Form
10KSB





Tank
Sports, Inc. - TNSP





Filed:
June 13, 2008 (period: February 29, 2008)























Table of
Contents




PART
      I
            PageITEM
      1
            DESCRIPTION
      OF BUSINESS
            2ITEM
      2
            DESCRIPTION
      OF PROPERTY.
            2ITEM
      3
            LEGAL
      PROCEEDINGS
            2ITEM
      4
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
            3ITEM
      5
            MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
            3ITEM
      6
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
            3ITEM
      7
            FINANCIAL
      STATEMENTS
            7ITEM
      8
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
            23ITEM
      8A
            CONTROLS
      AND PROCEDURES
            23PART
      IIITEM
      9
            DIRECTORS,
      EXECUTIVE OFFICERS. PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
      16(a)
            24ITEM
      9B
            COMPLIANCE
      WITH SECTION 16(a) OF THE EXCHANGE ACT
            24ITEM
      10
            EXECUTIVE
      COMPENSATION
            25ITEM
      11
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
            25ITEM
      12
            CERTAIN
      RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
            25ITEM
      13
            EXHIBITS
      AND REPORTS ON FORM 8-K
            26ITEM
      14
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
            26SIGNATURES
            27EX-31.1
            CERTIFICATE
      OF PRINCIPAL EXECUTIVE OFFICER AS REQUIRED BY RULE 13A-14(A)/15D-14RULE
      13A-14(A)/15D-14EX-31.2
            CERTIFICATE
      OF PRINCIPAL ACCOUNTING OFFICER AS REQUIRED BY RULE
      13A-14(A)/15D-14EX-32.1
            CERTIFICATE
      OF PRINCIPAL EXECUTIVE OFFICER AS REQUIRED BY RULE 13A-14(B) AND RULE 15D-
      14(B) (17 CFR 240.15D-14(B)) AND SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF
      THE UNITED STATES CODEEX-32.2
            CERTIFICATE
      OF PRINCIPAL ACCOUNTING OFFICER AS REQUIRED BY RULE 13A-14(B) AND RULE
      15D-14(B) (17 CFR 240.15D-14(B) AND SECTION 1350 OF CHAPTER 63 OF TITLE 18
      OF THE UNITED STATES CODE








UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 Form
10-KSB
  x  ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For the
fiscal year ended February 29, 2008
 
 
 o  TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For the
transition period from ______________ to
__________________
  Commission
File No.: 333-129910
 
 TANK SPORTS,
INC.
 (Name of
small business issuer in its charter)
  
  California
              95-4849012(State
      or other jurisdiction of incorporation or organization)
              (I.R.S.
      Employer Identification No.)
    
 10925
Schmidt Road
 El Monte,California91733
 (Address,
including zip code, of principal executive offices)
 
 
 Issuer’s
telephone number : (626) 350-4039
 
 
 Securities
registered under Section 12(b) of the Exchange Act: None
  Securities
registered under Section 12(g) of the Exchange Act:
  Common Stock, Par Value
$.001 Per Share
 (Title of
class)
 Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.  x Yes  o No
 
 Check
if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.x
 
 Indicate
by check mark whether the registrant is an accelerated filer (as defined in
exchange A Rule 12b-2)
 
 Yes   ̈    No  x
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 
 Yes   ̈    No  x
 
 
 As
of February 29, 2008, we had 38,535,114 shares of our $0.001 par value common
stock issued and outstanding.
  DOCUMENTS
INCORPORATED BY REFERENCE
 None
 
 Transitional
Small Business Disclosure Form (Check one):  Yeso  Nox
 
 To
simplify the language in this Form 10-KSB, Tank Sports, Inc., a California
corporation, is referred to herein as “Tank”, the "Company" or
"We."








PART
I





This
report on Form 10-KSB and documents incorporated herein by reference contain
certain “forward-looking statements” as defined by the Private Securities
Litigation Reform Act of 1995 which involve substantial risks and uncertainties.
When used in this report and in other reports filed by the Company, the
forward-looking statements are often identified by the use of such terms and
phrases as “anticipates,” “believes,” “intends,” “plans,”
“expects,” “seeks,” “scheduled,” “foreseeable future' and similar
expressions. Although the Company believes the understandings and assumptions on
which the forward-looking statements in this report are based are reasonable,
the Company's actual results, performance and achievements could differ
materially from the results in, or implied by, these forward-looking
statements. Certain factors that could cause or contribute to such differences
include those discussed in “Management's Plan of Operations” and elsewhere
herein.





ITEM
1.  DESCRIPTION OF BUSINESS.





Corporate
History





Tank
Sports, Inc. was originally incorporated under the laws of the State of
California on March 5, 2001, as Bi-Tank, Inc. On June 21, 2004, the Company
changed its name to Tank Sports, Inc. and its principal place of business is
located at 10925 Schmidt Road, El Monte, California 91733.





On
January 30, 2007, the Company acquired Lowprice.com, Inc. an Arizona corporation
d/b/a Redcat Motors (“Redcat”) as it’s wholly owned subsidiary. Redcat is
engaged in the distribution of motorcycles and ATVs under the Redcat brand name
in the United States through its dealer network.





On
November 15, 2007, the Company acquired 100% stock of People’s Motor
International Co., Ltd. (“PMI”) and its subsidiaries. PMI was incorporated in
the British Virgin Islands on March 13, 2001 and has manufacturing plant in
Shanghai to produce dune buggies and a distribution company in Hong Kong to
market the products to international markets including the United States under
the “Dazon” brand name. With these two acquisitions the Company has enhanced its
distribution network in the U.S., Europe and other international markets as well
as obtained proprietary technologies in dune buggy production and related
product development abilities.





Current
Business Operations





Tank
Sports markets, sells and distributes recreational and transportation
motorcycles, all-terrain vehicles (“ATVs’), dirt bikes, scooters and dune
buggies in the United States and international markets. The Company supports
each product line with an assortment of replacement parts and accessories, which
are available at the Company’s dealerships. Our products are distributed through
a sales net work of about 000 dealers and distributors worldwide, of which over
000 dealers are in the United States. Outside the U.S., the Company sells its
products through an international network of dealers and distributors in
countries like the United Kingdom, France, Holland, Spain, Italy, Austria,
Australia, South Africa, Mexico, Ecuador and Jamaica.





The
Company offers four models of cruiser motorcycles, seven models of dirt bike
motorcycles, eight models of scooters, seven models of all-terrain vehicles and
four models of dune buggies. The engine displacements of the motorcycles range
from 50cc to 250cc, dirt bikes range from 70cc to 250cc, scooters range from
50cc to 150cc, ATVs range form 70cc to 250cc and dune buggies range from 90cc to
1100cc. The Company’s 150cc, 250cc and 1100cc dune buggies have obtained EEC
homologation certificate for on road use in EEC countries.





Our
products are manufactured in China mainly in our own plant in Shanghai and a
designated factory in Guangzhou. Our plant in Shanghai has obtained China
Compulsory Certification and is in compliance with ISO 9000 standards regarding
its production standard and quality control. The dune buggies are primarily
produced in the Shanghai plant and are manufactured according to our proprietary
designs and factory standards. The factory in Guangzhou is owned by the
principal shareholders of the Company and is primarily the production base for
motorcycles, scooters, dirt bikes and ATVs. The quality assurance function of
our Company ensures that all the products from the two plants are shipped at the
highest possible standards to our customers and backed by timely after sales
services. The Company has a warranty program according to industry standards to
further support our products. SEE CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.





Industry
Background


The
Company operates in multi-billion dollar industry. Our industry is composed of
manufacturers, distributors,importers, dealers etc. The industry revolves around
Powersports equipment which is made up of but not exclusively, Motorcycles,
Scooters, Dirt Bikes, All Terrain Vehicles, Utility Vehicles, Personal Water
Crafts, Parts, and Accessories. There are 5 major markets, North America,
Central and South America, Europe, Middle East, Asia and Africa.








The
Powersports equipment market is often viewed as not an absolute necessity
product in many of the markets. The industry is controlled by an assortment of
government agencies to control the safety and emission standards. Domestically
the Powersports equipments are considered to be recreational.





Competition


Motorcycle
& ATV market is highly competitive. The company's American, Japanese and
European competitors have long established markets on an international scale.
They have well established retail, distribution, R&D, sales, service,
financial and marketing networks worldwide. They also have larger revenue, are
advanced in technology and production facility. The competitors have offices
both in the US and internationally. These competitors offer Powersports
equipment in a wide variety of models and specifications. The Company competes
by offering a product line that the competitors are weaker in, a line that does
not overlap their product models. Simultaneously the Company takes advantages of
manufacturing in China to provide a product that is more economical compared to
the competitors.








The
Company also has competitors that distribute Chinese made Powersports equipment
in the US and internationally. These competitors vary in company sizes and
history. They offer smaller displacement power, lower spec, very economical and
limited field of models. Many of these competitors lack the ability to
manufacture or support the products they sell. It has also been said that these
competitors often lack the viable business model and plan of support for the
market in which they operate in. Management believes the competition is unable
to keep up with the Company's vision and long term planning. Management further
believes the Company out paces these competitors in manufacturing and support by
offering better quality products and support in the market where we
operate.








Domestically,
the Company competes most heavily in the Motorcycle, Scooter and ATV market with
displacement of 50CC up to 500CC. Internationally, the Company has a 1100cc dune
buggy that can be off road use worldwide and on road use in Europe and this
product has proven to be a major sales item in the fiscal year ending February
28, 2009.








ITEM
2.  DESCRIPTION OF PROPERTY





The
principal office and warehouse is located at 10925 Schmidt Road, El Monte CA
91733. On August 1, 2005, the Company entered into a lease agreement with Jing
Jing Long and Jiang Yong Ji for the facilities in which the Company operates for
a period of 60 months with monthly rental of $19,900. The landlords are also
officers, directors and majority shareholders of the Company.





The
Company’s subsidiary PMI Shanghai Co., Ltd. (“Shanghai Dazon’) has a production
facility of about 76,000 sq ft for buggy production, warehouse and management
office. The Shanghai subsidiary has two pieces of land with a totaling area of
321,000 sq.ft. Each piece of land has land use right for a period of 50 years
from date of grant. The manufacturing plant is built on one piece of land and
the other piece of land with 157,000 sq. ft is used as testing ground for the
new dune buggy before development. The Company is planning on developing this
land in the near future to add production capacity to the Shanghai
facility.





ITEM
3.                      LEGAL
PROCEEDINGS





The
Company is subject to lawsuits and other matters. In determining required
reserves related to these items, the Company carefully analyzes cases and
considers the likelihood of adverse judgments or outcomes, as well as the
potential range of possible loss.  The required reserves are monitored on
an ongoing basis and are updated based on new developments or new information in
each matter.





On August
4, 2007, Changzhou Huaxin Company sued Shanghai Dazon to Changzhou City People's
Court, complaining that Shanghai Dazon defaulted in the payment for processing
fee of $361,574 on motorcycle frames and manufacturing molds. On September 13,
2007, the Intermediate People's Court in Changzhou ruled that Shanghai Dazon
should pay Changzhou Huaxin Company $361,574. Shanghai Dazon agreed to pay only
$148,951 before September 30, 2007 and pay the balance of $144,083 before
November 30, 2007 and Changzhou Huaxin accepted. On September 30, 2007 Shanghai
Dazon paid Changzhou Huaxin Company $148,951. On November 15, 2007,
Shanghai







2





Dazon and
Changzhou Huaxin Company entered into an agreement to pay the balance of the
amount outstanding. According to the agreement, Shanghai Dazon will pay $54,164
to Changzhou Huaxin Company before November 30, 2007. The balance of $89,919
would be paid before January 31, 2008.  This litigation details can be
seen in "(2007) ordinary people of the early word No. 201, civil mediation
paper."  On January 28, 2008, Shanghai Dazon made payment of $93,457
to Changzhou Huaxin Company to settle the debt in full. The increase in amount
of payment is because of the appreciation of the Chinese currency.





On
August18, 2007, Luoyang North Industry Company (Luoyang North) sued Shanghai
Dazon to People’s Court of Luoyang Jianxi District (District Court), complaining
that Shanghai Dazon defaulted in the payment of $372,376 fee according to the
cooperation agreement and supplementary cooperation agreement that the two
parties signed in June 13, 2002 and July 30, 2002. On October 16, 2007, the
District Court ruled on the judgment that Shanghai Dazon should pay Luoyang
North $372,376 within 10 days, together with the accrued interest at popular
bank interest rate by August 30, 2007. On November 19, 2007, Shanghai Dazon
filed appeal to Luoyang City Intermediate People’s Court (City Court) that
Shanghai Dazon should pay the 2005 and 2006 contract fee total $236,967 by
installments, while the contract payment of 2007 of $135,409 is not due until
the end of 2007. In April 2008, Shanghai Dazon took another approach and appeal
the claim of Luoyang North to the City Court on the ground that the basis of the
contract fee is invalid. The City Court re-examined the case to review the
merits of Shanghai Dazon’s appeal and informed Luoyang North and Shanghai Dazon
on May 26, 2008 that the case will be set for re-trial. As of the date of this
report the time for re-trial has not been set. As of February 29, 2008, Shanghai
Dazon has provided $410,463 in its accounts covering the amount of litigation
and accrued fees for the two months ended February 29, 2008.





Product
Liability Matters:




Additionally,
the Company is involved in product liability suits related to the operation of
its business.  The Company accrues for claim exposures that are probable of
occurrence and can be reasonably estimated.  The Company also maintains
insurance coverage for product liability exposures.  The Company believes
that its accruals and insurance coverage are adequate and that product liability
will not have a material adverse effect on the Company’s consolidated financial
statements.





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





None





ITEM
5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS





Principal
Market or Markets





Our
common stock is currently  listed on the Over-the-Counter Bulletin
Board by NASDAQ. The 10 day average trading volume as of Feb 28, 2007 is
 39,080 shares.





