**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**Form
      10-KSB**





(Mark
      One)





**x
      ANNUAL REPORT UNDER
      SECTION 13 OR 15(d)**


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**





For
      the
      fiscal year ended December 31, 2006





**o
      TRANSITION REPORT UNDER
      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, 48thFloorNew
                York, New York
            10019Address
                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 registrant (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 x No 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. o





Check
      whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange
      Act). Yes x No. o





The
      Company’s revenues for fiscal year end December 31, 2006 were $0.





As
      of
      February 20, 2007, there were 125,000 shares of common stock outstanding.





**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, the inclusion of such information should not be regarded as a
      representation by the Company or any other person that the objectives and plans
      of the Company will be achieved.





Transitional
      Small Business Disclosure Format (check one): Yes o No x










**PART
      I**





**Item
      1. Description of Business.**





**Introduction**





Kanai
      Sciences, Inc. (“we”, “us”, “our”, the “Company” or the “Registrant”) 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. 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 begun
      efforts to identify a possible business combination. However, the Company has
      not entered into a letter of intent or any definitive agreement concerning
      any
      target business. The business purpose of the Company is to seek the acquisition
      of, or merger with, an existing company.





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, as defined in Rule 12b-2 under the
      Exchange Act, also is a “shell company,” defined 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 a business 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.





**Competition**





Currently,
      with our primary goal the acquisition of a target company or business seeking
      the perceived advantages of being a publicly held corporation, 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**





The
      Company currently has no employees other than its two officers.




1




**Risk
      Factors**





**An
      investment in our securities is highly speculative and subject to numerous
      and
      substantial risks. These risks include those set forth below and elsewhere
      in
      this Form 10-KSB. Readers are encouraged to review these risks carefully before
      making any investment decision.**





**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. Further, our management's own pecuniary interest may at some
      point compromise its fiduciary duty to our stockholders. In addition, our
      officers and directors are currently involved with other blank check companies,
      and, in the pursuit of business combinations, conflicts with such other blank
      check companies with which they are, and may in the future become, affiliated,
      may arise. If we and the other blank check companies that our officers and
      directors are affiliated with desire to take advantage of the same opportunity,
      then those officers and directors 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. Knox, our
      Treasurer, and Mr. Weiser, our President and Secretary, are both employees
      of
      PBI and Paramount BioCapital Investments, LLC (“Paramount”). Also, as of 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. Knox, Mr. Weiser and Mr.
      Davis, our sole director, are employees of PBS.




Additionally,
      we may, from time to time, take loans that pay reasonable interest from
      Paramount to run our operations. We cannot assure you that conflicts of interest
      among us, PBI, Paramount, PBS and our stockholders will not develop. Any finders
      fees, placement fees, interest or other fees paid to PBI, PBS or Paramount
      will
      be comparable with unaffiliated third party fees.





**Our
      business is difficult to evaluate because we have no operating
      history.**





As
      the
      Company has no operating history or revenue and only minimal assets, there
      is a
      risk that we will be unable to consummate a business combination. The Company
      has had no recent operating history nor any revenues or earnings from operations
      since inception. 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 business combination. This may result in
      our
      incurring a net operating loss that will increase continuously until we can
      consummate a business combination with a profitable business opportunity. We
      cannot assure you that we can identify a suitable business opportunity and
      consummate a business combination.





**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.




2





**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.





**The
      Company has no existing agreement for a business combination or other
      transaction.**





We
      have
      no arrangement, agreement or understanding with respect to engaging in a merger
      with, joint venture with or acquisition of, a private or public entity. No
      assurances can be given 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, and there is consequently
      a
      risk that funds allocated to the purchase of our shares will not be invested
      in
      a company with active business operations.





**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.





**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, capital investment, resource
      self-sufficiency and balance of payments positions, and in other
      respects.





