UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.   20549





FORM
10-KSB








[
      X ]
            ANNUAL
      REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
fiscal year
ended                                                      February
29,
2008





[    ]
            TRANSITION
      REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
transition period from ____________________to ____________________





Commission
file number  000-53008








KUSHI
      RESOURCES INC.(Name
      of Small Business Issuer in its
charter)








Nevada
            00-0000000(State
      or other jurisdiction of incorporation or
organization)
            (I.R.S.
      Employer Identification No.)2215 South West Marine Drive, Vancouver, British
      Columbia, Canada
            V6P
  6C1(Address
      of principal executive offices)
            (Zip
      Code)





Issuer’s
telephone number:  778-835-9200








Securities
registered pursuant to Section 12(b) of the Act:


Title
      of each class
            Name
      of each exchange on which registeredNone
            N/A








Securities
registered pursuant to Section 12(g) of the Act:








shares
      of common stock - $0.001 par value(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 last 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.     [T]
Yes         [   ]  No





Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.  [   ]






Page
- 1







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


[
T ]
Yes         [    ]  No





State
issuer’s revenues for its most recent fiscal
year.                                                                                                           $nil





State the
aggregate market value of the voting and non-voting common equity held by non-affiliates computed by
reference to the price at which the common equity was sold, or the average bid
and asked price of such common equity, as of a specified date within the past 60
days: $41,500, as of May 29,
2008





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date.





Class
            Outstanding at May 29,
  2008common
      stock - $0.001 par value
            5,230,000








Documents
incorporated by reference:  Exhibit 3.1 (Articles of Incorporation) and
Exhibit 3.2 (By-laws)
both filed as exhibits to Kushi’s registration statement on Form SB-2 filed on
October 12, 2007; Exhibit 10.1 (Declaration of Trust) filed as
an exhibit to Kushi’s registration statement on Form SB-2 filed on October 12,
2007; and Exhibit 14 (Code of
Ethics) filed as an exhibit to Kushi’s registration statement on Form
SB-2 filed on October 12, 2007.





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





Page
- 2


PART
I





Item
1.                      Description
of Business.





(a)
            Business
      Development








Kushi
Resources Inc. (“Kushi”)
is a mineral exploration company and is a Nevada corporation that was
incorporated on October 3, 2005.





On
January 30, 2006, Kushi acquired the Bee Peak mineral claim in the Province of
British Columbia, Canada (the “Bee Peak Claim”).





Rajan
Rai, Kushi’s sole director and officer, has no previous experience exploring for
minerals or operating a mining company.  Even if Kushi completes its
proposed mineral exploration program and it is successful in identifying a
mineral deposit, Kushi will have to spend substantial funds on further drilling
and engineering studies before management will know if Kushi has a commercially
viable mineral deposit or reserve on the Bee Peak Claim.





Under the
Mineral Tenure Act(British Columbia), title to British Columbia mineral claims can only be
held by individuals or British Columbia corporations.  Because of this
regulation, Kushi’s sole director and officer, Rajan Rai, is holding the Bee
Peak Claim in trust for Kushi until management can determine whether there is a
commercially viable mineral deposit on the Bee Peak Claim.  If
management determines that there is a commercially viable mineral deposit on the
Bee Peak Claim management will incorporate a British Columbia subsidiary to hold
title to the Bee Peak Claim and Mr. Rai will transfer the Bee Peak Claim to the
subsidiary.  The transfer will be at no cost to Kushi other than the
costs associated with the incorporation of the British Columbia
subsidiary.





The cost
of the Bee Peak Claim charged to operations by Kushi was $143, which represented
the original staking costs of the Bee Peak Claim.  However, Kushi will
incur much more significant expenses in order to explore the Bee Peak Claim as
described in the Plan of Operation below.





In
December 2006, Kushi engaged Stephen G. Diakow, a geological technician, who is
familiar with the Atlin area, to develop a report on and about the Bee Peak
Claim.  The report entitled “The Report on the Bee Peak Mining Claim”
dated December 28, 2006 describes the Bee Peak Claim, the regional geology, the
mineral potential of the Bee Peak Claim and recommendations how Kushi should
explore the Bee Peak Claim (the “Report”).





The
potential economic significance of the Bee Peak Claim is that according to the
Report, the Bee Peak Claim is underlain by both Laberge and Sloko Group rocks in
proximity to a granitic pluton and a major fault zone.  Plutonic rock
is rock that forms from cooled magma deep in the Earth's crust. This geology
indicates there is potential to locate gold, as the principal metallic mineral,
with a list of associated minerals, including minor amounts of pyrite,
tetrahedrite, chalcopyrite, and telluride minerals.





Kushi has
no current plans to change its business activities from mineral exploration or
to combine with another business.  It is possible that beyond the
foreseeable future that if the mineral exploration efforts fail and world demand
for the minerals Kushi is seeking drops to the point that it is no longer
economical to explore for these minerals Kushi may need to change its business
plans.  However, until Kushi encounters such a situation management
intends to explore for minerals in British Columbia, Canada or
elsewhere.





Kushi has
not been involved in any bankruptcy, receivership or similar
proceedings.  There have been no material reclassifications, mergers,
consolidations or purchases or sales of a significant amount of assets not in
the ordinary course of Kushi’s business.





(b)
            Business
      of Kushi





Kushi is
an exploration stage company, as defined by Statement of Financial Accounting
Standard “SFAS No.7 Accounting and Reporting for Development Stage
Enterprises”.  Kushi’s principal business is the acquisition and
exploration of mineral resources.  Kushi has not generated any
revenues from its mineral exploration activities.  Kushi has not
presently determined whether the Bee Peak Claim contains mineral reserves that
are economically recoverable.





The
following is a summary of the Bee Peak Claim.  Kushi does not have any
assets or mineral properties that are currently in production or contain a
reserve.




Page
- 3





Location and Access





The Bee
Peak Claim is located approximately 30 kilometres (18 miles) southwest of the
town of Atlin, British Columbia, Canada. The Bee Peak Claim is centered six
kilometres (3.6 miles) east of Taku Arm of Tagish Lake at elevations from 1,100
metres to more that 1,500 metres (5,000 feet).





The Bee
Peak Claim is located at high elevation on Engineer Mountain in a dissected
plateau terrane and for practical purposes is best accessed by
helicopter.  The Bee Peak Claim can also be accessed by
boat.  Travel time by boat with good conditions takes approximately
1.75 hours.





The town
of Atlin is situated on the east shore of Atlin Lake, in northern British
Columbia, has a population of about 350 permanent residents and offers most
services required in support of mineral exploration activities.





Summary of the Bee Peak
Claim





The Bee
Peak Claim is unencumbered and in good standing and there are no third party
conditions that affect the Bee Peak Claim other than conditions defined by the
Province of British Columbia described below.  The combined units make
up an area of 410 hectares, which is equivalent to approximately 1,015
acres.  Kushi has no insurance covering the Bee Peak
Claim.  Management believes that no insurance is necessary since the
Bee Peak Claim is unimproved and contains no buildings or
improvements.  The tenure number, claim name, owner, good to date,
status, and area as typically recorded in British Columbia is as
follows:





Tenure
      Number
            Claim
      Name
            Owner
            Good
      to Date
            Status
            Area
              (Hectares)526773
            Bee
      Peak
            201674
              (100%)
            2009/Jan/30
            Good
            410.65





There is
no assurance that a commercially viable mineral deposit exists on the Bee Peak
Claim.  Further exploration will be required before an evaluation as
to the economic feasibility of the Bee Peak Claim can be
determined.  It is management’s intention to incorporate a British
Columbia subsidiary company and record the deed of ownership in the name of the
subsidiary if minerals are discovered on the Bee Peak Claim and it appears that
it would be economically viable to commercially mine the Bee Peak
Claim.  Kushi’s consulting geological technician has written a report
and provided Kushi with recommendations of how management should explore the Bee
Peak Claim.  Until Kushi can validate otherwise, the Bee Peak Claim is
without known reserves and management is planning a three phase mineral
exploration program as recommended by Kushi’s consulting geological
technician.  Kushi has not commenced any exploration or work on the
Bee Peak Claim.





Conditions to Retain Title to the Bee
Peak Claim





The Bee
Peak Claim has an expiry date of January 30, 2009, and in order to maintain the
Bee Peak Claim in good standing it will be necessary for Kushi to coordinate an
agent to perform and record valid exploration work with value of CDN$4.00 per
hectare in anniversary years 1, 2, and 3, and CDN$8.00 per hectare in subsequent
years or pay the equivalent sum to the Province of British Columbia in lieu of
work.  Failure to perform and record valid exploration work or pay the
equivalent sum to the Province of British Columbia on the anniversary dates will
result in forfeiture of title to the Bee Peak Claim.





History of Atlin and the Bee Peak Claim
Area





Atlin,
British Columbia has always been closely identified with the mining industry,
having been established about 1900 as a supply base and winter home for miners
and prospectors working in the nearby mines, prospects and placer gold
fields.  Placer gold fields are areas where gold is found in the
gravels of a mineral claim.  Placer mining continues to be an
important component of the local economy and other mining ventures have become
increasingly significant in recent years with several properties either in or
approaching the permitting and significant financing
phases.  Significant mining properties that are located in the
Tulesequah River valley, 200 kilometres (120 miles) south of Atlin, are in
advanced stages of exploration and approval process and are best accessed from
Atlin.




Page
- 4





In recent
years, the Atlin mining district has been mapped by scientists from the British
Columbia Ministry of Energy and Mines, who expanded on the pioneering studies of
the federal Geological Survey of Canada conducted from 1957 to
1959.  The formerly enigmatic geology of the area has been
rationalized and revealed in publications of the Ministry of Energy and
Mines.





Mining
exploration intensified during the 1970's when porphyry molybdenum deposits and
uranium occurrences located west and north of Surprise Lake were explored by
technical surveys and drilling.  The town of Atlin also served as a
base of operations for prospecting and geological crews working in the nearby
Coast Mountains and the Interior Plateau.





In 1989
and 1990 Golden Bee Minerals Inc. of Kamloops, British Columbia conducted two
exploration programs on mineral claims located northeast of the Engineer
Mine.  The Engineer Mine is situated close to the east shore of Tagish
Lake.  These claims likely covered the Bee Peak
Claim.  Golden Bee Minerals Inc. reported the presence on their claims
of epitermal to hydrothermal gold-silver mineralization and the discovery of two
new zones.  One zone was on Gleaner Mountain and the other one was in
proximity to the Bee Peak Claim.





Present Condition of the Bee Peak
Claim





Kushi has
yet to explore or access the Bee Peak Claim.  However, according to
the Report Kushi should expect to find patchy forest cover, with muskeg bogs in
lower elevation areas that have poorly developed drainage and/or
permafrost.  Management also expects to find evergreen trees,
primarily spruce and pine, along the valley walls, and stands of aspen and
poplar where drainage is suitable.  Grass slopes are found in many
parts of the area.  Tree line is commonly at about 1,500
metres.





The
Tagish Lake and Atlin districts of northwestern British Columbia experience
moderately cold winters and mild summers.  Precipitation is strongly
influenced by rain shadow effects, where the Coast Mountains receive heavy
snowfall whereas the valleys and particularly the town of Atlin are much
drier.  Summers are warm with frequent rain showers in the
mountains.  Winters are cold with temperatures as low as minus 40
degrees Celsius (minus 40 degrees Fahrenheit).  Periods of cold
weather are mitigated by short intervals of warm Chinook
conditions.





The Atlin
mining district is defined by several prominent features, such as the large
fiord-like lakes, the somewhat isolated high mountains that surmount the plateau
surface, and the snow and ice covered Coast Mountains that rise in the
west.  Also, streams are numerous and generally fast
flowing.





Currently,
there is no equipment, infrastructure or electricity on the Bee Peak
Claim.





Geology of the Bee Peak
Claim





The Bee
Peak Claim is the subject of a geological report prepared by Stephen G. Diakow,
Geological Technician, dated December 28, 2006.  Mr. Diakow has not
been on the Bee Peak Claim, but he is familiar with the Atlin mining district
and has reviewed various government publications, maps, and reports to determine
the geology of the Bee Peak Claim.





The Atlin
mining district is geologically varied and complex.  It is bordered to
the west by the precipitous and glacier shrouded Coast Mountains and the
attendant Coast Crystalline Complex of granitic terrains.  The central
portion is a deeply dissected plateau dominated by Mesozoic strata of mixed
volcanic and volcanogenic formations.  The east sector is a more
mature terrain underlain by Cache Creek Group sedimentary rocks of oceanic
origin and farther east the underlying formations of Sylvester Group of low
grade metamorphic rocks of the mid to late Paleozoic ages.





The Atlin
mining district is also structurally complex, with numerous
northwesterly-striking fault complexes, some of which are of crustal
scale.  These fault complexes can be traced far from the Bee Peak
Claim while others are splays that create imbrications of slivers of the various
formation.  Early Middle Jurassic deformation resulted in substantial
crustal shortening.  The geological complexity encountered in the area
results at least in part form its history of several continental plate
collisions followed by adjustments as plate fragments moved one against another
to form the present mosaic-like configuration.





The
geological setting of the Bee Peak Claim is a structurally complex area of
Laberge Group and Sloko Group formations and granitic intrusions.  It
is situated north of the Llewellyn fault and immediately east of the former
Engineer mine.  It is located in Stikinia terrain in the southerly
continuation of the Whitehorse Trough, a regional syncline.  The Bee
Peak Claim appears to be underlain by Eocene Sloko Group rocks that overlie
Lower Jurassic Laberge Group members, and a small plug of Coast Intrusion is
shown in proximity.  The Llewellyn fault zone occurs as a series of
northwest striking, steeply dipping to vertical faults strands at the contact
between Mesozoic strata of the southerly continuation of the Whitehorse Trough
and the metamorphosed rocks of the Boundary Ranges of the Coast Crystalline
terrane.  It varies in width from some tens of metres to as much as
several kilometres.  Eocene Sloko Group rocks are present in the Bee
Peak Claim area only as erosional remnants and may have occupied a much larger
area that was subsequently eroded.  They are heterogeneous volcanic
rocks comprising basal conglomeratic sandstone, rhyolite flows, dikes and
ignimbrites, dacitic and andesitic pyroclastic members, basalt, and vitrophyric
tuff and breccia.




Page
- 5





Competition





The
mineral exploration business is an extremely competitive
industry.  Kushi is competing with many other exploration companies
looking for minerals.  Kushi is one of the smallest exploration
companies and a very small participant in the mineral exploration
business.  Being a junior mineral exploration company, Kushi competes
with other similar mineral exploration companies for financing and joint venture
partners.  Additionally, Kushi competes for resources such as
professional geologists, camp staff, helicopters and mineral exploration
supplies.





Raw
Materials





The raw
materials for Kushi’s proposed mineral exploration program will be items
including camp equipment, sample bags, first aid supplies, groceries and
propane.  All of these types of materials are readily available in
either the city of Vancouver, British Columbia or the town of Atlin, British
Columbia from a variety of suppliers.





Dependence
on Major Customers





Kushi has
no customers.