Approximate
Number of Common Stock Holders





As of
February 29, 2008, the Company had 200 shareholders of record. We have 1,750,000
outstanding warrants to purchase our securities and a stock buy back agreement
with Hexagon Financial LLC for 264,350 shares of the common stock of the Company
at $1.05 a share. The initial buy back agreement was signed on August 16, 2007
and the Company paid $114,049 to buy back 108,618 shares in November 2007, and a
subsequent agreement was reached on May 30, 2008 under which the Company paid
$144,552 to purchase 130,151 shares as treasury stock. The total number of
shares bought back was lower than the number in the agreement since Hexagon has
sold some shares to the market. As of the date of this report, all the shares
repurchase commitment with Hexagon was completed. Please also refer to Footnote
18 of the financial statements.





On
November 15, 2007 the Company entered into a Stock Acquisition Agreement with
the shareholders of People’s Motor International Company Limited (“PMI”) to
acquire 100% of the equity of PMI by the issuance of 4,000,000 common shares and
granting of 1,500,000 warrants exercisable in 30 months at 64 cents a share. On
November 20, 2007 the Company issued 2,400,000 common shares and granted
1,500,000 warrants to the PMI shareholders pursuant to such Agreement. On May
20, 2008, the Company issued 1,600,000 common shares to complete its acquisition
of PMI. Please refer to Recent Sales of Unregistered Securities for further
details.





Dividend
Policy


The
Company has not declared any dividends or paid any cash dividends on its common
stock. The Directors anticipate that future earnings will be retained for
expansion of the Company.





Recent
Sales of Unregistered Securities





On
November15, 2007,Tank Sports,Inc. acquired 100%
of the equity of People’s Motor International Co., Ltd (“PMI”) and its
subsidiaries. PMI is a British Virgin Islands company with a subsidiary in
Shanghai engaged in buggy production, a subsidiary in Arizona for distribution
in the US and Canadian market and a trading company in Hong Kong for
distribution into EEC countries and other primarily English speaking affluent
markets. The costs of acquisition are 4,000,000 common shares of Tank Sports,
Inc. and 1,500,000 warrants exercisable in 30 months at a price of 64 cents
each. The common shares, which are subject to the restrictions of Rule 144, are
payable in two portions, the first portion of 2,400,000 shares and 1,500,000
warrants were issued and given on November 20, 2007 and the final portion of
1,600,000 shares were issued and given on May 20, 2008. The shareholders of PMI
consist of foreign nationals, US citizens and foreign business entities. The
valuation of shares and warrants in this acquisition at November 15, 2007 was
$4,683,661. Please refer to Notes 20 to 22 in the financial
statements.





There was
no cash proceeds for the issuance of shares in connection with to this
acquisition transaction.


We relied
upon Regulation S of the Securities Act of 1933, as amended (the ˇ°Actˇ) and
Section 4(2) of the Securities Act of 1933 and Regulation D promulgated
hereunder. Our officers and directors
determined the sophistication of our investors. In addition, we complied with
the applicable requirements of Rules 902 and 903 of the Act.





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





The
following discussion is intended to provide an analysis of the Company’s Plan of
Operation and financial condition after its acquisition of Lowprice.com, Inc.
and PMI. Matters discussed in this section that is not historical or current
facts are potential developments of the Company. The Company’s actual results
could differ materially from the results discussed in the forward looking
statements. Factors that could cause or contribute to such differences include
those described below.





Plan
of Operation





Since
inception, the Company commenced the sale and distribution of motorcycles and
ATVs under the brand name of TANK During late 2006, the Company started its plan
to acquire a US motorcycle distributor with well established dealership network
and sales history. In January 2007, the Company acquired Lowprice.com, Inc
(Redcat) with a view to bring in their 300 dealers, $15 million annual sales,
advanced ordering system and ATV product lines. The purchase of Redcat was at a
decent price. The Company issued stocks, cash and gave commitment to take over
certain debts, leases and contracts.





After the
completion of the acquisition of Redcat, the Company targeted PMI to start its
next acquisition because PMI has a well known DAZON brand name, established
distributorship network in Europe and in the US, advanced technology in dune
buggy production and a facility in Shanghai with 76,000 sq..ft. of floor space
and 321,000 sq. ft in land. The acquisition of PMI started from negotiation in
August 2007 and finalization of agreement on November 15, 2007. The PMI
acquisition did not involve in cash payment to the shareholders of PMI but the
Company has to take over the entire operation of PMI and all of its debts. After
completion of these two acquisitions, the Company is able to sell products under
the brand names of Redcat and DAZON to international markets in additional to
the domestic market.





Consolidation
and Integration after Acquisition





The
consolidation and integration measures that have been taken by the Company to
further strengthen its market position included, but not limited to,
restructuring of management and operation team, consolidation of regional
warehouse facility, ERP system integration, inventory control, development of
marketing promotion and sales plan, improvement of customer service
infrastructure, access to international markets with new products that are not
previously available form the OEM manufacturing resources in China and the use
of a world recognized brand name “Dazon”. In the beginning of 2008, the Company
has pull the vendor resources of all the units and through combining those
resources we are able to get better terms and rates in services such as shipping
rates. In May 2008 we closed down an unnecessary warehouse facility in Phoenix
by subleasing the space. Our plan is to eliminate the entire operation in
Phoenix and move all the staff back to the L.A, facility. Excessive manpower is
being eliminated and as a result several managers left the Company either by
will or by termination in April and May of 2008.  To
consolidate





3


the work
force in the Company we have trained the current crews in L.A. to enable them to
take on multiple tasks to


become a
small but very productive and efficient team. The next phase of the plan is to
review critically the warehouse spaces and shut down certain warehouses to
eliminate the needs for huge capital in inventory built up, interests, rental
and other overhead. With limited warehouse space, the Company has to plan our
product procurements better to generate a high inventory turnover. With all the
steps taken, the Company believes that it will significantly increase Tank
Sports’ overall productivity and revenues, reduce duplicate costs and expenses
and improve the profitability and cash flow in the years to come.





The
successful acquisition of Redcat and PMI, as described above, has strengthen the
dealership network of the Company in both the US and Europe. As of February 29,
2008, the Company has a network of 100 exclusive dealers in the US that sell
only Tank/Redcat/Dazon brand products. In Europe and other countries we used
distributors to sell our products ranging from 50cc scooters to 1100cc dune
buggies.





Tank's
Operational Model





The
Company conducts its business by integrating R&D, manufacturing through both
its wholly owned factory subsidiary and OEM sources, and distributing products
through dealership and chain store sales and service network
globally.





For
further expansion of our sales network worldwide and capacity of manufacturing
of a variety product lines, the Company has been actively seeking for strategic
investment, business partners and alliances through agreement relationship and
merger and acquisition. We also plan to expand our market to the areas of South
America, Middle East, and Africa. For example, we have reached exclusive sales
agreement with XingYue Corporation, a well known motorcycle/ATV
manufacturer in China, for 150cc and 260cc Scooters in the US market. With
acquisition of PMI, we have been reinforced by the capacity of R&D and
manufacturing of higher engine displacement up to 1100cc of go karts and dune
buggies.








Tank's
Operational and Sales Goal in 2008-2009





We plan
to achieve a total number of 900 dealerships, which includes 100 exclusive
dealers (dealers that only sell Tank products) with a sales objective of each
dealer in the amount of $250,000 - $500,000. Currently, we have a total number
of 620 dealers in the US market.





By partnering
with leading manufacturers and suppliers, and with out joint R&D effort to
develop new generation products, we intend to enhance our dealership
standardization by adding more product lines to our dealers.





We have
reduced the redundancy to achieve a cost effective operation. So far, we have
lowered our total number of US based employees from 24 to 14 through the
execution of the plan in the US operation. We seek to achieve a goal ratio of
$1.5 million or more in sales per employee in the US operation. An analysis of
our basic operational expenses done by the company has found that the current
level of staffing in the U.S. can still keep overall expenses under $4.30
million annually. This level of expense can support the company's U.S. revenue
up to between $23 and $30 million.


This plan
hopefully will result in increased gross profit and net income. PMI has 145
employees currently and there are plans to reduce this number to eliminate
redundancy. On May 15, 2008, the CEO of PMI retired from the Company. On April
1, 2008, the vice president of finance of the Company resigned and on May 15,
2008 the CFO of PMI also resigned from the Company. The former vice president of
finance and the former CFO of PMI will serve as consultants of the Company on a
fee basis when there is a need for their services. The full effect in savings
resulting from the departure of these executives will reflect in the second
quarter ending August 31, 2008.Further consolidation of PMI and Tank is being
undertaken and. the results will be disclosed in a follow up
report.





1.
            Generate Dealer Interest and
      Recruit Dealers. We have used our power sports vehicles to create
      awareness within the power sports industry. We have also displayed these
      vehicles at trade shows and events to generate dealer interest in TANK and
      Redcat products. We intend to continue our promotional efforts through
      public relations program, attending and displaying our products at dealer
      trade shows, direct mail efforts and direct solicitations of prospective
      customers. We believe our dealer qualification criteria are strict and
      they include experience, reputation, ability to serve the geographic
      territory and financial strength.2.
            Generate Consumer Interest and
      Develop the TANK,  Redcat and DAZON Brand Awareness. To
      date, our products have appeared in over 10 publications. We believe this
      publicity is critical to creating awareness of the TANK, Redcat and DAZON
      brands. We intend to continue our public relations efforts to create
      additional consumer interest and to support our dealers in targeted
      advertising and marketing efforts in their geographic territories. We also
      plan to continue to attend trade shows and events targeted to consumers to
      provide them with opportunities to see, and in some cases ride, our
      products. We believe these efforts, as well as mailing information to
      persons who have inquired about our products, will generate the customer
      awareness we believe is necessary to sell our products, and to develop the
      TANK, RedCat and DAZON brands.3.
            Continue to Merge and Acquire
      More Industry Entities in Both US and China Market. The
      Company’s  management has realized that the business expansion
      has to be achieved by both organic growth and M&A. With the first two
      merger transactions done with the Lowprice.com, Inc and PMI, the company
      has gained skills and knowledge to take the Company to the next level
      through M&A.4.
            Penetration into European
      market.The newly acquired subsidiary, PMI, has secured numerous
      orders from European customers. Its Dunne Buggies are approved for on road
      use with EEC Homologation
certificates.





Our focus
in the next 12 months has been to seek necessary working capital, and to further
execute our marketing plan to increase our sales. Our marketing plan focuses on
dealers and the retail market, through comprehensive print advertising,
participation in trade shows and other direct marketing efforts. Our marketing
strategy is based on a reliable product, consistent quality, parts and service
availability, and the delivery of a unique name and image.





FOR
THE FISCAL YEAR ENDED FEBRUARY 29, 2008





General
Overview


Towards
the late 2007 and most of the early 2008, because of the slow down of the
general economy in the US attributable to the sub prime lending and falling
property prices, it triggered a landslide effect on the Powersports industry. As
Powersports equipment is considered recreational and non essential, many
consumers found themselves better off building their saving than spending money
on Powersports products. Sales were down by as much as 30% in some markets as
compared to 2006.





The
impact to Chinese products isn’t just an economic issue. Compounded by the
issues of quality and safety, importers of Chinese products saw another drop in
their sales as the main stream media issued reports on unsafe toys that
adversely affected the toy industry and eventually affected the Chinese
powersports industry. Many competitors in the industry have to lower their
prices to sell inventory to generate cash and the Company has little choice but
to offer big discounts to sell off its older models in the last quarter of
2007.





The
slowdown in the industry has made it difficult for the Company to raise
additional capital in the market and accordingly the Company has to tighten all
its spending and use the existing resources to grow its sales. The management is
anticipating that after realizing all the savings from the integration measures,
the Company can report a better result in the second quarter ending August 31,
2008.





Sales
and gross profit


For the
fiscal year ended February 29, 2008 the Company recorded a turnover of
$11,610,750 which represented an increase of 26% as compared to $9,588,238 for
the fiscal year ended February 28, 2007. The gross profit for the year was
$2,009,475 as compared to $2,784,916 for the previous year. High purchase cost
of products due to the appreciation of RMB, the Chinese currency, and discounts
for certain out-dated models attributable to the lower gross profit in the
current fiscal year.





Our net
loss for fiscal year ended February 29, 2008 was $5,744,719 as compared to a net
loss of $249,325 for fiscal year ended February 28, 2007. The increase of our
net loss is primarily attributable to the consolidation of Redcat and PMI where
expenses like payroll, legal and accounting fees, rental of warehouses and
office, product liability insurance, depreciation, consulting fees and
transaction services fees increased significantly during the year.





Operating
Expenses


The
Company and its subsidiaries incurred $6,591,774 in operating expenses in the
current fiscal year as compared to $3,197,979 last year. Operating expenses in
the current year consisted of selling expenses of $1,084,024 administrative
expenses of $3,892,034, and goodwill impairment of $1,615,716. In the fiscal
year ended February 28, 2007, operating expenses consisted of selling expenses
of $1,040,481 and administrative expenses of $2,157,498.







4








Interest
and Financial Expenses


The
Company and its subsidiaries recorded an interest expense of $402,867 in the
current fiscal year as compared to $93,806 in the last year. The increase of
interest bearing debts to finance the sales growth and acquisitions were the
major reason for the increase in interest expenses.


Other non
operating items


The
Company recorded net other expense of $66,404 during the current fiscal year. In
the previous fiscal year, the Company had other income of $203,143 arising from
service fees for opening letter of credit on behalf of an affiliated
company.





Net cash
flow used in operating activities were $8,422,082 and $385,751 during the fiscal
years ended February 29, 2008 and February 28, 2007, respectively.





Net cash
flow used in investing activities were $1,866,927 and $15,914 during the fiscal
years ended February 29, 2008 and February 28, 2007, respectively.





Net cash
flow provided by financing activities were $10,022,357 and $3,049,147 during the
fiscal years ended February 29, 2008 and February 28, 2007,
respectively.





