  otherName and
              
              
              
              Salary
              
              Bonus
              
              Award(s)
              
              Award(s)
              
              Compensation
              
              Earnings
              
              Compensation
              
              TotalPrincipal Position
              
              Year
              
              ($)
              
              ($)
              
              ($)
              
              ($)
              
              (#)
              
              ($)
              
              ($)
              
              ($)Dian
                  Min Ma, CEO
              
              
              2007
                2006
              
              $
                $
              185,185
                185,185
              
              
              —
                —
              
              
              —
                —
              
              
              —
                —
              
              
              —
                —
              
              
              —
                —
              
              
              —
                —
              
              $
                $
              185,185
                185,185
              (1)
                (1)Xing
                  Fu Lu,
                President
              
              
              2007
                2006
              
              $
                $
              198,000
                198,000
              
              
              —
                  —
              
              
              —
                  —
              
              
              —
                  —
              
              
              —
                  —
              
              
              —
                  —
              
              
              —
                  —
              
              $
                $
              198,000
                198,000
              (2)
                (2)Gang
                  Ma,
                Chief
                  Financial Officer
              
              
              2007
                2006
              
              $
                $
              67,000
                67,000
              
              
              —
                  —
              
              
              —
                  —
              
              
              —
                  —
              
              
              —
                  —
              
              
              —
                  —
              
              
              —
                  —
              
              $
                $
              67,000
                67,000
              (3)
                (3)Anna
                  Herbst(4)
              
              
              2007
                2006
              
              $
                $
              0.00
                0.00
              
              
              —
                  —
              
              
              —
                  —
              
              
              —
                  —
              
              
              —
                  —
              
              
              —
                  —
              
              
              —
                  —
              
              $
                $
              0.00
                0.00Cosmo
                  Palmieri(5)
              
              
              2007
                2006
              
              $
                $
              0.00
                0.00
              
              
              —
                  —
              
              
              —
                  —
              
              
              —
                  —
              
              
              —
                  —
              
              
              —
                  —
              
              
              —
                  —
              
              $
                $
              0.00
                0.00
 
 (1)
              This
                  figure includes compensation paid to Dian Min Ma for services rendered
                  to
                  the Registrant’s majority owned subsidiary,
                  TaiAn.
 (2)
              This
                  figure includes compensation paid to Xing Fu Lu for services rendered
                  to
                  the Registrant’s majority owned subsidiary,
                  TaiAn.
 (3)
              This
                  figure includes compensation paid to Gang Ma for services rendered
                  to the
                  Registrant’s majority owned subsidiary,
                  TaiAn.
 (4)
              As
                  disclosed on Form 8-K filed with the SEC on November 9, 2007, and
                  hereby
                  incorporated by reference, pursuant to the terms of the Share Exchange
                  Agreement by and between the Registrant, Pacific Capital Group
                  and the
                  Shareholders of Pacific Capital Group, in conjunction with the
                  closing of
                  the Share Exchange on November 8, 2007, Anna Herbst resigned from
                  her
                  position as the Chief Financial Officer and President of the
                  Registrant.
 (5)
              As
                  disclosed on Form 8-K filed with the SEC on November 9, 2007, and
                  hereby
                  incorporated by reference, pursuant to the terms of the Share Exchange
                  Agreement by and between the Registrant, Pacific Capital Group
                  and the
                  Shareholders of Pacific Capital Group, in conjunction with the
                  closing of
                  the Share Exchange on November 8, 2007, Cosmo Palmieri resigned
                  from his
                  position as the Vice- President of the
                  Registrant.
  **Option
        Grants in Last Fiscal Year**
  There
        were no options granted to any of the named executive officers during the
        fiscal
        year ended December 31, 2007.
  **Employment
        Agreements**
 
 We
        do not
        have signed employment agreements with our officers. We do not have any
        agreements for compensation of officers after their resignation or retirement.
 
 **Majority-Owned
        Subsidiary Employment Agreements**
  The
        Company’s subsidiary TaiAn. has entered into employment agreements with its
        executive officers. The following discussion identifies and summarizes the
        employment agreements that TaiAn has entered into with its executive
        officers:
  55
  TaiAn
        has
        entered into an employment agreement with Dian Min Ma, its general manager
        for a
        ten-year term beginning on October 6, 2000 and ending on October 6, 2010.
        The
        agreement establishes the working relationship between TaiAn and Dian Min
        Ma. A
        copy of the agreement was filed as Exhibit 10.1 on Form 8-K filed with the
        SEC
        on November 9, 2007, and is hereby incorporated by reference.
 
