U.S.
      SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549




Form
      10-KSB




(Mark
      One)




**x
      ANNUAL REPORT PURSUANT
      TO SECTION 13 OR 15(d)**


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**




For
      the
      fiscal year ended December 31, 2007




**o
      TRANSITION REPORT
      PURSUANT TO SECTION 13 OR 15(d)**


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**




For
      the
      transition period from ______________ to ______________




Commission
      File Number 000-51613









**Kanai
      Sciences, Inc.**


(Exact
      name of registrant as specified in its charter)









Delaware
            
            20-3326980(State
                or other jurisdiction of
            
            (I.R.S.
                Employerincorporation
                or organization)
            
            Identification
                No.)c/o
                Paramount BioSciences, LLC787
                Seventh Avenue, 48th FloorNew
                York, NY
            
            10019(Address
                of principal executive offices)
            
            (zip
                code)




Registrant’s
      telephone number, including area code:


(212)
        554-4300


Securities
        registered under Section 12(b) of the Exchange Act:
  None.
  Securities
        registered under Section 12(g) of the Exchange Act:
  Common
        Stock, $0.001 par value per share
 (Title
        of
        Class)







Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o




Check
      whether the issuer (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter
      period that the registrant was required to file such reports), and (2) has
      been
      subject to such filing requirements for the past 90 days. Yes xNo o.




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B (§229.405 of this chapter) contained herein, 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. o




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes
xNo
o.




The
      issuer’s revenues for fiscal year end December 31, 2007 were $0.




As
      of
      March 20, 2008, there were 125,000 shares of common stock, par value $.001
      per
      share, outstanding, none of which were held by non-affiliates.




Transitional
        Small Business Disclosure Format (check one):  Yes oNo x
 DOCUMENTS
        INCORPORATED BY REFERENCE:




**None**






**FORWARD-LOOKING
      STATEMENTS**




Certain
      statements made in this Annual Report on Form 10-KSB are “forward-looking
      statements” (within the meaning of the Private Securities Litigation Reform Act
      of 1995) regarding the plans and objectives of management for future operations.
      Such statements involve known and unknown risks, uncertainties and other factors
      that may cause actual results, performance or achievements of Kanai Sciences,
      Inc.  (the “Company”) to be materially different from any future results,
      performance or achievements expressed or implied by such forward-looking
      statements. The forward-looking statements included herein are based on current
      expectations that involve numerous risks and uncertainties. The Company's plans
      and objectives are based, in part, on assumptions involving the continued
      expansion of business. Assumptions relating to the foregoing involve judgments
      with respect to, among other things, future economic, competitive and market
      conditions and future business decisions, all of which are difficult or
      impossible to predict accurately and many of which are beyond the control of
      the
      Company. Although the Company believes its assumptions underlying the
      forward-looking statements are reasonable, any of the assumptions could prove
      inaccurate and, therefore, there can be no assurance the forward-looking
      statements included in this Report will prove to be accurate. In light of the
      significant uncertainties inherent in the forward-looking statements included
      herein particularly in view of the current state of our operations, the
      inclusion of such information should not be regarded as a statement by us or
      any
      other person that our objectives and plans will be achieved.  Factors that
      could cause actual results to differ materially from those expressed or implied
      by such forward-looking statements include, but are not limited to, the factors
      set forth herein under the headings “Business,” “Plan of Operation” and “Risk
      Factors”.  We undertake no obligation to revise or update publicly any
      forward-looking statements for any reason.




**PART
          I**
  **Item
          1. Description of Business.**
  **Introduction**
  Kanai
          Sciences, Inc.  (“we”, “us”, “our” or the “Company”) was incorporated in
          the State of Delaware on August 12, 2005 and maintains its principal executive
          offices at 787 Seventh Avenue, 48 th Floor,
          New York, New York 10019.  Since inception, the Company has been engaged in
          organizational efforts and obtaining initial financing.  The Company was
          formed as a vehicle to pursue a business combination through the acquisition
          of,
          or merger with, an operating business.  The Company filed a registration
          statement on Form 10-SB with the U.S. Securities and Exchange Commission
          (the
“SEC”) on November 14, 2005, and since its effectiveness, the Company has
          focused its efforts to identify a possible business combination.
  The
          Company, based on proposed business activities, is a “blank check” company. The
          SEC defines those companies as "any development stage company that is issuing
          a
          penny stock, within the meaning of Section 3(a)(51) of the Securities Exchange
          Act of 1934, as amended (the “Exchange Act”), and that has no specific business
          plan or purpose, or has indicated that its business plan is to merge with
          an
          unidentified company or companies." Many states have enacted statutes,
          rules and
          regulations limiting the sale of securities of "blank check" companies
          in their
          respective jurisdictions. The Company is also a “shell company,” defined in Rule
          12b-2 under the Exchange Act as a company with no or nominal assets (other
          than
          cash) and no or nominal operations. Management does not intend to undertake
          any
          efforts to cause a market to develop in our securities, either debt or
          equity,
          until we have successfully concluded a business combination. The Company
          intends
          to comply with the periodic reporting requirements of the Exchange Act
          for so
          long as we are subject to those requirements.
  The
          Company was organized as a vehicle to investigate and, if such investigation
          warrants, acquire a target company or business seeking the perceived advantages
          of being a publicly held corporation. The Company’s principal business objective
          for the next 12 months and beyond such time will be to achieve long-term
          growth
          potential through a combination with an operating business. The Company
          will not
          restrict its potential candidate target companies to any specific business,
          industry or geographical location and, thus, may acquire any type of
          business.
  **Competition**
  The
          Company faces vast competition from other shell companies with the same
          objectives.  The Company is in a highly competitive market for a small
          number of business opportunities which could reduce the likelihood of
          consummating a successful business combination.  A large number of
          established and well-financed entities, including small public companies
          and
          venture capital firms, are active in mergers and acquisitions of companies
          that
          may be desirable target candidates for us.  Nearly all these entities have
          significantly greater financial resources, technical expertise and managerial
          capabilities than we do; consequently, we will be at a competitive disadvantage
          in identifying possible business opportunities and successfully completing
          a
          business combination.  These competitive factors may reduce the likelihood
          of our identifying and consummating a successful business
          combination.
  **Employees**
  We
          have
          no employees other than our management who devotes only a limited amount
          of time
          to our business.
 