Patents/Trade
Marks/Licences/Franchises/Concessions/Royalty Agreements or Labour
Contracts





Kushi
does not currently own any patents or trade marks.  Also, Kushi is not
party to any license or franchise agreements, concessions, royalty agreements or
labor contracts arising from any patents or trade marks.





Government
Controls and Regulations





Kushi
will be required to comply with all regulations defined in the Mineral Tenure Act(British
Columbia).  The Act is well defined by the Province of British
Columbia and is available from Kushi upon request.





Kushi’s
business could be adversely affected by new government regulation such as
controls on imports, exports and prices, new forms or rates of taxation and
royalties.  Kushi’s business could also be adversely affected by
regulatory inquiries or investigations into Kushi’s business
operations.





There are
several governmental regulations that materially restrict the use of
minerals.  Under the applicable legislation and regulations, to engage
in certain types of exploration will require work permits, the posting of bonds,
and the performance of remediation work for any physical disturbance to the
mineral claims.  Also, to operate a working mine, the regulatory
bodies that govern may require an environmental review process.





In
addition, the legal and regulatory environment that pertains to the exploration
of minerals is uncertain and may change. Uncertainty and new regulations could
increase Kushi’s costs of doing business and prevent Kushi from exploring for
mineral deposits.  This could also delay the growth in any potential
demand for such mineral deposits and limit Kushi’s ability to generate
revenues.   In addition to new laws and regulations being
adopted, existing laws may be applied to mining or mineral exploration that has
not yet been applied.  These new laws may increase Kushi’s cost of
doing business with the result that its financial condition and operating
results may be harmed





The
effect of the existing regulations on Kushi’s business is that Kushi is able to
carry out its proposed mineral exploration program as Kushi has described in
this prospectus.  However, it is possible that a future government
could change the regulations that could limit Kushi’s ability to explore the Bee
Peak Claim, but management believes this is highly unlikely.





Costs
and Effects of Compliance with Environmental Laws





Kushi
currently has not costs to comply with environmental laws concerning its
proposed mineral exploration program.





Expenditures
on Research and Development During the Last Two Fiscal Years





Kushi has
not incurred any research or development expenditures since its inception on
October 3, 2005.





Kushi is
not currently conducting any research and development activities.




Page
- 6





Number
of Total Employees and Number of Full Time Employees





Kushi
does not have any employees other than Rajan Rai, its sole director and
officer.  Management intends to retain the services of independent
geologists, prospectors and consultants on a contract basis to conduct the
exploration programs on the Bee Peak Claim starting in June 2008 and as required
thought the course of Kushi’s proposed mineral exploration
program.  The funds that will be used to pay for the independent
geologist, prospectors and consultants will be the funds that already exist in
Kushi’s corporate treasury and from funds that Kushi may have to raise in the
future.  A detailed explanation of when additional funds will be
required can be located in the proposed mineral exploration program described
below.





RISK
FACTORS





Kushi’s
business, operating results and financial condition could be seriously harmed
due to any of the following known material risks.  You should consider
each of the following risk factors and the other information in this Annual
Report, including Kushi’s financial statements and the related notes, in
evaluating Kushi’s business and prospects.  The risks and
uncertainties described below are not the only ones that impact on Kushi’s
business.  Additional risks and uncertainties not presently known to
Kushi or that Kushi currently considers immaterial may also impair its business
operations.  If any of the following risks actually occur, Kushi’s
business and financial results could be harmed.  In that case, the
trading price of Kushi’s Shares of common stock could decline.





Risks
associated with Kushi:





1.
            If
      Kushi does not obtain financing, its business plan will
    fail.





Kushi’s
current operating funds are insufficient to complete Phase One of the proposed
mineral exploration program on the Bee Peak Claim.  Kushi will need to
obtain financing in order to complete its mineral exploration program, which
calls for significant expenses in connection with the exploration of the Bee
Peak Claim.  Kushi has not made arrangements to secure any
financing.





2.
            As
      a result of Kushi’s auditors expressing substantial doubt about Kushi’s
      ability to continue as a going concern, Kushi may find it difficult to
      obtain additional financing.





The
accompanying financial statements have been prepared assuming that Kushi will
continue as a going concern.  As discussed in Notes 1 and 3 to the
financial statements, Kushi was incorporated on October 3, 2005 and does not
have a history of earnings, and as a result, Kushi’s auditors have expressed
substantial doubt about its ability to continue as a going concern. Continued
operations are dependent on Kushi’s ability to complete equity or debt
financings or generate profitable operations. Such financings may not be
available or may not be available on reasonable terms.  Kushi’s
financial statements do not include any adjustments that may result from the
outcome of this uncertainty.





3.
            As
      a result of Kushi only recently commencing business operations, Kushi
      faces a high risk of business
failure.





Kushi has
not begun the Phase One exploration program on the Bee Peak Claim, and thus has
no way to evaluate the likelihood whether Kushi will be able to operate its
business successfully.  Kushi was incorporated on October 3, 2005 and
to date has been involved primarily in organizational activities, acquiring the
Bee Peak Claim and obtaining financing.  Kushi has not earned any
revenues and has never achieved any profitability as of the date of this
prospectus.  Potential investors should be aware of the difficulties
normally encountered by new mineral exploration companies and the high rate of
failure of such enterprises.  The likelihood of success must be
considered in the light of problems, expenses, difficulties, complications and
delays encountered in connection with the exploration of the mineral properties
that Kushi plans to undertake.  These potential problems include, but
are not limited to, unanticipated problems relating to exploration and
additional costs and expenses that may exceed current
estimates.  Kushi has no history upon which to base any assumption as
to the likelihood that its business will prove successful, and management can
provide no assurance to investors that Kushi will generate any operating
revenues or ever achieve profitable operations.  If Kushi is
unsuccessful in addressing these risks its business will likely fail and you
will lose your entire investment in this offering.




Page
- 7





4.
            As
      a result of only recently commencing business operations, management
      expects that Kushi will continue to incur operating losses for the
      foreseeable future, which in effect will cause Kushi to run out of working
      capital.





Kushi has
never earned any revenue and has never been profitable.  Prior to
completing any exploration on the Bee Peak Claim, Kushi may incur increased
operating expenses without realizing any revenues from the Bee Peak
Claim.  As a result, Kushi could run out of working capital and its
business could fail, and you would lose your entire investment in this
offering.





5.
            Management
      has no experience in the mineral exploration business, and as a result
      management may make mistakes, which could cause Kushi’s business to
      fail.





Kushi’s
sole officer and director, Rajan Rain, has no previous experience operating an
exploration or a mining company and because of this lack of experience Mr. Rai
may be prone to errors.  Mr. Rai lacks the technical training and
experience with exploring for, starting, or operating a mine.  With no
direct training or experience in these areas Mr. Rai may not be fully aware of
the many specific requirements related to working in this
industry.  Mr. Rai’s decisions and choices may not take into account
standard engineering or managerial approaches mineral exploration companies
commonly use.  Consequently, Kushi’s operations, earnings, and
ultimate financial success could suffer irreparable harm due to Mr. Rai’s lack
of experience in this industry.





6.
            Kushi
      does not expect to pay dividends in the foreseeable
  future.





Kushi has
never paid cash dividends on its shares of common stock and has no plans to do
so in the foreseeable future.  Kushi intends to retain earnings, if
any, to develop and expand its business operations.





7.
            Kushi’s
      sole director and officer owns a majority of Kushi’s common stock, and as
      a result has the ability to override the interests of the other
      shareholders.





Rajan
Rai, the sole director of Kushi, owns 57.4% of Kushi’s outstanding shares of
common stock.  As a result, investors may find the corporate decisions
influenced by Mr. Rai inconsistent with their interests or the interests of
other shareholders.





8.
            As
      a result of holding a significant portion of its cash reserves in United
      States dollars, Kushi may experience weakened purchasing power in Canadian
      dollar terms and not be able to afford to conduct its proposed mineral
      exploration program.





Kushi
holds a significant portion of its cash reserves in United States
dollars.  Due to foreign exchange rate fluctuations, the value of
these United States dollar reserves can result in both translation gains or
losses in Canadian dollar terms.  If there was to be a significant
decline in the United States dollar versus the Canadian Dollar, Kushi’s US
dollar purchasing power in Canadian dollars would also significantly
decline.  If there was a significant decline in the US dollar Kushi
would not be able to afford to conduct its planned mineral exploration
program.  Kushi has not entered into derivative instruments to offset
the impact of foreign exchange fluctuations.





9.
            “Penny
      Stock” rules may make buying or selling Kushi’s shares of common stock
      difficult, and severely limit the market and liquidity of the shares of
      common stock.





Trading
in Kushi’s common stock is subject to certain regulations adopted by the SEC
commonly known as the “penny stock” rules.  These rules govern how
broker-dealers can deal with their clients and “penny stocks”.  The
additional burdens imposed upon broker-dealers by the “penny stock” rules may
discourage broker-dealers from effecting transactions in Kushi’s securities,
which could severely limit their market price and liquidity of Kushi’s
securities.  See “Penny Stock rules” on page 13 for more details. The
penny stock markets have suffered in recent years from fraud and abuse arising
from one or a few broker dealers controlling the market for a security, high
pressure sales tactics used by boiler room practices, manipulation of prices
through pre-arranged transactions followed by a large volume sale by broker
dealers, misleading information be disseminated, and excessive mark-ups and
undisclosed bid-ask differentials by selling broker dealers.





Risks
associated with Kushi’s business:





10.
            If
      Kushi fails to perform the required amount of expenditures or to make
      payments on its Bee Peak Claim, Kushi could lose its title to the Bee Peak
      Claim.





The Bee
Peak Claim has an expiry date of January 30, 2009 and in order to maintain the
tenures in good standing it will be necessary for Kushi to perform and record
valid exploration work with value of CDN$4.00 per hectare in anniversary years
1, 2, and 3, and CDN$8.00 per hectare in subsequent years, or pay the equivalent
sum to the Province of British Columbia in lieu of exploration
work.  Failure to perform and record valid exploration work or pay the
equivalent sum to the Province of British Columbia on the anniversary dates will
result in forfeiture of title to the Bee Peak Claim.




Page
- 8





11.
            If
      Kushi does not obtain clear title to the Bee Peak Claim, then its business
      operations may fail.





Under
British Columbia law, title to British Columbia mineral claims can only be held
by individuals or British Columbia corporations.  Since Kushi is a
Nevada corporation it is not legally allowed to be the registered owner of
mineral claims in British Columbia.  The Bee Peak Claim is being held
in trust for Kushi by its president, as he is an individual.  If Kushi
confirms economically viable deposits of minerals on the Bee Peak Claim Kushi
will incorporate a British Columbia subsidiary to hold title of the Bee Peak
Claim and Kushi’s president will transfer the Bee Peak Claim to the
subsidiary.  Until Kushi can confirm viable mineral deposits, its
president is holding the Bee Peak Claim in trust for Kushi by means of a
declaration of trust.  However, there could be situations, such as the
death of Kushi’s president, that could prevent Kushi from obtaining clear title
to the Bee Peak Claim.  If Kushi is unable to obtain clear title to
the Bee Peak Claim its business operations will likely fail and you will lose
your entire investment in this offering.





12.
            Access
      to the Bee Peak Claim may be restricted by inclement weather during the
      year, which may delay Kushi’s proposed mineral exploration programs and
      any future mining efforts.





Access to
the Bee Peak Claim is restricted to the period between May 1 and October 15 of
each year due to snow in the area.  As a result, any attempts to
visit, test, or explore the Bee Peak Claim are largely limited to these few
months of the year when weather permits such activities.  These
limitations can result in significant delays in exploration efforts, as well as
mining and production if commercial amounts of minerals are
found.  Such delays could also result in Kushi’s inability to meet
deadlines for exploration expenditures as defined by the Province of British
Columbia.  This could cause Kushi’s business venture to fail and the
loss of your entire investment in this offering unless Kushi can meet
deadlines.





13.
            If
      Kushi is unable to find a joint venture partner for the continued
      development of the Bee Peak Claim, Kushi may not be able to advance the
      exploration work on the Bee Peak
Claim.





If the
results of the Phase Two mineral exploration program are successful, Kushi may
try to enter a joint venture agreement with a partner for the further
exploration and possible production on the Bee Peak Claim.  Kushi
would face competition from other junior mineral resource exploration companies
who have properties that they deem to be attractive in terms of potential return
and investment cost.  In addition, if Kushi entered into a joint
venture agreement, it would likely assign a percentage of its interest in the
Bee Peak Claim to the joint venture partner.  If Kushi is unable to
enter into a joint venture agreement with a partner, Kushi’s business plan may
fail and you may lose your entire investment in this offering.





14.
            Land
      tenure disputes may negatively impact Kushi’s
  operations.





Kushi
operates in countries where ownership of land may be uncertain, and where
disputes may arise in relation to ownership.  These disputes cannot
always be predicted, and hence there is a risk that this may cause disruption to
some of Kushi’s exploration projects and prevent the development of new
projects.





Mineral
rights and interests of Kushi in the properties it has an interest in are
subject to government approvals, licences and permits.  Such
approvals, licenses and permits are, as a practical matter, subject to the
discretion of the applicable governments or governmental
officials.  No assurance can be given that Kushi will be successful in
maintaining any or all of the various approvals, licences and permits in full
force and effect without modification or revocation.





Kushi is unaware of any
outstanding native land claims on the areas in which it has an interest; however
it is possible that a native land claim could be made in the
future.  The government policy at this time is to consult with
all potentially affected native bands and other stakeholders in the area of any
potential mining.  Should Kushi encounter a situation where a native
person or group claims an interest in its mineral claims, Kushi may be unable to
provide compensation to the affected party in order to continue with its mineral
exploration work, or if such an option is not available, Kushi may have to
relinquish its interest in these claims. In either case, the costs and/or losses
could be greater than Kushi’s financial capacity, and Kushi’s business would
fail.





Risks
associated with Kushi’s industry:





15.
            Because
      of the speculative nature of exploration of mineral properties, there is a
      substantial risk that Kushi’s business will
  fail.





The
search for valuable minerals as a business is extremely risky.  Kushi
cannot provide investors with any assurance that any of the mineral properties
contain commercially exploitable reserves of base or precious
minerals.  Exploration for minerals is a speculative venture
necessarily involving substantial risk.  The expenditures to be made
by Kushi in the exploration of the mineral properties may not result in the
discovery of commercial quantities of minerals.  Problems such as
unusual or unexpected formations and other conditions are involved in mineral
exploration and often result in unsuccessful exploration efforts.  In
such a case, Kushi would be unable to complete its business plan and investors
could lose their entire investment in this offering.




Page
- 9





16.
            Kushi
      may incur liability or damages as it conducts its business operations due
      to the inherent dangers involved in mineral
  exploration.





The
search for minerals involves numerous hazards.  As a result, Kushi may
become subject to liability for such hazards, including pollution, cave-ins and
other hazards against which Kushi cannot insure or against which management may
elect not to insure.  Kushi currently has no such insurance nor does
management expect to get such insurance for the foreseeable future. If a hazard
were to occur, the costs of rectifying the hazard may exceed Kushi’s asset value
and cause it to liquidate all its assets resulting in the loss of your entire
investment in this offering.