 TaiAn
        has
        entered into an employment agreement with Xing Fu Lu, its president for a
        ten-year term beginning on October 6, 2000 and ending on October 6, 2010.
        The
        agreement establishes the working relationship between TaiAn and Xing Fu
        Lu. A
        copy of the agreement was filed as Exhibit 10.2 on Form 8-K filed with the
        SEC
        on November 9, 2007, and is hereby incorporated by reference.
 
 TaiAn
        has
        entered into an employment agreement with Gang Ma, its chief financial officer
        for a ten-year term beginning on October 6, 2000 and ending on October 6,
        2010.
        The agreement establishes the working relationship between TaiAn and Gang
        Ma. A
        copy of the agreement was filed as Exhibit 10.3 on Form 8-K filed with the
        SEC
        on November 9, 2007, and is hereby incorporated by reference.
 
 Aside
        from the foregoing, we have no written employment agreements with our officers
        and directors. Compensation was determined after discussion about expected
        time
        commitments, remuneration paid by comparable organizations and the flexibility
        provided to the Company by not having extended terms and other terms typical
        of
        employment agreements. We have no plans or packages providing for compensation
        of officers after resignation or retirement.
 
 **Equity
        Compensation Plan Information**
 
 The
        Company currently does not have any equity compensation plans.
 **Director
        Compensation**
 
 We
        do not
        currently compensate our directors for their services as directors. Directors
        are reimbursed for their reasonable out-of-pocket expenses incurred with
        attending board or committee meetings.
 
 The
        following table provides summary information concerning compensation awarded
        to,
        earned by, or paid to any of our directors for all services rendered to the
        Company in all capacities for the fiscal year ended December 31, 2007.
 
 Change
                  inFees
              
              
              
              
              
              
              
              PensionEarned
              
              
              
              
              
              Non-Equity
              
              Value
                  andAnd
              
              
              
              
              
              Incentive
              
              Non-qualifiedPaid
                  in
              
              Stock
              
              Option
              
              Plan
              
              Compensation
              
              All
                  otherName
                  and
              
              Cash
              
              Award(s)
              
              Award(s)
              
              Compensation
              
              Earnings
              
              Compensation
              
              TotalPrincipal
                  Position
              
              ($)
              
              ($)
              
              ($)
              
              (#)
              
              ($)
              
              ($)
              
              ($)Dian
                  Min Ma
              
              $
              0.00
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              $
              185,185
              
              $
              185,185
              (1)Xing
                  Fu Lu
              
              $
              0.00
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              $
              198,000
              
              $
              185,185
              (2)Jin
                  Tian
              
              $
              0.00
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              $
              0.00Anna
                  Herbst(3)
              
              $
              0.00
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              $
              0.00Frank
                  Pioppi(3)
              
              $
              0.00
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              $
              0.00Cosmo
                  Palimieri (3)
              
              $
              0.00
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              $
              0.00
 (1)
              This
                  figure includes compensation paid to Dian Min Ma for services rendered
                  to
                  the Registrant’s subsidiary,
                  TaiAn.
  56
  (2)
              This
                  figure includes compensation paid to Xing Fu Lu for services rendered
                  to
                  the Registrant’s subsidiary, TaiAn.
 (3)
              As
                  disclosed on Form 8-K filed with the SEC on November 9, 2007, and
                  hereby
                  incorporated by reference, pursuant to the terms of the Share Exchange
                  Agreement by and between the Registrant, Pacific Capital Group
                  and the
                  Shareholders of Pacific Capital Group, in conjunction with the
                  closing of
                  the Share Exchange on November 8, 2007, Anna Herbst, Frank Pioppi
                  and
                  Cosmo Palmieri, resigned from their respective positions as directors
                  of
                  the Company.
 
 **ITEM
        11.**  **SECURITY
        OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.**
 
 The
        following table sets forth, as of April 14, 2008, certain information with
        respect to the common stock beneficially owned by (i) each director, nominee
        to
        the Board of Directors and executive officer of the Company; (ii) each person
        who owns beneficially more than 5% of the common stock; and (iii) all directors
        and executive officers as a group:
 
 **Title
                  and Class**
              
              **Name
                  and Address**
                **of
                  Beneficial Owner**
              
              **Amount
                  and Nature**
                **of
                  Beneficial Ownership**
              
              **Percent
                  of class**Common
              
              
              Dian
                  Min Ma
                Director,
                  Chief Executive Officer, Secretary
                Wenyang
                  Town
                Feicheng
                  City
                ShanDong,
                  China 270016
              