 **Risk
          Factors**
  **You
          should carefully review and consider the following risks as well as all
          other
          information contained in this Annual Report on Form 10-KSB, including our
          financial statements and the notes to those statements. The following risks
          and
          uncertainties are not the only ones facing us. Additional risks and
          uncertainties of which we are currently unaware or which we believe are
          not
          material also could materially adversely affect our business, financial
          condition, results of operations, or cash flows.  To the extent any of the
          information contained in this annual report constitutes forward-looking
          information, the risk factors set forth below are cautionary statements
          identifying important factors that could cause our actual results
          for various financial reporting periods to differ materially from those
          expressed in any forward-looking statements made by or on our behalf and
          could
          materially adversely effect our financial condition, results of operations
          or
          cash flows.**
  1
  ***There
          may be conflicts of interest between our management and our non-management
          stockholders.***
  Conflicts
          of interest create the risk that management may have an incentive to act
          adversely to the interests of the Company.  A conflict of interest may
          arise between our management's personal pecuniary interest and its fiduciary
          duty to our stockholders.  In addition, our management is currently
          involved with other blank check companies, and in the pursuit of business
          combinations, conflicts with such other blank check companies with which
          it is,
          and may in the future become, affiliated, may arise.  If we and the other
          blank check companies that our management is affiliated with desire to
          take
          advantage of the same opportunity, then those members of management that
          are
          affiliated with both companies would abstain from voting upon the opportunity.
          In the event of identical officers and directors, the officers and directors
          will arbitrarily determine the company that will be entitled to proceed
          with the
          proposed transaction.
  Further,
          Paramount BioCapital, Inc. (“PBI”), a registered broker-dealer, may act as
          investment banker, placement agent or financial consultant to the Company
          or an
          acquisition candidate in connection with a potential business combination
          transaction. Dr. Rosenwald, our controlling stockholder, is the sole
          stockholder, Chairman and Chief Executive Officer of PBI.  Mr. Pilatzke,
          our Treasurer, and Mr. Davis, our President, Secretary and sole director,
          are
          both employees of PBI. Also, since January 1, 2006, the Company began paying
          Paramount BioSciences, LLC (“PBS”), a drug development firm, a monthly fee of
          $1,000 for certain management services.  PBS was founded by Dr. Rosenwald,
          the Company’s controlling stockholder.  Mr. Pilatzke and Mr. Davis are
          employees of PBS.
  Additionally,
          we may, from time to time, take loans that pay reasonable interest from
          PBS to
          run our operations. We cannot assure you that conflicts of interest among
          us,
          PBI, PBS and our stockholders will not develop.  Any finders fees,
          placement fees, interest or other fees paid to PBI or PBS will be comparable
          with unaffiliated third party fees.
  ***We
          have a limited operating history.***
  We
          have a
          limited operating history and no revenues or earnings from operations since
          inception, and there is a risk that we will be unable to continue as a
          going
          concern and consummate a business combination.. We have no significant
          assets or
          financial resources. We will, in all likelihood, sustain operating expenses
          without corresponding revenues, at least until the consummation of a merger
          or
          other business combination with a private company. This may result in our
          incurring a net operating loss that will increase unless we consummate
          a
          business combination with a profitable business. We cannot assure you that
          we
          can identify a suitable business opportunity and consummate a business
          combination, or that any such business will be profitable at the time of
          its
          acquisition by us or ever.
  ***We
          have incurred and may continue to incur losses.***
  Since
          August 12, 2005 (inception) through December 31, 2007, we have incurred
          a net
          loss of $121,813.  We expect that we will incur losses at least until we
          complete a merger or other business combination with an operating business
          and
          perhaps after such a combination as well.  There can be no assurance that
          we will complete a merger or other business combination with an operating
          business or that we will ever be profitable.
  2
  ***We
          face a number of risks associated with potential
          acquisitions.***
  We
          intend
          to use reasonable efforts to complete a merger or other business combination
          with an operating business. Such combination will be accompanied by risks
          commonly encountered in acquisitions, including, but not limited to,
          difficulties in integrating the operations, technologies, products and
          personnel
          of the acquired companies and insufficient revenues to offset increased
          expenses
          associated with acquisitions.  Failure to manage and successfully integrate
          acquisitions we make could harm our business, our strategy and our operating
          results in a material way.
  ***There
          is competition for those private companies suitable for a merger transaction
          of
          the type contemplated by management.***
  The
          Company is in a highly competitive market for a small number of business
          opportunities which could reduce the likelihood of consummating a successful
          business combination. We are, and will continue to be, an insignificant
          participant in the business of seeking mergers with, joint ventures with
          and
          acquisitions of small private and public entities. A large number of established
          and well-financed entities, including small public companies and venture
          capital
          firms, are active in mergers and acquisitions of companies that may be
          desirable
          target candidates for us. Nearly all these entities have significantly
          greater
          financial resources, technical expertise and managerial capabilities than
          we do;
          consequently, we will be at a competitive disadvantage in identifying possible
          business opportunities and successfully completing a business combination.
          These
          competitive factors may reduce the likelihood of our identifying and
          consummating a successful business combination.
  ***Future
          success is highly dependent on the ability of management to locate and
          attract a
          suitable acquisition.***
  The
          nature of our operations is highly speculative, and there is a consequent
          risk
          of loss of your investment. The success of our plan of operation will depend
          to
          a great extent on the operations, financial condition and management of
          the
          identified business opportunity. While management intends to seek business
          combination(s) with entities having established operating histories, we
          cannot
          assure you that we will be successful in locating candidates meeting that
          criterion. In the event we complete a business combination, the success
          of our
          operations may be dependent upon management of the successor firm or venture
          partner firm and numerous other factors beyond our control.
  ***Management
          intends to devote only a limited amount of time to seeking a target company
          which may adversely impact our ability to identify a suitable acquisition
          candidate.***
 
 While
          seeking a business combination, management anticipates devoting very limited
          time to the Company's affairs. Our officers have not entered into written
          employment agreements with us and are not expected to do so in the foreseeable
          future. This limited commitment may adversely impact our ability to identify
          and
          consummate a successful business combination.
  ***There
          can be no assurance that the Company will successfully consummate a business
          combination.***
  We
          can
          give no assurances that we will successfully identify and evaluate suitable
          business opportunities or that we will conclude a business combination.
          Management has not identified any particular industry or specific business
          within an industry for evaluation. We cannot guarantee that we will be
          able to
          negotiate a business combination on favorable terms.
  ***The
          time and cost of preparing a private company to become a public reporting
          company may preclude us from entering into a merger or acquisition with
          the most
          attractive private companies.***
  Target
          companies that fail to comply with SEC reporting requirements may delay
          or
          preclude acquisition. Sections 13 and 15(d) of the Exchange Act require
          reporting companies to provide certain information about significant
          acquisitions, including certified financial statements for the company
          acquired,
          covering one, two, or three years, depending on the relative size of the
          acquisition. The time and additional costs that may be incurred by some
          target
          entities to prepare these statements may significantly delay or essentially
          preclude consummation of an acquisition. Otherwise suitable acquisition
          prospects that do not have or are unable to obtain the required audited
          statements may be inappropriate for acquisition so long as the reporting
          requirements of the Exchange Act are applicable.
  3
  ***The
          Company may be subject to further government regulation which would adversely
          affect our operations.***
  Although
          we are subject to the reporting requirements under the Exchange Act, management
          believes we are not subject to regulation under the Investment Company
          Act of
          1940, as amended (the “Investment Company Act”), since we are not engaged in the
          business of investing or trading in securities. If we engage in business
          combinations which result in our holding passive investment interests in
          a
          number of entities, we could be subject to regulation under the Investment
          Company Act. If so, we would be required to register as an investment company
          and could be expected to incur significant registration and compliance
          costs. We
          have obtained no formal determination from the SEC as to our status under
          the
          Investment Company Act and, consequently, violation of the Investment Company
          Act could subject us to material adverse consequences.
  ***Any
          potential acquisition or merger with a foreign company may subject us to
          additional risks.***
  If
          we
          enter into a business combination with a foreign company, we will be subject
          to
          risks inherent in business operations outside of the United States. These
          risks
          include, for example, currency fluctuations, regulatory problems, punitive
          tariffs, unstable local tax policies, trade embargoes, risks related to
          shipment
          of raw materials and finished goods across national borders and cultural
          and
          language differences. Foreign economies may differ favorably or unfavorably
          from
          the United States economy in growth of gross national product, rate of
          inflation, market development, rate of savings, and capital investment,
          resource
          self-sufficiency and balance of payments positions, and in other
          respects.
  ***The
          Company may be subject to certain tax consequences in our business, which
          may
          increase our cost of doing business.***
  We
          may
          not be able to structure our acquisition to result in tax-free treatment
          for the
          companies or their stockholders, which could deter third parties from entering
          into certain business combinations with us or result in being taxed on
          consideration received in a transaction. Currently, a transaction may be
          structured so as to result in tax-free treatment to both companies, as
          prescribed by various federal and state tax provisions. We intend to structure
          any business combination so as to minimize the federal and state tax
          consequences to both us and the target entity; however, we cannot guarantee
          that
          the business combination will meet the statutory requirements of a tax-free
          reorganization or that the parties will obtain the intended tax-free treatment
          upon a transfer of stock or assets. A non-qualifying reorganization could
          result
          in the imposition of both federal and state taxes that may have an adverse
          effect on both parties to the transaction.
  ***Our
          business will have no revenue unless and until we merge with or acquire
          an
          operating business.***
  We are a development stage company and have had no revenue from operations.
          We
          do not expect to realize any revenue unless and until we successfully merge
          with
          or acquire an operating business.
  ***Because
          we may seek to complete a business combination through a “reverse merger”,
          following such a transaction we may not be able to attract the attention
          of
          major brokerage firms.***
  Additional risks may exist since we expect to assist a privately held business
          to become public through a “reverse merger.”  Securities analysts of major
          brokerage firms may not provide coverage of our Company since there is
          no
          incentive to brokerage firms to recommend the purchase of our common stock,
          par
          value $0.001 per share (the “Common Stock”).  No assurance can be given
          that brokerage firms will want to conduct any secondary offerings on behalf
          of
          our post-merger company in the future.
  4
  ***We
          cannot assure you that following a business combination with an operating
          business, our Common Stock will be listed on NASDAQ or any other securities
          exchange.***
 