Reasons
for Increase of Expenses for 2008 Fiscal Year





The
following factors have contributed to the increase of expenses for the 2008
fiscal year:




(1)
            Increase
      in overhead expenses for auditing and filing reporting as
      a  OTCBB company;(2)
            Adjustment
      of dealership structure (drop in dealership number due to standardization
      of dealership selection criteria).(3)
            Fees
      and requirements of applying for new models' entry to the
      market.(4)
            Increased
      premium of insurance coverage.(5)
            Overpaid
      dealership incentive and commission package, due to increase of covered
      items.(6)
            Expenses
      to cutting employee redundancy to streamline operation
      efficiency.(7)
            Additional
      expenses for warehouse/sales facility consolidation.(8)
            Organization
      restructuring cost and severance pay for post Redcat
      acquisition.(9)
            Other
      acquisition related expenses.










Liquidity
and Financial Resources


As at
February 29, 2008, the Company had net current liabilities of about $19.1
million, total assets of $18.7 million and shareholders equity of about $0.8
million. As at February 29, 2008, the cash balance of the Company was
approximately of $2.9 million and included $2.5 million being pledged as
security for banking facilities.





The
Company and its subsidiaries’ total bank borrowings as at February 29, 2008 were
approximately $7.9 million. These banking facilities were secured by the land
and building of the Shanghai subsidiary and certain personal properties of the
directors and officers.





Capital
Structure


During
the fiscal year ended February 29, 2008, the Company issued 2,107,000 shares for
cash and 2,400,000 shares at $.95 each to acquire PMI.. The common stock capital
and additional paid in capital increased by $3,294,033 during the
year.








OFF-BALANCE
SHEET ARRANGEMENTS





We have
no off-balance sheet arrangements.





MATERIAL
COMMITMENTS


We have
no material commitments as at the date of this registration statement, other
than certain lease commitments arising from the normal course of business, and
are described in Note 24 of the financial statements.







5





PURCHASE
OF SIGNIFICANT EQUIPMENT





We have
no purchase of significant equipment.








RECENT
ACCOUNTING PRONOUNCEMENTS





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51.  This statement clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements.  This statement changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to both parent and the
noncontrolling interest.  This statement is effective for the fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008.  Based on current conditions, the Company does not
expect the adoption of SFAS 160 to have a significant impact on its results of
operations or financial position.




In March,
2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities”. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The new standard also improves transparency about the location and
amounts of derivative instruments in an entity’s financial statements; how
derivative instruments and related hedged items are accounted for under
Statement 133; and how derivative instruments and related hedged items affect
its financial position, financial performance, and cash flows.





FASB
Statement No. 161 achieves these improvements by requiring disclosure of the
fair values of derivative instruments and their gains and losses in a tabular
format. It also provides more information about an entity’s liquidity by
requiring disclosure of derivative features that are credit risk–related.
Finally, it requires cross-referencing within footnotes to enable financial
statement users to locate important. Based on current conditions, the Company
does not expect the adoption of SFAS 161 to have a significant impact on its
results of operations or financial position.





In May 0f
2008, FSAB issued SFASB No.162, The Hierarchy of Generally Accepted Accounting
Principles.  The pronouncement mandates the GAAP hierarchy reside in
the accounting literature as opposed to the audit literature.  This
has the practical impact of elevating FASB Statements of Financial Accounting
Concepts in the GAAP hierarchy.  This pronouncement will become
effective 60 days following SEC approval.  The company does not
believe this pronouncement will impact its financial statements.





In May of
2008, FASB issued SFASB No. 163, Accounting for Financial Guarantee Insurance
Contracts-an interpretation of FASB Statement No. 60.  The scope of
the statement is limited to financial guarantee insurance (and reinsurance)
contracts.  The pronouncement is effective for fiscal years beginning
after December 31, 2008.  The company does not believe this
pronouncement will impact its financial statements.





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations.”  This statement replaces FASB Statement No. 141,
“Business Combinations.” This statement retains the fundamental requirements in
SFAS 141 that the acquisition method of accounting (which SFAS 141 called
the purchase method) be used for all business combinations and for an acquirer
to be identified for each business combination. This statement defines the
acquirer as the entity that obtains control of one or more businesses in the
business combination and establishes the acquisition date as the date that the
acquirer achieves control. This statement requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the statement. This statement applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The


Company
does not expect the adoption of SFAS 160 to have a significant impact on its
results of operations or financial position.





APPLICATION
OF CRITICAL ACCOUNTING POLICIES


Our
significant accounting policies are identified and described in Note 2 to the
financial statements. The preparation of our financial statements in conformity
with U.S. generally accepted accounting principles require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ
materially from those estimates. Tank continually evaluates its critical
accounting policies and estimation procedures. Estimates are often based on
historical experience and on assumptions that are believed to be reasonable
under the circumstances, but which could change in the future. Some of Tank's
accounting policies and estimation procedures require the use of substantial
judgment, and actual results could differ materially from the estimates
underlying the amounts reported in the consolidated financial statements. A
summary of our significant accounting policies is included in Note 2 to our
financial statements which are included in PART I. FINANCIAL STATEMENTS of this
Form 10 - KSB.





In
applying these policies, estimates and judgments affect the amounts at which
accounts receivable, inventory, and certain liabilities are recorded and the
useful lives of property and equipment. We apply our accounting policies on a
consistent basis. Changes in circumstances are considered in our estimates and
judgments. Future changes in circumstances could result in changes in
amounts at which assets and liabilities are recorded. Future changes could also
affect the estimated useful levels of property and equipment, which could result
in changes in depreciation expense or write, offs or writes downs of such
assets.




Revenue
Recognition. The Company's revenue recognition policies are in compliance with
Staff Accounting Bulletin (SAB) 104. Sales revenue is recognized when the
delivery to customers (independent dealers and distributors) is completed and
ownership is transferred, the price is fixed and determinable, no other
significant obligations of the Company exist and collectability is reasonably
assured. Payments received prior to completing all aforementioned criteria are
recorded as unearned revenue. The Company's dealers enter into an annual
renewable contract and are required to maintain status as an authorize dealer in
order to continue selling company's products. Dealers are required to assemble
and prep the vehicles before its sold, inform customer on warranties information
and to repair and service the vehicles. The Company sets a fixed pricing
structure each year. All dealers must follow the pricing structure or no more
than 12% above or below the MSRP. Any additional discounts will need approval
from the Company. The Company offers a limited and parts only warranties to all
its dealers, distributors and retail customers. Tank requires its customer to be
responsible for a 15% restocking fee for all unused return and shipping fees are
non refundable. Used merchant cannot be returned without reason and the
defective merchandise must be repaired. Tank has not historically recorded any
significant sales return allowances because it has not been required to
repurchase a significant number of units. However, should there be an adverse
change in retail sales could cause this situation to change.





Allowance
for Doubtful Accounts. The Company maintains reserves for potential credit
losses on accounts receivable. Management reviews the composition of accounts
receivable and analyzes historical bad debts, customer concentrations, customer
credit worthiness, current economic trends and change in customer payment
patterns to evaluate the adequacy of these reserves. Reserves are recorded
primarily on a specific identification basis.





Inventory.
Inventories are valued at the lower of cost (determined on a weighted average
basis) or market.





Property,
Plant and Equipment. Property, plant and equipment are stated at cost or
evaluated market value at the date of acquisition. Expenditures for maintenance
and repairs are charged to earnings as incurred; additions, renewals and
betterments are capitalized. Straight line method is used to depreciate the
assets according to their respective economic useful lives.





Land Use
Rights. Land use rights are stated at evaluated market value at the date of
acquisition. Straight line method is used to amortize the land use right
according to the life of the land use right.





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


to the
amount expected to be realized.





Product
warranties and insurance. Tank provides a limited warranty for parts only for a
period of twelve months for its ATVs, Dirt bikes, Go Karts, and Scooters with a
50cc engine, for a period of three years for its cruiser motorcycles with
Trademark "VISION" and Scooters with 150cc and 250 cc engines. Tank's standard
warranties require the Company or its dealers to repair or replace defective
products during such warranty periods at no cost to the consumer.
Major cost incurred in connection with warranty obligations is the cost of
new parts replacing the damage/defective parts. We have not recorded a liability
for warranty obligations because they were immaterial for the periods presented;
and we have recorded expenses when the costs were actually incurred. Tank
insures its product liability claims with ACORD Jordan and Jordan Insurance
Agency, LLC. The product liability coverage are up to $1,000,000 limit per
occurrence, $50,000 limits on damage to rented premises, $1,000,000 to personal
injury, $2,000,000 to general aggregate and $2,000,000 limit to products comp/or
aggregate. Historically, the Company has not experienced any threatened
litigation or product liability claim. The Company believes that based on its
historical product liability claim experience, the product liability insurance
will be sufficient to cover any such claim.





Dazon
Arizona has similar product warranty program.





6








ITEM
7. Financial Statements







TANK
      SPORTS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE
      SHEETAS
      OF FEBRUARY 29, 2008ASSETSCURRENT
      ASSETS
            
            2008Cash
      and cash equivalents
            
            $
            2,889,820Accounts
      receivable, net
            
            
            134,863Prepaid
      expenses and other assets
            
            
            68,184Purchase
      advances
            
            
            1,248,606Loan
      receivable
            
            
            -Due
      from related parties
            
            
            1,938,153Inventory
            
            
            3,999,891Total
      Current Assets
            
            
            10,279,517PROPERTY
      AND EQUIPMENT, NET
            
            
            1,929,197DEPOSIT
            
            
            25,616INVESTMENT
      IN EQUITY
            
            
            55,096ASSETS
      HELD FOR SALE
            
            
            139,279INTANGIBLE
      ASSETSTrademark,
      net
            
            
            2,812Licenses
      and permits
            
            
            1,184,090Land
      right, net
            
            
            3,870,978Goodwill
            
            
            1,178,492Total
      Intangible Assets
            
            
            6,236,372TOTAL
      ASSETS
            
            $
            18,665,077LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable and accrued expenses
            
            $
            2,610,576Notes
      payable
            
            
            2,000,740Loans
      Payable
            
            
            7,949,633Customer
      deposits
            
            
            162,578Other
      payable
            
            
            131,385Due
      to related parties
            
            
            4,749,163Shares
      to be issued
            
            
            1,520,000Total
      Current Liabilities
            
            
            19,124,075LONG-TERM
      LIABILITIESLoan
      payable
            
            
            203,067MINORITY
      INTEREST
            
            
            96,331STOCKHOLDERS'
      DEFICITCommon
      stock (authorized 200,000,000 shares, $0.001 par value, 38,636,214 shares
      issued,38,527,596
      and 32,902,800 outstanding as of February 29, 2008 and February 28, 2007
      respectively)
            
            
            38,636Additional
      paid in capital
            
            
            5,823,688Accumulated
      deficit
            
            
            (6,788,710
            )Other
      comprehensive income
            
            
            282,039Treasury
      common stock, at cost (108,618 shares of common stock)
            
            
            (114,049
            )Total
      Stockholders' Deficit
            
            
            (758,396
            )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
            
            $
            18,665,077The
      accompanying notes are an integral part of these consolidated financial
      statements







7





TANK
      SPORTS, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOMEFOR
      THE YEARS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 20072008
            
            
            2007REVENUE,
      NET
            
            $
            11,610,750
            
            
            $
            9,588,238COST
      OF REVENUE
            
            
            9,601,276
            
            
            
            6,803,322Gross
      profit
            
            
            2,009,475
            
            
            
            2,784,916OPERATING
      EXPENSES:Selling
      expenses
            
            
            1,084,024
            
            
            
            1,040,481General
      and administrative expenses
            
            
            3,892,034
            
            
            
            2,157,498Goodwill
      impairment
            
            
            1,615,716
            
            
            
            -Total
      operating expenses
            
            
            6,591,774
            
            
            
            3,197,979LOSS
      FROM CONTINUING OPERATIONS
            
            
            (4,582,299
            )
            
            
            (413,063
            )NON-OPERATING
      INCOME (EXPENSES)Other
      income (expense)
            
            
            (66,404
            )
            
            
            203,143Loss
      on investment in equity
            
            
            (5,436
            )
            
            
            -Interest
      incomes
            
            
            47,747
            
            
            
            55,201Interest
      expenses
            
            
            (402,867
            )
            
            
            (93,806
            )Total
      non-operating income (expense)
            
            
            (426,960
            )
            
            
            164,538LOSS
      FROM CONTINUING OPERATIONS
            
            
            (5,009,259
            )
            
            
            (248,525
            )Loss
      from operation to be disposed
            
            
            (745,605
            )
            
            
            -LOSS
      BEFORE INCOME TAX & MINORITY INTEREST
            
            
            (5,754,864
            )
            
            
            (248,525
            )PROVISION
      FOR INCOME TAX
            
            
            800
            
            
            
            800LOSS
      BEFORE MINORITY INTEREST
            
            
            (5,755,664
            )
            
            
            (249,325
            )Minority
      interest
            
            
            (10,945
            )
            
            
            -NET
      LOSS
            
            
            (5,744,719
            )
            
            
            (249,325
            )OTHER
      COMPREHENSIVE GAIN (LOSS)Foreign
      currency translation gain
            
            
            282,039
            
            
            
            -OTHER
      COMPREHENSIVE LOSS
            
            $
            (5,462,680
            )
            
            $
            (249,325
            )WEIGHTED
      AVERAGE SHARES OF COMMON STOCKOUTSTANDING,
      BASIC AND DILUTIVE
            
            
            36,355,413
            
            
            
            32,525,814NET
      LOSS PER SHARE FROM CONTINUNING OPERATIONS
            
            $
            (0.14
            )
            
            $
            (0.01
            )NET
      LOSS PER SHARE FROM ASSETS HELD FOR SALE
            
            $
            (0.02
            )
            
            $
            -BASIC
      AND DILUTIVE LOSS PER SHARE
            
            $
            (0.16
            )
            
            $
            (0.01
            )*
      Weighted average number of shares used to compute basic and diluted loss
      per share is the same as the effect of dilutive securities are
      anti-dilutiveThe
      accompanying notes are an integral part of these consolidated financial
      statements







8





TANK
      SPORTS, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWFOR
      THE YEARS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007CASH
      FLOWS FROM OPERATING ACTIVITIES
            
            2008
            
            
            2007Net
      loss
            
            $
            (5,744,719
            )
            
            $
            (249,325
            )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Depreciation
      and amortization
            
            
            223,894
            
            
            
            36,570Bad
      debt
            
            
            144,607
            
            
            
