**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form 10-KSB**





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


EXCHANGE
      ACT OF 1934





For
      the
      fiscal year ended December 31, 2007





o TRANSITION
      REPORT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE


ACT
      OF
      1934





For
      the
      transition period from
              
to
              .





**CHINA
      KANGTAI CACTUS BIO-TECH INC.**


(Name
      of
      small business issuer in its charter)





Nevada
            
            000-33097
            
            87-0650263(State
                or other jurisdiction of
              incorporation)
            
            (Commission
                File Number)
            
            (IRS
                Employer Identification
              Number)





99
      Taibei
      Road


Limin
      Economic and Technological Development Zone


Harbin,
      Heilongjiang Province


People’s
      Republic China


Zip
      Code:
      150025


(Address
      of principal executive offices)




Issuer’s
      telephone number: (86) 451-57351189 ext 126




Securities
      to be registered under Section 12(b) of the Act: None




Securities
      to be registered under Section 12(g) of the Act: Common Stock, $.001
      par value




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




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. Yes oNo x




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




State
      issuer’s revenue for its most recent fiscal year:
      $14,240,655.


The
      aggregate market value of the common stock of the issuer held by non-affiliates
      of the issuer on March 31, 2008 based on the closing price of the common stock
      as reported on the OTC Bulletin Board on such date was $5,425,560.




As
      of
      March 31, 2008 there were 17,739,625 outstanding shares of common stock,
      par value $.001 per share.




DOCUMENTS
      INCORPORATED BY REFERENCE: None




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










**TABLE
      OF CONTENTS**




PagePART IItem
                1.
            Description
                of Business
            
            3Item
                2.
            Description
                of Property
            
            7Item
                3.
            Legal
                Proceedings
            
            7Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            8PART IIItem
                5.
            Market
                for Common Equity and Related Stockholder Matters
            
            8Item
                6.
            Management’s
                Discussion and Analysis
            
            9Item
                7.
            Financial
                Statements
            
            11Item
                8.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            11Item
                8A
            Controls
                and Procedures
            
            11Item
                8A(T)
            Management’s
                Annual Report on Internal Control Over Financial Reporting
            
            11Item
                8B
            Other
                Information
            
            11PART IIIItem
                9.
            Directors,
                Executive Officers, Promoters and Control Persons; Compliance With
                Section 16(a) of the Exchange Act.
            
            12Item
                10.
            Executive
                Compensation
            
            14Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management
            
            14Item
                12.
            Certain
                Relationships and Related Transactions
            
            15Item
                13.
            Exhibits
            
            16Item
                14.
            Principal
                Accountant Fees and Services
            
            18SIGNATURES
            
            19




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          2
          -


**PART I**




**ITEM
      1. DESCRIPTION OF BUSINESS.**




Corporate
      History




As
      used
      in this report, “we”, “us”, “our”, “CKGT”, “our Company”, “the Company”, or
“China Kangtai” refers to China Kangtai Cactus Bio-Tech Inc. and all of its
      subsidiaries and affiliated companies.




Our
      Company was initially incorporated as InvestNet, Inc. (“InvestNet”) on
      March 16, 2000 under the laws of the State of Nevada. Prior to June 3,
      2005, the Company’s operations consisted of real time software and IT solutions
      which the Company held through its subsidiaries, Champion Agents Limited (which
      wholly owned DSI Computer Technology Company Limited) and Interchance Limited.
      Due to the fact that the Company was unable to generate sufficient cash flows
      from operations, obtain funding to sustain operations nor reduce or stabilize
      expenses to the point where it could have realized a net positive cash flow,
      management and the board of directors determined that it was in the best
      interests of the stockholders to seek a strategic alternative so that the
      Company could continue to operate. On May 13, 2005, InvestNet entered into
      a series of agreements to effect a “reverse merger transaction” via a share
      exchange and through the conversion of a convertible promissory note, as
      described below, with China Kangtai Cactus Bio-tech Company Limited (“BVI China
      Kangtai”), a British Virgin Islands (“BVI”) incorporated on November 26,
      2004.