 Following
          a business combination, we may seek the listing of our Common Stock on
          NASDAQ or
          the American Stock Exchange.  However, we cannot assure you that following
          such a transaction, we will be able to meet the initial listing standards
          of
          either of those or any other stock exchange, or that we will be able to
          maintain
          a listing of our Common Stock on either of those or any other stock
          exchange.  After completing a business combination, until our Common Stock
          is listed on the NASDAQ or another stock exchange, we expect that our Common
          Stock would be eligible to trade on the OTC Bulletin Board, another
          over-the-counter quotation system, or on the “pink sheets,” where our
          stockholders may find it more difficult to dispose of shares or obtain
          accurate
          quotations as to the market value of our Common Stock.  In addition, we
          would be subject to an SEC rule that, if it failed to meet the criteria
          set
          forth in such rule, imposes various practice requirements on broker-dealers
          who
          sell securities governed by the rule to persons other than established
          customers
          and accredited investors.  Consequently, such rule may deter broker-dealers
          from recommending or selling our Common Stock, which may further affect
          its
          liquidity.  This would also make it more difficult for us to raise
          additional capital following a business combination.
  ***Our
          stockholders may have a minority interest in the Company following a merger
          or
          other business combination with an operating business.***
  **** If
          we
          consummate a merger or business combination with a company with a value
          in
          excess of the value of our Company and issue shares of Common Stock to
          the
          stockholders of such company as consideration for merging with us, our
          stockholders would own less than 50% of the Company after the business
          combination.  The stockholders of the acquired company would therefore be
          able to control the election of our board of directors (the “Board of
          Directors”) and control our Company.
  ***There
          is currently no trading market for our Common Stock, and liquidity of shares
          of
          our Common Stock is limited.***
  Shares
          of
          our Common Stock are not registered under the securities laws of any state
          or
          other jurisdiction, and accordingly there is no public trading market for
          the
          Common Stock.  Further, no public trading market is expected to develop in
          the foreseeable future unless and until the Company completes a business
          combination with an operating business and the Company thereafter files
          a
          registration statement under the Securities Act of 1933, as amended (the
          “Securities Act”).  Therefore, outstanding shares of Common Stock cannot be
          offered, sold, pledged or otherwise transferred unless subsequently registered
          pursuant to, or exempt from registration under, the Securities Act and
          any other
          applicable federal or state securities laws or regulations.  Shares of
          Common Stock cannot be sold under the exemptions from registration provided
          by
          Rule 144 under or Section 4(1) of the Securities Act (“Rule 144”), in accordance
          with the letter from Richard K. Wulff, Chief of the Office of Small Business
          Policy of the Securities and Exchange Commission’s Division of Corporation
          Finance, to Ken Worm of NASD Regulation, dated January 21, 2000 (the “Wulff
          Letter”).  The Wulff Letter provides that certain private transfers of the
          shares of common stock also may be prohibited without registration under
          federal
          securities laws.  The SEC changed certain aspects of the Wulff Letter and
          such changes apply retroactively to our stockholders.  Since February 15,
          2008, all holders of shares of common stock of a “shell company” have been
          permitted to sell their shares of common stock under Rule 144, subject
          to
          certain restrictions, starting one year after (i) the completion of a business
          combination with a private company in a reverse merger or reverse takeover
          transaction after which the company would cease to be a “shell company” (as
          defined in Rule 12b-2 under the Exchange Act) and (ii) the disclosure of
          certain
          information on a Current Report on Form 8-K within four business days
          thereafter.
  Compliance
          with the criteria for securing exemptions under federal securities laws
          and the
          securities laws of the various states is extremely complex, especially
          in
          respect of those exemptions affording flexibility and the elimination of
          trading
          restrictions in respect of securities received in exempt transactions and
          subsequently disposed of without registration under the Securities Act
          or state
          securities laws.
  5
  ***There
          are issues impacting liquidity of our securities with respect to the SEC’s
          review of a future resale registration statement.***
  Since
          shares of our Common Stock issued prior to a business combination or reverse
          merger cannot currently, nor will they for a considerable period of time
          after
          we complete a business combination, be available to be offered, sold, pledged
          or
          otherwise transferred without being registered pursuant to the Securities
          Act,
          we will likely file a resale registration statement on Form S-1, or some
          other
          available form, to register for resale such shares of Common Stock.  We
          cannot control this future registration process in all respects as some
          matters
          are outside our control.  Even if we are successful in causing the
          effectiveness of the resale registration statement, there can be no assurances
          that the occurrence of subsequent events may not preclude our ability to
          maintain the effectiveness of the registration statement. Any of the foregoing
          items could have adverse effects on the liquidity of our shares of Common
          Stock.
  In
          addition, the SEC has recently disclosed that it has developed internal
          informal
          guidelines concerning the use of a resale registration statement to register
          the
          securities issued to certain investors in private investment in public
          equity
          (PIPE) transactions, where the issuer has a market capitalization of less
          than
          $75 million and, in general, does not qualify to file a Registration Statement
          on Form S-3 to register its securities if the issuer’s securities are listed on
          the Over-the-Counter Bulletin Board or on the Pink Sheets.  The SEC has
          taken the position that  these smaller issuers may not be able to rely on
          Rule 415 under the Securities Act (“Rule 415”), which generally permits the
          offer and sale of securities on a continued or delayed basis over a period
          of
          time, but instead would require that the issuer offer and sell such securities
          in a  direct or "primary" public offering, at a fixed price, if the facts
          and circumstances are such that the SEC believes the investors seeking
          to have
          their shares registered are underwriters and/or affiliates of the issuer. 
It appears that the SEC in most cases will permit a registration for resale
          of
          up to one third of the total number of shares of common stock then currently
          owned by persons who are not affiliates of such issuer and, in some cases,
          a
          larger percentage depending on the facts and circumstances.  Staff members
          also have indicated that an issuer in most cases will have to wait until
          the
          later of six months after effectiveness of the first registration or such
          time
          as substantially all securities registered in the first registration are
          sold
          before filing a subsequent registration on behalf of the same investors. 
Since, following a reverse merger or business combination, we may have
          little or
          no tradable shares of Common Stock, it is unclear as to how many, if any,
          shares
          of Common Stock the SEC will permit us to register for resale, but SEC
          staff
          members have indicated a willingness to consider a higher percentage in
          connection with registrations following reverse mergers with shell companies
          such as the Company.  The SEC may require as a condition to the declaration
          of effectiveness of a resale registration statement that we reduce or “cut back”
the number of shares of common stock to be registered in such registration
          statement.   The result of the foregoing is that a stockholder’s
          liquidity in Common Stock may be adversely affected in the event the SEC
          requires a cut back of the securities as a condition to allow the Company
          to
          rely on Rule 415 with respect to a resale registration statement, or, if
          the SEC
          requires us to file a primary registration statement.
  ***We
          have never paid dividends on our Common Stock.***
  We have never paid dividends on our Common Stock and do not presently intend
          to
          pay any dividends in the foreseeable future.  We anticipate that any funds
          available for payment of dividends will be re-invested into the Company
          to
          further its business strategy.
  ***The
          Company intends to issue more shares in a merger or acquisition, which
          will
          result in substantial dilution.***
  Our
          Certificate of Incorporation authorizes the issuance of a maximum of
          75,000,000 shares of Common Stock and a maximum of 10,000,000 shares of
          preferred stock, par value $.001 per share (the “Preferred Stock”). Any merger
          or acquisition effected by us may result in the issuance of additional
          securities without stockholder approval and the substantial dilution in
          the
          percentage of Common Stock held by our then existing stockholders. Moreover,
          the
          Common Stock issued in any such merger or acquisition transaction may be
          valued
          on an arbitrary or non-arm’s-length basis by our management, resulting in an
          additional reduction in the percentage of Common Stock held by our current
          stockholder.  Our Board of Directors has the power to issue any or all of
          such authorized but unissued shares without stockholder approval.  To the
          extent that additional shares of Common Stock or Preferred Stock are issued
          in
          connection with a business combination or otherwise, dilution to the interests
          of our stockholder will occur and the rights of the holder of Common Stock
          might
          be materially and adversely affected.
  6
  ***Our
          stockholders may engage in a transaction to cause the Company to repurchase
          their shares of Common Stock.***
  In
          order
          to provide an interest in the Company to a third party, our stockholders
          may
          choose to cause the Company to sell Company securities to third parties,
          with
          the proceeds of such sale being utilized by the Company to repurchase their
          shares of Common Stock. As a result of such transaction, our management,
          stockholders and Board of Directors may change.
  ***Our
          Board of Directors has the power to issue shares of Preferred Stock with
          certain
          rights without stockholder approval.***
  Our
          Certificate of Incorporation authorizes the issuance of up to 10,000,000
          shares
          of Preferred Stock with designations, rights and preferences determined
          from
          time to time by its Board of Directors.  Accordingly, our Board of
          Directors is empowered, without stockholder approval, to issue shares of
          Preferred Stock with dividend, liquidation, conversion, voting, or other
          rights
          which could adversely affect the voting power or other rights of the holders
          of
          the Common Stock.  In the event of issuance, the Preferred Stock could be
          utilized, under certain circumstances, as a method of discouraging, delaying
          or
          preventing a change in control of the Company.  Although we have no present
          intention to issue any shares of our authorized Preferred Stock, there
          can be no
          assurance that we will not do so in the future.
  ***Shareholder
          control over management.***
  As
          indicated elsewhere herein, our management intends to devote only a limited
          amount of time to our affairs.  They will spend the majority of their time
          devoted to their full time employment.  Although management currently owns
          none of our Common Stock, 97% of all the issued and outstanding Capital
          Stock of
          the Company is owned by an individual who is the Chairman and Chief Executive
          Officer of PBI, which employs members of our management team on a full
          time
          basis.  Consequently, our majority stockholder, Dr. Rosenwald, has the
          ability to influence control of the operations of the Company and will
          have the
          ability to influence or control substantially all matters submitted to
          stockholders for approval, including:
  ·
                Election
                    of the board of directors;
  ·
                Removal
                    of any directors;
  ·
                Amendment
                    of the Company’s certificate of incorporation or bylaws;
                    and
  ·
                Adoption
                    of measures that could delay or prevent a change in control or
                    impede a
                    merger, takeover or other business
                    combination.
  This
          stockholder will thus have substantial influence and control over our management
          and affairs.  Accordingly, this concentration of ownership may have the
          effect of impeding a merger, consolidation, takeover or other business
          consolidation, or discouraging a potential acquirer from making a tender
          offer
          for our Common Stock. Moreover, as PBI is in the business of founding and
          financing life science companies it is likely that most merger candidates
          will
          be substantially owned or controlled by Dr. Rosenwald.
  **Item
          2. Description of Property.**
  The Company neither rents nor owns any properties. The Company utilizes
          the
          office space and equipment of its management at no cost.  Management
          estimates such amounts to be immaterial.  The Company currently has no
          policy with respect to investments or interests in real estate, real estate
          mortgages or securities of, or interests in, persons primarily engaged
          in real
          estate activities.
  7
  **Item
          3. Legal Proceedings.**
  Presently,
          there are not any material pending legal proceedings to which the Company
          is a
          party or as to which any of its property is subject, and no such proceedings
          are
          known to the Company to be threatened or contemplated against it.
  **Item
          4. Submission of Matters to a Vote of Security Holders.**
  None.
  **PART
          II**
  **Item
          5. Market for Common Equity, Related Stockholder Matters and Small Business
          Issuer Purchases of Equity Securities.**
  **Common
          Stock**
  Our
          Certificate of Incorporation authorizes the issuance of up to 75,000,000
          shares
          of Common Stock.  Our Common Stock is not listed on a publicly-traded
          market.  As of March 20, 2008, there were twenty one holders of record of
          our Common Stock.
  **Preferred
          Stock**
  Our
          Certificate of Incorporation authorizes the issuance of up to 10,000,000
          shares
          of Preferred Stock.  The Company has not yet issued any of the Preferred
          Stock.
  **Dividend
          Policy**
  The
          Company has not declared or paid any cash dividends on Common Stock and
          does not
          intend to declare or pay any cash dividend in the foreseeable future. The
          payment of dividends, if any, is within the discretion of the Board of
          Directors
          and will depend on the Company’s earnings, if any, its capital requirements and
          financial condition and such other factors as the Board of Directors may
          consider.
  **Securities
          Authorized for Issuance Under Equity Compensation Plans**
  None.
  **Recent
          Sales of Unregistered Securities**
  The
          Company did not sell any equity securities that were not registered under
          the
          Securities Act during the fiscal quarter ended December 31, 2007.
  The
          Company issued 125,000 shares of Common Stock on August 14, 2005, to accredited
          investors, for aggregate cash consideration of $5,000. The Company sold
          these
          shares of Common Stock under the exemption from registration provided by
          Section
          4(2) of the Securities Act.
  No
          securities have been issued for services. Neither the Company nor any person
          acting on its behalf offered or sold the securities by means of any form
          of
          general solicitation or general advertising. No services were performed
          by any
          purchaser as consideration for the shares issued.
  8
  **Item
          6. Management’s Discussion and Analysis or Plan of
          Operation.**
  **Plan
          of Operation**
  The
          Company has not realized any revenues from operations since inception,
          and its
          plan of operation for the next twelve months is to locate a suitable acquisition
          or merger candidate and consummate a business combination. The Company
          may need
          additional cash advances from its stockholders or loans from other parties
          to
          pay for operating expenses until the Company consummates a merger or business
          combination with a privately-held operating company.  Although it is
          currently anticipated that the Company can satisfy its cash requirements
          with
          additional cash advances or loans from other parties, if needed, for at
          least
          the next twelve months, the Company can provide no assurance that it can
          continue to satisfy its cash requirements for such period.
  Since
          our
          formation on August 12, 2005, our purpose has been to effect a business
          combination with an operating business which we believe has significant
          growth
          potential. We are currently considered to be a “blank check” company in as much
          as we have no specific business plans, no operations, revenues or employees.
          We
          currently have no definitive agreements or understanding with any prospective
          business combination candidates and have not targeted any business for
          investigation and evaluation nor are there any assurances that we will
          find a
          suitable business with which to combine. The implementation of our business
          objectives is wholly contingent upon a business combination and/or the
          successful sale of securities in the company.
 