            -Loss
      on investment in equity
            
            
            5,436
            
            
            
            -Common
      stock issued for employee compensation
            
            
            68,881
            
            
            
            -Goodwill
      impairment
            
            
            1,615,716Minority
      interest
            
            
            (10,945
            )
            
            
            -(Increase)
      / decrease in current assets:Accounts
      receivable
            
            
            162,328
            
            
            
            (123,542
            )Prepaid
      expenses and other assets
            
            
            136,927
            
            
            
            (151,395
            )Inventories
            
            
            (940,419
            )
            
            
            428,823Advance
      from customers
            
            
            (915,925
            )
            
            
            -Loan
      receivable
            
            
            251,240
            
            
            
            -Deposits
            
            
            25,854
            
            
            
            (23,400
            )Increase
      / (decrease) in current liabilities:Accounts
      payable, other payables, and accrued liabilities
            
            
            (1,210,307
            )
            
            
            (338,957
            )Notes
      payable
            
            
            (2,936,539
            )
            
            
            -Tax
      payable
            
            
            (16,502
            )
            
            
            14,475Customer
      deposit
            
            
            (83,951
            )
            
            
            21,000Net
      cash used in operating activities
            
            
            (9,224,426
            )
            
            
            (385,751
            )Net
      cash provided by operating activities of assets held for
    sale
            
            
            802,344
            
            
            
            -Net
      cash used in operating activities
            
            
            (8,422,082
            )
            
            
            (385,751
            )CASH
      FLOWS FROM INVESTING ACTIVITIESCash
      acquired from PMI
            
            
            170,725
            
            
            
            -Payment
      on purchase of property and equipment
            
            
            (80,621
            )
            
            
            (15,914
            )Purchase
      of trade mark
            
            
            (3,056
            )
            
            
            -Purchase
      of intangible asset
            
            
            (50,906
            )
            
            
            -Purchase
      of land use right
            
            
            (200,218
            )
            
            
            -Due
      from related parties
            
            
            (1,702,852
            )
            
            
            -Net
      cash used in investing activities
            
            
            (1,866,927
            )
            
            
            (15,914
            )Net
      cash provided by investing activities of assets held for
    sale
            
            
            -
            
            
            
            -Net
      cash usded in investing activities
            
            
            (1,866,927
            )
            
            
            (15,914
            )CASH
      FLOWS FROM FINANCING ACTIVITIESCash
      received against common stocks to be issued
            
            
            -
            
            
            
            1,090,000Issuance
      of common stocks for cash
            
            
            1,014,033
            
            
            
            -Receipt
      (repayment) of loans from related parties
            
            
            1,316,611
            
            
            
            (1,111,514
            )Increase
      (decrease) in loans payable
            
            
            7,949,633
            
            
            
            3,925,873Repayment
      of long term notes payable
            
            
            (77,920
            )
            
            
            (855,212
            )Cash
      payment for shortfall on common stock issued for debt
      settlement
            
            
            (65,951
            )
            
            
            -Repurchased
      of treasury stock
            
            
            (114,049
            )
            
            
            -Net
      cash provided by financing activities
            
            
            10,022,357
            
            
            
            3,049,147Net
      cash provided by financing activities of assets held for
    sale
            
            
            -
            
            
            
            -Net
      cash provided by financing activities
            
            
            10,022,357
            
            
            
            3,049,147EFFECT
      OF FOREIGN EXCHANGE RATE CHANGES
            
            
            279,557
            
            
            
            -ON
      CASH AND CASH EQUIVALANTSNET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            12,905
            
            
            
            2,647,483CASH
      AND CASH EQUIVALENTS, BEGINNING BALANCE
            
            
            2,876,915
            
            
            
            229,432CASH
      AND CASH EQUIVALENTS, ENDING BALANCE
            
            $
            2,889,820
            
            
            $
            2,876,9150SUPPLEMENTAL
      DISCLOSURES:Interest
      paid
            
            $
            335,242
            
            
            $
            38,108Income
      tax paid
            
            $
            800
            
            
            $
            800SUPPLEMENTAL
      DISCLOSURES FOR NON CASH INVESTINGAND
      FINANCING ACTIVITIESShares
      and warrants issued for acquisition of PMI
            
            $
            3,163,661
            
            
            $
            -Share
      to be issued for acquisition of PMI
            
            $
            1,520,000
            
            
            $
            -Share
      issued for cash received in last period
            
            $
            1,090,000
            
            
            $
            -Payable
      from additional cost of acquisition of PMI
            
            $
            189,855
            
            
            $
            -Shares
      issued for settlement of debt
            
            $
            -
            
            
            $
            456,000The
      accompanying notes are an integral part of these consolidated financial
      statements







9





TANK
      SPORTS, INC. AND SUBSIDIARIESSTATEMENTS
      OF STOCKHOLDERS' DEFICITFOR
      THE YEARS ENDED FEBRUARY 29, 2008 AND FEBRUARY 28, 2007Common
      Stock
            
            
            Additional
            
            
            Accumulated
            
            
            Treasury
            
            
            Other
            
            
            TotalNumber
      of
            
            
            
            
            
            Paid
      in
            
            
            
            
            
            
            
            
            Comprehensive
            
            
            Stockholders'shares
            
            
            Amount
            
            
            Capital
            
            
            Deficit
            
            
            Stock
            
            
            Income
            
            
            DeficitBalance
      at February 28, 2006
            
            
            32,502,800
            
            
            $
            135,700
            
            
            $
            -
            
            
            $
            (794,666
            )
            
            $
            
            
            
            $
            
            
            
            $
            (658,966
            )Adjustment
      to the par value
            
            
            -
            
            
            
            (103,197
            )
            
            
            103,197
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Stock
      issuance for debt settlement
            
            
            400,000
            
            
            
            400
            
            
            
            455,600
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            456,000Net
      loss for the year ended February 28, 2007
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (249,325
            )
            
            
            -
            
            
            
            -
            
            
            
            (249,325
            )Balance
      at February 28, 2007
            
            
            32,902,800
            
            
            
            32,903
            
            
            
            558,797
            
            
            
            (1,043,992
            )
            
            
            
            
            
            
            
            
            
            
            (452,292
            )Stock
      issuance for cash
            
            
            2,107,000
            
            
            
            2,107
            
            
            
            1,011,926
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,014,033Shares
      issued for cash received in last year
            
            
            1,144,500
            
            
            
            1,145
            
            
            
            1,088,856
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,090,000Stock
      issuance for employee compensation
            
            
            81,914
            
            
            
            82
            
            
            
            68,799
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            68,881Stock
      issuance for PMI Acquisition
            
            
            2,400,000
            
            
            
            2,400
            
            
            
            2,277,600
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,280,000Warrants
      issuance for PMI acquisition
            
            
            -
            
            
            
            -
            
            
            
            883,661
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            883,661Cash
      paid for shares price adjustment issued for debt
settlement
            
            
            -
            
            
            
            -
            
            
            
            (65,951
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (65,951
            )Purchase
      of treasury stock
            
            
            (108,618
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (114,049
            )
            
            
            -
            
            
            
            (114,049
            )Foreign
      exchange gain
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            282,039
            
            
            
            282,039Net
      loss for the year ended February 29, 2008
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (5,744,719
            )
            
            
            -
            
            
            
            -
            
            
            
            (5,744,719
            )Balance
      at Februry 29, 2008
            
            
            38,527,596
            
            
            $
            38,636
            
            
            $
            5,823,688
            
            
            $
            (6,788,711
            )
            
            $
            (114,049
            )
            
            $
            282,039
            
            
            $
            (758,396
            )0The
      accompanying notes are an integral part of these consolidated financial
      statements








10







REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and Stockholders


Tank
Sports, Inc. and subsidiary





We have
audited the accompanying balance sheet of Tank Sports, Inc. (the Company) and
its subsidiaries as of February 29, 2008 and the related consolidated statements
of operations, stockholders' deficit, and cash flows for each of the two years
in the period ended February 29, 2008. 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 of these statements 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 Tank Sports Inc. and its
subsidiary, as of February 29, 2008, and the results of its operations and its
cash flows for each of the two years ended February 29, 2008, in conformity with
accounting principles generally accepted in the United States of
America.





The
Company’s financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has accumulated deficit of $6,788,710 as of February 29,
2008 including a net loss of $5,744,719 during the year ended February 29, 2008.
These factors as discussed in Note 2 to the financial statements, raises
substantial doubt about the Company’s ability to continue as a going
concern. Management’s plans in regard to these matters are also described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.








KABANI
& COMPANY, INC.


CERTIFIED
PUBLIC ACCOUNTANTS





Los
Angeles, California


May 27,
2008









11





TANK
SPORTS, INC. AND SUBSIDIARIES


ORGANIZATION
AND DESCRIPTION OF BUSINESS





Tank
Sports, Inc. (“Tank” or “the Company”) was incorporated on March 5, 2001. The
Company is located in the city of El Monte, California, U.S.A. The Company is
engaged in the manufacture, sales and distribution of high quality recreational
and transportation motorcycles, all-terrain vehicles (“ATVs”), dirt bikes,
scooters, and Go Karts. The Company’s motorcycles and ATVs products are
manufactured in China and Mexico.





On
January 30, 2007, the Company acquired Lowprice.com, Inc., an Arizona
corporation d/b/a Redcat Motors (“Redcat”) as it’s wholly owned subsidiary
(Refer to Note 20). Redcat was created in 2001 in New Orleans, Louisiana and
subsequently relocated to Phoenix, Arizona in September 2005 after Hurricane
Katrina. Redcat changed its name to Tank Sports, Inc (referred as “Tank
(Arizona)”) in the State of Arizona on March, 2007. Redcat is engaged in
importing and distributing ATVs with brand name of Redcat nationwide through its
Dealer Network.





On
November 15, 2007, the Company acquired 100% stocks of People’s Motor
International Co, Ltd  (“PMI”) and its direct and indirect
wholly-owned subsidiaries (Refer to Note 20). PMI was incorporated in the
British Virgin Islands in March 2001. PMI and its subsidiaries have three active
entities in China, United States and Hong Kong. The entities in China are
engaged in manufacturing of buggy kart from 90cc to 1100cc with brand name of
Dazon and hold 3 design patents in USA. The entities in United States and Hong
Kong are distributing arms for PMI in United States and European
markets.





Tank
Sports Inc. and its subsidiaries are also referred to as the “Group” in the
footnotes.








1.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES








Use
of estimates





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





Principles
of Consolidation





The
consolidated financial statements for the year ended February 29, 2008 include
the financial statements of the Company, its wholly owned subsidiary Tank
(Arizona) and People’s Motor International (“PMI”) and PMI’s direct and indirect
wholly-owned subsidiaries: PMI Motorcycle (Asia) Co., Ltd. (“PMI Asia”), PMI
Import and Export Co., Ltd. (“PMI I&E”), PMI Motorcycle (USA) Co., Ltd.
(“PMI USA”), People’s Motor (Hong Kong) Co., Ltd. (“PMI Hong Kong”), Dazon Inc.,
Dazon Arizona Inc. and PMI Shanghai Co., Ltd., (“Shanghai Dazon”) from the
acquisition date. All significant inter-company transactions and balances have
been eliminated on consolidation.





Accounts
receivable and other receivable





Accounts
receivable and other receivable are recorded at net realizable value consisting
of the carrying amount less an allowance for uncollectible accounts, as
needed.







12





The Group
maintains reserves for potential credit losses on accounts
receivable.  Management reviews the composition of accounts receivable
and analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves. Terms of the sales vary from COD
through a credit term up to 10 days and 30 days. Reserves are recorded primarily
on a specific identification basis.





Inventory





Inventory
is valued at the lower of cost (determined on a weighted average basis) or
market. Management compares the cost of inventory with the market value and an
allowance is made for writing down the inventories to the market value, if
lower.





Property,
Plant and Equipment





Property,
Plant and Equipment are stated at cost. Expenditures for maintenance and repairs
are charged to earnings as incurred; additions, renewals and betterments are
capitalized. When property and equipment are retired or otherwise disposed of,
the related cost and accumulated depreciation are removed from the respective
accounts, and any gain or loss is included in operations. Depreciation of
property and equipment is provided using the straight-line method for
substantially all assets with estimated useful lives of 5 to 39
years.





Intangible
Assets





The Group
evaluates intangible assets for impairment, at least on an annual basis and
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable from its estimated future cash flows. Recoverability of
intangible assets, other long-lived assets and, goodwill is measured by
comparing their net book value to the related projected undiscounted cash flows
from these assets, considering a number of factors including past operating
results, budgets, economic projections, market trends and product development
cycles. If the net book value of the asset exceeds the related undiscounted cash
flows, the asset is considered impaired, and a second test is performed to
measure the amount of impairment loss. The company performed an impairment test
relating to goodwill arising from its acquisitions of Redcat in 2007 and
concluded that there was an impairment as to the carrying value of goodwill as
of February 29, 2008. The Company evaluated value of the subsidiary based upon
market value and recorded an impairment of $1,615,716.




Fair
value of financial instruments





Statement
of financial accounting standard No. 107, Disclosures about fair value of
financial instruments, requires that the Company disclose estimated fair values
of financial instruments. The carrying amounts reported in the statements of
financial position for current assets and current liabilities qualifying as
financial instruments are a reasonable estimate of fair value.





Shares
to be issued





The
Company classifies all shares to be issued as liabilities. Once the Company
issues shares, the par value of shares issued are classified as Common Stock and
the premium are classified as Paid in Capital.





Revenue
recognition





The
Group's revenue recognition policies are in compliance with Staff Accounting
Bulletin (SAB) 104. Sales revenue is recognized when the delivery is completed,
the price is fixed or determinable, no other significant obligations of the
Company exist and collectibility is reasonably assured. Payments received before
all of the relevant criteria for revenue recognition are satisfied to be
recorded as unearned revenue.


The Group
determines title transfer based upon delivery date.  For the customers with
FOB shipping term, the Group





recognizes
sales and determines title transferred when delivery of items takes place. 
For the customers on CNF (cost and freight), the Group recognizes sales and
determines title has passed when goods arrive in the port of
destination.