              
              11,936,372
              
              
              45.90
              %Common
              
              
              Xing
                  Fu Lu
                President,
                  Director
                Wenyang
                  Town
                Feicheng
                  City
                ShanDong,
                  China 270016
              
              
              11,096,220
              
              
              42.70
              %Common
              
              
              Gang
                  Ma
                Chief
                  Financial Officer
                Wenyang
                  Town
                Feicheng
                  City
                ShanDong,
                  China 270016
              
              
              0
              
              
              0.00
              %Common
              
              
              Jin
                  Tian
                Director
                Wenyang
                  Town
                Feicheng
                  City
                ShanDong,
                  China 270016
              
              
              0
              
              
              0.00
              %Common
              
              
              All
                  Directors and executive officers
                (4
                  persons)
              
              
              23,032,592
              
              
              88.60
              %
  57
  **ITEM
        12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
        INDEPENDENCE**
 
 **Related
        Transactions**
 The
        following are transactions with related parties:
 
 **Advance
        to Employees**
 
 “TaiAn
        has a process of making advances to employees. “Advances to Employees” are
        advances to employees who are working on projects on behalf of TaiAn. After
        the
        work is finished, they will submit expense reports with supporting documents
        to
        the accounting department. Then, the expenses are debited into the relevant
        accounts and the advances are credited out. Cash flows from these activities
        are
        classified into operating activities. The total advance to employees was
        $2,966,919 and $1,629,857 for the years ended December 31, 2007 and 2006,
        respectively.
 
 **Due
        From Related Party**
 
 Prior
        to
        the closing of the Share Exchange, Shandong Ruitai Chemicals Co., Ltd.
        ("Shandong Ruitai"), owned a 75% equity ownership interest in TaiAn. Mr.
        Xingfu
        Lu, our President, and Mr. Dian Min Ma, our CEO, collectively own 100% of
        capital stock of Shandong Ruitai. On March 20, 2007, Shandong Ruitai sold
        74% of
        its equity interest in TaiAn to Pacific Capital Group Co., Ltd. From January
        2000 through February 2007, prior to the closing of the Share Exchange, TaiAn
        would periodically make loans to Shandong Ruitai.
 
 “Due
        from
        a related party" represents loans which occurred prior to the closing of
        the
        Share Exchange from TaiAn to Shandong Ruitai. As of December 31, 2007, the
        balance of loaned funds from TaiAn to Shandong Ruitai amounted to US
        $14,738,564. Subsequent to the closing of the Share Exchange, on December
        31,
        2007, Shandong Ruitai entered into a Loan Contract with TaiAn for the repayment
        of the outstanding balance of the loans. Pursuant to the terms of the Loan
        Contract, Shandong Ruitai will repay the principal outstanding balance of
        the
        loan, $14,738,564, and interest which is accruing monthly at 7% over a
        three-year period ending December 31, 2010, with 30% of the principal and
        interest due as of the fiscal year ending 2008, 30% of the principal and
        interest due as of the fiscal year ending 2009, and 40% of the principal
        and
        interest due as of the fiscal year ending 2010. The repayment obligations
        of
        Shandong Ruitai under the Loan Contract are secured by a thermal power plant
        owned by Shandong Ruitai. Additionally, Shandong Ruitai’s repayment obligations
        are personally guaranteed by Shandong Ruitai’s principals, Mr. Dian Min Ma and
        Mr. Xingfu Lu. The foregoing description of the loan contract is qualified
        in
        its entirety by reference to the Loan Contact which was filed as Exhibit
        10.7 to
        the Company’s Form 10-KSB filed with the Securities and Exchange Commission on
        April 15, 2008, and is hereby incorporated by reference.
 
 **Due
        To Employees**
 
 Due
        to
        Employees represents loans from employees to finance the Company’s operations
        due to a lack of cash resources. There are no formal loan agreements for
        these
        loans, therefore, these loans were unsecured, and have no fixed terms of
        repayment. The employees can inject or withdraw funds as they wish. The Company
        pays 6‰ interest on these loans monthly beginning from July 1, 2007. Cash flows
        from these activities are classified as cash flows from financing activities.
        The total borrowing from employees was $694,429 and $137,924 for the years
        ended
        December 31, 2007 and 2006, respectively. The Company paid interest of $31,008
        and $0 for the years ended December 31, 2007 and 2006,
        respectively.
 