 As
          a
          result of our limited resources, we expect to effect only a single business
          combination. Accordingly, the prospects for our success will be entirely
          dependent upon the future performance of a single business. Unlike certain
          entities that have the resources to consummate several business combinations
          or
          entities operating in multiple industries or multiple segments of a single
          industry, we will not have the resources to diversify our operations or
          benefit
          from the possible spreading of risks or offsetting of losses. A target
          business
          may be dependent upon the development or market acceptance of a single
          or
          limited number of products, processes or services, in which case there
          will be
          an even higher risk that the target business will not prove to be commercially
          viable.
  Our
          officers and sole director are only required to devote a very limited portion
          of
          their time to our affairs on a part-time or as-needed basis. We expect
          to use
          outside consultants, advisors, attorneys and accountants as necessary,
          none of
          which will be hired on a retainer basis. We do not anticipate hiring any
          full-time employees so long as we are seeking and evaluating business
          opportunities.
  We
          expect
          our present management to play no managerial role in the Company following
          a
          merger or business combination. Although we intend to scrutinize closely
          the
          management of a prospective target business in connection with our evaluation
          of
          a business combination with a target business, our assessment of management
          may
          be incorrect. We cannot assure you that we will find a suitable business
          with
          which to combine.
  **Results
          of Operations**
  The
          Company has not conducted any active operations since inception, except
          for its
          efforts to locate a suitable acquisition or merger transaction. No revenue
          has
          been generated by the Company during such period, and it is unlikely the
          Company
          will have any revenues unless it is able to effect an acquisition of or
          merger
          with another operating company, of which there can be no assurance.
  We
          had a
          net loss of approximately $49,000 for the year ended December 31, 2007
          consisting primarily of approximately $9,000 in legal fees, $20,000 in
          accounting fees, $12,000 for management services, $4,000 in interest expense
          and
          $4,000 of general corporate expenses all of which was financed through
          the loans
          with PBS.
  We
          had a
          net loss of approximately $42,000 for the year ended December 31, 2006
          consisting primarily of approximately $20,000 in accounting fees, $12,000
          for
          management services, $2,000 in interest expense and $8,000 of general corporate
          expenses all of which was financed through the loans with PBS.
  9
  **Off-Balance
          Sheet Arrangements**
  The Company does not have any off-balance sheet arrangements that have
          or are
          reasonably likely to have a current or future effect on the Company’s financial
          condition, changes in financial condition, revenues or expenses, results
          of
          operations, liquidity, capital expenditures or capital resources that is
          material to investors.
  10
  **Item
          7.  Financial Statements.**
  **KANAI
          SCIENCES, INC.**
 **(A
          Development Stage Company)**
  Page(s)Report
                      of Independent Registered Public Accounting Firm
                  
                  F-2Balance
                      Sheets
                    December
                      31, 2007 and 2006
                  
                  F-3Statements
                      of Operations
                    For
                      the years ended December 31, 2007 and 2006 and the period from
                      August 12,
                      2005 (Inception) to December 31, 2007
                  
                  F-4Statement
                      of Changes in Stockholders' Deficiency
                    Period
                      from August 12, 2005 (Inception) to December 31, 2007
                  
                  F-5Statements
                      of Cash Flows
                    For
                      the years ended December 31, 2007 and 2006 and the period from
                      August 12,
                      2005 (Inception) to December 31, 2007
                  