17.
            Kushi
      faces significant competition in the mineral exploration
      industry.





Kushi
competes with other mining and exploration companies possessing greater
financial resources and technical facilities than Kushi in connection with the
acquisition of mineral exploration claims and other precious metals prospects
and in connection with the recruitment and retention of qualified
personnel.  There is significant competition for the limited number of
mineral acquisition opportunities and, as a result, Kushi may be unable to
acquire an interest in attractive mineral exploration properties on terms it
considers acceptable on a continuing basis.





18.
            Government
      regulation or any change in such regulation may adversely affect Kushi’s
      business.





There are
several governmental regulations that materially restrict the exploration of
minerals.  Kushi will be subject to the mining laws and regulations as
contained in the Mineral Tenure Act ( British Columbia) as Kushi carries out its
mineral exploration program.  Kushi may be required to obtain work
permits, post bonds and perform remediation work for any physical disturbance to
the land in order to comply with these regulations.  While Kushi’s
planned mineral exploration program budgets for regulatory compliance, there is
a risk that new regulations could increase Kushi’s time and costs of doing
business and prevent Kushi from carrying out its mineral exploration
program.





19.
            Compliance
      with health, safety and environment regulations may impose burdensome
      costs and if compliance is not achieved Kushi’s business and reputation
      may be detrimentally impacted.





The
nature of the industries in which Kushi operates means that its activities are
highly monitored by health, safety and environmental groups.  As
regulatory standards and expectations are constantly developing, Kushi may be
exposed to increased litigation, compliance costs and unforeseen environmental
remediation expenses.





The
search for valuable minerals involves numerous hazards.  As a result,
Kushi may become subject to liability for such hazards, including pollution,
cave-ins and other hazards against which Kushi cannot insure or against which
Kushi may elect not to insure.  The payment of such liabilities may
have a material adverse effect on Kushi’s financial position.





Kushi may
continue to be exposed to increased operational costs due to the costs and lost
worker’s time associated with the health and well-being of Kushi’s workforce on
its project areas.





Despite
Kushi’s best efforts and best intentions, there remains a risk that health,
safety and/or environmental incidents or accidents may occur which may
negatively impact Kushi’s reputation and freedom or licence to
operate.





20.
            Kushi
      may not be able to attract and retain qualified personnel necessary for
      the implementation of its business strategy and mineral exploration
      programs.





Kushi’s
future success depends largely upon the continued service of its sole director
and officer and other key personnel.  Kushi’s success also depends on
its ability to continue to attract, retain and motivate qualified
personnel.  Key personnel represent a significant asset, and the
competition for these personnel is intense in the mineral exploration
industry.





Kushi may
have particular difficulty attracting and retaining key personnel in initial
phases of its mineral exploration programs.  Kushi does not maintain
key person life insurance on any of its personnel.  The loss of one or
more of its key employees or its inability to attract, retain and motivate
qualified personnel could negatively impact Kushi’s ability to complete its
mineral exploration programs.




Page
- 10





21.
            Market
      factors in the mining industry are out of the control of Kushi, and as a
      result, Kushi may not be able to market any minerals that may be found on
      the Bee Peak Claim.





The
mining industry, in general, is intensely competitive and management can provide
no assurance to investors even if minerals are discovered on the Claims that a
ready market will exist from the sale of any ore found.  Numerous
factors beyond Kushi’s control may affect the marketability of
minerals.  These factors include market fluctuations, the proximity
and capacity of natural resource markets and processing equipment, government
regulations, including regulations relating to prices, taxes, royalties, land
tenure, land use, importing and exporting of minerals and environmental
protection.  The exact effect of these factors cannot be accurately
predicted, but the combination of these factors may result in Kushi not
receiving an adequate return on invested capital and you may lose your entire
investment in this offering.





Item
2.                      Description
of Property.





Kushi’s
executive offices are located at 2215 South West Marine Drive, Vancouver,
British Columbia, V6P 6C1, Canada. Kushi’s sole officer and director, Rajan Rai,
currently provides this space to Kushi free of charge. This space may not be
available to Kushi free of charge in the future.





Kushi
also has one mineral claims located in the Atlin Mining Division, British
Columbia, Canada as described above in the “Description of Business”
section.





Item
3.                      Legal
Proceedings.





Kushi is
not a party to any pending legal proceedings and, to the best of Kushi’s
knowledge, none of Kushi’s property or assets are the subject of any pending
legal proceedings





Item
4.                      Submission
of Matters to a Vote of Security Holders.





No matter
was submitted to a vote of security holders, through the solicitation of proxies
or otherwise, during the fourth quarter of the fiscal year covered by this
report.





PART
II





Item
      5.
            Market
      for Common Equity and Related Stockholder Matters and Small Business
      Issuer Purchases of Equity
Securities.





(a)           Market
Information





Kushi’s
common stock has been quoted on the NASD OTC Bulletin Board since March 13, 2008
under the symbol “KUSI”.  However, Kushi’s common stock has not traded
as of the date of this report.





(b)           Holders
of Record





There are
33 holders of record of Kushi’s shares of common stock.





(c)           Dividends





Kushi has
declared no dividends on its shares of common stock and is not subject to any
restrictions that limit its ability to pay dividends on its shares of shares of
common stock.  Dividends are declared at the sole discretion of
Kushi’s Board of Directors.





(d)  Recent
Sales of Unregistered Securities





There
have been no sales of unregistered securities within the last three years that
would be required to be disclosed pursuant to Item 701 of Regulation S-B, with
the exception of the following;




Page
- 11





Since
October 3, 2005, Kushi has sold 5,455,000 shares of unregistered common
stock.  All of these 5,455,000 shares were acquired from Kushi in
private placements that were exempt from registration under Regulation S of the
Securities Act of 1933 (the “1933 Act”) and were sold to
Canadian residents.  The unregistered shares include the
following:





1.
            On
      November 28, 2005, Kushi issued 3,000,000 shares of common stock to Rajan
      Rai, Kushi’s sole officer and director, at a price of $0.001 per share for
      cash proceeds of $3,000;





2.
            On
      January 30, 2006, Kushi issued 1,900,000 shares of common stock to 15
      non-affiliate Canadian residents at a price of $0.01 per share for cash
      proceeds of $19,000;





3.
            On
      February 28, 2006, Kushi issued 450,000 shares of common stock to 18
      non-affiliate Canadian residents at a price of $0.05 per share for cash
      proceeds of $22,500; and





4.
            On
      November 10, 2006, Kushi issued 105,000 shares of common stock to one
      non-affiliate Canadian resident at a price of $0.05 per share for cash
      proceeds of $5,250.





With
respect to all of the above offerings, Kushi completed the offerings of the
common stock pursuant to Rule 903 of Regulation S of the 1933 Act on the basis
that the sale of the common stock was completed in an “offshore transaction”, as
defined in Rule 902(h) of Regulation S.  Kushi did not engage in any
directed selling efforts, as defined in Regulation S, in the United States in
connection with the sale of the shares.  Each investor represented to
Kushi that the investor was not a U.S. person, as defined in Regulation S, and
was not acquiring the shares for the account or benefit of a U.S.
person.  The subscription agreement executed between Kushi and the
investor included statements that the securities had not been registered
pursuant to the 1933 Act and that the securities may not be offered or sold in
the United States unless the securities are registered under the 1933 Act or
pursuant to an exemption from the 1933 Act.  The investor agreed by
execution of the subscription agreement for the common stock: (i) to resell the
securities purchased only in accordance with the provisions of Regulation S,
pursuant to registration under the 1933 Act or pursuant to an exemption from
registration under the 1933 Act; (ii) that Kushi is required to refuse to
register any sale of the securities purchased unless the transfer is in
accordance with the provisions of Regulation S, pursuant to registration under
the 1933 Act or pursuant to an exemption from registration under the 1933 Act;
and (iii) not to engage in hedging transactions with regards to the securities
purchased unless in compliance with the 1933 Act.  All securities
issued were endorsed with a restrictive legend confirming that the securities
had been issued pursuant to Regulation S and could not be resold without
registration under the 1933 Act or an applicable exemption from the registration
requirements of the 1933 Act.





Each
investor was given adequate access to sufficient information about Kushi to make
an informed investment decision.  None of the securities were sold
through an underwriter and accordingly, there were no underwriting discounts or
commissions involved.  No registration rights were granted to any of
the investors.





On
November 10, 2006, Kushi entered into a Return to Treasury Agreement with one of
the subscribers for the cancellation and removal from the shares issued and
outstanding of aggregate 225,000 shares of common stock.  Kushi paid a
total of $5,250 to the subscriber as consideration for the return of the shares
of common stock.  The shares were cancelled and returned to the
authorized capital as unissued capital.  The shares were issued as
part of Kushi’s private placement on January 30, 2006 (150,000 shares of common
stock) and the private placement on February 28, 2006 (75,000 shares of common
stock).





There are
no outstanding options or warrants to purchase, or securities convertible into,
shares of Kushi’s shares of common stock.




Page
- 12





(e)
            Penny
      Stock Rules





Trading
in Kushi’s common stock is subject to the “penny stock” rules.  The
SEC has adopted regulations that generally define a penny stock to be any equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions.  These rules require that any broker-dealer who
recommends Kushi’s common stock to persons other than prior customers and
accredited investors, must, prior to the sale, make a special written
suitability determination for the purchaser and receive the purchaser’s written
agreement to execute the transaction.  Unless an exception is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated with trading in the penny stock
market.  In addition, broker-dealers must disclose commissions payable
to both the broker-dealer and the registered representative and current
quotations for the securities they offer.  The additional burdens
imposed upon broker-dealers by such requirements may discourage broker-dealers
from effecting transactions in Kushi’s common stock, which could severely limit
their market price and liquidity of Kushi’s common stock.





Item
6.                      Management’s
Discussion and Analysis or Plan of Operation.





GENERAL





You
should read this discussion and analysis in conjunction with Kushi’s audited
financial statements and related notes included in this Form
10-KSB.  Kushi’s inclusion of supplementary analytical and related
information may require Kushi to make estimates and assumptions to enable it to
fairly present, in all material respects, its analysis of trends and
expectations with respect to its results of operations and financial position
taken as a whole.





Kushi’s
principal business is the acquisition and exploration of mineral resources in
northern British Columbia, Canada.  Kushi has not presently determined
whether Kushi’s properties contain mineral reserves that are economically
recoverable.  Kushi has not commenced significant operations and are
considered an Exploration Stage Company, as defined by Statement of Financial
Accounting Standard (SFAS) No.7 Accounting and Reporting by
Development Stage Enterprises.





Kushi has
no operations and if Kushi’s mineral claim is not successfully developed we will
not earn any revenues.





OVERVIEW





Kushi’s
mineral claims are in the Atlin mining district of northwest British Columbia,
Canada.  Kushi staked the Bee Peak Claim (the “Bee Peak Claim”) on January
30, 2006.  The mineral tenure number is 526773 and the total area of
the Bee Peak Claim is 410.65 hectares.





The Bee
Peak Claim is presently in good standing and management intends to commence
Phase One of Kushi’s three phase exploration program in June 2008.





CRITICAL
ACCOUNTING POLICIES AND ESTIMATES





An
appreciation of Kushi’s critical accounting policies is necessary to understand
Kushi’s financial results.  These policies may require that management
make difficult and subjective judgments regarding uncertainties, and as a
result, such estimates may significantly impact Kushi’s financial
results.  The precision of these estimates and the likelihood of
future changes depend on a number of underlying variables and a range of
possible outcomes.  Other than Kushi’s accounting for mineral property
costs, Kushi’s critical accounting policies do not involve the choice between
alternative methods of accounting.  Management has applied Kushi’s
critical accounting policies and estimation methods consistently.





Cash
and Cash Equivalents





For
purposes of the balance sheet and statement of cash flows management considers
all amounts on deposit with financial institutions and highly liquid investments
with maturities of 90 days or less to be cash equivalents.  At
February 29, 2008, Kushi did not have any cash equivalents.







Page
- 13





Mineral
Property Costs





Kushi has
been in the exploration stage since inception on October 3, 2005 and has not yet
realized any revenues from its planned operations.  Kushi is primarily
engaged in the acquisition and exploration of mining
properties.  Kushi expenses mineral property exploration costs as they
are incurred.  Mineral property acquisition costs are initially
capitalized, when incurred, using the guidance in the Emerging Issues Task Force
(EITF) 04-02, Whether Mineral
Rights are Tangible or Intangible Assets.Management assesses
the carrying costs for impairment under SFAS No. 144, Accounting for Impairment or
Disposal of Long Lived Assets at each fiscal quarter end.  An
impairment is recognized when the sum of the expected undiscounted future cash
flows is less than the carrying amount of the mineral
property.  Impairment losses, if any, are measured as the excess of
the carrying amount of the mineral property over its estimated fair
value.  During the years ended February 29, 2008 and February 28,
2007, Kushi expensed $1,824 and $7,625 respectively, in mineral property
exploration and development costs.





Once
Kushi has determined that a mineral property can be economically developed, as a
result of establishing proven and probable reserves, the costs then incurred to
develop such property, will be capitalized.  Such costs will be
amortized using the units-of-production method over the estimated life of the
probable reserves.  If mineral properties are subsequently abandoned
or impaired, any capitalized costs will be charged to operations.





Asset
Retirement Obligations





SFAS No.
143 (“SFAS 143”), Accounting
for Asset Retirement Obligations addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs.  Specifically, SFAS
143 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made.  In addition, the asset retirement
cost is capitalized as part of the asset’s carrying value and subsequently
allocated to expense over the asset’s useful life.  At February 29,
2008, Kushi did not have any asset retirement obligations.





Financial
Instruments





Foreign
Exchange Risk





Kushi is
subject to foreign exchange risk for transactions denominated in foreign
currencies.  Foreign currency risk arises from the fluctuation of
foreign exchange rates and the degree of volatility of these rates relative to
the United States dollar.  Management does not believe that Kushi has
any material risk due to foreign currency exchange.





Fair
Value of Financial Instruments





Kushi’s
financial instruments include cash, accounts payable, accrued administrative
fees and accrued professional fees.  The fair value of these financial
instruments approximates their carrying values due to their short
maturities.





Concentration
of Credit Risk





Financial
instruments that potentially subject Kushi to significant concentrations of
credit risk consist principally of cash deposits.  At February 29,
2008 and February 28, 2007, Kushi had approximately $2,000 and $39,000,
respectively in cash that was not insured.  This cash is on deposit
with a major chartered Canadian bank.  As part of Kushi’s cash
management process, management performs periodic evaluations of the relative
credit standing of this financial institution.  Kushi has not
experienced any losses in cash balances and management does not believe Kushi is
exposed to any significant credit risk on Kushi’s cash.





Accounting
Estimates





The
preparation of the financial statements in conformity with accounting principles
generally accepted in the United States of America requires us 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.





Kushi’s
financial statements are based on a number of estimates, including accruals for
estimated administrative and professional fees.




Page
- 14





Income
Taxes





Income
tax expense is based on pre-tax financial accounting income.  Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax
bases.  Deferred tax assets, including tax loss and credit
carryforwards, and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled.  The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.  Deferred income tax expense
represents the change during the period in the deferred tax assets and deferred
tax liabilities.  The components of the deferred tax assets and
liabilities are individually classified as current and non-current based on
their characteristics.  Deferred tax assets are reduced by a valuation
allowance when, in management’s opinion, it is more likely than not that some
portion or all of the deferred tax assets will not be realized.