**There
      is currently no trading market for our common stock, and liquidity of shares
      of
      our common stock is limited.**





Our
      shares of common stock are not registered under the securities laws of any
      state
      or other jurisdiction, and accordingly there is no public trading market for
      our
      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. Therefore, outstanding shares of our 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. S hares
      of
      our common stock cannot be sold under the exemptions from registration provided
      by Rule 144 under or Section 4(1) of the Securities Act, 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. This letter provides that
      certain private transfers of the shares of common stock also may be prohibited
      without registration under federal securities laws. 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.





**There
      are issues impacting liquidity of our securities with respect to the SEC’s
      review of a future resale registration statement.**





Since our shares of 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
      SB-2
      or 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.




4





In
      addition, the SEC has recently disclosed that it has developed internal
      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.  The SEC has taken the
      position that  these smaller issuers may not be able to rely on Rule 415
      under the Securities Act, 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 our 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 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.




5





**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 may not
      realize any revenue unless and until we successfully merge with or acquire
      an
      operating business.





**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. Any merger or acquisition effected by us may result in
      substantial dilution in the percentage of our 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 then existing stockholders. 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 stockholders will occur and the rights of the holders of common stock
      might be materially adversely affected.





**Our
      principal 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 principal
      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 shares of common stock held by the stockholders. As a result of
      such
      transaction, our management, principal stockholders and Board of Directors
      (the
“Board” or the “Board of Directors”) may change.





**The
      Company has conducted limited market research or identification of business
      opportunities, which may affect our ability to identify a business to merge
      with
      or acquire.**





The
      Company has conducted limited market research concerning prospective business
      opportunities. Therefore, we have no assurances that market demand exists for
      a
      merger or acquisition as contemplated by us. Our management has not identified
      any specific business combination or other transactions for formal evaluation
      by
      us, such that it may be expected that any such target business or transaction
      will present such a level of risk that conventional private or public offerings
      of securities or conventional bank financing will not be available. There is
      no
      assurance that we will be able to acquire a business opportunity on terms
      favorable to us. Decisions as to
      which
      business opportunity to participate in will be unilaterally made by our
      management, which may act without the consent, vote or approval of our
      stockholders.





**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 will 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. 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.




6




**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.




**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 and Paramount, which employ members
      of our management team on a full time basis. Consequently, our majority
      shareholder, 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 over our management and affairs and
      future stockholders of the Company possess no practical ability to remove
      management or effect the operations of the business of the Company. Accordingly, this concentration of ownership by itself 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 the common
      stock. Moreover, as Paramount and PBI are 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.





**This
      report on Form 10-KSB contains forward-looking statements and information
      relating to us, our industry and to other businesses.**





These
      forward-looking statements are based on the beliefs of our management, as well
      as assumptions made by and information currently available to our management.
      When used in this prospectus, the words "estimate," "project," "believe,"
      "anticipate," "intend," "expect" and similar expressions are intended to
      identify forward-looking statements. These statements reflect our current views
      with respect to future events and are subject to risks and uncertainties that
      may cause our actual results to differ materially from those contemplated in
      our
      forward-looking statements. We caution you not to place undue reliance on these
      forward-looking statements, which speak only as of the date of this prospectus.
      We do not undertake any obligation to publicly release any revisions to these
      forward-looking statements to reflect events or circumstances after the date
      of
      this prospectus or to reflect the occurrence of unanticipated
      events.




7





**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.





**Item
      3. Legal Proceedings.**





Presently,
      there are not any material pending legal proceedings to which the Registrant
      is
      a party or as to which any of its property is subject, and no such proceedings
      are known to the Registrant 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 Issuer Purchases
      of
      Equity Securities.**





**Common
      Stock**





Our
      Certificate of Incorporation authorizes the issuance of up to 75,000,000 shares
      of common stock, par value $.001 per share (the “Common Stock”). The Common
      Stock is not listed on a publicly-traded market. As of February 20, 2007,
      there were 21 holders of record of the Common Stock.





**Preferred
      Stock**





Our
      Certificate of Incorporation authorizes the issuance of up to 10,000,000 shares
      of preferred stock, par value $.001 per share (the “Preferred Stock”). The
      Company has not yet issued any of its Preferred Stock.