                  F-6Notes
                      to Financial Statements
                  
                  F-7
                      -
                      F-9
  F-1
  **Report
          of Independent Registered Public Accounting Firm**
  The
          Board
          of Directors and Stockholders
 Kanai
          Sciences, Inc.
  We
          have
          audited the accompanying balance sheets of Kanai Sciences, Inc. (A Development
          Stage Company) as of December 31, 2007 and 2006, and the related statements
          of
          operations, changes in stockholders’ deficiency and cash flows for the years
          then ended and for the period from August 12, 2005 (inception) to December
          31,
          2007.  These financial statements are the responsibility of the Company’s
          management.  Our responsibility is to express an opinion on these financial
          statements based on our audits.
  We
          conducted our 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.  An audit includes
          examining, on a test basis, evidence supporting the amounts and disclosures
          in
          the financial statements.  An audit also includes assessing the accounting
          principles used and significant estimates made by management, as well as
          evaluating the overall financial statement presentation.  We believe that
          our audits provide a reasonable basis for our opinion.
  In
          our
          opinion, the financial statements referred to above present fairly, in
          all
          material respects, the financial position of Kanai Sciences, Inc. (A Development
          Stage Company) as of December 31, 2007 and 2006, and its results of operations
          and cash flows for the years then ended and for the period from August
          12, 2005
          (inception) to December 31, 2007, in conformity with accounting principles
          generally accepted in the United States of America.
  The
          accompanying financial statements have been prepared assuming that the
          Company
          will continue as a going concern. As discussed in Note 1 to the financial
          statements, the Company will need additional equity or debt financing or
          will
          need to complete a business combination with a company that has such financing
          to be able to sustain its operations. These matters raise substantial doubt
          about the Company's ability to continue as a going concern. Management's
          plans
          regarding these matters are also described in Note 1. The accompanying
          financial
          statements do not include any adjustments that might result from the outcome
          of
          this uncertainty.
   /s/
          J.H.
          Cohn LLP
  Roseland,
          New Jersey
 March
          24,
          2008
  F-2
  **KANAI
          SCIENCES, INC.**
 **(A
          Development Stage Company)**
  **Balance
          Sheets**
  **December
                    31, 2007**
                
                **December
                    31, 2005****ASSETS**Cash
                
                **$**
                **3,126**
                
                $
                4,476LIABILITIES
                    AND STOCKHOLDERS’ DEFICIENCYCurrent liabilities:Accrued expenses
                
                **$**
                **25,889**
                
                $
                15,057Accrued interest - related party, current portion
                
                
                **3,414**
                
                
                -Notes payable - related party, current portion
                
                
                **30,581**
                
                
                -Total current liabilities
                
                
                **59,884**
                
                
                15,057Noncurrent liabilities:Accrued interest - related party, net of current portion
                
                
                **2,910**
                
                
                2,493Notes payable - related party, net of current portion
                
                
                **57,145**
                
                
                54,954Total liabilities
                
                
                **119,939**
                
                
                72,504Commitments and contingenciesStockholders’ deficiency:Preferred stock, $.001 par value; 10,000,000 shares authorized;
                    none
                    issued
                
                
                **-**
                
                
                -Common stock, $.001 par value; 75,000,000 shares authorized;
                    125,000
                    sharesissued and outstanding
                
                
                **125**
                
                
                125Additional paid-in capital
                
                
                **4,875**
                
                
                4,875Deficit accumulated during the development stage
                
                
                **(121,813**
                **)**
                
                (73,028
                )Total stockholders’ deficiency
                
                
                **(116,813**
                **)**
                
                (68,028
                )Totals
                
                **$**
                **3.126**
                
                $
                4,476
  *See
          notes to financial statements.*
  F-3
  **KANAI
          SCIENCES, INC.**
 **(A
          Development Stage Company)**
  **Statements
          of Operations**
  **Year
                    ended December 31, 2007**
                
                Year
                    ended
                  December
                    31, 2006
                
                Period
                    from
                  August
                    12, 2005
                  (Inception)
                    to
                  December
                    31, 2007**Operating
                    expenses and loss from operations:**General and administrative
                
                **$**
                **44,954**
                
                $
                39,430
                
                $
                115,489**Loss
                    from operations**
                
                
                **(44,954**
                **)**
                
                (39,430
                )
                
                (115,489
                )**Interest
                    expense**
                
                
                **3,831**
                
                
                2,169
                
                
                6,324**Net
                    loss**
                
                **$**
                **(48,785**
                **)**
                $
                (41,599
                )
                $
                (121,813
                )Basic
                    net loss per common share
                
                $
                **(0.39**
                **)**
                $
                (0.33
                )**Weighted
                    average common shares outstanding**
                
                
                **125,000**
                
                
                125,000
  *See
          notes to financial statements.*
  F-4
  **KANAI
          SCIENCES, INC.**
 **(A
          Development Stage Company)**
  **Statement
          of Changes in Stockholders’ Deficiency**
 **Period
          from August 12, 2005 (Inception) to December 31, 2007**
  **Additional****Common
                    Stock**
                
                **Paid-in**
                
                **Accumulated****Shares**
                
                **Amount**
                
                **Capital**
                
                **Deficit**
                
                **Total**Issuance
                    of common stock tofounders
                    in August 2005at
                    $.04 per share
                
                
                125,000
                
                $
                125
                
                $
                4,875
                
                
                
                
                $
                5,000Net
                    loss
                
                
                
                
                
                
                
                
                
                
                $
                (31,429
                )
                
                (31,429
                )Balance
                    - December 31, 2005
                
                
                125,000
                
                
                125
                
                
                4,875
                
                
                (31,429
                )
                
                (26,429
                )Net
                    loss
                
                
                
                
                
                
                
                
                
                
                
                (41,599
                )
                
                (41,599
                )Balance
                    - December 31, 2006
                
                
                125,000
                
                
                125
                
                
                4,875
                
                
                (73,028
                )
                
                (68,028
                )Net
                    loss
                
                
                
                
                
                
                
                
                
                
                
                (48,785
                )
                
                (48,785
                )Balance
                    - December 31, 2007
                
                
                **125,000**
                
                **$**
                **125**
                
                **$**
                **4,875**
                
                **$**
                **(121,813**
                **)**
                **$**
                **(116,813**
                **)**
  *See
          notes to financial statements.*
  F-5
  **KANAI
          SCIENCES, INC.**
 **(A
          Development Stage Company)**
  **Statements
          of Cash Flows**
   **Year
                    ended December 31, 2007**
                
                Year
                    ended
                  December
                    31, 2006
                
                Period
                    from
                  August
                    12, 2005
                  (Inception)
                    to
                  December
                    31, 2007**Cash
                    flows from operating activities:**Net loss
                
                **$**
                **(48,785**
                **)**
                $
                (41,599
                )
                $
                (121,813
                )Adjustments to reconcile net loss to net cash used in operating
                    activities:Changes in:Accrued expenses
                
                
                **10,832**
                
                
                8,807
                
                
                25,889Expenses
                    paid by related parties satisfied through the issuance of
                    notes
                
                
                **32,772**
                
                
                30,623
                
                
                87,726Accrued interest - related party
                
                
                **3,831**
                
                
                2,169
                
                
                6,324Net cash used in operating activities
                
                
                **(1,350**
                **)**
                
                -
                
                
                (1,874
                )**Cash
                    flows from financing activities:**Proceeds
                    from issuance of common stock
                