 **Land
        Use Right Transaction**
 
 On
        October 25, 2006, the Company purchased the use right of a piece of land,
        approximately 36 acre, located in Wenyang County, Shandong Province, from
        its
        majority shareholder, Shandong Ruitai, for $3,352,840, a copy of the Land
        Transfer Agreement was filed as an exhibit to the Form 8-K filed with the
        Securities and Exchange
        Commission on November 9, 2007, and is hereby incorporated by reference.
        The
        local government approved the transaction and certified that the purchase
        price
        is at the fair market value. The consideration has been paid to the seller,
        and
        the title transferal is under going. The Management believes the transaction
        is
        on terms no less favorable to the Company than those reasonably obtainable
        from
        third parties.
  58
  **Advisory
        Agreement**
 
 As
        disclosed on Form 8-K filed with the Securities and Exchange Commission on
        June
        13, 2007, on June 11, 2007, the Company entered into an advisory agreement
        with
        Mid-Continental Securities Corp., (“Mid-Continental”) its agents and/or assigns,
        which in essence requires that varying consulting services be rendered during
        a
        one year period. The Company made payment of these services in advance through
        the issuance of 1,300,000 shares valued at $0.20 per share, totaling $260,000.
        Since this issuance occurred prior to the closing of the Share Exchange and
        reverse merger, the transaction has no affect on the consolidated financial
        statements presented.
 
 **Advances
        From Stockholder**
 
 During
        the nine-month period ended September 30, 2007, Mid-Continental paid expenses
        and liabilities of the Company in the amount of $47,738. These payments are
        considered capital contributions inasmuch as the Company will not repay these
        amounts to the stockholder. Since these payments occurred prior to the closing
        of the Share Exchange and reverse merger, the transaction has no affect on
        the
        consolidated financial statements presented.
 
 Aside
        from the foregoing, there were no material transactions, or series of similar
        transactions, during our Company’s last fiscal year, or any currently proposed
        transactions, or series of similar transactions, to which our Company was
        or is
        to be a party, in which the amount involved exceeded the lesser of $120,000
        or
        one percent of the average of the small business issuer’s total assets at
        year-end for the last three completed fiscal years and in which any director,
        executive officer or any security holder who is known to us to own of record
        or
        beneficially more than five percent of any class of our common stock, or
        any
        member of the immediate family of any of the foregoing persons, had an
        interest.
 
 **Director
        Independence**
 
 The
        NASDAQ Stock Market has instituted director independence guidelines that
        have
        been adopted by the Securities & Exchange Commission. These guidelines
        provide that a director is deemed “independent” only if the board of directors
        affirmatively determines that the director has no relationship with the company
        which, in the board’s opinion, would interfere with the director’s exercise of
        independent judgment in carrying out his or her responsibilities. Significant
        stock ownership will not, by itself, preclude a board finding of
        independence.
 
 For
        NASDAQ Stock Market listed companies, the director independence rules list
        six
        types of disqualifying relationships that preclude an independence filing.
        The
        Company’s board of directors may not find independent a director
        who:
 
 1.  is
        an
        employee of the company or any parent or subsidiary of the company;
 
 2.  accepts,
        or who has a family member who accepts, more than $60,000 per year in payments
        from the company or any parent or subsidiary of the company other than (a)
        payments from board or committee services; (b) payments arising solely from
        investments in the company’s securities; (c) compensation paid to a family
        member who is a non-executive employee of the company’ (d) benefits under a tax
        qualified retirement plan or non-discretionary compensation; or (e) loans
        to
        directors and executive officers permitted under Section 13(k) of the Exchange
        Act;
  59
  3.  is
        a
        family member of an individual who is employed as an executive officer by
        the
        company or any parent or subsidiary of the company;
 
 4.  is,
        or
        has a family member who is, a partner in, or a controlling shareholder or
        an
        executive officer of, any organization to which the company made, or from
        which
        the company received, payments for property or services that exceed 5% of
        the
        recipient’s consolidated gross revenues for that year, or $200,000, whichever is
        more, other than (a) payments arising solely from investments in the company’s
        securities or (b) payments under non-discretionary charitable contribution
        matching programs;
 
 5.  is
        employed, or who has a family member who is employed, as an executive officer
        of
        another company whose compensation committee includes any executive officer
        of
        the listed company; or
 
 6.  is,
        or
        has a family member who is, a current partner of the company’s outside auditor,
        or was a partner or employee of the company’s outside auditor who worked on the
        company’s audit.
 
 Based
        upon the foregoing criteria, our Board of Directors has determined that Dian
        Min
        Ma and Xing Fu Lu are not independent directors under these rules as they
        are
        also employed by the Company as its Chief Executive Officer and President,
        respectively.
 