Segment
reporting





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





Stock-based
compensation





Effective
March 1, 2006, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 123-R, “Share-Based Payment” (“SFAS 123-R”), which
requires the measurement and recognition of compensation expense for all
share-based payment awards made to employees and directors, including stock
options based on their fair values. SFAS 123-R supersedes Accounting Principles
Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB
25”), which the Company previously followed in accounting for stock-based
awards. In March 2005, the SEC issued Staff Accounting Bulletin No. 107
(SAB 107) to provide guidance on SFAS 123-R. The Company has applied SAB 107 in
its adoption of SFAS 123-R.





The
Company does not have any stock options based employee compensation plan in
effect. The Company has 1,500,000 shares of warrants outstanding as a result of
acquisition of PMI and its subsidiaries as of February 29, 2008..





Foreign
currency transactions and comprehensive income (loss)





As of
February 29, 2008, the accounts and financial statements of Shanghai Dazon and
its 50% owned equity company Shanghai Dazon Northern Motorcycle Co., Ltd were
expressed in Chinese Yuan Renminbi (CNY). Such financial statements were
translated into U.S. Dollars (USD) in accordance with Statement of Financial
Accounts Standards (“SFAS”) No. 52, “Foreign Currency Translation,” with the CNY
as the functional currency. According to the Statement, all assets and
liabilities were translated at the current exchange rate, stockholder’s equity
are translated at the historical rates and income statement items are translated
at the average exchange rate for the period. The resulting translation
adjustments are reported under other comprehensive income in accordance with
SFAS No. 130, “Reporting Comprehensive Income” as a component of shareholders’
equity.








During
the period from November 16, 2007 to February 29, 2008,, the transactions of the
Shanghai Dazon and its 50% owned equity company Shanghai Dazon Northern
Motorcycle Co., Ltd were denominated in foreign currency and were recorded in
Chinese Yuan Renminbi (CNY) at the rates of exchange in effect when the
transactions occur. Exchange gains and losses are recognized for the different
foreign exchange rates applied when the foreign currency assets and liabilities
are settled. Transaction gains and losses that arise from exchange rate
fluctuations on transactions denominated in a currency other than the functional
currency are included in the results of operations as incurred.




13


Concentration
of Credit Risk


Financial
instruments that potentially subject the Company to concentrations of credit
risk are cash, and other receivables arising from the Company’s normal business
activities. The Company placed its cash in what the Company believes to be
credit-worthy financial institutions. We have a diversified customer base, most
of which are in China. We control credit risk by collecting the revenue in
advance. The Company routinely assesses the financial strength of its customers
and, based upon factors surrounding the credit risk, establishes an allowance,
if required, for uncollectible accounts and, as a consequence, believes that its
accounts receivable credit risk exposure beyond such allowance is
limited.





Income
taxes





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





Basic
and diluted net loss per share







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







Recent
pronouncements





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51.  This statement clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements.  This statement changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to both parent and the
noncontrolling interest.  This statement is effective for the fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008.  Based on current conditions, the Company does not
expect the adoption of SFAS 160 to have a significant impact on its results of
operations or financial position.




In March,
2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities”. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The new standard also improves transparency about the location and
amounts of derivative instruments in an entity’s financial statements; how
derivative instruments and related hedged items are accounted for under
Statement 133; and how derivative instruments and related





hedged
items affect its financial position, financial performance, and cash
flows.


FASB
Statement No. 161 achieves these improvements by requiring disclosure of the
fair values of derivative instruments and their gains and losses in a tabular
format. It also provides more information about an entity’s liquidity by
requiring disclosure of derivative features that are credit risk–related.
Finally, it requires cross-referencing within footnotes to enable financial
statement users to locate important. Based on current conditions, the Company
does not expect the adoption of SFAS 161 to have a significant impact on its
results of operations or financial position.





In May 0f
2008, FSAB issued SFASB No.162, The Hierarchy of Generally Accepted Accounting
Principles.  The pronouncement mandates the GAAP hierarchy reside in
the accounting literature as opposed to the audit literature.  This
has the practical impact of elevating FASB Statements of Financial Accounting
Concepts in the GAAP hierarchy.  This pronouncement will become
effective 60 days following SEC approval.  The company does not
believe this pronouncement will impact its financial statements.





In May of
2008, FASB issued SFASB No. 163, Accounting for Financial Guarantee Insurance
Contracts-an interpretation of FASB Statement No. 60.  The scope of
the statement is limited to financial guarantee insurance (and reinsurance)
contracts.  The pronouncement is effective for fiscal years beginning
after December 31, 2008.  The company does not believe this
pronouncement will impact its financial statements.





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations.”  This statement replaces FASB Statement No. 141,
“Business Combinations.” This statement retains the fundamental requirements in
SFAS 141 that the acquisition method of accounting (which SFAS 141 called
the purchase method) be used for all business combinations and for an acquirer
to be identified for each business combination. This statement defines the
acquirer as the entity that obtains control of one or more businesses in the
business combination and establishes the acquisition date as the date that the
acquirer achieves control. This statement requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the statement. This statement applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The Company does not expect the adoption of SFAS 160 to have
a significant impact on its results of operations or financial
position.





2.
            GOING
      CONCERN





The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
Group as a going concern. However, the Group has accumulated deficit of
$6,788,710 including a net loss of $5,744,719 during the year ended February 29,
2008.. The continuing losses have adversely affected the liquidity of the Group.
Losses might continue for the immediate future. The Group faces some business
risks, which includes but not limited to, its ability to maintain vendor and
supplier relationships by making timely payments when due.





In view
of the matters described in the preceding paragraph, recoverability of a major
portion of the recorded asset amounts shown in the accompanying balance sheet is
dependent upon continued operations of the Group, which in turn is dependent
upon the Group’s ability to raise additional capital, to increase more sales and
to succeed in its future operations.  The financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going
concern.





Management
has taken many steps to revise its operating and financial requirements, which
it believes are sufficient to provide the Company with the ability to continue
as a going concern.  The acquisition and consolidation measures have
strengthen




14


itsmarket
position, included, but not limited to, restructuring of management and labor
forces, consolidation of  regional marketing facility,  ERP
system integration, better inventory control, further development
of  marketing promotion and sales network, and improvement of customer
service infrastructure. The management has taken steps to upgrade the company’s
product line with more advanced engine technologies by collaborating with
National Motor in Taiwan and Jianshe Motor Industry in China. . With all steps
taken, the Management believes that it will significantly increase its overall
productivity and revenues, reduce unnecessary costs and expenses, and achieve a
goal of high profit margin with the controlled budget. Management has devoted
considerable effort towards to (i) build “Tank”, “Redcat” and Dazon brand names
(ii) set up more dealers to increase sales (iii) liquidate less profitable
products, and focus on selling more profitable products (iv) strive to reduce
product costs and operating expenses through fully functioning of manufacturing
capacity in Shanghai; (v) increase product range by utilization of R&D
capacity ;  and (vi) obtain additional equity. Management believes
that the above actions will allow the Group to continue operations through the
next fiscal year.





3.
            ACCOUNTS
      RECEIVABLE


Accounts
receivable was $134,863, net of allowance for doubtful debts of $223,838 as of
February 29, 2008.





4.
            PREPAID
      EXPENSES AND OTHER ASSETS







Prepaid
expenses and other assets consist of the following as of February 29,
2008:









Prepaid
      insurance
            
            $
            14,841Prepaid
      expenses
            
            
            17,247Prepaid
      Value Added Tax
            
            
            36,096Others$
            68,184










5.
            RELATED
      PARTIES RECEIVABLE





As of
February 29, 2008 receivable from related parties amounted to $1,938,153, which
included $1,000 as receivable from officer, $1,667,573 as receivable from an
affiliated company “LONG Sa De CV”, $85,954 as receivable from “Steady Star
Inc.. ” , $177,631 as receivable from PMI  Northern Co. Ltd.,
(Shanghai Dazon Northern),  and $5,995 receivable
from  former officers of Tank (Arizona) . The Company’s Chairman and
Director are also the major shareholders and officers of LONG Sa De CV and
Steady Star Inc.. The receivables are unsecured, due on demand and interest
free.








INVENTORY





Inventory
consists of the following as of February 29, 2008:





Raw
      Materials - Parts
            
            
            
            
            $
            1,534,869Work
      in progress
            
            
            
            
            
            85,618Finished
      goods :Vehicles
            
            
            2,726,164Accessories
            
            
            21,186Total
      Finished Goods
            
            
            
            
            
            
            2,747,350Less
      : Reserve for inventory obsolesce and slow-moving
            
            
            
            
            
            
            (367,946
            )Total
      Inventory
            
            
            
            
            
            $
            3,999,891








7.           PURCHASE
ADVANCES




As
of February 29, 2008, the Group had purchase advances of $972,226 for its
affiliated company Long Sa De CV and advances to suppliers of
$276,380.






8.           PROPERTY,
PLANT & EQUIPMENT






Property,
Plant & Equipment consist of the following as of February 29,
2008:










Building
            
            $
            1,282,473Machinery
      & Equipment
            
            
            289,103Furniture
      & Fixtures
            
            
            86,760Electronic
      Equipment
            
            
            547,178Automobile
            
            
            108,853Construction
      in progress
            
            
            7,253Less
      : Accumulated depreciation
            
            
            (392,423
            )Total
            
            $
            1,929,197









Depreciation
expenses were $197,810 and $36,570 for the years ended February 29, 2008 and
February 28, 2007, respectively.







9.
            DEPOSITS





As of
February 29, 2008, the Group had deposits for rent and utilities of
$25,616.





15










10.           INTANGIBLE
ASSETS





1)
            Trade
      Marks





The trade
marks of Group amount to $2,812 and consist of the trade mark of “Redcat” of
$975 and the fees incurred by


Shanghai
Dazon in applying for brand name product export rights of $1,837, net of
amortization as of February 29, 2008.





2)
            License
      and Permits





The
Company own licenses to distribute vehicles in various states in the US and
other countries. The Company also directly owns certificates that permit the
company to import vehicles legally into the US.





The
Company’s subsidiary Shanghai Dazon and Dazon Arizona own licenses and permits
to sell products in Europe and United States which was evaluated at fair market
value of $1,184,090 as of February 29, 2008. The licenses and permits enable the
Group to manufacture a variety of products that have ready markets.








3)
            Land
      use right





The
Company‘s subsidiary Shanghai Dazon owns two pieces of land in Shanghai and with
land use right for a period of 50 years from the date of grant for industrial
use. The land was evaluated at fair market value of $3,700,387 as of acquisition
date of November 15, 2007. As of February 29, 2008, the fair value of the land
right was $3,870,978, net of amortization for the period from November 16, 2007
to February 29, 2008 of $29,628. The difference in value between February 29,
2008 and November 15, 2007 is resulted from Chinese currency
appreciation.





Amortization
expenses for next five years after February 29, 2008 are as
follows:







1 year after February 29,
      2008
            
            $
            94,0002 year after February 29, 2008
            
            
            94,0003 year after February 29, 2008
            
            
            94,0004 year after February 29, 2008
            
            
            94,0005 year after February 29, 2008
            
            
            94,000Total
            
            $
            470,000








11.
            INVESTMENT





Shanghai
Dazon has 50% ownership of Shanghai Dazon Northern. The Company use equity
method to account for the operating results of this investment. The Company’s
share of this investment amounts to $55,096 as of February 29, 2008. As of
February 29, 2008, the main accounts of Shanghai Dazon Northern consist of the
following:




Total
Assets                                                                        $214,557


Total
Liabilities                                                                     104,364


Net
Equity                                                                           
110,193





The
Company’s share of operating loss on this investment amounts to $5,436 for the
period from November 16, 2007 to February 28, 2008. For the period ended
February 29, 2008, the operating loss of Shanghai Dazon Northern consist of the
following:


General
and Administration
expense                                                                    (10,872)


Net
loss                                                                                                                     ($10,872)




16


12.
            ACCOUNTS
      PAYABLE AND ACCRUED EXPENSES







Following
is the detail of accounts payable and accrued expenses as of February 29,
2008:





13.
            OTHER
      PAYABLES





Following
is the detail of other payables as of February 29, 2008:





14.
            CUSTOMER
      DEPOSITS





The
customer deposits amounts to $162,578 as of February 29, 2008 and represents the
advance payment received from customers to purchase motorcycles and buggies from
the Group.





15.
            LOANS
      PAYABLE





On June
1, 2005, the company signed a five year note payable against auto loan. The loan
was unsecured, with an interest of 5.90% with monthly payment of $743. As of
February 29, 2008, this note payable was $19,418, of which $7,560 is current
payable and $11,858 is non-current payable. Interest expense was $1,790 for the
year ended February 29, 2008..





On March
20, 2006, the company obtained a loan payable of $372,259 from a non-related
party.  The note is secured by various computer equipments and
software purchased from Microsoft Capital, with an annual interest rate of
5.00%, and due on June 1, 2011.  As of February 29, 2008, the balance
of the note payable was $262,009, of which $70,800 is current payable and
$191,209 is non-current payable. Interest expense was $15,485 for the year ended
February 29, 2008.





On July
14, 2006, the company obtained a line of credit of $6,500,000 from United
Commercial Bank. The outstanding payable ended the earlier of July 31, 2007 or
when the Company paid the note in full, including principal, interest, and all
the expenses involved. The annual interest rate on the loan is 8.5%. The line of
credit is secured by the Company’s business assets, real property, certificates
of deposit of $2,500,000 and guaranteed by the major shareholders and by the
Company’s affiliate. This line of credit was fully paid in October 2007 with a
new line of credit obtained from First General Bank. Accordingly, the company
terminated this line of credit.





On
September 12, 2007, the Company obtained $7,280,000 credit line from First
General Bank. The annual interest rates are 0.5% over the Collaterized Deposit
Rate on the $3,280,000 credit line and prime rate on the $4,000,000 credit line.
These credit lines are to replace the existing credit line granted by United
Commercial Bank. The maturity date of the loan is on September 18, 2008. The
loan is secured by the Company’s business assets, real property, certificates of
deposit of $2,500,000 and guaranteed by the major shareholders and by the
Company’s affiliate.  The outstanding balance under this line of
credit amounted to $4,309,665 as of February 29,, 2008.  The interest
expense on bank lines of credit for the year ended February 29,


2008 was
$283,066.