**Dividend
      Policy**





The
      Company has not declared or paid any cash dividends on its 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.





8




**Recent
      Sales of Unregistered Securities**





The
      Registrant issued 125,000 shares of Common Stock on August 14, 2005, to
      accredited investors, for aggregate cash consideration of $5,000. The Registrant
      sold these shares of Common Stock under the exemption from registration provided
      by Section 4(2) of the Securities Act.





All
      purchasers represented in writing that they acquired the securities for their
      own accounts. A legend was placed on the stock certificates stating that the
      securities have not been registered under the Securities Act and cannot be
      sold
      or otherwise transferred without an effective registration or an exemption
      therefrom, but may not be sold pursuant to the exemptions provided by Section
      4(1) of the Securities Act or Rule 144 under the Securities Act, 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, Inc., dated January 21, 2000.





**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 stockholders or loans from other
      parties to pay for operating expenses until the Company consummates the merger
      with a privately-held 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.





**Results
      of Operations**





The
      Company has not conducted any active operations since inception, except for
      its
      efforts to locate suitable acquisition or merger transactions. 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 consummate or effect an acquisition
      of, or merger with, an operating company, of which there can be no
      assurance.





9




**Item
      7. Financial Statements.**





**KANAI
      SCIENCES, INC.**


**(A
      Development Stage Company)**





PagesReport
                of Independent Registered Public Accounting Firm
            
            F-2Balance
                SheetsDecember
                31, 2006 and 2005
            
            F-3Statements
                of OperationsFor
                the year ended December 31, 2006, the period from August 12, 2005
                (Inception) to December 31, 2005, and the period from August 12,
                2005
                (Inception) to December 31, 2006
            
            F-4Statement
                of Changes in Stockholders' DeficiencyPeriod
                from August 12, 2005 (Inception) to December 31, 2006
            
            F-5Statements
                of Cash FlowsFor
                the year ended December 31, 2006, the period from August 12, 2005
                (Inception) to December 31, 2005, and the period from August 12,
                2005
                (Inception) to December 31, 2006
            
            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, 2006 and 2005, and the related statements
      of
      operations, changes in stockholders’ deficiency and cash flows for the year
      ended December 31, 2006, the period from August 12, 2005 (inception) to December
      31, 2005 and the period from August 12, 2005 (inception) to December 31, 2006.
      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, 2006 and 2005, and its results of operations
      and cash flows for the year ended December 31, 2006, the period from August
      12,
      2005 (inception) to December 31, 2005 and the period from August 12, 2005
      (inception) to December 31, 2006, 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


February
      6, 2007





F-2




**KANAI
      SCIENCES, INC.**


**(A
      Development Stage Company)**





**Balance
      Sheets**





**December
                31, 2006**
            
            **December
                31, 2005****ASSETS**Cash
            
            **$**
            **4,476**
            
            $
            4,476**LIABILITIES
                AND STOCKHOLDERS’ DEFICIENCY**Current
                liabilities:Accrued
                expenses
            
            **$**
            **15,057**
            
            $
            6,250Noncurrent
                liabilities:Accrued
                interest - related party
            
            
            **2,493**
            
            
            324Notes
                payable - related party
            
            
            **54,954**
            
            
            24,331Total
                liabilities
            
            
            **72,504**
            
            
            30,905Commitments
                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
            
            
            **(73,028**
            **)**
            
            (31,429
            )Total
                stockholders’ deficiency
            
            
            **(68,028**
            **)**
            
            (26,429
            )Totals
            
            **$**
            **4,476**
            
            $
            4,476




*See
      notes to financial statements.*




F-3




**KANAI
      SCIENCES, INC.**


**(A
      Development Stage Company)**





**Statements
      of Operations**





**Year
                ended December 31, 2006**
            
            Period
                from August 12, 2005 (Inception) to December 31, 2005
            
            Period
                from August 12, 2005 (Inception) to December 31, 2006**Operating
                expenses and loss from operations:**General
                and administrative
            