Foreign
Currency Translation





Kushi’s
functional and reporting currency is the United States
dollar.  Monetary assets and liabilities denominated in foreign
currencies are translated in accordance with SFAS No. 52 Foreign Currency Translation,
using the exchange rate prevailing at the balance sheet date.  Gains
and losses arising on settlement of foreign currency denominated transactions or
balances are included in the determination of income.  Foreign
currency transactions are primarily undertaken in Canadian
dollars.  Kushi has not, to the date of this filing, entered into
derivative instruments to offset the impact of foreign currency
fluctuations.





Recent
Accounting Pronouncements





In
September 2006, the FASB issued SFAS No. 157 (“SFAS 157”), Fair Value
Measurements.   SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosure requirements about
fair value measurements.  SFAS 157 was effective for Kushi on March 1,
2007.  The adoption of SFAS 157 did not have a material impact on
Kushi’s financial statements.





In
September 2006, the FASB issued SFAS 158 (“SFAS 158”), Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R).  This statement requires an
employer to recognize the over funded or under funded status of a defined
benefit postretirement plan as an asset or liability in its statement of
financial position and to recognize changes in that funded status in the year in
which the changes occur through comprehensive income of a business
entity.  This statement also requires an employer to measure the
funded status of a plan as of the date of its year end statement of financial
position, with limited exceptions.  Kushi was required to initially
recognize the funded status of a defined benefit postretirement plan and to
provide the required disclosures as of the end of the fiscal year ending after
December 15, 2006.  The requirement to measure plan assets and benefit
obligations as of the date of the employer’s fiscal year end statement of
financial position is effective for fiscal years ending after December 15, 2008,
or February 28, 2009 for Kushi.  Adoption of SFAS 158 is not expected
to have a material impact on Kushi’s financial statements.





In
February 2007, the FASB issued SFAS No. 159 (“SFAS 159”), The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement No.
115.SFAS 159 permits entities to choose to measure many
financial instruments and certain other items at fair
value.  Unrealized gains and losses on items for which the fair value
option has been elected will be recognized in earnings at each subsequent
reporting date.  SFAS 159 will be effective for Kushi on March 1,
2008.  Adoption of SFAS 159 is not expected to have a material impact
on Kushi’s financial statements.





In June
2007, the EITF of the FASB reached a consensus on Issue No. 07-3, Accounting for Nonrefundable Advance
Payments for Goods or Services Received for Use in Future Research and
Development Activities(“EITF 07-3”).  EITF
07-3 requires that non-refundable advance payments for goods or services that
will be used or rendered for future research and development activities must be
deferred and capitalized.  As the related goods are delivered or the
services are performed, or when the goods or services are no longer expected to
be provided, the deferred amounts must be recognized as an
expense.  This issue is effective for financial statements issued for
fiscal years beginning after December 15, 2007 and earlier application is not
permitted.  This consensus is to be applied prospectively for new
contracts entered into on or after the effective date.  EITF 07-03
will be effective for Kushi on March 1, 2008.  The pronouncement is
not expected to have a material effect on Kushi’s financial
statements.





In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations(“SFAS 141(R)”), which replaces
SFAS 141, Business
Combinations.  SFAS 141(R) requires an acquirer to recognize
the assets acquired, the liabilities assumed, and any non-controlling interest
in the acquiree at the acquisition date, measured at their fair values as of
that date, with limited exceptions.  This statement also requires the
acquirer in a business combination achieved in stages to recognize the
identifiable assets and liabilities, as well as the non-controlling interest in
the acquiree, at the full amounts of their fair values.  SFAS 141(R)
makes various other amendments to authoritative literature intended to provide
additional guidance or to confirm the guidance in that literature to that
provided in this 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.  SFAS 141(R) will be effective for Kushi on March 1,
2009.  Management does not expect the adoption of SFAS 141(R) to have
a significant impact on Kushi’s financial statements.




Page
- 15





In
December 2007, the Emerging Issues Task Force (“EITF”) of the FASB reached a
consensus on Issue No. 07-1, Accounting for Collaborative
Arrangements(“EITF
07-1”).  The EITF concluded on the definition of a
collaborative arrangement and that revenues and costs incurred with third
parties in connection with collaborative arrangements would be presented gross
or net based on the criteria in EITF 99-19 and other accounting
literature.  Companies are also required to disclose the nature and
purpose of collaborative arrangements along with the accounting policies and the
classification and amounts of significant financial-statement amounts related to
the arrangements.  Activities in the arrangement conducted in a
separate legal entity should be accounted for under other accounting literature;
however, required disclosure under EITF 07-1 applies to the entire collaborative
agreement.  This issue is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years, and is to be applied retrospectively to all periods
presented for all collaborative arrangements existing as of the effective
date.  EITF 07-1 will be effective for Kushi on March 1,
2009.  Management does not expect the adoption of EITF 07-1 to have a
significant impact on Kushi’s financial statements.





In
December 2007, FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements(“SFAS 160”), which amends
Accounting Research Bulletin No. 51, Consolidated Financial
Statements, to improve the relevance, comparability, and transparency of
the financial information that a reporting entity provides in its consolidated
financial statements.  SFAS 160 establishes accounting and reporting
standards that require the ownership interests in subsidiaries not held by the
parent to be clearly identified, labeled and presented in the consolidated
statement of financial position within equity, but separate from the parent’s
equity.  This statement also requires the amount of consolidated net
income attributable to the parent and to the non-controlling interest to be
clearly identified and presented on the face of the consolidated statement of
income.  Changes in a parent’s ownership interest while the parent
retains its controlling financial interest must be accounted for consistently,
and when a subsidiary is deconsolidated, any retained non-controlling equity
investment in the former subsidiary must be initially measured at fair
value.  The gain or loss on the deconsolidation of the subsidiary is
measured using the fair value of any non-controlling equity
investment.  The statement also requires entities to provide
sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the non-controlling
owners.  This statement applies prospectively to all entities that
prepare consolidated financial statements and applies prospectively for fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008.  SFAS 160 will be effective for Kushi on March 1,
2009.  Management does not expect the adoption of SFAS 160 to have a
significant impact on Kushi’s financial statements.





In
February 2008 the FASB staff issued Staff Position No. 157-2 (“FSP FAS 157-2”) Effective date of FASB Statement
No.157.FSP FAS 157-2 delayed the effective date of SFAS 157
for non-financial assets and non-financial liabilities, except for items that
are recognized or disclosed at fair value in the financial statements on a
recurring basis.  The provisions of FSP FAS 157-2 will be effective
for Kushi on March 1, 2009.





In March
2008, the FASB issued SFAS No. 161 (“SFAS 161”), Disclosures about Derivative
Instruments and Hedging Activities – An Amendment of FASB Statement No. 133(“SFAS
133”).  This statement is intended to improve financial
reporting of derivative instruments and hedging activities by requiring enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS 133
and its related interpretations and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance and
cash flows.  The provisions of SFAS 161 are effective for fiscal years
beginning after November 15, 2008.  SFAS 161 will be effective for
Kushi on March 1, 2009.  Management is currently evaluating the impact
adoption of SFAS 161 may have on Kushi’s financial statement
disclosures.





PLAN
OF OPERATION





Exploration
Plan





Kushi’s
plan of operation for the next 12 months is to complete the following objectives
within the time periods specified, subject to obtaining any additional funding
necessary for the continued exploration of the Bee Peak Claim.  Kushi
does not have enough funds to complete its proposed three phase mineral
exploration program, which management plans to complete in the summer of 2010 if
the results of Kushi’s Phase One and Phase Two exploration programs are
encouraging.  The following is a brief summary of Kushi’s three phase
mineral exploration program.




Page
- 16





1.
            The
      anniversary date of the Bee Peak Claim was is January 30, 2008, Kushi paid
      $1,635 (CDN $1,643) to the Province of British Columbia, in lieu of filing
      exploration expenses, in order to keep the Bee Peak Claim in good standing
      until January 30, 2009.





2.
            As
      recommended by Kushi’s consulting geological technician, management
      intends to commence Phase One of the mineral exploration program in June
      2008.  Phase One is expected to cost approximately $26,200
      (CDN$25,700).  Kushi will conduct a review of the available
      geochemical data for the region to help focus exploration initiatives,
      including the Regional Geochemical Survey data from the area close to the
      Bee Peak Claim.  Next, a suitably equipped and experienced
      prospecting team will helicopter onto the Bee Peak Claim and will stay for
      a period of 14 days.  During this period the crew will generally
      survey the Bee Peak Claim seeking any outcroppings and locating
      streams.  An outcropping is a part of a rock formation that
      appears above the surface of the surrounding land.  The crew
      will use global positioning equipment and take a total of 80 samples,
      including rock, stream sediment, and stream sediment panned concentrate
      samples.  All samples will be bagged and tagged for location,
      date and time for later analysis.  After this period is over the
      crew will return to Atlin by
helicopter.





3.
            The
      samples obtained during Phase One of the mineral exploration program will
      be analyzed and considered with reference to the regional
      database.  Kushi will review the results of Phase One in the
      winter of 2008.  Kushi will engage a consulting geologist to
      interpret the results of Phase One.  If Kushi is able to
      identify favorable rock formations and structures with elevated metal
      values it will plan and conduct Phase Two of the mineral exploration
      program.





4.
            If
      Phase Two of the mineral exploration program were to proceed, Kushi’s
      consulting geological technician has indicated that Kushi should budget
      approximately $66,000 (CDN $65,000) for Phase Two, but depending on
      efficiencies, field conditions and the scope of surveys, and trenching,
      the budget may be closer to $153,000 (CDN $150,000).  If Kushi
      proceeds with Phase Two it would do so between June and September
      2009.  A prospector and geologist will helicopter onto the Bee
      Peak Claim and will stay for a period of 10 days.  During this
      period the crew will use global positioning equipment and will obtain 50
      samples from locations that are to be determined during the Phase One
      review.  All samples will be bagged and tagged for location,
      date and time for later analysis.  Also, the program will
      include further rock and soil geochemistry sampling, a limited amount of
      trenching using hand tools and dynamite, additional geochemical sampling,
      and simple geophysical survey methods.  After this period is
      over the crew will return to Atlin by
  helicopter.





5.
            In
      the case that Phase Two of the mineral exploration program takes place,
      Kushi will review the results in the winter of 2009.  If Kushi
      is able to continue to confirm elevated metal values at specific hand
      drilled targets it will consider Phase Two a success and would plan for
      Phase Three of the mineral exploration program.  Phase Three is
      expected to cost at least $195,000 (CDN $191,000) and will be speculative,
      depending on the location and configuration of the mineral
      zones.  It is likely that further geophysical surveys with
      different techniques or more densely spaced observations will be required
      to assist in designing a program of diamond drill holes to test the deeper
      potential of the best parts of the Bee Peak Claim.  Costs,
      including, the cost of a limited drilling campaign, are difficult to
      estimate but in a somewhat remote area like the Bee Peak Claim are likely
      to be fairly high.  At this stage, Kushi would seek to link with
      a major resource company in a joint venture relationship in recognition of
      financing requirements.  If Kushi goes ahead with Phase Three it
      would commence in June 2010.





Management
intends to commence Phase One of the mineral exploration program in June
2008.  Kushi’s consulting geologist has informed Kushi that a
geological survey of the Bee Peak Claim will cost approximately
$23,000.





At
February 29, 2008, Kushi had a cash balance of $1,916.  Kushi will
have to raise additional funds to pay for Phase One of the mineral exploration
program.





During
the next 12 months, management does not anticipate generating any revenue and
additional funds will be required.  The additional funding will come
from equity financing from the sale of Kushi’s common stock, advances from
Kushi’s President, advances from third parties, or sale of part of Kushi’s
interest in the Bee Peak Claim.  If Kushi is successful in completing
an equity financing, existing shareholders will experience dilution of their
interest in Kushi.  Kushi does not have any financing arranged and it
cannot provide investors with any assurance that it will be able to raise
sufficient funding from the sale of its common stock to fund the mineral
exploration program.  In the absence of such financing, Kushi’s
business will fail.




Page
- 17





Kushi may
consider entering into a joint venture partnership by linking with a major
resource company to provide the required funding to complete Phase Three of the
mineral exploration program.  Kushi has not undertaken any efforts to
locate a joint venture partner for Phase Three.  If Kushi enters into
a joint venture arrangement, it will assign a percentage of its interest in the
Bee Peak Claim to the joint venture partner.





Based on
the nature of Kushi’s business, management anticipates incurring operating
losses in the foreseeable future.  Management bases this expectation,
in part, on the fact that very few mineral claims in the exploration stage
ultimately develop into producing, profitable mines.  Kushi’s future
financial results are also uncertain due to a number of factors, some of which
are outside Kushi’s control.  These factors include, but are not
limited to:





a)           Kushi’s
ability to raise additional funding;


b)           the
market price for minerals;


c)           the
results of Kushi’s proposed exploration programs on the Bee Peak Claim;
and


d)
            Kushi’s
      ability to find joint venture partners for the development of Kushi’s
      interest in the Bee Peak Claim.





Due to
Kushi’s lack of operating history and present inability to generate revenues,
Kushi’s auditors have stated in their opinion that there currently exists
substantial doubt about Kushi’s ability to continue as a going
concern.  Even if Kushi completes its current exploration program and
is successful in identifying a mineral deposit, Kushi will have to spend
substantial funds on further drilling and engineering studies before it will
know if it has a commercially viable mineral deposit or reserve.





Transportation
Purchase Plan





The
transportation costs of Phase One are comprised of helicopter service from Atlin
to the Bee Peak Claim.  For Phase One, $7,050 (CDN$6,900) will be
budgeted to allow for four hours of helicopter trips from Atlin, British
Columbia to the Bee Peak Claim and for travel expenses to review files at the
Geological Survey Branch in Victoria and Vancouver, British
Columbia.  Also included in the budget will be the mobilization costs
to and from the Atlin mining district.





Equipment
Purchase Plan





Kushi
will purchase camp equipment and prospecting supplies for Phase
One.  The expected cost of the camp equipment such as tents, stove,
and other typical camping equipment will be $1,020 (CDN$1,000).





Consumable
Purchase Plan





Kushi
will purchase consumables including groceries and propane to provide for two
persons for 14 days for Phase One of the mineral exploration
program.  The expected cost of these consumables will be $1,020
(CDN$1,000).





Employee
hiring (Labor) Plan





Kushi
will not hire any employees.  Kushi will use two consulting
prospectors to perform Phase One of the mineral exploration
program.  The expected cost of each prospector is $335 (CDN $330) per
day.  Kushi has budgeted to pay each prospector for 14 days to conduct
Phase One plus additional wages to complete a review of the regional
database.  The expected cost of labor for Phase One will be $10,500
(CDN $10,300).