 **ITEM
        13.**  **EXHIBITS**
 
 (a)  Exhibits.
 
 3.1(i)
              Articles
                  of Incorporation, dated November 11, 1955 (incorporated by reference
                  from
                  exhibit to Form 8-K filed with the Securities and Exchange Commission
                  on
                  November 9, 2007)3.1.1(i)
              Articles
                  of Amendment to Articles of Incorporation, dated December 8, 1955
                  (incorporated by reference from exhibit to Form 8-K filed with
                  the
                  Securities and Exchange Commission on November 9, 2007)3.1(ii)
              Bylaws
                  of China RuiTai International Holdings Co., Ltd. (incorporated
                  by
                  reference from exhibit to Form 8-K filed with the Securities and
                  Exchange
                  Commission on November 9, 2007)10.1
              Labor
                  Contract dated October 6, 2000, by and between TaiAn RuiTai Cellulose
                  Co.,
                  Ltd. and Ma Dianmin (incorporated by reference from exhibit to
                  Form 8-K
                  filed with the Securities and Exchange Commission on November 9,
                  2007)10.2
              Labor
                  Contract dated October 6, 2000, by and between TaiAn RuiTai Cellulose
                  Co.,
                  Ltd. and Lu Xingfu (incorporated by reference from exhibit to Form
                  8-K
                  filed with the Securities and Exchange Commission on November 9,
                  2007)10.3
              Labor
                  Contract dated October 6, 2000, by and between TaiAn RuiTai Cellulose
                  Co.,
                  Ltd. and Ma Gang (incorporated by reference from exhibit to Form
                  8-K filed
                  with the Securities and Exchange Commission on November 9,
                  2007)
  60
  10.7
              Loan
                  Contact dated December 31, 2007, by and between Shandong Ruitai
                  ChemicalsCo.,
                  Ltd. and TaiAn RuiTai Cellulose Co., Ltd.( incorporated by reference
                  from
                  ExhibitForm
                  10-KSB filed with the Securities and Exchange Commission on April
                  15,
                  2008)31.1
              Certifications
                  pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities ExchangeAct
                  of 1934, as amended, as adopted pursuant to Section 302 of the
                  Sarbanes-Oxley Actof
                  2002.*31.2
              Certifications
                  pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities ExchangeAct
                  of 1934, as amended, as adopted pursuant to Section 302 of the
                  Sarbanes-Oxley Actof
                  2002.*32.1
              Certifications
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906of
                  the Sarbanes-Oxley Act of 2002.*32.2
              Certifications
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906of
                  the Sarbanes-Oxley Act of 2002.*
 
 *
        Filed
        Herewith
 
 **ITEM
        14.**  **PRINCIPAL
        ACCOUNTANT FEES AND SERVICES**
 
 **Audit
        Fees**
 
 (1)  The
        aggregate fees billed by Keith K. Zhen, CPA for audit of the Company's annual
        financial statements were $70,000 for the fiscal year ended December 31,
        2007,
        and $ 11,000 by Child, Van Wagoner & Bradshaw, PLLC for the fiscal year
        ended December 31, 2006.
 
 **Audit
        Related Fees**
  (2)  Keith
        K.
        Zhen, CPA did not bill the Company any amounts for assurance and related
        services that were related to its audit or review of the Company’s financial
        statements during the fiscal years ended 2007 and 2006.
 
 **Tax
        Fees**
 
 (3)  The
        aggregate fees billed by Keith K. Zhen, CPA for tax compliance, advice and
        planning were $0.00 for the fiscal year ended December 31, 2007 and $750
        by
        Child, Van Wagoner & Bradshaw, PLLC for the fiscal year ended December 31,
        2006.
 
 **All
        Other Fees**
 
 (4)  Keith
        K.
        Zhen, CPA and Child, Van Wagoner & Bradshaw, PLLC did not bill the Company
        for any products and services other than the foregoing during the fiscal
        years
        ended 2007 and 2006.
 
 **Audit
        Committee** **=** **s
        Pre-approval Policies and Procedures**
  61
  (5)  China
        RuiTai International Holdings Co., Ltd. does not have an audit committee
        per se.
        The current board of directors functions as the audit committee.
 **SIGNATURES**
 
 In
        accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
        this report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
  **CHINA
                  RUITAI INTERNATIONAL HOLDINGS CO., LTD.**By:
              /S/
                  Dian Min ManDian
                  Min Man, Chief Executive OfficerDate:
                  August 6, 2008By:
              /S/
                  Gang MaGang
                  Ma, Chief Financial OfficerDate:
                  August 6, 2008
  62