            **$**
            **39,430**
            
            $
            31,105
            
            $
            70,535**Loss
                from operations**
            
            
            **(39,430**
            **)**
            
            (31,105
            )
            
            (70,535
            )**Interest
                expense**
            
            
            **2,169**
            
            
            324
            
            
            2,493**Net
                loss**
            
            **$**
            **(41,599**
            **)**
            $
            (31,429
            )
            $
            (73,028
            )**Basic
                and diluted net loss per common share**
            
            **$**
            **(0.33**
            **)**
            $
            (0.25
            )**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, 2006**





**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**
            **)**




*See
      notes to financial statements.*




F-5




**KANAI
      SCIENCES, INC.**


**(A
      Development Stage Company)**





**Statements
      of Cash Flows**





**Year
                ended December 31, 2006**
            
            Period
                from August 12, 2005 (Inception) to December 31, 2005
            
            Period
                from August 12, 2005 (Inception) to December 31, 2006**Cash
                flows from operating activities:**Net
                loss
            
            **$**
            **(41,599**
            **)**
            $
            (31,429
            )
            $
            (73,028
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Changes
                in:Accrued
                expenses
            
            
            **8,807**
            
            
            6,250
            
            
            15,057Expenses
                paid by related parties satisfied through the issuance
                ofnotes
            
            
            **30,623**
            
            
            24,331
            
            
            54,954Accrued
                interest - related party
            
            
            **2,169**
            
            
            324
            
            
            2,493Net
                cash used in operating activities
            
            
            **-**
            
            
            (524
            )
            
            (524
            )**Cash
                flows from financing activities:**Proceeds
                from issuance of common stock
            
            
            **-**
            
            
            5,000
            
            
            5,000**Net
                increase in cash**
            
            
            **-**
            
            
            4,476
            
            
            4,476Cash,
                beginning of period
            
            
            **4,476**
            
            
            -
            
            
            -**Cash,
                end of period**
            
            **$**
            **4,476**
            
            $
            4,476
            
            $
            4,476




*See
      notes to financial statements.*




F-6




**KANAI
      SCIENCES, INC.**


**(A
      Development Stage Company)**





**Notes
      to the Financial Statements**


**December
      31, 2006**





**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 registration statement, 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, 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 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. 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, 2006 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.




F-7




**KANAI
      SCIENCES, INC.**


**(A
      Development Stage Company)**





**Notes
      to the Financial Statements**


**December
      31, 2006**





**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.





**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, for the year ended December 31,
      2006, the period from August 12, 2005 (inception) to December 31, 2005, and
      for
      the period from August 12, 2005 (inception) to December 31, 2006 approximate
      $17,000, $13,000 and $30,000, respectively, and have been fully offset by a
      valuation allowance. Net operating loss carryforwards of approximately $73,000
      expire through 2026.





**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, 2006 and
      2005.





F-8




**KANAI
      SCIENCES, INC.**


**(A
      Development Stage Company)**





**Notes
      to the Financial Statements**


**December
      31, 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 matures on August
      14, 2008 or earlier if certain events occur. The note payable was issued to
      Paramount for future expenses that it has since paid on behalf of the Company.
      As of December 31, 2006 and December 31, 2005, the principal balance of this
      note was $30,581 and $24,331, respectively. 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 matures 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, 2006, the principal
      balance of this note is $24,373.




**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.





**Note
      4 - Stockholders’ Equity:**




The
      Company is authorized to issue 10,000,000 shares of preferred stock. No shares
      have been issued as of December 31, 2006.





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. Controls and Procedures.**





The
      Company’s management is responsible for establishing and maintaining a system of
      disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)
      under the Exchange Act) that is designed to ensure that information required
      to
      be disclosed by the Company in the reports that the Company files or submits
      under the Exchange Act is recorded, processed, summarized and reported, within
      the time periods specified in the Commission’s rules and forms. Disclosure
      controls and procedures include, without limitation, controls and procedures
      designed to ensure that information required to be disclosed by an issuer in
      the
      reports that it files or submits under the Exchange Act is accumulated and
      communicated to the issuer’s management, including its principal executive
      officer or officers and principal financial officer or officers, or persons
      performing similar functions, as appropriate to allow timely decisions regarding
      required disclosure.