Sample
Analysis Plan





Kushi
plans to allow for the analysis for up to 80 samples.  The estimated
cost of each sample is $21 (CDN $20) per sample.  The expected cost
for sample analysis will be $1,630 (CDN $1,600) for the Phase One exploration
program.  Also, Kushi will budget for $1,020 (CDN $1,000) for the
assembling and reporting results of the field work and an additional $510 (CDN
$500) for the purchase of maps, air photographs and publications to be reviewed
in conjunction with the regional database.





Phase
One Exploration Cost Review





The costs
described above, which include transportation, equipment, consumables, labor,
and sample analysis, make up the entire cost of Phase One of the mineral
exploration program.  All the costs described above are estimated so
Kushi has provided for a 15% contingency allowance for unanticipated and wrongly
estimated costs.  The table below summarizes the cost estimate for
Phase One of the mineral exploration program.




Page
- 18







Phase
      One Exploration Items
            Cost
      EstimateTransportation
            $                    7,050Equipment
            1,020Consumables
            1,020Labor
            10,500Sample
      Analysis
            3,160Contingency
      (15%)
            3,450Phase
      One Total
            $                  26,200





Accounting
and Audit Plan





Management
intends to continue to have Kushi’s outside consultant assist in the preparation
of Kushi’s quarterly and annual financial statements and have these financial
statements reviewed or audited by Kushi’s independent
auditor.  Kushi’s outside consultant is expected to charge
approximately $1,000 to prepare Kushi’s quarterly financial statements and
approximately $5,000 to prepare Kushi’s annual financial
statements.  Kushi’s independent auditor is expected to charge
approximately $1,500 to review Kushi’s quarterly financial statements and
approximately $7,500 to audit Kushi’s annual financial statements.  In
the next 12 months, management anticipates spending approximately $20,000 to pay
for Kushi’s accounting and audit requirements.





Risks
and Uncertainties





There are
a number of known material risks and uncertainties that are reasonably likely to
have a material impact on Kushi’s revenues, operations, liquidity and income
over the short and long term.  The primary risk that Kushi faces over
the long term is that the Bee Peak Claim may not contain a commercially viable
mineral deposit.  If the Bee Peak Claim does not contain a
commercially viable deposit this will have a material effect on Kushi’s ability
to earn revenue and income as it will not be able to sell any
minerals.




There are
a number of industry-wide risk factors that may affect Kushi’s
business.  The most significant industry-wide risk factor is that
mineral exploration is an inherently risky business.  Very few
exploration companies go on to discover economically viable mineral deposits or
reserves that ultimately result in an operating mine.  In order for
Kushi to commence mining operations it faces a number of challenges, which
include finding qualified professionals to conduct Kushi’s proposed mineral
exploration program, obtaining adequate financing to continue Kushi’s proposed
mineral exploration program, locating a viable ore body, partnering with a
senior mining company, obtaining mining permits, and ultimately selling minerals
in order to generate revenue.





Another
important industry-wide risk factor is that the price of commodities can
fluctuate based on world demand and other factors.  For example, if
the price of a mineral were to dramatically decline this could make Kushi’s ore
uneconomical to mine.  Kushi and other companies in the mineral
exploration business are relying on a price of ore that will allow it to develop
a mine and ultimately generate revenue by selling minerals.





Additionally,
because the Bee Peak Claim is in a remote region of Canada and in an area of
inclement weather Kushi faces risks and uncertainties relating to the operation
of Kushi’s proposed mineral exploration program.  This presents both a
short and long term risk to Kushi in that poor weather could delay the proposed
mineral exploration program and prevent Kushi from exploring the Bee Peak Claim
as planned.  This is a risk shared by many exploration companies in
the same business.  Kushi has the ability to monitor weather
predictions and can preserve capital by not sending exploration crews out in
poor weather conditions.  However, such weather delays could cause
Kushi to not be able to explore the Bee Peak Claim and not be able to file valid
exploration work with the Province of British Columbia.  Failure to
file valid exploration work would mean Kushi would have to pay the Province of
British Columbia in lieu of exploration in order to keep title to the Bee Peak
Claim.  Payments in lieu of exploration are generally not an efficient
use of funds since it does not advance the understanding of a potential mineral
deposit.  However, these payments are sometimes required in Kushi’s
business.




Page
- 19





Finally,
Kushi faces a risk of not being able to finance its proposed mineral exploration
program.  With each unsuccessful attempt at locating a commercially
viable mineral deposit Kushi becomes more and more unattractive in the eyes of
investors.  Currently, Kushi does not have sufficient funds to
complete Phase One of Kushi’s proposed mineral exploration
program.  Kushi will need to raise the additional financing to
complete its proposed mineral exploration program.  Without adequate
financing Kushi cannot operate exploration programs.  However, this
risk is faced by all exploration companies and it is not unique to
Kushi.





OPERATIONS
REVIEW





During
the year ended February 29, 2008, Kushi had a net loss of $52,206 or a net loss
of $0.01 per share.  As of February 29, 2008, Kushi’s current assets
consisted of cash of $1,916.  When this cash balance is offset against
Kushi’s current obligations of $3,575 in accounts payable, $3,180 in accrued
administrative fees, $7,159 in accrued professional fees and $6,051 that is due
to Kushi’s President, Rajan Rai, Kushi is left with a working capital deficit of
$18,049.  Management believes Kushi’s cash position as of the date of
this filing is inadequate to satisfy Kushi’s working capital
needs.  Over the next 12 months management anticipates that Kushi’s
operating costs will be approximately $80,000.





Over the
next 12 months, management does not anticipate generating any
revenue.  Management plans to fund Kushi’s operations through equity
financing from the sale of Kushi’s shares of common stock, advances from Kushi’s
President or other third parties, or through the sale of a part interest in the
Bee Peak Claim.  Kushi does not have any financing arranged and cannot
provide any assurance that it will be able to raise sufficient funding from the
sale of its shares of common stock or that it will be able to sell a part
interest in the Bee Peak Claim, to cover Kushi’s general and administrative
expenses or to fund Phase One of the proposed mineral exploration
program.





Kushi may
consider entering into a joint venture partnership with a major resource company
to provide the required funding to complete any of the phases of the proposed
mineral exploration program.  Although Kushi has not attempted to
locate a joint venture partner, if it enters into a joint venture arrangement,
it would assign a percentage of Kushi’s interest in the Bee Peak Claim to
Kushi’s joint venture partner.





Related-Party
Transactions





At
February 29, 2008, Kushi was indebted to its President in the amount of $6,051
for expenses he paid on Kushi’s behalf and for funds he advanced to us to cover
certain expenses.  This debt is unsecured, bears no interest and has
no fixed terms of repayment.





From
inception to the date of this filing Kushi’s director performed his services
without compensation and at the date of this filing Kushi has not determined how
Kushi’s director will be compensated.





The Bee
Peak Claim is registered in the name of Kushi’s director and pursuant to a trust
agreement is held in trust on Kushi’s behalf.





Results
of Operations





Comparison
of the Years Ended February 29, 2008 and February 28, 2007.





Overall
Results of Operations





During
the year ended February 29, 2008, Kushi had a net loss of $52,206 primarily due
to professional and administrative fees.  Over the next 12 months
management expects Kushi’s operating losses to increase to approximately
$80,000.





Revenues





Kushi did
not have any operating revenues from inception (October 3, 2005) to the date of
this filing.  To date Kushi’s activities have been financed through
the proceeds of share subscriptions and funds advanced to it by Kushi’s
President.  Due to the nature of Kushi’s business management does not
expect to have operating revenues within the next year.





Page
- 20











Operating
Expenses





Kushi’s
operating expenses increased by $34,294 or 191% from $17,912 for the year ended
February 28, 2007 to $52,206 for the year ended February 29,
2008.  The increase was primarily due to an increase in professional
fees of approximately $42,000 for legal and audit fees associated with
preparation of the Form SB-2 – Registration Statement.  This increase
was partially offset by the decrease in exploration and development costs of
approximately $6,000.  During the year ended February 28, 2007 Kushi
recognized approximately $8,000 in donated rent and services, as opposed to
recognizing approximately $6,500 in administrative fees during the year ended
February 29, 2008 which covered Kushi’s rent, accounting and administrative
services for the year.





Over the
next 12  months we anticipate that Kushi’s operating costs will be
approximately $80,000, which includes the estimated cost of Phase One of Kushi’s
mineral exploration program of $26,200 (CDN$25,700), $8,000 in administration
costs, and $45,800 in professional fees related to filing
requirements.





OFF-BALANCE-SHEET
ARRANGEMENTS





Kushi has
no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on Kushi’s financial condition, changes in financial
condition, revenue or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to Kushi’s
investors.  Kushi does not have any non-consolidated, special-purpose
entities.





LIQUIDITY,
CAPITAL RESOURCES AND FINANCIAL POSITION





At
February 29, 2008, Kushi had a cash balance of $1,916 and used $36,741 in cash
for operations.  To date Kushi has funded its operations with cash
that it received from the sale of Kushi’s common stock and advances from Kushi’s
President.





In the
notes to Kushi’s February 29, 2008 financial statements, Kushi discloses its
uncertain ability to continue as a going concern.  Kushi has not and
does not expect to generate any revenues to cover its expenses while it is in
the exploration stage and as a result Kushi has accumulated a deficit of $74,549
since inception.  At February 29, 2008, Kushi had $19,965 in current
liabilities, and when Kushi’s current liabilities are offset against Kushi’s
current assets of $1,916, Kushi is left with a working capital deficit of
$18,049.  Kushi’s ability to achieve and maintain profitability and
positive cash flows is dependent upon Kushi’s ability to locate profitable
mineral properties, generate revenues from Kushi’s mineral production and
control production costs.  Based upon current plans, management
expects to incur operating losses in future periods.  These factors
raise substantial doubt regarding Kushi’s ability to continue as a going
concern.  There is no assurance that Kushi will be able to generate
revenues in the future.  Kushi’s financial statements do not give
effect to any adjustments that would be necessary should it be unable to
continue as a going concern and therefore be required to realize Kushi’s assets
and discharge Kushi’s liabilities in other than the normal course of business
and at amounts different from those reflected in the accompanying financial
statements.  While Kushi has successfully generated sufficient working
capital through the sale of common stock and advances from Kushi’s President to
the date of this filing and management believes that Kushi can continue to do so
for the next year, there are no assurances that it will succeed in generating
sufficient working capital through the sale of Kushi’s common stock or from
private loans or advances.





Net
Cash Used In Operating Activities





Net cash
used in operating activities during the year ended February 29, 2008, was
$36,741.  During the year ended February 29, 2008, Kushi used $2,500
in cash to pay its accrued exploration fees.  Kushi’s operating costs
were partially funded by increases in accounts payable of $3,575, accrued
administrative fees of $2,180, accrued professional fees of $6,659 and funds
advanced by Kushi’s President of $5,551.





Net
Cash Used in Investing Activities





Kushi did
not have any investing activities during the year ended February 29,
2008.





Net
Cash Provided By Financing Activities





Kushi did
not have any financing activities during the year ended February 29,
2008.








Page
- 21








INCOME
TAXES





The
following table sets out Kushi’s deferred tax assets as of February 29, 2008 and
February 28, 2007.  Kushi has established a 100% valuation allowance,
as management believes it is more likely than not that the deferred tax assets
will not be realized.





2008
            
            
            2007Federal
      loss carryforwards (estimated at 35%)
            
            $
            26,092
            
            
            $
            7,597Less:
      valuation allowance
            
            $
            (26,092
            )
            
            $
            (7,597
            )$
            -
            
            
            $
            -





Kushi
established a 100% valuation allowance against its deferred tax assets based on
Kushi’s current operating results.  If Kushi’s operating results
improve significantly, Kushi may have to record its deferred taxes in its
financial statements, which could have a material impact on Kushi’s financial
results.





CONTINGENCIES
AND COMMITMENTS





Kushi did
not have any contingencies or long-term commitments at February 29,
2008.





CONTRACTUAL
OBLIGATIONS





Kushi did
not have any contractual obligations at February 29, 2008.





INTERNAL
AND EXTERNAL SOURCES OF LIQUIDITY





To date
Kushi has funded its operations from the sale of its common stock.





FOREIGN
EXCHANGE





Kushi is
subject to foreign exchange risk for transactions denominated in foreign
currencies.  Foreign currency risk arises from the fluctuation of
foreign exchange rates and the degree of volatility of these rates relative to
the United States dollar.  Management does not believe that Kushi has
any material risk due to foreign currency exchange.





INFLATION





Management
does not believe that inflation will have a material impact on Kushi’s future
operations.







Page
- 22





Item
7.                      Financial
Statements




Audited Financial Statements as of
February 28, 2008
   Kushi Resources
Inc.
   (an exploration stage
company)
   FINANCIAL
STATEMENTS
       REPORT OF INDEPENDENT REGISTERED
      ACCOUNTING FIRM
              F-1BALANCE
      SHEET
              F-2STATEMENTS OF
      OPERATIONS
              F-3STATEMENTS OF STOCKHOLDERS
      DEFICIT
              F-4STATEMENTS OF CASH
      FLOWS
              F-5NOTES TO FINANCIAL
      STATEMENTS
              F-6
  
   Page
- 24







Madsen
& Associates CPA’s, Inc.
 684 EAST
VINE STREET #3
 MURRAY,
UTAH 84107
 TELEPHONE
(801) 268-2632
 FAX (801)
262-3978
 TED A.
MADSEN,
CPA                                                                                                
MEMBER:                      
AMERICAN INSTITUTE OF
 CERTIFIED PUBLIC
ACCOUNTANTS
 
 UTAH ASSOCIATION OF
 CERTIFIED PUBLIC
ACCOUNTANTS


Board of
Directors


Kushi
Resources Inc.








Report of Independent Registered Accounting Firm





We have
audited the accompanying balance sheets of Kushi Resources Inc. (the Company),
as of February 29, 2008 and February 28, 2007 and the statements of operations,
stockholders’ equity, and cash flows for the years ended February 29, 2008 and
February 28, 2007 and for the period from October 3, 2005 (inception) to
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 audit.





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





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Kushi Resources Inc. as of
February 29, 2008 and February 28, 2007, and the results of its operations and
cash flows for the years ended February 29, 2008 and February 28, 2007 and for
the period from October 3, 2005 (inception) to February 29, 2008, in conformity
with accounting principles generally accepted in the United States of
America.





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  As disclosed in the consolidated
financial statements and notes to the consolidated financial statements, the
Company will need additional working capital for its planned activity and to
service its debt.  This raises substantial doubt about the Company’s
ability to continue as a going concern.  Management’s plans in regard
to these matters are described in the notes to the consolidated financial
statements.  The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.








/s/
Madsen & Associates CPA’s, Inc.





Madsen
& Associates CPA’s, Inc.