These
      documents included a Stock Purchase Agreement, pursuant to which InvestNet
      issued 30,000,000 shares to a stockholder of BVI China Kangtai for $300,000.
      Additionally, InvestNet entered into an Agreement and Plan of Reorganization,
      pursuant to which the stockholders of BVI China Kangtai exchanged 12% of BVI
      China Kangtai’s outstanding shares for 110,130,615 shares of InvestNet.
      Additionally, InvestNet issued a Convertible Promissory Note to BVI China
      Kangtai or its designees in the amount of $8,070,000 plus accrued interest
      at a
      rate of 5% per annum or convertible at the option of the holder(s) in the event
      that InvestNet effected a one for seventy reverse split of InvestNet’s common
      stock into the remaining 88% of the outstanding shares of BVI China Kangtai
      (the
“Convertible Note”). The Company did effect a one for seventy reverse split of
      all of its outstanding shares of Common Stock and changed its name (to “China
      Kangtai Cactus Bio-Tech Inc.”) and trading symbol on the OTC Bulletin Board (to
“CKGT”) on August 25, 2005. The holders of the Convertible Note converted
      the Convertible Note a day later on August 26, 2005 into 14,248,395 shares
      of Common Stock of the Company. As the result of the share exchange and
      conversion of the Convertible Note, the Company completed a “reverse merger
      transaction” whereby InvestNet acquired 100% of BVI China Kangtai, which wholly
      owns Harbin Hainan Kangda Cacti Hygienical Foods Co., Ltd. (“Harbin Hainan
      Kangda”).




Harbin
      Hainan Kangda is presently our main operating subsidiary.  Harbin Hainan
      Kangda is in the business of selling and producing cactus and cactus related
      products in the PRC as more fully described below. In connection with the
“reverse merger transaction”, we completely sold all the Company’s real time
      software and IT solutions operations by selling all of the stock held by the
      Company in its prior wholly owned subsidiaries, Champion Agents Limited (which
      wholly owned DSI Computer Technology Company Limited) and Interchance Limited
      to
      V-Capital Limited, a Republic of Mauritius corporation which is controlled
      by a
      former director of InvestNet.




On
      June 3, 2005, in connection with the reorganization of the Company and the
      acquisition of BVI China Kangtai and its wholly owned subsidiary, Harbin Hainan
      Kangda, the Company’s executive officers and directors significantly changed.
      Specifically, Norman Koo resigned as a director, Chief Executive Officer and
      President of the Company; Terence Ho resigned as a director, Chief Financial
      Officer, and Treasurer of the Company; Vivian Szeto resigned as a director
      (However, Ms. Szeto’s resignation from the Board of Directors was
      contingent on the Company completing its filing and mailing requirements of
      its
      Schedule 14f-1 which occurred on July 22, 2005 and so, from
      June 3, 2005 to July 22, 2005 she served as the Company’s
      soledirector) and Secretary of the Company; Johnny Lu resigned as a director
      of
      the Company; and Mantin Lu resigned as a director of the Company.




In
      contemplation of the aforementioned resignations, also on June 3, 2005, the
      Board of Directors appointed in accordance with Section 3.04 of the
      Company’s Bylaws, Jinjiang Wang, Chengzhi Wang, Hong Bu, Jiping Wang and Song
      Yang as members of the Company’s Board of Directors, subject to the fulfillment
      of the filing and mailing requirements, including the 10 day waiting period of
      its Schedule 14f-1 that was sent to all stockholders of the Company
      pursuant to section 14(f) of the Securities Exchange Act of 1934 which
      occurred on July 22, 2005 and appointed the following officers to serve
      immediately: Jinjiang Wang, President; Chengzhi Wang, General Manager; Hong
      Bu,
      Chief Financial Officer and Treasurer; Fengxi Lang, Secretary; Changfu Wang,
      Vice General Manager; Zhimin Zhan, Vice General Manager; and Lixian Zhou,
      Assistant General Manager of the Company.




-
          3
          -





On
      July 20, 2005, InvestNet’s sole director, Vivian Szeto, and a majority of
      the Company’s stockholders unanimously approved and ratified a one for seventy
      reverse split (the “Reverse Split”) of the Company’s common stock and the
      amendment and restatement of the Company’s Articles of Incorporation to effect a
      name change of the Company from “Investnet, Inc.” to “China Kangtai Cactus
      Bio-Tech Inc.”. The Reverse Split became effective on August 25, 2005; 20
      days after the Company sent an Information Statement to all of its
      stockholders and after the filing of the Amended and Restated Articles of
      Incorporation with the Secretary of State of Nevada. As a result of the Reverse
      Split, the number of issued and outstanding shares of common stock of the
      Company, now named China Kangtai Cactus Bio-Tech Inc., was reduced from a total
      of 200,000,000 shares outstanding to 2,857,143 shares outstanding. A day after
      the Reverse Split on August 26, 2005, the Convertible Note was converted by
      its holders(s) into 14,248,395 shares of the Company, which increased the total
      outstanding shares of the Company to 17,105,625 shares. The Company’s trading
      symbol was changed by the OTC Bulletin Board Stock Market (“OTCBB”) to “CKGT” to
      better reflect the Company’s new name. The Company has also changed its Web site
      to www.xrz.cn.