On June
25, 2007, Shanghai Dazon obtained a loan of $473,934 (CNY3,500,000) from
DongGuan Yi Chang Star Co. Ltd. The loan was unsecured with an interest of 6.5%
and due on December 20, 2007. The loan was fully repaid on January 2, 2008 and
the interest expense on this loan from November 16, 2007 to February 29, 2008
was $4,943.





On
December 29, 2007, Shanghai Dazon obtained a loan of $1,970,222 (CNY 14,000,000)
from a Chinese Bank with an interest rate of 8.217% p.a. This loan is secured by
the two pieces of land and the building of Shanghai Dazon and has a maturity
date on December 28, 2008. As of February 29, 2008, Shanghai Dazon paid interest
of $27,692 on this loan.





The
company has bank acceptance of $1,591,386 from First General Bank as of February
29, 2008, which composed of various lines of credit.  The bank
acceptance is unsecured, due in 120 0r 150 days, and interest free. The bank
acceptance has been classified as Loans payable in the accompanying consolidated
financial statements.





16.
            NOTES
      PAYABLE





On
February 29, 2008, the Company borrowed $1,500,000 from a non-related party with
an interest rate of 4.41%. This unsecured note payable was due on February 28,
2009 . The note payable was subordinated to the line of credit of $7,280,000.
..





On
February 15, 2007, the Company signed the “Second Amended and Restated
Promissory Note and Security Agreement” with Hexagon Financial, LLC (“Payee”).
The Company is indebted to the Payee of $882,839 which reflected the book value
of Payee’s inventory in related to the acquisition of Redcat as of January 28,
2007.The note has a fixed interest rate of 5% per annum. Pursuant to the
agreement, the Company shall make $100,000 payments on April 5, 2007 and April
10, 2007, and $300,000 immediately upon the closing of the line of credit with
United Commercial Bank but no later than August 1, 2007. And then the Company
should make payments of $50,000 for every month starts in June 1, 2007 and ends
on January 31, 2008. Any default amount under this agreement bears interest at a
rate equal to ten percent (10%) per annum. In November 2007, the Payee promised
to reduce the outstanding note payable to $275,000 and to amend the payment
schedule if the Company adheres to the new payment schedule and the stock
repurchase agreement, as defined in Note 20. As of February 29, 2008, the
Company has a payable of $500,740 due the Payee. In May 2008 the Company and the
Payee negotiated the terms of the settlement of the stock repurchase agreement
and the note settlement. As a result of such negotiations, the Company paid the
Payee $250,000 on May 10, 2008 and $180,000 on May 30, 2008 to complete the
settlement. The Company bought back 137,669 shares at $1.05 a share and recorded
another treasury shares acquisition for $144,552 and applied $285,448 as final
settlement of the Payee’s debt of $500,740.




The
scheduled payments for all the loans payable and notes payable are as follows as
of February 29, 2008:




Year
      ended2009
            
            $
            9,950,3732010
            
            
            78,3602011
            
            
            75,0982012
            
            
            49,609Total
            
            
            10,153,440Current
      Portion
            
            
            9,950,373Non-Current
      Portion
            
            $
            203,067





17




17.
            SHARES
      TO BE ISSUED





As of
February 29,2008, the Company has total shares to be issued of 1,600,000
amounted to $1,520,000, pursuant to the definitive Stock Purchase Agreement
dated November 15, 2007 (see Note 20). The 1,600,000 shares were issued on May
20, 2008.





18.
            STOCKHOLDERS’
      EQUITY





On
December 4, 2006, the Company entered into an Investment Agreement with an
investor, Dutchess Private Equities Fund, L.P. (“the Investor”). Pursuant to
this Agreement, the Investor shall commit to purchase up to $10,000,000 of the
Company’s common stock over the course of thirty-six (36) months. The amount
that the Company shall be entitled to request from each purchase shall be equal
to, at the Company’s election, either (i) $150,000 or (ii) 200% of the average
daily volume (U.S. market only) of the common stock for the three (3) trading
days prior to the applicable put notice date, multiplied by the average of the
three (3) daily closing prices immediately preceding the put date. The put date
shall be the date that the Investor receives a put notice of a draw down by the
Company. The purchase price shall be set at ninety-five percent (95%) of the
lowest closing Best Bid price of the common stock during the pricing period. The
pricing period shall be the five (5) consecutive trading days immediately after
the put notice date. There are put restrictions applied on days between the put
date and the closing date with respect to that particular Put. During this time,
the Company shall not be entitled to deliver another put notice. Further, the
Company shall reserve the right to withdraw that portion of the Put that is
below seventy-five percent (75%) of the lowest closing bid prices for the
10-trading day period immediately preceding each put notice. As of February 29,
2008, the Company has sold 27,000 shares to the investor and received cash of
$14,033.





On
December 22, 2006, the Company signed Web Site Development Agreement with a
consultant and agreed to pay $17,500 worth of S-8 stock after the completion of
the website. 21,875 shares were issued on April 12, 2007.





On
December 28, 2006, the Company board of directors approved the Private Placement
Memorandum and started to offer up to 500 units of the Company’s securities at
$10,000 per unit. Each unit consists of 10,500 shares of the Company’s common
stock (“Shares”) and 5,000 warrants (“Warrants”) to purchase one share of the
Company’s common stock at an exercise price of $2.00 per share. The Warrants
will be immediately exercisable and will remain exercisable for one year. The
Unit offered including the Shares, Warrants and the common shares issuable
exercise of the Warrants, are being issued as restricted securities under the
federal securities laws, and investors’ right to sell, transfer, pledge or
otherwise dispose of any of the shares will be limited by the 1933 Act and the
rules and regulations and any applicable state securities laws. No sales
commissions will be


paid to
the Company in connection with this offering. The offering was terminated on
February 28, 2007 and the Company sold 1,144,500 shares of common stock and
granted 545,000 shares of Warrants in this offering. The cash proceeds for the
issuance of shares amounted to $1,090,000. The Company actually issued the
1,144,500 shares on March 9, 2007.The fair value of the warrants was $27,567 and
was calculated using the Black-Scholes option pricing model using the following
assumptions: risk free rate of return of 4.75%, volatility of 103%, and dividend
yield of 0% and expected life of one year. The Company recorded the value of
warrants net of the gross proceeds received out of this offering.





On
January 30, 2007, the Company completed the acquisition of one hundred percent
(100%) of the issued and outstanding common stock of Lowprice.com, Inc., an
Arizona corporation d/b/a RedCat Motors (the “Redcat”) pursuant to a Stock
Purchase Agreement, as amended (the “Agreement”) by and among the Company, (the
Shareholders), the Company and Hexagon. The Company purchased 100% of the common
stock of Redcat from the Shareholders for an aggregate purchase price of $1.00.
Further, the Company made a capital contribution to Redcat  of
$1,000,000 in cash, which was paid to the Redcat upon the Closing. The Company
further issued to Hexagon 400,000 shares of the common stock of the Company
which was valued at the fair market price and an additional $200,000 capital
contribution in cash for the settlement of debt.




On
February 1, 2007, the Company board of directors approved to issue $50,943 worth
of unrestricted shares to former Redcat employees as bonus for 90 days of
employment starting February 1, 2007. The 81,914 shares were actually issued at
the market prices to the eligible employees on April 11, 2007.





Pursuant
to the Investment Agreement with the investor of Dutchess Private Equities Fund,
L.P. dated December 4, 2006, the 27,000 shares were actually issued to the
investor at the market price of $0.52 on April 9, 2007.





On May
20, 2007, the Company board of directors issued 2,080,000 shares of common
stocks and 250,000 warrants excisable for two years to an investor pursuit of
the Private Placement Memorandum The proceeds received from the issuance of the
shares consists of the cash of $900,000 and $100,000 direct purchase deposit to
a vendor . Thefair value of
thewarrants
$52,641 was calculated by using the Black-Scholes option pricing model and
followed the assumptions of: risk free rate of return of 4.92%, volatility of
93%, dividend yield of 0% and expected life of two years. The Company recorded
the value of warrants net of the gross proceeds received out of this offering.
According to the management, this investor will sit in the board as an
independent board member.





On August
16, 2007, the Company signed Share Buyback Agreement with Hexagon Financial LLC.
To purchase 264,350 common shares among the 400,000 shares that the Company
issued to Hexagon in February 2007. Pursuant to the First Amendment to Stock
Purchase Agreement Tank agreed to issue to Hexagon 400,000 shares and also
agreed to offer Hexagon price protection of $1.00 per share for the 400,000
shares issued if the shares were sold in the public market within 180 days
following the close of purchase transaction. Hexagon has sold a total of 135,650
shares for $69,699 and had $65,951 shortfall.  Hexagon agrees to sell
the rest of 264,350 shares to Tank at a price of $1.05 per share for total of
$277,567.5 Tank paid $65,951 in 3rd Quarter
for the shortfall amount and bought 108,618 shares as treasury shares from
Hexagon at cost of $114,049. In May, 2008, the Company and Hexagon reached
agreement on the settlement of note payable and repurchase of shares, and
accordingly the Company paid a total of $430,000 to Hexagon in May 2008 to
settle the repurchase of stock and note payable (See Note 18)





On
November 15, 2007, the Company completed the acquisition of one hundred percent
(100%) of the issued and outstanding common stock, total of the 10,500,000
shares of People’s Motor International Co, Ltd and its direct and indirect owned
subsidiaries (“PMI”) pursuant to a Stock Purchase Agreement (the “Agreement”) by
the Company and the shareholders of PMI. Pursuant to the Agreement, the Company
shall issue aggregate common shares of 4,000,000, which are restricted and
control securities pursuant to Rule 144 in the Securities Exchange Act of 1934.
The Company issued 2,400,000 shares of restricted


common
stock amounting of $2,280,000 and 1,500,000 warrants exercisable within 30
months from closing date on November 20, 2007. The Black Schole value of the
warrants was $883,661. The remaining 1,600,000 shares of common stock were
issued on May 20, 2008.





All
historical share count and per share information has been adjusted for the
Company’s 4-for-1 forward stock split that became effective on November 6,
2006.





19.           WARRANTS


Following
is a summary of the warrant activity for the year ended February 29,
2008:





Outstanding,
      February 28, 2007
            
            
            545,000Granted
      during the year
            
            
            1,750,000Forfeited
      during the year
            
            
            (545,000
            )Exercised
      during the year
            
            
            -Outstanding,
      February 29, 2008.
            
            
            1,750,000







18


Following
is a summary of the status of warrants outstanding at February 29,
2008:





Outstanding
      Warrants
            
            Exercisable
      Warrants----------------------------
            
            ----------------------------------------------------------Exercise
      Price
            Number
            Average
      Remaining Contractual Life
            Average
      Exercise Price
            Number
            Intrinsic
      Value$1.50
            250,000
            1.24
            $1.50
            250,000
            -$0.64
            1,500,000
            2.21
            $0.64
            1,500,000
            $240,000








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





The
545,000 warrants granted on February 27, 2007:





Risk-free
      interest rate
            
            
            4.75
            %Expected
      life of the options
            
            1.00
      yearExpected
      volatility
            
            
            103
            %Expected
      dividend yield
            
            
            0








The
250,000 warrants granted on May 20, 2007:





Risk-free
      interest rate
            
            
            4.92
            %Expected
      life of the options
            
            2.00
      yearExpected
      volatility
            
            
            93
            %Expected
      dividend yield
            
            
            0





The
1,500,000 warrants granted on November 15, 2007:





Risk-free
      interest rate
            
            
            3.01
            %Expected
      life of the options
            
            2.50
      yearExpected
      volatility
            
            
            87
            %Expected
      dividend yield
            
            
            0





20.
            RELATED
      PARTIES





Lease





On August
1, 2005, Tank entered into a lease agreement for the new facilities in which
they operate. The lessors are Tank’s two main shareholders who are also Tank’s
directors and officers. The term of the lease is 60 months with monthly payments
of $19,900.





Rent
expenses were $238,800 for both years ended February 29, 2008 and February 28,
2007,, respectively.







19


Related
party receivable





On August
1, 2006, the Company signed a credit agreement with LONG Sa De CV (“Long
Company”), whereas the Company agrees to let Long Company to utilize the line of
credit of the Company up to $5,500,000 for the Letter of Credit issued to
vendors in China for one year. In exchange, Long Company agrees to pay up to 6%
of service charges to the Company to cover the lending costs and service charges
from its bank. The Company’s Chairman and Director are also the officers of Long
Company.  As of February 29, 2008, total $1,573,182 was charged to
Long Company for opening letter of credit and was recorded as related party
receivable in the accompanying financial statements. Total service charge
receivable of $94,391 was recorded as of February 29, 2008.





On
February 29, 2008, the Company had receivable of $85,954 from Steady Star Inc.,
a company owned by the Chairman and Director of the Company.





The Group
has net receivable from Shanghai Dazon Northern of $177,631 as of February 29,
2008. Shanghai Dazon owns 50% of Shanghai Dazon Northern and uses equity method
to account for the operating results.





Other
related party receivable also included $1,000 as receivable from officer and
$5,995 receivable from former officers of Tank (Arizona).





Due to related
parties





The
Company has an affiliated company Steady Star facilitated the Company to
purchase merchandize from China. Steady Star obtains the international letter of
credit from bank and then pay for the vendors in China for the merchandize
purchased by the Company. After the Company receives the merchandise, the
Company makes payment to Steady Star. The Company’s Chairman and Director are
the main shareholders of Steady Star Company. As of February 29, 2008, the
Company over paid Steady Star hence had a receivable of $85,934.