May 29,
2008


Salt Lake
City, Utah








F
- 1


KUSHI
RESOURCES INC.
 (AN
EXPLORATION STAGE COMPANY)
 BALANCE SHEETS


February
      29,
            
            
            February
      28,2008
            
            
            2007ASSETSCurrent
      assets:Cash
            $
            1,916
            
            
            $
            38,657Total
      assets
            $
            1,916
            
            
            $
            38,657LIABILITIES
      AND STOCKHOLDERS' (DEFICIT) EQUITYCurrent
      liabilities:Accounts
      payable
            $
            3,575
            
            
            $
            -Accrued
      administrative fees
            
            3,180
            
            
            
            1,000Accrued
      exploration fees
            
            -
            
            
            
            2,500Accrued
      professional fees
            
            7,159
            
            
            
            500Due
      to related party
            
            6,051
            
            
            
            500Total
      liabilities
            
            19,965
            
            
            
            4,500Commitments
      and contingenciesStockholders'
      (deficit) equity:Common
      stock; authorized 75,000,000; $0.001 par value; 5,230,000issued
      and outstanding at February 29, 2008 and February 28, 2007
            
            5,230
            
            
            
            5,230Additional
      paid in capital
            
            51,270
            
            
            
            51,270Deficit
      accumulated during the exploration stage
            
            (74,549
            )
            
            
            (22,343
            )Total
      stockholders' (deficit) equity
            
            (18,049
            )
            
            
            34,157Total
      liabilities and stockholders' (deficit) equity
            $
            1,916
            
            
            $
            38,657


The
accompanying notes are an integral part of these financial
statements







F
- 2








KUSHI
RESOURCES INC.


(AN
EXPLORATION STAGE COMPANY)


STATEMENTS OF OPERATIONS





FromYear
      ended
            
            
            Year
      ended
            
            
            October
      3, 2005February
      29,
            
            
            February
      28,
            
            
            (Inception)
      to2008
            
            
            2007
            
            
            February
      29, 2008Operating
      Expenses:Administrative
            $
            6,450
            
            
            $
            1,000
            
            
            $
            7,450Bank
      charges and interest
            
            361
            
            
            
            212
            
            
            
            611Donated
      rent
            
            -
            
            
            
            2,750
            
            
            
            4,000Donated
      services
            
            -
            
            
            
            5,500
            
            
            
            8,000Exploration
      and development costs
            
            1,824
            
            
            
            7,625
            
            
            
            9,592Professional
      fees
            
            42,571
            
            
            
            500
            
            
            
            43,071Regulatory
            
            1,000
            
            
            
            325
            
            
            
            1,825Net
      loss
            $
            52,206
            
            
            $
            17,912
            
            
            $
            74,549Net
      loss per share:Basic
      and diluted
            $
            (0.01
            )
            
            $
            (0.00
            )Weighted
      average number of shares outstanding:Basic
      and diluted
            
            5,230,000
            
            
            
            5,313,507


The
accompanying notes are an integral part of these financial
statements









F
- 3




KUSHI
RESOURCES INC.
 (AN
EXPLORATION STAGE COMPANY)
 STATEMENT
OF STOCKHOLDERS' DEFICIT
 FOR
THE PERIOD FROM OCTOBER 3, 2005 (INCEPTION) TO FEBRUARY 29, 2008


DeficitCommon
      Stock Issued
            AccumulatedAdditional
            During
      theNumber
      of
            
            Paid-in
            ExplorationShares
            Amount
            Capital
            Stage
            TotalBalance
      at October 3,  2005 (Inception)
            -
            $                      -
            $                          -
            $                               -
            $                        -Common
      stock issued for cash
            5,350,000
            5,350
            39,150
            -
            44,500Donated
      services and rent
            -
            -
            3,750
            -
            3,750Net
      loss
            -
            -
            -
            (4,431)
            (4,431)Balance
      at February 28, 2006
            5,350,000
            5,350
            42,900
            (4,431)
            43,819Common
      stock returned to treasury
            (105,000)
            (105)
            (3,945)
            -
            (4,050)Common
      stock issued from treasury for cash
            105,000
            105
            5,145
            -
            5,250Common
      stock cancelled
            (120,000)
            (120)
            (1,080)
            -
            (1,200)Donated
      services and rent
            -
            -
            8,250
            -
            8,250Net
      loss
            -
            -
            -
            (17,912)
            (17,912)Balance
      at February 28, 2007
            5,230,000
            5,230
            51,270
            (22,343)
            34,157Net
      loss
            -
            -
            -
            (52,206)
            (52,206)Balance
      at February 29, 2008
            5,230,000
            $              5,230
            $                 51,270
            $                   (74,549)
            $             (18,049)




The
accompanying notes are an integral part of these financial
statements







F
- 4


KUSHI
RESOURCES INC.
 (AN
EXPLORATION STAGE COMPANY)
 STATEMENTS OF CASH FLOWS


FromYear
      ended
            
            
            Year
      ended
            
            
            October
      3, 2005February
      29,
            
            
            February
      28,
            
            
            (Inception)
      to2008
            
            
            2007
            
            
            February
      29, 2008Cash
      flow from operating activities:Net
      loss
            $
            (52,206
            )
            
            $
            (17,912
            )
            
            $
            (74,549
            )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Donated
      rent and services
            
            -
            
            
            
            8,250
            
            
            
            12,000Changes
      in operating assets and liabilities:
            
            
            
            
            
            
            
            
            
            -Accounts
      payable
            
            3,575
            
            
            
            -
            
            
            
            3,575Accrued
      administrative fees
            
            2,180
            
            
            
            1,000
            
            
            
            3,180Accrued
      exploration fees
            
            (2,500
            )
            
            
            2,500
            
            
            
            -Accrued
      professional fees
            
            6,659
            
            
            
            500
            
            
            
            7,159Due
      to related party
            
            5,551
            
            
            
            -
            
            
            
            6,051Net
      cash used in operating activities
            
            (36,741
            )
            
            
            (5,662
            )
            
            
            (42,584
            )Cash
      flows from financing activitiesCash
      from issuance of common stock
            
            -
            
            
            
            -
            
            
            
            44,500Cash
      paid on cancellation of common stock
            
            -
            
            
            
            (1,200
            )
            
            
            (1,200
            )Cash
      from issuance of common stock
            
            -
            
            
            
            5,250
            
            
            
            5,250Cash
      paid on cancellation of common stock
            
            -
            
            
            
            (4,050
            )
            
            
            (4,050
            )Net
      cash provided by financing activities
            
            -
            
            
            
            -
            
            
            
            44,500(Decrease)
      increase in cash during the period
            
            (36,741
            )
            
            
            (5,662
            )
            
            
            1,916Cash,
      beginning of period
            
            38,657
            
            
            
            44,319
            
            
            
            -Cash,
      end of period
            $
            1,916
            
            
            $
            38,657
            
            
            $
            1,916Supplemental
      disclosure of cash flow information:Cash
      paid during the periodTaxes
            $
            -
            
            
            $
            -
            
            
            $
            -Interest
            $
            -
            
            
            $
            -
            
            
            $
            -


The
accompanying notes are an integral part of these financial
statements







F
- 5







KUSHI RESOURCES
INC.
 (AN
EXPLORATION STAGE COMPANY)
 NOTES TO THE FINANCIAL STATEMENTS
 February
29, 2008





NOTE
1 – ORGANIZATION AND BASIS OF PRESENTATION




Nature
of Operations





Kushi
Resources Inc. (“Kushi”) was incorporated on October 3, 2005, under the laws of
the State of Nevada. Kushi’s principal business is the acquisition and
exploration of mineral resources in northern British Columbia,
Canada.  Kushi has not presently determined whether its properties
contain mineral reserves that are economically recoverable.  Kushi has
not commenced significant operations and is considered an Exploration Stage
Company, as defined by Statement of Financial Accounting Standard (“SFAS”) No.7
Accounting and Reporting by
Development Stage Enterprises.  In these notes, the terms
“Company”, “we”, “us” or “our” mean Kushi.





Exploration
Stage





These
financial statements and related notes are presented in accordance with
accounting principles generally accepted in the United States of America, and
are expressed in United States dollars.  The Company has not produced
any revenues from its principal business and is an exploration stage company as
defined by Statement of Financial Accounting Standard (SFAS) No. 7.





The
Company is in the early exploration stage.  In an exploration stage
company, management devotes most of its time to conducting exploratory work and
developing its business.  These financial statements have been
prepared on a going concern basis, which implies the Company will continue to
realize its assets and discharge its liabilities in the normal course of
business.  The Company has never paid any dividends and is unlikely to
pay dividends or generate earnings in the immediate or foreseeable
future.  The Company’s continuation as a going concern and its ability
to emerge from the exploration stage with any planned principal business
activity is dependent upon the continued financial support of its shareholders
and its ability to obtain the necessary equity financing and attain profitable
operations.





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Cash
and Cash Equivalents





For
purposes of the balance sheet and statement of cash flows, the Company considers
all amounts on deposit with financial institutions and highly liquid investments
with maturities of 90 days or less to be cash equivalents.  At
February 29, 2008, the Company did not have any cash equivalents.





Foreign
Currency Translation





The
Company’s functional and reporting currency is the United States
dollar.  Monetary assets and liabilities denominated in foreign
currencies are translated in accordance with SFAS No. 52 Foreign Currency Translation,
using the exchange rate prevailing at the balance sheet date. Gains and losses
arising on settlement of foreign currency denominated transactions or balances
are included in the determination of income.  Foreign currency
transactions are primarily undertaken in Canadian dollars.  The
Company has not to the date of these financial statements, entered into
derivative instruments to offset the impact of foreign currency
fluctuations.





Comprehensive
Income (Loss)





Comprehensive
Income (loss) reflects changes in equity that results from transactions and
economic events from non-owner sources.  At February 29, 2008 and
February 28, 2007, the Company has no items that represent a comprehensive
income (loss) and, therefore, has not included a schedule of comprehensive
income (loss) in the financial statements.




F
- 6






KUSHI RESOURCES
INC.
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE FINANCIAL STATEMENTS
 February
29, 2008





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued





Mineral
Property Costs




The
Company has been in the exploration stage since its inception on October 3, 2005
and has not yet realized any revenues from its planned operations.  It
is primarily engaged in the acquisition and exploration of mining
properties.  Mineral property exploration costs are expensed as
incurred.  Mineral property acquisition costs are initially
capitalized when incurred using the guidance in the Emerging Issues Task Force
(EITF) 04-02, Whether Mineral
Rights are Tangible or Intangible Assets.The Company assesses
the carrying costs for impairment under SFAS No. 144, Accounting for Impairment or
Disposal of Long Lived Assets at each fiscal quarter end.  An
impairment is recognized when the sum of the expected undiscounted future cash
flows is less than the carrying amount of the mineral
property.  Impairment losses, if any, are measured as the excess of
the carrying amount of the mineral property over its estimated fair
value.




When it
has been determined that a mineral property can be economically developed as a
result of establishing proven and probable reserves, the costs then incurred to
develop such property, are capitalized.  Such costs will be amortized
using the units-of-production method over the estimated life of the probable
reserves.  If mineral properties are subsequently abandoned or
impaired, any capitalized costs will be charged to operations.





Asset
Retirement Obligations





SFAS No.
143 (SFAS 143), Accounting for
Asset Retirement Obligations addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs.    Specifically, SFAS
143 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made.  In addition, the asset retirement
cost is capitalized as part of the asset’s carrying value and subsequently
allocated to expense over the asset’s useful life.  At February 29,
2008, the Company did not have any asset retirement obligations.





Financial
Instruments





Foreign
Exchange Risk





The
Company is subject to foreign exchange risk for transactions denominated in
foreign currencies.  Foreign currency risk arises from the fluctuation
of foreign exchange rates and the degree of volatility of these rates relative
to the United States dollar.  The Company does not believe that it has
any material risk due to foreign currency exchange.





Fair
Value of Financial Instruments





The
Company’s financial instruments include cash, accounts payable, accrued
administrative fees and accrued professional fees.  The fair value of
these financial instruments approximate their carrying values due to their short
maturities.





Concentration
of Credit Risk





Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash deposits. At February 29, 2008 and
February 28, 2007, the Company had approximately $2,000 and $39,000,
respectively in cash that was not insured.  This cash is on deposit
with a major chartered Canadian bank.  As part of its cash management
process, the Company performs periodic evaluations of the relative credit
standing of this financial institution.  The Company has not
experienced any losses in cash balances and does not believe it is exposed to
any significant credit risk on its cash.




F
- 7




KUSHI RESOURCES
INC.
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE FINANCIAL STATEMENTS
 February
29, 2008






NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued




Accounting
Estimates





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





The
Company’s financial statements are based on a number of estimates, including
accruals for estimated administrative and professional fees.





Income
Taxes





Income
tax expense is based on pre-tax financial accounting income.  Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets, including tax loss and credit carryforwards, and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.  Deferred income tax expense represents the change
during the period in the deferred tax assets and deferred tax liabilities. The
components of the deferred tax assets and liabilities are individually
classified as current and non-current based on their characteristics. Deferred
tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized.





Basic
and Diluted Net (Loss) Per Common Share (“EPS”)





Basic net
(loss) per share is computed by dividing the net (loss) attributable to the
common stockholders by the weighted average number of common shares outstanding
during the reporting period.  Diluted net income per common share
includes the potential dilution that could occur upon exercise of the options
and warrants to acquire common stock computed using the treasury stock method
which assumes that the increase in the number of shares is reduced by the number
of shares which could have been repurchased by the Company with the proceeds
from the exercise of the options and warrants (which were assumed to have been
made at the average market price of the common shares during the reporting
period).





Potential
common shares are excluded from the diluted loss per share computation in net
loss periods as their inclusion would be anti-dilutive.





At
February 29, 2008 and February 28, 2007, the Company had issued 5,230,000 common
shares and had no outstanding options or warrants.











F
- 8








KUSHI RESOURCES
INC.
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE FINANCIAL STATEMENTS
 February
29, 2008








NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued




Stock-Based
Compensation





In
December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No.
123(R), Share-Based
Payment (SFAS 123(R)), which is a revision of SFAS No. 123, Accounting for Stock-Based
Compensation.  SFAS 123(R) was effective for public companies
for the first fiscal year beginning after June 15, 2005, supersedes Accounting
Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to
Employees, and amends SFAS 95, Statement of Cash
Flows.  SFAS 123(R) eliminates the option to use APB 25’s
intrinsic value method of accounting and requires recording expense for stock
compensation based on a fair value based method.





The
adoption of SFAS 123(R) did not have a material effect on the Company’s
financial condition or results of operations because since inception the Company
has not entered into any share-based transactions.





Reclassifications





Certain
amounts from 2007 have been reclassified to conform to current year
presentation.







Recent
Accounting Pronouncements




In
September 2006, the FASB issued SFAS No. 157 (SFAS 157), Fair Value
Measurements. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosure requirements about
fair value measurements. SFAS 157 will be effective for the Company on March 1,
2008. The adoption of SFAS 157 is not expected to have a material impact on our
financial statements.





In
September 2006, the FASB issued SFAS 158 (SFAS 158), Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R). This statement requires an
employer to recognize the over funded or under funded status of a defined
benefit postretirement plan as an asset or liability in its statement of
financial position and to recognize changes in that funded status in the year in
which the changes occur through comprehensive income of a business entity. This
statement also requires an employer to measure the funded status of a plan as of
the date of its year end statement of financial position, with limited
exceptions. The Company was required to initially recognize the funded status of
a defined benefit postretirement plan and to provide the required disclosures as
of the end of the fiscal year ending after December 15,
2006.  The requirement to measure plan assets and benefit obligations
as of the date of the employer’s fiscal year end statement of financial position
is effective for fiscal years ending after December 15, 2008, or February
28, 2009 for the Company. Adoption of SFAS 158 is not expected to have a
material impact on our financial statements.