                
                **-**
                
                
                -
                
                
                5,000**Net
                    (decrease) increase in cash**
                
                
                **(1,350**
                **)**
                
                -
                
                
                3,126Cash,
                    beginning of period
                
                
                **4,476**
                
                
                4,476
                
                
                -**Cash,
                    end of period**
                
                **$**
                **3,126**
                
                $
                4,476
                
                $
                3,126
  *See
          notes to financial statements.*
  F-6
  **KANAI
          SCIENCES, INC.**
 **(A
          Development Stage Company)**
  **Notes
          to the Financial Statements**
 **December
          31, 2007**
  **Note
          1 -    Organization, Business and
          Operations:**
  Kanai
          Sciences, Inc. (the “Company”) was incorporated in the State of Delaware on
          August 12, 2005. The objective of the Company is to acquire an operating
          business.
  The
          Company's primary activities since incorporation have been organizational
          activities relating to the Company’s formation and the filing of a registration
          statement under the Securities Exchange Act of 1934, as amended (the “Exchange
          Act”), which became effective in January 2006.  The Company has not
          generated any revenues from these activities and, accordingly, it is in
          the
          development stage. The Company selected December 31 as its fiscal
          year-end.
  The
          Company, based on its proposed business activities, is a "blank check"
          company.
          The Securities and Exchange Commission defines those companies as "any
          development stage company that is issuing a “penny stock”, within the meaning of
          Section 3 (a)(51) of the Exchange Act and that has no specific business
          plan or
          purpose, or has indicated that its business plan is to merge with an
          unidentified company or companies." Many states have enacted statutes,
          rules and
          regulations limiting the sale of securities of "blank check" companies
          in their
          respective jurisdictions. Management does not intend to undertake any efforts
          to
          cause a market to develop in our securities, either debt or equity, until
          the
          Company has successfully concluded a business combination. The Company
          intends
          to comply with the periodic reporting requirements of the Exchange Act
          for so
          long as it is subject to those requirements.
  The
          Company was organized as a vehicle to investigate and, if such investigation
          warrants, acquire a target company or business seeking the perceived advantages
          of being a publicly-held corporation. The Company’s principal business objective
          for the 12 months subsequent to December 31, 2007 and beyond such time
          will be
          to achieve long-term growth potential through a combination with a business
          (“Business Combination”) rather than immediate, short-term earnings. The Company
          will not restrict its potential candidate target companies to any specific
          business, industry or geographical location and thus may acquire any type
          of
          business.  The analysis of new business opportunities will be undertaken
          by, or under the supervision of, the officers and directors of the
          Company.
  The
          Company's financial statements have been prepared on a going concern basis
          which
          contemplates the realization of assets and the settlement of liabilities
          and
          commitments in the normal course of business. Management believes that
          the
          Company will continue to incur losses for the foreseeable future and will
          need
          additional equity or debt financing or will need to complete a Business
          Combination with a company that has such financing to be able to sustain
          its
          operations until it can achieve profitability and positive cash flows,
          if
          ever.
  Management
          plans to seek additional debt and/or equity financing for the Company through
          private or public offerings or through a Business Combination, but it cannot
          assure that such financing will be available on acceptable terms or at
          all.
          These matters raise substantial doubt about the Company's ability to continue
          as
          a going concern. The accompanying financial statements do not include any
          adjustments that might result from the outcome of this uncertainty.
  **Note
          2 - Summary of Significant Accounting Policies:**
 ****
 **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 reported amounts of revenue and expenses during
          the
          reporting period.  Actual results could differ from those
          estimates.
  F-7
  **KANAI
          SCIENCES, INC.**
 **(A
          Development Stage Company)**
  **Notes
          to the Financial Statements**
 **December
          31, 2007**
  **Note
          2 - Summary of Significant Accounting Policies
          (continued):**
 ****
 **Fair
          value of financial instruments:**
  Financial
          instruments consist of cash and notes payable.   The carrying value of
          these financial instruments approximates their fair values.
  **Income
          taxes:**
  In
          accordance with Statement of Financial Accounting Standards No. 109, “Accounting
          for Income Taxes,” deferred tax assets and liabilities are recognized based on
          temporary differences between the financial statement and tax bases of
          assets
          and liabilities.  Deferred tax assets and liabilities are measured using
          enacted tax rates expected to apply to taxable income in the years in which
          these assets and liabilities are expected to be recovered or settled.  The
          Company provides a valuation allowance when it is more likely than not
          that some
          or all of its net deferred tax assets will not be realized.  Potential
          income tax benefits, relating primarily to net operating losses, as of
          December
          31, 2007 and 2006, and for the period from August 12, 2005 (inception)
          to
          December 31, 2007 approximate $20,000, $17,000 and $49,000, respectively,
          and
          have been fully offset by a valuation allowance.  Net operating loss
          carryforwards of approximately $122,000 expire through 2027.
  **Loss
          per common
          share:**
  Basic
          earnings (loss) per common share excludes dilution and is computed by dividing
          net income (loss) by the weighted average number of common shares outstanding
          during the period. Diluted earnings per common share reflect the potential
          dilution that could occur if securities or other contracts to issue common
          stock
          were exercised or converted into common stock or resulted in the issuance
          of
          common stock that then shared in the earnings of the entity. There were
          no
          potentially dilutive securities outstanding as of December 31, 2007 and
          2006.
  **Note
          3 - Related Party Transactions:**
 ****
 **Notes payable:**
  On
          August
          14, 2005, the Company issued a 5% promissory note payable to Paramount
          BioCapital Investments, LLC (“Paramount”), an affiliate of a significant
          stockholder of the Company. This note and all accrued interest mature on
          August
          14, 2008 or earlier if certain events occur. The note payable was issued
          to
          Paramount for expenses that it has paid on behalf of the Company.  As of
          December 31, 2007 and 2006, the principal balance of this note was
          $30,581.  On December 31, 2006, this note was assigned to Paramount
          BioSciences, LLC (“PBS”), an affiliate of a significant stockholder of the
          Company.
  On
          January 30, 2006, the Company issued a 5% promissory note payable to PBS. 
This note and all accrued interest mature on January 30, 2009 or earlier
          if
          certain events occur.  The note payable was issued to PBS for expenses that
          it has paid on behalf of the Company.  As of December 31, 2007 and 2006,
          the principal balance of this note was $57,145 and $24,373,
          respectively.
  **Office space and administrative
          services:**
  Effective
          January 1, 2006, the Company began accruing a monthly fee of $1,000 charged
          by
          PBS for certain management services.
  F-8
  **KANAI
          SCIENCES, INC.**
 **(A
          Development Stage Company)**
  **Notes
          to the Financial Statements**
 **December
          31, 2007**
  **Note
          4 - Stockholders’ Equity:**
  The
          Company is authorized to issue 10,000,000 shares of preferred stock with
          such
          designations, voting and other rights and preferences as may be determined
          from
          time to time by the Board of Directors.  No shares have been issued through
          December 31, 2007.
  The
          Company is authorized to issue 75,000,000 shares of common stock.  On
          August 14, 2005, the Company issued 125,000 shares.
  F-9
 **Item
            8. Changes in and Disagreements with Accountants on Accounting and Financial
            Disclosure.**
 
 None.
 
 **Item
            8A(T). Controls and Procedures.**
 
 Evaluation
            of Disclosure Controls and Procedures.
  As
            of the
            end of the period covered by this annual report, we carried out an evaluation,
            under the supervision and with the participation of our management, including
            our principal executive officer and principal financial officer, of the
            effectiveness of the design and operation of our disclosure controls
            and
            procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)).
            Based
            upon the foregoing evaluation, our principal executive officer and principal
            financial officer have concluded that our disclosure controls and procedures
            are
            not effective, for the reasons discussed below, to ensure that information
            required to be disclosed by us in the reports that we file or submit
            under the
            Exchange Act is recorded, processed, summarized and reported within the
            time
            periods specified in the rules and forms of the SEC.
 
 *Management’s
            Report on Internal Control Over Financial Reporting*
 
 Our
            management is responsible for establishing and maintaining adequate internal
            control over financial reporting and for the assessment of the effectiveness
            of
            internal control over financial reporting. As defined by the SEC, internal
            control over financial reporting is a process designed by, or under the
            supervision of our principal executive officer and principal financial
            officer
            and effected by our Board of Directors, management and other personnel,
            to
            provide reasonable assurance regarding the reliability of financial reporting
            and the preparation of the financial statements in accordance with U.S.
            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 our transactions and dispositions of our
            assets;
            (2) provide reasonable assurance that transactions are recorded as necessary
            to
            permit preparation of the financial statements in accordance with U.S.
            generally
            accepted accounting principles, and that our receipts and expenditures
            are being
            made only in accordance with authorizations of our management and directors;
            and
            (3) provide reasonable assurance regarding prevention or timely detection
            of
            unauthorized acquisition, use or disposition of our assets that could
            have a
            material effect on the financial statements.
 
 Because
            of its inherent limitations, internal control over financial reporting
            may not
            prevent or detect misstatements. Also, projections of any evaluation
            of
            effectiveness to future periods are subject to the risk that controls
            may become
            inadequate because of changes in conditions, or that the degree of compliance
            with the policies or procedures may deteriorate.
 