On
November 15, 2007, PMI bought back the minority shares of Shanghai Dazon and PMI
Hong Kong from Jaguar


Investments
Ltd. Prior to the shares buyback, PMI owns 80.73% of Shanghai Dazon and 75% of
PMI Hong Kong. PMI purchased 1,794,450 PMI common shares from Smartman
Enterprise Ltd. for $170,900 and use these shares purchased to exchange the
17.09% ownership of Shanghai Dazon from Jaguar Investments Ltd. PMI purchased
151,540 PMI common shares from Smartman Enterprise Ltd. for $29,100, and use
these shares purchased to exchange 25% ownership in PMI Hong Kong from Jaguar
Investments Ltd. After the shares exchange, PMI owns 97.82% of Shanghai Dazon
and 100% of PMI Hong Kong. The shareholders of Smartman Enterprises Ltd. are
also the former officers of PMI. The amount will be repaid in installments of
$25,000 each from June 2008 to November 2008 with the balance of $42,361 in
December 2008. As of February 29, 2008, the amount due to Smartman Enterprise
Ltd. was $382,216.





Loans from Related
Parties





1) Loans
from former officers:





As of
February 29, 2008, the Company has loans of $125,183 due to its former officers.
These loans carried interests at 6.5% p.a. and are payable in installments, with
last payment on September 30,,2008.





On
February 10, 2008, the Company obtained a loan of $1,750,000 from its director
and officer. This loan carries an interest at 7% per annum and is payable on
February 10, 2009. In the event that the Company cannot repay the loan on
maturity date, the


director
and officer has the right to demand for repayment of principal and interest in
full or ask the Company to issue 5,128,644 shares of its common stock as
settlement of the loan. As of February 29, 2008, the accrued interest on the
loan was $6,377.





2) Loans
from related party





Shanghai
Dazon obtained loans from Guangzhou Tank (USA) Vehicles Co., Ltd. (Tank
Guangzhou) for working capital purposes. These loans are unsecured, interest
free and due on demand. As of February 29, 2008, the amount due was $1,351,012.
The Company’s Chairman and Director are also the officers of Tank Guangzhou. As
of February 29, 2008, the loan payable has the following breakdown:








Total
      advances
            
            $
            1,905,485Total
      repaid
            
            
            554,473Balance
      due
            
            $
            1,351,012





As of
February 29, 2008, the Company had a loan of $102,000 and trade payables of
$770,385 due to Tank Guangzhou. The loan is interest free and is payable on
demand.





21.
            MINORITY
      INTEREST





The
minority shareholder of Shanghai Dazon has 2.18% ownership of Shanghai Dazon.
The minority interest in Shanghai Dazon amounts to $96,331 as of February 29,
2008..





22.
            COMMITMENTS
      AND CONTINGENCIES





On August
1, 2005, Tank entered into a lease agreement with one of the Company’s director
for a term of 60 months with monthly payments of $19,900.





Minimum
annual rent expense for Tank for the next 3 years subsequent to February 29,
2008 is as follows:





Period                                                                                   Amount


1 year
after                                                                           $238,800


2 year
after                                                                           $238,800


3 year
after                                                                           $
99,500





On
December 25, 2005, the Company’s subsidiary Redcat entered into a lease
agreement for a term of 36 months until January 31, 2009. The rent expense for
the year ended February 29, 2008 was $254,515.





Minimum
annual rent expense for Tank (Arizona) for the next 2 years subsequent to
February 29, 2008 is as follows:





Period                                                                                  Amount


1year
after                                                                           $233,310





20




On May 1,
2005, the Company’s subsidiary Dazon Arizona Inc, entered into a lease agreement
for a term of 60 months until April 30, 2010. The monthly payment for this rent
is $8,985 for the period from May 1, 2007 to April 30, 2008. The rent expense
for the period from November 16, 2007 to February 28, 2008 was $40,433. The
lease was guaranteed by a former officer of PMI and in return PMI provides a
letter of indemnity. After the acquisition of PMI, the Company took over the
guarantee.


Minimum
annual rent expense for Dazon Arizona Inc. for the next 3 years subsequent to
February 29, 2008 is as follows:





Period                                                                                     Amount


1 year
after                                                                           $110,370


2 year
after                                                                           $113,480


3 year
after                                                                           $
19,000





Starting
June 2008, the rental space of Dazon Arizona is subleased to a third
party.





On
February 29, 2008, PMI entered into a short lease for 6 months ending August 31,
2008 for its Hong Kong office. The monthly rental is $962 and the commitment
under this lease at February 29, 2008 is $5,772.





The
Company is subject to lawsuits and other matters. In determining required
reserves related to these items, the Company carefully analyzes cases and
considers the likelihood of adverse judgments or outcomes, as well as the
potential range of possible loss.  The required reserves are monitored on
an ongoing basis and are updated based on new developments or new information in
each matter.





On August
4, 2007, Changzhou Huaxin Company sued Shanghai Dazon to Changzhou City People's
Court, complaining that Shanghai Dazon defaulted in the payment for processing
fee of $361,574 on motorcycle frames and manufacturing molds. On


September
13, 2007, the Intermediate People's Court in Changzhou ruled that Shanghai Dazon
should pay Changzhou Huaxin Company $361,574. Shanghai Dazon agreed to pay only
$148,951 before September 30, 2007 and pay rest of amount($144,083 before
November 30, 2007 and Changzhou Huaxin accepted.. On September 30, 2007 Shanghai
Dazon paid Changzhou Huaxin Company $148,951. On November 15, 2007, Shanghai
Dazon and Changzhou Huaxin Company entered into an agreement to pay the rest of
amount. According to the agreement, Shanghai Dazon will pay $54,164 to Changzhou
Huaxin Company before November 30, 2007. Rest of amount of $89,919 would be paid
before January 31, 2008.  This litigation’s detail can be seen in
"(2007) ordinary people of the early word No. 201, civil mediation
paper."  On January 28, 2008, Shanghai Dazon made payment of $93,457
to Changzhou Huaxin Company to settle the debt in full.





On
August18, 2007, Luoyang North Industry Company (Luoyang North) sued Shanghai
Dazon to People’s Court of Luoyang Jianxi District (District Court), complaining
that Shanghai Dazon defaulted in the payment of $372,376 fee according to the
cooperation agreement and supplementary cooperation agreement that the two
parties signed in June 13, 2002 and July 30, 2002. On October 16, 2007, the
District Court ruled on the judgment that Shanghai Dazon should pay Luoyang
North $372,376 within 10 days, together with the accrued interest at popular
bank interest rate by August 30, 2007. On November 19, 2007, Shanghai Dazon
filed appeal to Luoyang City Intermediate People’s Court (City Court) that
Shanghai Dazon should pay the 2005 and 2006 contract fee total $236,967 by
installments, while the contract payment of 2007 of 4135,409 is not due until
the end of 2007. In April 2008, Shanghai Dazon took another approach and appeal
the claim of Luoyang North to the City Court on the ground that the basis of the
contract fee is invalid. The City Court re-examined the case to review the
merits of Shanghai Dazon’s appeal and informed Luoyang North and Shanghai Dazon
on May 26, 2008 that the case will be set for re-trial by the District Court..
As of the date of this report the time for re-trial has not been set. As of
February 29, 2008, Shanghai Dazon has provided $410,463 in its accounts covering
the amount of litigation and accrued fees for the two months ended February
29,


2008.





Product
Liability Matters:




Additionally,
the Company is involved in product liability suits related to the operation of
its business.  The Company accrues for claim exposures that are probable of
occurrence and can be reasonably estimated.  The Company also maintains
insurance coverage for product liability exposures.  The Company believes
that its accruals and insurance coverage are adequate and that product liability
will not have a material adverse effect on the Company’s consolidated financial
statements.





23.
            ACQUISITION





On
November 15, 2007, the Company completed the acquisition of one hundred percent
(100%) of the issued and outstanding common stock, total of the 10,500,000
shares of People’s Motor International Co, Ltd and its direct and indirect owned
subsidiaries (“PMI”) pursuant to a Stock Purchase Agreement (the “Agreement”) by
the Company and the shareholders of PMI. Pursuant to the Agreement, the Company
shall issue aggregate common shares of 4,000,000, which are restricted and
control securities pursuant to Rule 144 in the Securities Exchange Act of 1934.
The Company issued 2,400,000 shares of restricted common stock and 1,500,000
warrants exercisable within 30 months from closing date. The remaining 1,600,000
shares of common stock will be issued on the 180th day
following the closing transaction. The purchase consideration for this
acquisition aggregate to $4,683,661, including, $3,800,000 worth of stock
calculated based on the fair market value on the acquisition day, and $883,661
worth of options calculated by using the Black-Scholes option pricing model and
followed the assumptions of: risk free rate of return 3.01%, volatility of 87%,
dividend yield of 0% and expected life of 30 months.





The
following table presents the price allocation to the assets acquired and
liabilities assumed:


Cash
      and cash equivalents
              
              
              174,590Accounts
      receivable
              
              
              382,715Inventory
              
              
              1,176,051Other
      assets
              
              
              170,222Due
      from related party
              
              
              208,767Investment
      in joint venture
              
              
              58,050Fixed
      assets
              
              
              1,587,932Intangible
      assets
              
              
              5,282,029Total
      Assets
              
              
              
              
              
              $
              9,040,356Accounts
      payable and accrued expenses
              
              
              2,711,576Others
      payable
              
              
              1,039,567Loans
      payable
              
              
              1,676,768Total
      Liabilities
              
              
              
              
              
              $
              5,427,911Minority
      interest
              
              
              
              
              
              
              107,276Total
      Cost of Investment
              
              
              
              
              
              
              3,505,169Total
      Acquisition Cost
              
              
              
              
              
              
              4,683,661Goodwill
      of PMI Acquisition
              
              
              
              
              
              $
              1,178,492


21


On
January 30, 2007, the Company completed the acquisition of one hundred percent
(100%) of the issued and outstanding common stock of Lowprice.com, Inc., an
Arizona corporation d/b/a Redcat Motors (the “Redcat”) pursuant to a Stock
Purchase Agreement, as amended (the “Agreement”) by and among the Company, (the
Shareholders), the Redcat and Hexagon Financial Group (as “Creditor”). The
Company purchased 100% of the common stock of the Redcat from Shareholders the
Redcat and Hexagon. The Company purchased 100% of the common stock of the Redcat
from the Shareholders for an aggregate purchase price of 1.00. Further, the
Company made a capital contribution to the Redcat consisting of $1,000,000 in
cash, which was paid to the Redcat upon the Closing. The Company further issued
to Hexagon 400,000 shares of the common stock of the Company for the settlement
of debt and made an additional $200,000 capital contribution in
cash.





The
following table presents the allocation of the acquisition cost to the assets
acquired and liabilities assumed:







Cash
      and cash equivalents
            
            $
            65,903Inventory
            
            
            1,164,586Other
      assets
            
            
            196,294Fixed
      assets
            
            
            464,793Total
      assets
            
            
            
            1,891,576Accounts
      payable
            
            
            769,638Others
      payable
            
            
            208,895Loans
      payable
            
            
            2,528,758Total
      Liabilities
            
            
            
            3,507,291Total
      cost of investment
            
            
            
            (1,615,715)Total
      acquisition cost
            
            
            
            1GooGoodwill
      of Redcat acquisiton
            
            $
            1,615,716GooGoodwill
      impairment
            
            
            (1,615,716)Goo\Goodwill
      of Redcat acquisition, net
            
            $
            -







The
Company performed an impairment test relating to goodwill arising from its
acquisitions of Redcat in 2007 and concluded that there was an impairment as to
the carrying value of goodwill as of February 29, 2008. The Company evaluated
value of the subsidiary based upon market value and recorded an impairment of
$1,615,716.




The
accompanying pro forma condensed consolidated financial statements are provided
for informational purposes only. The Pro Forma Combined Statement of Operations
are not necessarily indicative of the consolidated financial position which
actually would have occurred if the above transaction had been consummated on
March 1, 2006 and 2007, nor does it purport to present the operating results
that would be achieved for future periods.





The
acquisition is to be recoded as a purchase acquisition.   The
following is the pro forma financial information of the Company assuming the
transaction had been consummated at the beginning of the year ended February 29,
2008 and February 28, 2007:




Statement
      of Operation Pro Forma:For
      the Year
            
            
            For
      the YearEnded
      February 29
            
            
            Ended
      February 282008
            
            
            2007Revenues
            
            $
            16,835,988
            
            
            $
            16,381,487Cost
      of Sales
            
            
            14,309,316
            
            
            
            12,522,232Gross
      Profit
            
            
            2,526,672
            
            
            
            3,859,255Operating
      Expenses
            
            
            8,668,389
            
            
            
            6,311,594Income
      (loss) from operations
            
            
            ( 6,141,717
            )
            
            
            (2,452,339)Total
      Non-operating income (expenses)
            
            
            (577,549
            )
            
            
            (498,319)Net
      Income (loss) before income taxes
            
            
            (6,719,266
            )
            
            
            (2,950,658)Provision
      for income taxes
            
            
            800
            
            
            
            845Net
      Income (loss)$
            (6,720,066)
            
            
            $
            (2,951,503
            )Earnings
      Per Shares:Basic
      and diluted
            
            $
            (0.18
            )
            
            $
            (0.09
            )Weighted
      average number of shares outstanding
            
            
            36,355,413
            
            
            
            32,525,814





NOTE
24 - ENTITY HELD FOR DISPOSAL





On
February 26, 2008, the Board of Directors of the Company approved a resolution
to dispose Dazon Arizona.  .







The
components of income (loss) from operations related to discontinue operations
for the year ended February 29, 2008 are shown below.


Assets
      held for saleSales,
      net
            
            $
            474,052Cost
      of sales
            
            
            470,516Gross
      profit
            
            
            3,536-Selling
      expenses
            
            
            60,001General
      and administrative expenses
            
            
            624,738loss
      from operations
            
            
            (745,554
            )Other
      (Income) ExpenseOther
      expenses
            
            
            51Total
      Other Expense
            
            
            (51
            )Provision
      for income tax
            
            
            -Net
      loss from discontinued operations
            
            $
            (745,605
            )





22







Assets
and liabilities for the entity held for sale as of February 29, 2008 are as
follows:





AssetsOther
      receivables
            
            
            11,767Inventories
            
            
            149,194Property,
      plant and equipment,  net
            
            
            54,618Total
      Assets
            
            
            215,579LiabilitiesAccounts
      payable and accrued expense
            
            
            76,300Net
      assets held for sale
            
            $
            139,279











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





None.