F
- 9





KUSHI RESOURCES
INC.
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE FINANCIAL STATEMENTS
 February
29, 2008





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued





Recent
Accounting Pronouncements, continued




In
February 2007, the FASB issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement
No. 115. SFAS 159 permits entities to choose to measure
many financial instruments and certain other items at fair value. Unrealized
gains and losses on items for which the fair value option has been elected will
be recognized in earnings at each subsequent reporting date. SFAS 159 will be
effective for the Company on March 1, 2008. Adoption of SFAS 159 is not expected
to have a material impact on the Company’s financial statements.






In
June 2007, the EITF of the FASB reached a consensus on Issue No. 07-3,
Accounting for Nonrefundable
Advance Payments for Goods or Services Received for Use in Future Research and
Development Activities(EITF 07-3). EITF 07-3 requires that
non-refundable advance payments for goods or services that will be used or
rendered for future research and development activities must be deferred and
capitalized.  As the related goods are delivered or the services are
performed, or when the goods or services are no longer expected to be provided,
the deferred amounts must be recognized as an expense.  This issue is
effective for financial statements issued for fiscal years beginning after
December 15, 2007 and earlier application is not permitted. This consensus
is to be applied prospectively for new contracts entered into on or after the
effective date.  EITF 07-03 will be effective for the Company on March
1, 2008.  The pronouncement is not expected to have a material effect
on our financial statements.




In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations(SFAS
141(R)), which replaces SFAS 141, Business
Combinations.  SFAS 141(R) requires an acquirer to recognize
the assets acquired, the liabilities assumed, and any non-controlling interest
in the acquiree at the acquisition date, measured at their fair values as of
that date, with limited exceptions.  This statement also requires the
acquirer in a business combination achieved in stages to recognize the
identifiable assets and liabilities, as well as the non-controlling interest in
the acquiree, at the full amounts of their fair values. SFAS 141(R) makes
various other amendments to authoritative literature intended to provide
additional guidance or to confirm the guidance in that literature to that
provided in this 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.  SFAS 141(R) will be effective for the Company on March 1,
2009.  We do not expect the adoption of SFAS 141(R) to have a
significant impact on our financial statements.





In
December 2007, the Emerging Issues Task Force (EITF) of the FASB reached a
consensus on Issue No. 07-1, Accounting for Collaborative
Arrangements(EITF 07-1). The EITF concluded on the definition of a
collaborative arrangement and that revenues and costs incurred with third
parties in connection with collaborative arrangements would be presented gross
or net based on the criteria in EITF 99-19 and other accounting
literature.  Companies are also required to disclose the nature and
purpose of collaborative arrangements along with the accounting policies and the
classification and amounts of significant financial-statement amounts related to
the arrangements.  Activities in the arrangement conducted in a
separate legal entity should be accounted for under other accounting literature;
however, required disclosure under EITF 07-1 applies to the entire collaborative
agreement.  This issue is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years, and is to be applied retrospectively to all periods
presented for all collaborative arrangements existing as of the effective date.
EITF 07-1 will be effective for the Company on March 1, 2009.  We do
not expect the adoption of EITF 07-1 to have a significant impact on our
financial statements.








F
- 10





KUSHI RESOURCES
INC.
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE FINANCIAL STATEMENTS
 February
29, 2008





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued





Recent
Accounting Pronouncements, continued





In
December 2007, FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements(SFAS 160), which amends Accounting
Research Bulletin No. 51, Consolidated Financial
Statements, to improve the relevance, comparability, and transparency of
the financial information that a reporting entity provides in its consolidated
financial statements.  SFAS 160 establishes accounting and reporting
standards that require the ownership interests in subsidiaries not held by the
parent to be clearly identified, labeled and presented in the consolidated
statement of financial position within equity, but separate from the parent’s
equity.  This statement also requires the amount of consolidated net
income attributable to the parent and to the non-controlling interest to be
clearly identified and presented on the face of the consolidated statement of
income.  Changes in a parent’s ownership interest while the parent
retains its controlling financial interest must be accounted for consistently,
and when a subsidiary is deconsolidated, any retained non-controlling equity
investment in the former subsidiary must be initially measured at fair
value.  The gain or loss on the deconsolidation of the subsidiary is
measured using the fair value of any non-controlling equity
investment.  The statement also requires entities to provide
sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the non-controlling
owners.  This statement applies prospectively to all entities that
prepare consolidated financial statements and applies prospectively for fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008.  SFAS 160 will be effective for the Company on
March 1, 2009.  We do not expect the adoption of SFAS 160 to have a
significant impact on our financial statements.





In
February 2008 the FASB staff issued Staff Position No. 157-2 (FSP FAS 157-2)
Effective date of FASB
Statement No.157.FSP FAS 157-2 delayed the effective date of
SFAS 157 for non-financial assets and non-financial liabilities, except for
items that are recognized or disclosed at fair value in the financial statements
on a recurring basis.  The provisions of FSP FAS 157-2 will be
effective for us on March 1, 2009.





In
March 2008, the FASB issued SFAS No. 161 (SFAS 161), Disclosures about Derivative
Instruments and Hedging Activities – An Amendment of FASB Statement No. 133
(SFAS 133). This statement is intended to improve financial
reporting of derivative instruments and hedging activities by requiring enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS 133
and its related interpretations and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance and
cash flows. The provisions of SFAS 161 are effective for fiscal years beginning
after November 15, 2008.  SFAS 161 will be effective for the
Company on March 1, 2009.  The Company is currently evaluating the
impact adoption of SFAS 161 may have on its financial statement
disclosures.





NOTE
3 – GOING CONCERN




These
financial statements have been prepared on a going concern basis, which implies
the Company will continue to realize its assets and discharge its liabilities in
the normal course of business. The Company has not generated any revenues since
inception and has never paid any dividends and is unlikely to pay dividends or
generate earnings in the immediate or foreseeable future. The continuation of
the Company as a going concern is dependent upon the continued financial support
from its shareholders, the ability of the Company to obtain necessary equity
financing to continue operations, confirmation of the Company’s interests in the
underlying properties, and the attainment of profitable operations. The
Company’s ability to achieve and maintain profitability and positive cash flows
is dependent upon its ability to locate profitable mineral properties, generate
revenues from its mineral production and control production costs. Based upon
current plans, the Company expects to incur operating losses in future
periods.  As at February 29, 2008, the Company had a working capital
deficit of $18,049 and accumulated losses of $74,549 since
inception.  These factors raise substantial doubt regarding the
Company’s ability to continue as a going




F
- 11




KUSHI RESOURCES
INC.
 (AN
EXPLORATION STAGE COMPANY)
 NOTES
TO THE FINANCIAL STATEMENTS
 February
29, 2008






NOTE
3 – GOING CONCERN, continued





concern.
There is no assurance that the Company will be able to generate revenues in the
future. These financial statements do not give any effect to any adjustments
that would be necessary should the Company be unable to continue as a going
concern and therefore be required to realize its assets and discharge its
liabilities in other than the normal course of business and at amounts different
from those reflected in the accompanying financial statements.




NOTE
4 - RELATED PARTY TRANSACTIONS




The
Company recognized donated rent at $250 per month and donated services provided
by the President of the Company at $500 per month until January 31,
2007.  Between March 1, 2006 and January 31, 2007 the Company
recognized $2,750 in donated rent and $5,500 in donated
services.  Subsequent to January 31, 2007, these services were
contracted out at $1,000 per quarter to a non-related
company.




All of
the Company’s mineral claims are registered in the name of the President of the
Company and pursuant to a trust agreement are held in trust on behalf of the
Company (see Note 5).





On
November 28, 2005, the Company issued 3,000,000 common shares to its President
and on February 28, 2006, the Company issued a total of 25,000 common shares to
relatives of its President (see Note 6).





At
February 29, 2008 and February 28, 2007, the Company was indebted to its
President in the amounts of $6,051 and $500 respectively.





NOTE
5 - MINERAL PROPERTIES




On
January 30, 2006, the Company staked a mineral claim near Atlin, British
Columbia, Canada, comprising an area of 410.65 hectares.  The Company
is required to incur approximately $1,680 (CDN$1,643)
each year on or before 2009 and approximately $3,350 (CDN$3,285) on or before
January 30, 2010 and each year thereafter in exploration expenditures or pay the
equivalent sum in cash in lieu of work, in order to retain title to the
claims.  In January 2008, the Company paid $1,635 (CDN$1,643) in cash
to the Province of British Columbia, in lieu of work, to retain title to the
claims until January 30, 2009.




NOTE
6 - COMMON STOCK




On
November 28, 2005, the Company issued 3,000,000 common shares at $0.001 per
share for cash of $3,000 to its President (see Note 4).





On
January 30, 2006, the Company issued 1,900,000 common shares at $0.01 per share
for cash of $19,000.





On
February 28, 2006, the Company issued 450,000 common shares at $0.05 per share
for cash of $22,500.





On
November 10, 2006, the Company purchased and removed from the issued and
outstanding 75,000 and 30,000 common shares at their original sale price of
$0.05 and $0.01 respectively, per share. No gain or loss was recognized on this
transaction.





On
November 10, 2006, the Company purchased and cancelled 120,000 common shares at
their original sale price of $0.01 per share. No gain or loss was recognized on
this transaction.





On
November 10, 2006, the Company issued 105,000 common shares at $0.05 per share
for proceeds of $5,250.











NOTE
7 – INCOME TAXES





Income
tax expense has not been recognized for the years ended February 29, 2008 and
February 28, 2007 and no taxes were payable at February 29, 2008 or February 28,
2007, because the Company has incurred losses since its inception.





The
Company’s net operating losses (NOL’s) for the years ended February 29, 2008 and
February 28, 2007, were:





2008
            
            2007$
            52,206
            
            $
            17,912$
            52,206
            
            $
            17,912





At
February 29, 2008 and February 28, 2007 the Company had the following deferred
tax assets that primarily relate to NOL’s.  A 100% valuation allowance
has been established as management believes it is more likely than not that the
deferred tax assets will not be realized.





2008
            
            2007Federal
      loss carryforwards
            $
            26,092
            
            $
            7,597Less:
      valuation allowance
            
            (26,092)
            
            
            (7,597)$
            -
            
            $
            -





The
Company’s valuation allowance increased during 2008 and 2007 by $18,495 and
$6,090 respectively.





The
Company had the following NOL carryforwards at February 29, 2008 and February
28, 2007:





2008
            
            2007$
            74,549
            
            $
            22,343$
            74,549
            
            $
            22,343





The
federal NOL’s begin to expire in 2026.  The Company is a Nevada
corporation and is not subject to state taxes.











F
- 12








Item
8.                      Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure.





Since
inception on October 3, 2005, there were no disagreements with Kushi’s
accountants on any matter of accounting principle or practices, financial
statement disclosure or auditing scope or procedure. In addition, there were no
reportable events as described in Item 304(a)(1)(iv)(B)1 through 3 of Regulation
S-B that occurred within Kushi’s two most recent fiscal years and the subsequent
interim periods.  Kushi’s Independent Registered Public
Accounting Firm from inception to the current date is Madsen & Associates
CPA’s, Inc., 684 East Vine Street, #3, Murray, Utah, 84107.





Item 8A.  Controls and
Procedures.





Disclosure 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 is recorded,
processed, summarized and reported, within the time period specified in the
SEC’s rules and forms.  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 Exchange Act is
accumulated and communicated to management, including Rajan Rai, Kushi’s Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure.





Mr. Rai
has evaluated the effectiveness of the design and operation of Kushi’s
disclosure controls and procedures (as such term is defined in Rules 13a-15 and
15d-15 under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end
of the period covered by this annual report (the “Evaluation
Date”).  Based on such evaluation, Mr. Rai has concluded that,
as of the Evaluation Date, Kushi’s disclosure controls and procedures are
effective to alert Kushi on a timely basis to any material information required
to be included in the reports to be filed or submitted under the Exchange Act
and to ensure that the information required to be disclosed in those reports is
recorded, processed, summarized and reported as and when required.





Changes in Internal
Controls





During
the quarter of the fiscal year covered by this report, there were no changes in
Kushi’s internal controls or, to Kushi’s knowledge, in other factors that have
materially affected, or are reasonably likely to materially affect, these
controls and procedures subsequent to the Evaluation Date.





Item
8B.  Other Information





During
the fourth quarter of the fiscal year covered by this Form 10-KSB, Kushi
reported all information that was required to be disclosed in a report on Form
8-K.





PART
III





Item
9.                      Directors,
Executive Officers, Promoters, Control Persons and Corporate Governance;
Compliance with Section 16(a) of the Exchange Act.





(a)           Identify
Directors and Executive Officers





Any
director of Kushi is elected by the stockholders to a term of one year and
serves until his successor is elected and qualified.  Any officer of
Kushi is appointed by the board of directors to a term of one year and serves
until his successor is duly appointed and qualified, or until he is removed from
office.  The board of directors has no nominating, auditing or
compensation committees.





The name,
age and position of Kushi’s sole officer and director is set forth
below:





Name
            Age
            PositionsRajan
      Rai
            33
            Chief
      Executive Officer, President, Chief Financial Officer, Treasurer,
      Corporate Secretary, and sole member of Kushi’s board of
      directors








Rajan
Rai● Mr.
Rai (33 years old) has been the sole director and officer of Kushi since
inception. For the past five years, Mr. Rai has been self-employed as a
consultant and is a part owner in a real estate development and management
company.




Page
- 36





Given
that Mr. Rai has no previous experience in mineral exploration or operating a
mining company, he intends to perform his job for Kushi by engaging consultants
who have experience in the areas where he is lacking.





Though
Mr. Rai does not work with any other mineral exploration companies other than
Kushi, he may in the future.  Kushi does not have any written
procedures in place to address conflicts of interest that may arise between its
business and the future business activities of Mr. Rai.





(b)           Identify
Significant Employees





Kushi has
no significant employees other than Mr. Rai who is Kushi’s sole director and
officer.  Mr. Rai will devote approximately 20 hours per week or 33%
of his working time to Kushi’s business.  For Kushi’s accounting
requirements management utilizes the consulting services of DaCosta Management
Corp. of Vancouver, Canada to assist in the preparation of Kushi’s annual and
interim financial statements in accordance with accounting principles generally
accepted in the United States.





(c)           Family
Relationships





There are
no family relationships among the directors, executive officers or persons
nominated or chosen by Kushi to become directors or executive
officers.





(d)           Involvement
in Certain Legal Proceedings





(1)
            No
      bankruptcy petition has been filed by or against any business of which any
      director was a general partner or executive officer either at the time of
      the bankruptcy or within two years prior to that
  time.





(2)
            No
      director has been convicted in a criminal proceeding and is not subject to
      a pending criminal proceeding (excluding traffic violations and other
      minor offences).





(3)
            No
      director has been subject to any order, judgement, or decree, not
      subsequently reversed, suspended or vacated, of any court of competent
      jurisdiction, permanently or temporarily enjoining, barring, suspending or
      otherwise limiting his involvement in any type of business, securities or
      banking activities.