In
      accordance with Exchange Act Rules 13a-15 and 15d-15, an evaluation was
      completed under the supervision and with the participation of the Company’s
      management, including the Company’s President, Principal Financial Officer and
      Secretary, of the effectiveness of the design and operation of the Company’s
      disclosure controls and procedures as of the end of the period covered by this
      Annual Report. Based on that evaluation, the Company’s management including the
      President, Principal Financial Officer and Secretary, concluded that the
      Company’s disclosure controls and procedures were effective in providing
      reasonable assurance that information required to be disclosed in the Company’s
      reports filed or submitted under the Exchange Act was recorded, processed,
      summarized, and reported within the time periods specified in the Commission’s
      rules and forms. There have been no changes to the Company’s internal control
      over financial reporting that occurred during the last fiscal quarter of the
      year ended December 31, 2006, that materially affected, or were reasonably
      likely to materially affect, our internal control over financial reporting.





**Item
      8B. Other Information.**





None.





**PART
      III**





**Item
      9. Directors and Executive Officers of the Registrant.**





(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, 2006:





**Name**
            
            **Age**
            
            **Position**
            
            **Term**Michael
                Weiser
            
            43
            
            President
                and Secretary
              Director
            
            August
                14, 2005 thru Present
              August
                14, 2005 thru November 6, 2006John
                Knox
            
            37
            
            Treasurer
            
            August
                14, 2005 thru PresentMatt
                H. Davis
            
            28
            
            Director
            
            November
                6, 2006 thru Present




10




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, President, Secretary**  **and
      Director.** Mr.
      Weiser has served as the President and Secretary of the Company since its
      inception. 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 also serves as President and Secretary of Seward Sciences, Inc. and
      Kodiak Sciences, Inc., both of which
      are blank check, publicly reporting and non-trading shell companies. 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, Treasurer.** Mr.
      Knox
      has served as Treasurer of the Company since its inception. In
      addition, Mr. Knox currently serves as the Chief Financial Officer of Paramount,
      PBS and PBI, positions he has held since February 2005. From March 1995
      through February 2005 Mr. Knox served as the Controller of Paramount 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 also serves as Treasurer of Arctic
      Acquisition Corp., Chitina Sciences, Inc., Cordova Sciences, Inc., Bristol
      Bay
      Sciences, Inc., Seward Sciences, Inc., Sitka Sciences, Inc., Norton Sound
      Acquisition Corp., Kodiak Sciences, Inc. and Denali Sciences, Inc., all of
      which
      are blank check, publicly reporting and non-trading shell companies. Mr. Knox
      received his B.A. degree in Accounting from Emory University in May 1991 and
      his
      New York C.P.A in 1995.





**Matt
      H. Davis, Director.** Mr.
      Davis has served as director of the Company since November 6, 2006. 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 director of Cordova Sciences, Inc., Kodiak Sciences, Inc., Chitina
      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.




11





(b)
      Significant Employees.





As
      of the
      date hereof, the Company has no significant 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 Registrant 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 year ended December 31, 2006 and written representations that no
      other reports were required, the Company believes that the following person
      who,
      at any time during such fiscal year, was a director, officer or beneficial
      owner
      of more than 10% of the Company’s common stock failed to comply with all
      Section 16(a) filing requirements during such fiscal year:





Name
            
            Number
                of Late Reports
            
            Number
                of Transactions Not Reported on a Timely BasisMatt
                H. Davis
            
            1
            
            1





**Code
      of Ethics**





We
      have
      not adopted a Code of Business Conduct and Ethics that applies to our principal
      executive officer, principal financial officer, principal accounting officer
      or
      controller, or persons performing similar functions in that our officers serve
      in all the above capacities.