ITEM
8A. CONTROLS AND PROCEDURES


Disclosure
controls and procedures are designed to ensure that information required to be
disclosed in the reports filed or submitted under the Exchange Act of 1934 is
recorded, processed, summarized and reported, within the time periods specified
in the rules and forms of the Securities and Exchange Commission. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in the reports
filed under the Securities Exchange Act of 1934 is accumulated and communicated
to management, including our Chief Executive Officer, as appropriate, to allow
timely decisions regarding required disclosure.





At end of
the period covered by this report, we carried out an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-15 and 15d-15(e). This evaluation
was done under the supervision and with the participation of our Chief Executive
Officer and Chief Financial Officer. Based upon that evaluation, they
concluded that our disclosure controls and procedures are effective in
gathering, analyzing and disclosing information needed to satisfy our disclosure
obligations under the Exchange Act.










Changes
in Internal Controls


There
were no changes in our internal controls or in other factors during the last
fiscal year that materially affected, or was reasonably likely to materially
affect, internal control over financial reporting.


MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING




The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Exchange
Act Rules 13a-15(f).  Under the supervision and with the participation
of management, including the principal executive officer and principal financial
officer, management conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the criteria established inInternal
Control – Integrated Frameworkissued by the Committee
of Sponsoring Organizations of the Treadway Commission.  Based on
management’s evaluation under the framework in Internal
Control – Integrated Framework, management has concluded that the
Company’s internal control over financial reporting was effective as of February
29, 2008.





June
      13, 2008.Jiang
      Yong Ji
            Jing
      Jing LongChief
      Executive Officer
            Chief
      Financial Officer




23


PART
II





ITEM
9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a).





The
following table sets forth the names and ages of the directors and executive
officers of the Company through the date of this Report, as well as the current
officers and directors; the principal offices and positions with the Company
held by each person and the date such person became a director or executive
officer of the Company. Each serves until the next annual meeting of the
stockholders.




NAME
            
            AGE
            
            POSITION
      WITH THE COMPANYJiang
      Yong Ji
              10925
      Schmidt Road
              El
      Monte, CA 91733
            
            
            53
            
            President
      and Chief Executive Officer and DirectorJing
      Jing Long
              10925
      Schmidt Road
              El
      Monte, CA 91733
            
            
            55
            
            Chairman
      and Chief Financial Officer and DirectorJim
      Ji
              10925
      Schmidt Road
              El
      Monte, CA 91733
            
            
            27
            
            Secretary
      and DirectorLing
      Ji
              10925
      Schmidt Road
              El
      Monte, CA 91733
            
            
            49
            
            DirectorMike
      Turber
              10925
      Schmidt Road
              El
      Monte, CA 91733
            
            
            41
            
            Director
      of Marketing and Sales








The
following is a brief account of the education and business experience of each
director, executive officer and key employee during at least the past five
years, indicating each person's principal occupation during the period, and the
name and principal business of the organization by which he or she was
employed.





Jiangyong Ji, age 53, has
served as President CEO, director of Tank Sport, Inc. from March 2001 to
present; served as co-founder of Steady Star, Inc, a California Corporation from
1994 to present; served as President, CEO and director of LONG Sa De CV from
September 1998 to present; served as President, CEO and director of KTMMEX
SA DE CV from February 2002 to present. Mr. Ji was the accounting manager for
Beijing Group Wuzhou Hotel, a hotel management company, from Sep 1987 to Dec
1992. Mr. Ji has a bachelor degree from the Air Force Medical School of People's
Republic of China.





Jing Jing Long, age 55, has served as CFO,
treasurer and director of Tank Sport, Inc. from March 2001 to present; served as
President and co-founder of Steady Star, Inc., a California Corporation from
1994 to present; served as Manager of Panama Hua Mei Group, Co. from 1988 to
1991. Ms. Long received a bachelor degree from First Army Medical School of
People's Republic of China.





Jim Ji, age 27, has served as Chief
Operating Officer, secretary and director of Tank Sports, Inc. ; served as
Technical Support department supervisor of Giga Fast Ethernet, Inc., a
California Corporation, from September 1999 to September 2003. Mr. Ji has
received a bachelor's degree from ITT Technical College.





Ling Ji, age 49,
director,  is the Chairman of PMI Shanghai Co. Ltd (Shanghai
Dazon)., the manufacturing base of the Company’s dune buggies in addition to
serving as the deputy general manager of Guangzhou Tank..





Mike Turber, Director of Marketing
& Sales, age 41, brings over 20 years in sales and marketing. Prior
to Tank Sports, he served as sales & general manager for a leading
powersports company. Before then he was a sales manager for Tandy Name Brands
and personally built 4 multi-million dollar companies. He will bring his
experience in sales and marketing & help the company to achieve its sales
goals.




Ms. Jing
Jing Long is the spouse of Mr. Jiangyong Ji, and Mr. Jim Ji is the son of Mr.
Jiangyong Ji. Ms. Ling Ji is the sister of Mr. Jiangyong Ji.





ITEM
9B: COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT





Section
16(a) of the Securities Exchange Act of 1934 requires our officers, directors
and person who own more than 10% of our Common Stock to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
All of the aforesaid persons are required by SEC regulation to furnish us with
copies of all Section 16(a) forms they file. No changes in the holdings of any
officer, director or other person took place and therefore, no other reports
were required to be filed.







24


ITEM
10. EXECUTIVE COMPENSATION





None of
our executive officers received an annual salary and bonus that exceeded
$100,000 during the fiscal year ending February 29, 2008. The following table
sets forth the compensation received by Jiangyong Ji, Jing Jing Long and Jim Ji.
We currently do not have any compensation or employment agreements with any of
our executive officers, and we do not anticipate entering into any such
agreements in the foreseeable future.




ANNUAL
      COMPENSATION
            LONG
      TERMCOMPENSATIONFISCAL
            SALARY
            OTHER
            SECURITIESPRINCIPAL
      POSITION
            YEAR
            OPTIONS
            UNDERLYINGJiangyong
      Ji
              President
      and Chief Executive Officer
            2008
              2007
              2006
              2005
              2004
              2003
            60,000.00
              15,600.00
              15,600.00
              12,506.88
              17,964.23
              25,932.80
            -0-
              -0-
              -0-
              -0-
              -0-
              -0-
            -0-
              -0-
              -0-
              -0-
              -0-
              -0-Jing
      Jing Long
              Chief
      Financial Officer
            2008
              2007
              2006
              2005
              2004
              2003
            60,000.00
              13,200.00
              13,200.00
              10,856.40
              16,481.15
              24,674.00
            -0-
              -0-
              -0-
              -0-
              -0-
              -0-
            -0-
              -0-
              -0-
              -0-
              -0-
              -0-Jim
      Ji
              Secretary
            2008
              2007
              2006
              2005
              2004
              2003
            96,000.00
              96,000.00
              96,000.00
              31,200.00
              27,527.52
              24,113.04
            -0-
              -0-
              -0-
              -0-
              -0-
              -0-
            -0-
              -0-
              -0-
              -0-
              -0-
              -0-






ITEM
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.








The
following table sets forth, as of February 28, 2008, certain information with
respect to the beneficial ownership of our common stock by each stockholder
known by us to be the beneficial owner of more than 5% of our common stock and
by each of our current directors and executive officers. All shares included in
the table represent all shares that could be obtained by the individuals listed
within sixty (60) days from the date of this Registration Statement. Each person
has sole voting and investment power with respect to the shares of common stock,
except as otherwise indicated. Beneficial ownership consists of a direct
interest in the shares of common stock, except as otherwise
indicated.




NAME
      AND ADDRESS OF
              BENEFICIAL
      OWNER
            
            AMOUNT
      AND NATURE OF
              BENEFICIAL
      OWNERSHIP
            
            
            PERCENT
      OF
              BENEFICIAL
      OWNERSHIPJiangyong
      Ji
              Chairman
            
            
            10,716,800
            
            
            
            27.74
            %Jing
      Jing Long
              President,
      Treasurer
              and
      Director
            
            
            16,000,000
            
            
            
            41.41
            %Jim
      Ji
              Secretary
      and Director
            
            
            0
            
            
            
            0.00
            %All
      Officers, Directors
              And
      5% Shareholders
            
            
            26,716,800
            
            
            
            69.15
            %








ITEM
12. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS





In April
2001, Steady Star, Inc., an S Corp, owned by Mr. Ji and Ms. Long (each 50%)
(“Steady Star”) loaned a total of $90,000 to Tank Sports Inc.. Steady Star also
invested $10,000 in “paid in capital” into Tank.  Steady Star then become
the 100% shareholder of Tank. Steady Star received 10,000 shares of common stock
of Tank for its $10,000 investment. The $90,000 was no interest bearing
loan with maturation date of April 2002. We were able to fund our start up
operations with this loan. As of April 30, 2002, both Steady Star and the
Company reached mutual agreement on the loan. The Company had paid principal in
full as of July 21, 2002.




On
January 30, 2005, the board of Steady Star consented to a non-liquidation
dividend of its ownership of the 10,000 shares of Tank to its only 2
shareholders, Mr. Ji and Ms. Long, each 5,000 shares.




On March
15, 2005, Mr. Ji gifted a total of 1,501 shares to 8 individuals.




On August
16, 2003, Tank and Steady Star, a related company, jointly entered into a lease
agreement for the term of 36 months with a monthly payment of $7,840, of which
$4,075 was allocated to Tank. The leased space was located at 1718 Floradale
Ave, South El Monte, CA 91733 with 15,404 square feet for warehouse
and office use. As we expanded, the space lacked efficient warehouse space
and office presentation required for us to further our business
development.




On August
1, 2005, Tank entered into another lease agreement for the new facilities in
which they operate. The lessors are Tank's 2 largest shareholders who are also
Tank's directors and officers. The term of the lease is 60 months with monthly
payments of $19,900. As of February 29,2008, there was no amount due on
rent.





Minimum
annual rent expense for Tank for the year subsequent to February 29, 2008 is as
follows:




Period
            
            Amount2009
            
            $
            238,800




Tank and
its affiliated company share one credit card. The credit card is a commonly held
card under Tank's 2 largest shareholders who are also Tank's directors and
officers. The credit card is for business related purposes only. Tank and its
affiliated company will make payments for each company's share of the expenses
accordingly directly to the credit card company. As of February 29, 2008, the
amount due was $9905.00. The amount is due on demand, interest free and
unsecured.





25


Prior to
September 2007, when the Company issues purchase orders to third party vendors
in China, the third party vendors are


paid by
Steady Star, a US company owned by some of the shareholders of the Company. This
affiliated company issues letter of credit in favor of vendors when the Company
issues purchase order to the vendors. The Company makes payment to this
affiliated company, which in turn pays to the vendors. Starting October 2007
when the Company has banking facilities where it can open letter of credit
directly to the vendors, the Company paid off the debts due Steady Star. As of
February 29, 2008, the amount due from this affiliate was $ 85,934.The amount is
due on demand, interest free and unsecured.





The
Company and its subsidiaries used the funding support and sourced products from
Guangzhou Tank in the fiscal year ended February 29, 2008. Guangzhou Tank is
majority owned by the two largest shareholders of the Company who are also
directors and officers. As of February 29, 2008 the total payable due Guangzhou
Tank was $2,463,397. The amount is due on demand, interest free and
unsecured.




The Group
owed the former officers of PMI for loans and advances of $125,183 and to the
company owned by the former officers for payment for shares of Shanghai Dazon of
$192,361.and accrued interests of $189,855.Please refer to Note 22 on the
financial statements.






ITEM
13. EXHIBITS AND REPORTS ON FORM 8-K





(a)
Exhibits





Exhibit
No.  Description and Method of
Filing




31.1
            Certificate
      of Principal Executive Officer as Required by Rule
      13a-14(a)/15d-14




31.2
            Certificate
      of Principal Financial Officer as Required by Rule
      13a-14(a)/15d-14




32.1
            Certificate
      of Principal Executive Officer as Required by Rule 13a-14(b) and Rule 15d-
      14(b) (17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of
      the United States Code




32.2
            Certificate
      of Principal Accounting Officer as Required by Rule 13a-14(b) and Rule
      15d-14(b) (17 CFR 240.15d-14(b) and Section 1350 of Chapter 63 of Title 18
      of the United States Code







(b)
Reports On Form 8-K





8-K         filed                      11/20/2007


8-K         filed                      11/08/2007


8-K/A    filed                      4/12/2007


8-K         filed                      4/11/2007


8-K/A    filed                      4/10/2007


8-K         filed                      2/02/2007


8-K/A    filed                      1/03/2007


8-K         filed                      1/03/2007











ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES


Our Board
of Directors reviews and approves audit and permissible non-audit services
performed by its independent accountants, as well as the fees charged for such
services. In our review of non-audit service fees and its appointment of Kabani
& Company, Inc., as our independent accountants, our Board of Directors
considered whether the provision of such services is compatible with maintaining
independence. All of the services provided and fees charged by Kabani &
Company, Inc., in fiscal year ended February 298, 2008, were approved by our
board of directors.





Audit
Fees





The
aggregate fees billed by Kabani & Company, Inc. for professional services
for the audit of our annual financial statements for our fiscal year ended
February 29, 2008 were $75,000.





Tax
      Fees
            
            $
            0

















26
  SIGNATURES
 
 In
accordance with Section 13 and 15(d) of the Exchange Act, the Company caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
  TANK
SPORTS, INC.
 
 Date:
      June 27, 2007
              
              
              Date:
      June 27, 2007/s/ Jing
      Jing Long
              
              
              /s/ Jing
      Jing LongJing
      Jing Long
                Principal
      Executive Officer
              
              
              Jing
      Jing Long
                Principal
      Accounting Officer
                Principal
      Financial Officer
  Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been
signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
  Date: June
      27, 2007
              By:
              /s/ Jing
      Jing LongDirectorDate:
      June 27, 2007
              By:
              /s/ Jiangyong
      JiDirectorDate: June
      27, 2007
              By:
              /s/ Jim
      JiDirector
 
  27