(4)
            No
      director has been found by a court of competent jurisdiction (in a civil
      action), the Securities Exchange Commission or the Commodity Futures
      Trading Commission to have violated a federal or state securities or
      commodities law, that has not been reversed, suspended, or
      vacated.





(e)           Compliance
with Section 16(a) of the Exchange Act.





All
reports were filed with the SEC on a timely basis and Kushi is not aware of any
failures to file a required report during the period covered by this annual
report, with the exception of the following.  Rajan Rai failed to file
a Form 5 (Annual Statement of Beneficial Ownership).





(f)           Nomination
Procedure for Directors





Kushi
does not have a standing nominating committee; recommendations for candidates to
stand for election as directors are made by the board of
directors.  Kushi has not adopted a policy that permits shareholders
to recommend nominees for election as directors or a process for shareholders to
send communications to the board of directors.





(g)           Audit
Committee Financial Expert





Kushi has
no financial expert.  Management believes the cost related to
retaining a financial expert at this time is prohibitive.





(h)           Identification
of Audit Committee





Kushi
does not have a separately-designated standing audit
committee.  Rather, Kushi’s entire board of directors perform the
required functions of an audit committee.  Currently, Rajan Rai is the
only member of Kushi’s audit committee.  Mr. Rai meets Kushi’s
independent requirements for an audit committee member.  See Item 12.
(c)  Director independence below for more information on
independence.




Page
- 37





Kushi’s
audit committee is responsible for: (1) selection and oversight of Kushi’s
independent accountant; (2) establishing procedures for the receipt, retention
and treatment of complaints regarding accounting, internal controls and auditing
matters; (3) establishing procedures for the confidential, anonymous submission
by Kushi’s employees of concerns regarding accounting and auditing matters; (4)
engaging outside advisors; and, (5) funding for the outside auditory and any
outside advisors engagement by the audit committee.





As of
February 29, 2008, Kushi did not have a written audit committee charter or
similar document.





(i)           Code
of Ethics





Kushi has
adopted a code of ethics that applies to all its executive officers and
employees, including its CEO and CFO.  See Exhibit 14 – Code of Ethics
for more information.  Kushi undertakes to provide any person with a
copy of its code of ethics free of charge.  Please contact Rajan Rai
at 778-835-9200 to request a copy of Kushi’s code of
ethics.  Management believes Kushi’s code of ethics is reasonably
designed to deter wrongdoing and promote honest and ethical conduct; provide
full, fair, accurate, timely and understandable disclosure in public reports;
comply with applicable laws; ensure prompt internal reporting of code
violations; and provide accountability for adherence to the code.





Item
10.  Executive Compensation.





Kushi has
paid $nil in compensation to its named executive officers during its 2008 fiscal
year.  The table below summarizes all compensation awarded to, earned
by, or paid to Kushi’s sole officer for all services rendered in all capacities
to Kushi for the fiscal periods indicated.





Summary
      Compensation TableName
      and principal position
              
              
              
              
              (a)
            Year
              
              
              
              (b)
            Salary
              ($)
              
              
              (c)
            Bonus
              ($)
              
              
              (d)
            Stock
      Awards
              ($)
              
              
              
              (e)
            Option
      Awards
              ($)
              
              
              
              (f)
            Non-Equity
      Incentive Plan
              ($)
              
              
              
              
              (g)
            Non-qualified
      Deferred Compen-
              sation
      Earnings ($)
              
              
              
              
              (h)
            All
      other compen-sation
              ($)
              
              
              
              (i)
            Total
              ($)
              
              
              (j)Rajan
      Rai
              CEO
      and President,  Director
              Oct
      2005- present
            2008
              2007
              2006
            nil
              nil
              nil
            nil
              nil
              nil
            nil
              nil
              nil
            nil
              nil
              nil
            nil
              nil
              nil
            nil
              nil
              nil
            nil
              nil
              nil
            nil
              nil
              nil





Kushi’s
sole director has not received any monetary compensation since Kushi’s inception
to the date of this report.  Kushi currently does not pay any
compensation to the directors serving on its board of directors.





Since
Kushi’s inception, no stock options, stock appreciation rights, or long-term
incentive plans have been granted, exercised or repriced.





Currently,
there are no arrangements between Kushi and any of its directors or between any
of the subsidiaries and any of its directors whereby such directors are
compensated for any services provided as directors.





Also,
Kushi does not have an employment agreement or consulting agreement with Rajan
Rai, Kushi’s sole officer and director, and Kushi does not pay any salary to
him.  There is an understanding between Kushi and Mr. Rai that he will
work for Kushi at no cost.  Mr. Rai will not be compensated for past,
current, or future work.  Also, there are no employment agreements or
other compensating plans or arrangements with regard to any named executive
officer that provide for specific compensation in the event of resignation,
retirement, other termination of employment or from a change of control of Kushi
or from a change in a named executive officer’s responsibilities following a
change in control.




Page
- 38





Item
11.  Security Ownership of Certain Beneficial Holders and
Management.





(a)           Security Ownership of Certain
Beneficial Owners (more than 5%)





(1)
              Title
      of Class
            (2)
              Name
      and Address of Beneficial Owner
            (3)
              Amount
      and Nature of
              Beneficial
      Owner[1]
            (4)
              Percent
              of Class[2]shares
      of common stock
            Rajan
      Rai
              2215
      South West Marine Drive
              Vancouver,
      British Columbia
              V6P
      6C1     Canada
            3,000,000
            57.4%


[1]The
      listed beneficial owner has no right to acquire any shares within 60 days
      of the date of this Form 10-KSB from options, warrants, rights, conversion
      privileges or similar obligations excepted as otherwise
    noted.


[2]Based on 5,230,000 shares of shares of common stock issued and
      outstanding as of May 29, 2008.




(b)           Security
Ownership of Management







(1)
              Title
      of Class
            (2)
              Name
      and Address of Beneficial Owner
            (3)
              Amount
      and Nature of Beneficial Owner
            (4)
              Percent
              of Class[1]shares
      of common stock
            Rajan
      Rai
              2215
      South West Marine Drive
              Vancouver,
      British Columbia
              V6P
      6C1     Canada
            3,000,000
            57.4%shares
      of common stock
            Directors
      and Executive Officers (as a group)
            3,000,000
            57.4%


[1]Based
      on 5,230,000 shares of shares of common stock issued and outstanding as of
      May 29, 2008.





(c)           Changes
in Control





Kushi is
not aware of any arrangement that may result in a change in control of
Kushi.





Item
12.  Certain Relationships and Related Transactions, and Director
Independence.





(a)           Transactions
with Related Persons





Since the
inception of Kushi on October 3, 2005, no director, executive officer, security
holder, or any immediate family of such director, executive officer, or security
holder has had any direct or indirect material interest in any transaction or
currently proposed transaction, which Kushi was or is to be a participant, that
exceeded the lesser of (1) $120,000 or (2) one percent of the average of Kushi’s
total assets at year-end for the last three completed fiscal years, except for
the following:





Claim Payments





In return
for Rajan Rai holding the one mineral claim in trust for Kushi, Kushi has agreed
to make payments on behalf of Mr. Rai to keep the Bee Peak Claim in good
standing with the Province of British Columbia.  Kushi anticipates the
amount of the payments to be made on behalf of Mr. Rai to be approximately
$1,700 (CDN$1,650) annually for the next two years.





Donated Services and Rent





Rajan
Rai, Kushi’s sole officer and director, donates services and rent to Kushi that
are recognized on its financial statements.  From inception on October
3, 2005 to January 31, 2008, Kushi recognized a total of $8,000 for donated
services at a rate of $500 per month and $4,000 for donated rent at a rate of
$250 per month.





(b)           Promoters
and control persons





Since the
inception of Kushi on October 3, 2005, Rajan Rai has been the sole promoter of
Kushi’s business, but has not received anything of value from Kushi nor is he
entitled to receive anything of value from Kushi for services provided as a
promoter of the business of Kushi.  Also, since inception, Kushi has
not paid any promoter for services provided as a promoter of Kushi.




Page
- 39





(c)           Director
independence





Kushi’s
sole director currently is Rajan Rai.  Pursuant to Item 407(a)(1)(ii)
of Regulation S-B of the Securities Act, Kushi’s board of directors has adopted
the definition of “independent director” as set forth in Rule 4200(a)(15) of the
NASDAQ Manual.  In summary, an “independent director” means a person
other than an executive officer or employee of Kushi or its subsidiaries or any
other individual having a relationship which, in the opinion of Kushi’s board of
directors, would interfere with the exercise of independent judgement in
carrying out the responsibilities of a director, and includes any director who
accepted any compensation from Kushi in excess of $200,000 during any period of
12 consecutive months with the three past fiscal years.  Also, the
ownership of Kushi’s stock will not preclude a director from being
independent.





In
applying this definition, Kushi’s board of directors has determined that Mr. Rai
does not qualify as an “independent director” pursuant to Rule 4200(a)(15) of
the NASDAQ Manual





As of the
date of the report, Kushi did not maintain a separately designated compensation
or nominating committee.


Kushi has
also adopted this definition for the independence of the members of its audit
committee.  Rajan Rai serves on Kushi’s audit
committee.  Kushi’s board of directors has determined that Mr. Rai is
not “independent” for purposes of Rule 4200(a)(15) of the NASDAQ Manual,
applicable to audit, compensation and nominating committee members, and is not
“independent” for purposes of Section 10A(m)(3) of the Securities Exchange
Act.





Item
13.  Exhibits.





(a)           Index
to and Description of Exhibits.





Exhibit
            Description
            Status3.1
            Articles
      of Incorporation of Kushi Resources Inc., filed as an Exhibit to Kushi’s
      Form SB-2 (Registration Statement) filed on October 12, 2007 and
      incorporated herein by reference.
            Filed3.2
            By-Laws
      of Kushi Resources Inc., filed as an Exhibit to Kushi’s Form SB-2
      (Registration Statement) filed on October 12, 2007 and incorporated herein
      by reference.
            Filed10.1
            Declaration
      of Trust, filed as an Exhibit to Kushi’s Form SB-2 (Registration
      Statement) filed on October 12, 2007 and incorporated herein by
      reference.
            Filed14
            Code
      of Ethics, filed as an Exhibit to Kushi’s Form SB-2 (Registration
      Statement) filed on October 12, 2007 and incorporated herein by
      reference.
            Filed31
            Certifications pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.
            Included32
            Certification pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
            Included








Item
14.  Principal Accounting Fees and Services





(1)  Audit
Fees





The
aggregate fees billed for each of the last two fiscal years for professional
services rendered by the principal accountant for Kushi’s audit of consolidated
annual financial statements and for review of financial statements included in
Kushi’s Form 10-QSB’s or services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements for those
fiscal years was:





2008 -
$12,500 – Madsen & Associates CPA’s, Inc.


2007 -
$nil – Madsen & Associates CPA’s, Inc.






Page
- 40





(2)  Audit-Related
Fees





The
aggregate fees billed in each of the last two fiscal years for assurance and
related services by the principal accountants that are reasonably related to the
performance of the audit or review of Kushi’s consolidated financial statements
and are not reported in the preceding paragraph:





2008 -
$nil – Madsen & Associates CPA’s, Inc.


2007 -
$nil – Madsen & Associates CPA’s, Inc.





(3)  Tax
Fees





The
aggregate fees billed in each of the last two fiscal years for professional
services rendered by the principal accountant for tax compliance, tax advice,
and tax planning was:





2008 -
$1,075– Madsen & Associates CPA’s, Inc.


2007 -
$nil – Madsen & Associates CPA’s, Inc.





(4)  All
Other Fees





The
aggregate fees billed in each of the last two fiscal years for the products and
services provided by the principal accountant, other than the services reported
in paragraphs (1), (2), and (3) was:





2008 -
$nil – Madsen & Associates CPA’s, Inc.


2007 -
$nil – Madsen & Associates CPA’s, Inc.





(6)  The percentage
of hours expended on the principal accountant’s engagement to audit Kushi’s
consolidated financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal accountant’s
full time, permanent employees was nil %.


Page
- 41








SIGNATURES





In
accordance with the requirements of the Securities Exchange Act of 1934, Kushi
Resources Inc. has caused this report to be signed on its behalf by the
undersigned duly authorized person.





KUSHI
RESOURCES INC.





By:/s/ Rajan Rai





Name:                      Rajan Rai


Title:                      CEO, President, and Principal
Executive Officer


Dated:                      May 29, 2008











Pursuant
to the requirements of the Securities Exchange Act of 1934, the following
persons on behalf of Kushi Resources Inc. and in the capacities and on the dates
indicated have signed this report below.





Signature
            Title
            Date/s/
      Rajan Rai
            President,
      Chief Executive Officer,
              Principal
      Executive Officer, Chief Financial Officer, Principal Financial
      Officer,
              Principal
      Accounting Officer,
              Corporate
      Secretary, Treasurer
              and
      Member of the Board of Directors
            May
      29, 2008







Page
- 42








Exhibit
31











Page
- 43




KUSHI
RESOURCES INC.


CERTIFICATIONS
PURSUANT TO


SECTION
302 OF THE SARBANES-OXLEY ACT OF 2002






CERTIFICATION




I, Rajan
Rai, certify that:




1.  
I have reviewed this annual report on Form 10-KSB of Kushi Resources
Inc.;




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




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




4.  The
small business issuer’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
small business issuer and have:




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




(b)
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;




(c)
Evaluated the effectiveness of the small business issuer’s disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and




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




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




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




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






Date:  May
29, 2008




/s/
Rajan Rai


Rajan
Rai


Chief
Executive Officer







Page
- 44




KUSHI
RESOURCES INC.


CERTIFICATIONS
PURSUANT TO


SECTION
302 OF THE SARBANES-OXLEY ACT OF 2002






CERTIFICATION




I, Rajan
Rai, certify that:




1.  
I have reviewed this annual report on Form 10-KSB of Kushi Resources
Inc.;




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




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




4.  The
small business issuer’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
small business issuer and have:




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




(b)
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;




(c)
Evaluated the effectiveness of the small business issuer’s disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and




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




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




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




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






Date:  May
29, 2008






/s/
Rajan Rai


Rajan
Rai


Chief
Financial Officer







Page
- 45








Exhibit
32











Page
- 46




CERTIFICATION
PURSUANT TO


18
U.S.C. SECTION 1350,


AS
ADOPTED PURSUANT TO


SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002









In
connection with the Annual Report of Kushi Resources Inc. (the “Company”) on
Form 10-KSB for the period ending February 29, 2008 as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), I, Rajan Rai,
President and Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:






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






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













/s/
Rajan Rai


Rajan
Rai


Chief
Executive Officer






May 29,
2008




Page
- 47




CERTIFICATION
PURSUANT TO


18
U.S.C. SECTION 1350,


AS
ADOPTED PURSUANT TO


SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002








In
connection with the Annual Report of Kushi Resources Inc. (the “Company”) on
Form 10-KSB for the period ending February 29, 2008 as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), I, Rajan Rai, Chief
Financial Officer, Treasurer, and Secretary of the Company and a member of the
Board of Directors, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:






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






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











/s/
Rajan Rai


Rajan
Rai


Chief
Financial Officer






May 29,
2008







Page
- 48