**Nominating
      Committee**





We
      have
      not adopted any procedures by which security holders may recommend nominees
      to
      our Board of Directors.





12





**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 all other executive officers for services rendered during the
      fiscal years ended December 31, 2006 and December 31, 2005.





Name
                and Position
            
            Year
            
            Other
                CompensationMichael
                Weiser, President and Secretary
            
            2006
              2005
            
            None
              NoneJohn
                Knox, Treasurer
            
            2006
              2005
            
            None
              None





As
      of
      January 1, 2006, the Company began paying PBS a monthly fee equal to $1,000
      for
      certain management services.





**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, 2006
      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 February 20, 2007,
      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 10036
            
            
            121,205
            
            
            97%Michael
                Weiser (1)
              c/o
                Paramount BioSciences, LLC
              787
                Seventh Avenue, 48thFloor
              New
                York, NY 10036
            
            
            0
            
            
            0%John
                Knox (2)
              c/o
                Paramount BioSciences, LLC
              787
                Seventh Avenue, 48thFloor
              New
                York, NY 10036
            
            
            0
            
            
            0%Matt
                H. Davis (3)
              c/o
                Paramount BioSciences, LLC
              787
                Seventh Avenue, 48thFloor
              New
                York, NY 10036
            
            
            0
            
            
            0%All
                Directors and Officers as a Group
              (3
                individuals)
            
            
            0
            
            
            0%




(1)
            Mr.
                Weiser is the President and Secretary of the
                Company.





(2)
            Mr.
                Knox is the Treasurer of the
                Company.





(3)
            Mr.
                Davis is the sole director of the
                Company.


13


**Item
      12. Certain Relationships and Related Transactions.**





On
      August
      14, 2005, the Company issued a 5% promissory note payable to Paramount, an
      affiliate of Dr. Lindsay Rosenwald, 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 the lender for an advance
      made for future expenses that it has since paid on behalf of the Company. As
      of
      December 31, 2006, the principal balance of this note was $30,581. On December
      31, 2006 this note was assigned to PBS.




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, 2006, the principal balance of this note is $24,373. PBS was
      founded by Dr. Rosenwald, the Company’s controlling stockholder. Mr. Weiser, the
      Company’s President and Secretary, Mr. Knox, the Company’s Treasurer, and Mr.
      Davis, the Company’s sole director, are all 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.





**Item
      13. Exhibits.**





Index
      to
      Exhibits





Exhibit
            
            Description*3.1
            
            Certificate
                of Incorporation*3.2
            
            Amended
                and Restated Certificate of Incorporation*3.3
            
            By-laws31.1
            
            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,
                2006.31.2
            
            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, 2006.32.1
            
            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.






14




**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
      audits of our annual financial statements and reviews 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 $8,000 for
      fiscal year ended December 31, 2005 and $13,500 for fiscal year ended December
      31, 2006.





**Audit-Related
      Fees**





The
      aggregate fees billed by J.H. Cohn for assurance and related services that
      are
      reasonably related
      to the performance of the audit or review of the Company’s financial statements
      were $0 for the fiscal year ended December 31, 2005 and $0 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, 2005 and $3,000 for the
      fiscal year ended December 31, 2006.





**All
      Other Fees**





The
      aggregate fees billed by J.H. Cohn for other products and services were $0
      for
      the fiscal year ended December 31, 2005 and $0 for the fiscal year ended
      December 31, 2006.





15




**SIGNATURES**





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




**KANAI SCIENCES,
              INC.**Dated: February 20, 2007
            By:
            /s/ Michael WeiserName:
              Michael WeiserTitle: President,
              Secretary





In
      accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
      this
      report has been signed below by the following persons on behalf of the
      registrant and in the capacities and on the dates indicated.





Title
            
            Date/s/
                John Knox
            
            Treasurer
            
            February
                20, 2007John
                Knox/s/
                Matt H. Davis
            
            Director
            
            February
                20, 2007Matt
                H. Davis







16