 In
            connection with the preparation of our annual financial statements, management
            has undertaken an assessment of the effectiveness of our internal control
            over
            financial reporting as of December 31, 2007, based on criteria established
            in
            Internal Control - Integrated Framework issued by the Committee of Sponsoring
            Organizations of the Treadway Commission, or the COSO Framework. Management’s
            assessment included an evaluation of the design of our internal control
            over
            financial reporting and testing of the operational effectiveness of those
            controls.
  11
  Based
            on
            this evaluation, management has concluded that our internal control over
            financial reporting was not effective as of December 31, 2007.  Our
            principal executive officer and principal financial officer concluded
            that we
            have material weaknesses in our internal control over financial reporting
            because we do not have an independent board of directors or audit committee
            or
            adequate segregation of duties. We have no independent body to oversee
            our
            internal control over financial reporting. The lack of segregation of
            duties is
            due to the limited nature and resources of the Company. We plan to rectify
            these deficiencies upon consummation of a business combination with an
            operating
            company that has an independent board of directors in place and the resources
            to
            eliminate the lack of segregation of duties.
  **Item
          8B. Other Information.**
  *The
          following information is being provided herein in lieu of in a Current
          Report on
          Form 8-K.*
  **Departure
          of Directors or Principal Officers; Election of Directors; Appointment
          of
          Principal Officers.**
  (b) 
          On March 25, 2008, John Knox resigned from his position as Treasurer of
          the
          Company.  Mr. Knox’s resignation letter is attached hereto as Exhibit
          17.2 .
  (c) 
          To replace Mr. Knox, on March 25, 2008, the Board of Directors elected
          Stephen
          J. Pilatzke as Treasurer of the Company.
  Please
          see a paragraph detailing Mr. Pilatzke’s business experience under Item 9 set
          forth herein.
  There
          are
          no family relationships between any officer or director of the Company
          and Mr.
          Pilatzke.
  **PART
          III**
  **Item
          9. Directors and Executive Officers of the Company.**
  (a) 
          Identification of Directors and Executive Officers.  The following table
          sets forth certain information regarding the Company’s directors and executive
          officers for the fiscal year ended December 31, 2007:
  **Name**
                
                **Age**
                
                **Position**
                
                **Term**Michael
                    Weiser
                
                44
                
                Former
                    President, Secretary and director
                
                Mr.
                    Weiser served as director of the Company from August 14, 2005
                    thru
                    November 6, 2006.  Mr. Weiser served as President and Secretary of
                    the Company from August 14, 2005 thru August 10, 2007.John
                    Knox
                
                38
                
                Former
                    Treasurer
                
                Mr.
                    Knox served as Treasurer of the Company from August 14, 2005
                    thru March
                    25, 2008.Matthew
                    H. Davis
                
                29
                
                President,
                    Secretary and director
                
                Mr.
                    Davis has served as director of the Company since November 6,
                    2006. 
                    Mr. Davis has served as President and Secretary of the Company
                    since
                    August 10, 2007.Stephen
                    J. Pilatzke
                
                29
                
                Treasurer
                
                Mr.
                    Pilatzke has served as Treasurer of the Company since March 25,
                    2008.
  12
  The
          Company’s officers and directors are elected annually for a one year term or
          until their respective successors are duly elected and qualified or until
          their
          earlier resignation or removal.
  **Michael
          Weiser, Former President, Secretary and Director.** Mr. Weiser has served as President, Secretary and director of the Company
          since
          its inception.  Mr. Weiser resigned as director of the Company on November
          6, 2006 and he resigned as President and Secretary of the Company on August
          10,
          2007.  Since July 1998, Dr. Weiser has served as the director of research
          at Paramount BioCapital Asset Management, and is a registered representative
          of
          PBI.  Prior to joining Paramount BioCapital Asset Management, Dr. Weiser
          was a medical student and later a resident at New York University School
          of
          Medicine and New York University Medical Center.  Dr. Weiser is also a
          director of the following public companies:
  ·
                Hana
                    Biosciences, Inc., an OTC Bulletin Board-listed biopharmaceutical
                    company
                    that aims to acquire, develop and commercialize innovative products
                    for
                    the treatment of important unmet medical needs in cancer and
                    immunological
                    diseases;
  ·
                Manhattan
                    Pharmaceuticals, Inc., an OTC Bulletin Board-listed company developing
                    and
                    commercializing biomedical and pharmaceutical technologies;
  ·
                Chelsea
                    Therapeutics International, Ltd., an OTC Bulletin Board-listed
                    company
                    developing and commercializing biomedical and pharmaceutical
                    technologies;
  ·
                Emispshere
                    Technologies, Inc. (NASDAQ:
                    EMIS).
  ·
                VioQuest
                    Pharmaceuticals, Inc., an OTC Bulletin Board-listed company that,
                    through
                    its subsidiaries, provides products and services to pharmaceutical
                    and
                    fine chemical companies; and
  ·
                Paramount
                    Acquisition Corp., a publicly traded blank check company (ticker:
                    PMQCU)
                    of which he is also Executive Vice President.
  Dr.
          Weiser received a B.A. from University of Vermont, a Ph.D. from Cornell
          University Graduate School of Medicine and a M.D. from New York University
          School of Medicine.
  **John
          Knox, Former Treasurer.** Mr.
          Knox
          served as Treasurer of the Company since its inception. Mr.
          Knox
          resigned as Treasurer of the Company on March
          25,
          2008.  In addition, Mr. Knox currently serves as the Chief Financial
          Officer of PBS and PBI, positions he has held since February 2005. From March 1995
          through February 2005 Mr. Knox served as the Controller of Paramount
          BioCapital Investments, LLC and PBI. From October 1991 to February 1995, he was an auditor at Eisner LLP (f/k/a
          Richard A. Eisner & Company, LLP).  Mr. Knox received his B.A. degree
          in Accounting from Emory University in May 1991 and his New York C.P.A
          in
          1995.
  **Matthew
          H. Davis, President, Secretary and Director.** Mr. Davis has served as director of the Company since November 6, 2006
          and he
          has served as President and Secretary of the Company since August 10,
          2007.  Mr. Davis has served as Associate General Counsel for PBS since
          October 2006. Prior to joining PBS, from October 2004 until September 2006,
          Mr.
          Davis was an associate specializing in Life Sciences and Private Equity
          in the
          New York office of Heller Ehrman LLP, where he principally represented
          private
          and public companies in financings, acquisitions, and a variety of other
          transactions.  Mr. Davis also serves as President, Secretary and sole
          director of Chitina Sciences, Inc., Cordova Sciences, Inc., Kodiak Sciences,
          Inc. and Seward Sciences, Inc., all of which are blank check, publicly
          reporting
          and non-trading shell companies.  Mr. Davis received his B.A. degree in
          Political Science and Mathematics from Columbia University in 2001 and
          his J.D.
          from Harvard Law School in 2004.  Mr. Davis is admitted to the bar in New
          York.
  13
  **Stephen
          J. Pilatzke, Treasurer.** Mr. Pilatzke has served as Treasurer of the Company since March 25, 2008. 
Mr. Pilatzke has been the Controller of PBS since December 2005. 
Previously, he worked as an auditor at Eisner LLP, from November 2001 through
          December 2005.  Mr. Pilatzke is an officer of several privately held
          biotechnology companies.  Mr. Pilatzke also serves as Treasurer of Arctic
          Acquisition Corp., Bristol Bay Sciences, Inc., Chitina Sciences, Inc.,
          Cordova
          Sciences, Inc., Kodiak Sciences, Inc., Norton Sound Acquisition Corp.,
          Seward
          Sciences, Inc. and Sitka Sciences, Inc., all of which are blank check,
          publicly
          reporting and non-trading shell companies.  Mr. Pilatzke is a certified
          public accountant.  Mr. Pilatzke received his Bachelor’s degree in
          Accounting from Binghamton University in May 2001.
  (b) 
          Significant Employees.
  As
          of the
          date hereof, the Company has no employees.
  (c) 
          Family Relationships.
  None.
  (d) 
          Involvement in Certain Legal Proceedings.
  There
          have been no events under any bankruptcy act, no criminal proceedings and
          no
          judgments, injunctions, orders or decrees material to the evaluation of
          the
          ability and integrity of any director, executive officer, promoter or control
          person of Company during the past five years.
  **Compliance
          with Section 16(a) of the Exchange Act**
  Section 16(a)
          of the Exchange Act requires the Company’s directors and officers, and persons
          who beneficially own more than 10% of a registered class of the Company’s equity
          securities, to file reports of beneficial ownership and changes in beneficial
          ownership of the Company’s securities with the SEC on Forms 3, 4 and 5.
          Officers, directors and greater than 10% stockholders are required by SEC
          regulation to furnish the Company with copies of all Section 16(a) forms
          they file.
  Based
          solely on the Company’s review of the copies of the forms received by it during
          the fiscal years ended December 31, 2007 and 2006 and written
          representations that no other reports were required, the Company believes
          that
          the following persons who, at any time during such fiscal years, was a
          director,
          officer or beneficial owner of more than 10% of Common Stock failed to
          comply
          with all Section 16(a) filing requirements during such fiscal
          years:
 
 Name
                
                Number
                    of Late Reports
                
                Number
                    of Transactions Not Reported on a Timely BasisMichael
                    Weiser
                
                2
                
                2Matthew
                    H. Davis
                
                1
                
                1
  **Code
          of Ethics**
  On December 31, 2007, Company adopted a formal code of ethics statement
          for
          senior officers and directors (the “Code of Ethics”) that is designed to deter
          wrongdoing and to promote ethical conduct and full, fair, accurate, timely
          and
          understandable reports that the Company files or submits to the Securities
          and
          Exchange Commission and others.  A form of the Code of Ethics is attached
          hereto as Exhibit
          14.1 . 
          Requests for copies of the Code of Ethics should be sent in writing to
          Kanai
          Sciences, Inc., Attention: President, 787 Seventh Avenue, 48 th Floor,
          New York, New York 10019.
  14
  **Nominating
          Committee**
  We have not adopted any procedures by which security holders may recommend
          nominees to our Board of Directors.
  **Audit
          Committee**
  The
          Board
          of Directors acts as the audit committee. The Company does not have a qualified
          financial expert at this time because it has not been able to hire a qualified
          candidate. Further, the Company believes that it has inadequate financial
          resources at this time to hire such an expert. The Company intends to continue
          to search for a qualified individual for hire.
 ****
 **Item
          10. Executive Compensation.**
  The
          following table sets forth the cash compensation paid by the Company to
          its
          President and Secretary for services rendered during the fiscal year ended
          December 31, 2007.
  Name
                    and Position
                
                Year
                
                Total
                    CompensationMichael
                    Weiser, Former President and Secretary
                
                2007
                  2006
                
                None
                  NoneMatthew
                    H. Davis, President and Secretary
                
                2007
                
                None
  **Director
          Compensation**
  We do not currently pay any cash fees to our d irectors,
          but we pay d irectors'
          expenses in attending board meetings.  During the year ended December 31,
          2007 no director expenses were reimbursed.
  **Employment
          Agreements**
  The
          Company is not a party to any employment agreements.
  **Item
          11. Security Ownership of Certain Beneficial Owners and Management and
          Related
          Stockholder Matters.**
  The
          following tables set forth certain information as of March 20, 2008, regarding
          (i) each person known by the Company to be the beneficial owner of more
          than 5%
          of the outstanding shares of Common Stock, (ii) each director, nominee
          and
          executive officer of the Company and (iii) all officers and directors as
          a
          group.
  Name
                    and Address
                
                Amount
                    and Nature ofBeneficial
                    Ownership
                
                Percentage
                  of
                    ClassDr.
                    Lindsay Rosenwald, M.D.
                  c/o
                    Paramount BioSciences, LLC
                  787
                    Seventh Avenue, 48thFloor
                  New
                    York, NY 10019
                
                121,205
                
                97
                %Matthew
                    H. Davis (1)
                  c/o
                    Paramount BioSciences, LLC
                  787
                    Seventh Avenue, 48thFloor
                  New
                    York, NY 10019
                
                0
                
                0
                %Stephen
                    J. Pilatzke (2)
                  c/o
                    Paramount BioSciences, LLC
                  787
                    Seventh Avenue, 48thFloor
                  New
                    York, NY 10019
                
                0
                
                0
                %All
                    Directors and Officers as a Group
                  (2
                    individuals)
                
                0
                
                0
                %
  (1) 
          Mr. Davis is the President, Secretary and sole director of the
          Company.
  (2) 
          Mr. Pilatzke is the Treasurer of the Company.
  15
  **Item
          12. Certain Relationships and Related Transactions.**
  On August 14, 2005, the Company issued a 5% promissory note payable to
          Paramount
          BioCapital Investments, LLC (“Paramount”), an affiliate of Dr. Lindsay
          Rosenwald, a controlling stockholder of the Company. This note and all
          accrued
          interest mature on August 14, 2008 or earlier if certain events occur.
          The note
          payable was issued to the lender for an advance made for future expenses
          that it
          has since paid on behalf of the Company.  Paramount ceased operations in
          2006.  On December 31, 2006 this note was assigned to PBS.  As of
          December 31, 2007, the principal balance of this note was $30,581.
  Since
          January 1, 2006, the Company has paid PBS a monthly fee of $1,000 for services
          including the preparation of the Company’s financial statements and quarterly
          and annual reports.  Also, on January 30, 2006, the Company issued a 5%
          promissory note payable to PBS.  This note and all accrued interest mature
          on January 30, 2009 or earlier if certain events occur.  The note payable
          was issued to PBS for future expenses that it has since paid on behalf
          of the
          Company.  As of December 31, 2007, the principal balance of this note is
          $57,145.  PBS was founded by Dr. Rosenwald, the Company’s controlling
          stockholder.  Mr. Davis, the Company’s President, Secretary and sole
          director, and Mr. Pilatzke, the Company’s Treasurer, are both employees of
          PBS.
  The
          Company utilizes the office space and equipment of PBS, an affiliate of
          Dr.
          Rosenwald, a significant stockholder, at no cost.  Management estimates
          such amounts to be immaterial.
  Except as otherwise indicated herein, there have been no related party
          transactions, or any other transactions or relationships required to be
          disclosed pursuant to Item 404 of Regulation S-B.
  **Item
          13. Exhibits.**
  Index
          to
          Exhibits
 Exhibit
                  
                  Description*3.1
                  
                  Certificate
                      of Incorporation, as filed with the Delaware Secretary of State
                      on August
                      12, 2005.*3.2
                  
                  Amended
                      and Restated Certificate of Incorporation, as filed with the
                      Delaware
                      Secretary of State on October 20, 2005.*3.3
                  
                  By-laws.14.1
                  
                  Corporate
                      Code of Ethics and Conduct, adopted December 31, 2007.**17.1
                  
                  Resignation
                      Letter from Michael Weiser, dated August 10, 2007.17.2
                  
                  Resignation
                      Letter from John Knox, dated March 25, 2008.31.1
                  
                  Certification
                      of the Company’s Principal Executive Officer pursuant to Section 302 of
                      the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Annual
                      Report on Form 10-KSB for the year ended December 31,
                      2007.31.2
                  
                  Certification
                      of the Company’s Principal Financial Officer pursuant to Section 302 of
                      the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Annual
                      Report on Form 10-KSB for the year ended December 31,
                      2007.32.1
                  
                  Certification
                      of the Company’s Principal Executive Officer pursuant to 18 U.S.C. Section
                      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
                      Act of
                      2002.32.2
                  
                  Certification
                      of the Company’s Principal Financial Officer pursuant to 18 U.S.C. Section
                      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
                      Act of
                      2002.
  *
                Filed
                    as an exhibit to the Company’s Registration Statement on Form 10-SB, as
                    filed with the Securities and Exchange Commission on November
                    14, 2005,
                    and incorporated herein by this
                    reference.
  **
                Filed
                    as an exhibit to the Company’s Quarterly Report on Form 10-QSB, as filed
                    with the Securities and Exchange Commission on August 13, 2007,
                    and
                    incorporated herein by this reference.
  16
  **Item
          14.   Principal Accountant Fees and Services**
  J.H.
          Cohn
          LLP (“J.H. Cohn”) is the Company's independent registered public accounting
          firm.
  **Audit
          Fees**
  The
          aggregate fees billed by J.H. Cohn for professional services rendered for
          the
          audit of our annual financial statements and review of financial statements
          included in our quarterly reports on Form 10-QSB or services that are normally
          provided in connection with statutory and regulatory filings were $17,000
          for
          the fiscal year ended December 31, 2007 and $17,000 for the fiscal year
          ended
          December 31, 2006.
  **Audit-Related
          Fees**
  Audit-related
          fees are for assurance and related services that are reasonably related to
          the performance of the audit or review of the Company’s financial statements but
          not included in audit fees above. There were no audit-related fees billed
          by
          J.H. Cohn for the fiscal year ended December 31, 2007 and for the fiscal
          year ended December 31, 2006.
  **Tax
          Fees**
  The
          aggregate fees billed by J.H. Cohn for professional services for tax returns
          were $3,000 for the fiscal year ended December 31, 2007 and $3,000 for
          the
          fiscal year ended December 31, 2006.
  **All
          Other Fees**
  There
          were no fees billed by J.H. Cohn for other products and services for the
          fiscal
          year ended December 31, 2007 and for the fiscal year ended December 31,
          2006.
  **Audit
          Committee’s Pre-Approval Process**
  The Board of Directors acts as the audit committee of the Company, and
          accordingly, all services are approved by all the members of the Board
          of
          Directors.
  17
  **SIGNATURES**
  In
          accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
          the
          registrant has caused this report to be signed on its behalf by the undersigned,
          thereunto duly authorized.
  **KANAI
                  SCIENCES, INC.**Dated:
                  March 25, 2008
                By:
                /s/
                  Matthew H. DavisMatthew
                  H. DavisPresident,
                  Secretary and Director
 Dated:
                  March 25, 2008
                By:
                /s/
                  Stephen J. PilatzkeStephen
                  J. PilatzkeTreasurer
 
 18