Description
      of Business




The
      Company is principally engaged in the production, R&D, sales and marketing
      of products derived from cacti. The Company’s product lines include cactus
      nutriceuticals, cactus nutritional food and drinks, as well as cactus raw and
      intermediate materials.




The
      Company has over 387 acres of cactus-farming bases in the Guangdong and
      Heilongjiang Provinces of China. The Company predominantly grows three species
      of cacti which are Mexican Pyramid, Mexican Milpa-Alta and Mexican Queen.
      Mexican Pyramid and Queen cacti are used for cactus fruit drinks and
      nutriceutical products; Mexican Milpa-Alta is mainly used for cactus nutritional
      food products. The Company’s annual production capability of cactus fruits and
      edible cacti in 2007 is 73,000 tons. Most of the cactus fruits are processed
      into cactus fruit juice, which is the raw material for cactus nutritional
      drinks. Most of the harvested edible cacti are processed into dry powers,
      which are raw materials for cactus nutriceuticals.




The
      Company engages with, by co-operative production agreements, local
      pharmaceutical, food and beverage manufacturers to produce its products. This
      strategy allows the Company to fill the orders quickly with short production
      runs and to reduce the requirements in fixed assets investment.





The
      Exhibits at the end of this form provides a list of the existing co-operative
      production agreements.





Two
      of
      such agreements are with Shandong Tsingtao Beer Inc (Harbin subsidiary)’s Acheng
      Branch and Harbin Ice Lantern Noodle Factory first dated March, 2004 to jointly
      produce cactus beer and noodles for long term cooperation. The Company has
      renewed these contracts every year and most recently on January and March of
      2008. Pursuant to these contracts, the Company provides raw materials, quality
      control guidelines and technical support while the processors (Shandong Tsingtao
      Beer Inc. Acheng Branch and Harbin Ice Lantern Noodle Factory) provide other
      materials, processing facilities and labor, and strictly follows the Company’s
      guidelines and instructions for production. The Company inspects all of the
      final products.




The
      Company also has co-operative production agreements with two nutriceutical
      producers, Harbin Diwang Pharmacy Co. Ltd. (a GMP certified processor) and
      Harbin Bin County HuaLan Dairy Factory.





In
      2006,
      the Company had entered two new co-processing agreements with Huimeijia Bio-tech
      Ltd. to produce nutriceutical soft capsules and Kangwei Health Foods Ltd. of
      Mudanjiang City to produce cactus palm dry powder products.





In
      October 2007, the Company has signed a new agreement with Harbin
      Meijia Bio-Tech Co., Ltd.





All
      of
      the above co-operative production agreements have been renewed during January
      and March of 2008.





The
      Company has also established its own cactus beverage and fruit wine production
      facilities. The Company’s cactus beverage product category includes cactus beer,
      cactus fruit wine (including the brand name of Overlord Scourge Flower Imperial
      Wine), cactus palm juices and cactus fruit drinks,


-
          4
          -





Cacti
      have been proven to contain the following elements:




1.              
      Protein and amino acids;


2.              
      Organic fat and acids;


3.              
      Carbohydrates;


4.              
      Vitamins;


5.              
      Minerals; and


6.              
      Microelements.




The
      Company’s nutriceutical products containing cactus extracts include Cactus
      Protein Nutrient, Cactus Calcium Peptide Soft Capsule, and Cactus Shuxin
      Capsule.


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          5
          -


Cactus
      Protein Nutrient




Cactus
      Protein Nutrient is produced with Yu lotus, protein and agglomerate element.
      It
      has been proven to be effective on stomachaches, tardiness gastritis,
      digestibility canker and duodenum canker.




Cactus
      Calcium Peptide Soft Capsule




Cactus
      Calcium Peptide Soft Capsule is made of cactus, active albumen peptide of
      soybean and liquid calcium. It has the following characteristics:




A) Several
      nutritional components that can be easily absorbed; and




B) It
      contains an albumen peptide of soybean which can enhance the absorption of
      calcium, phosphor and other mineral elements, consequently raising the calcium
      in the body and fighting fatigue.




Cactus
      Shuxin Capsule




Cactus
      Shuxin Capsule is made with cactus and haws extracts. It has been proven to
      have
      an effect on raising the flow capacity of coronary artery blood, alleviating
      drowsiness and improving red cell’s oxygen carrying capability.




The
      revenue generated from sales of nutriceutical products was $7,846,577 in fiscal
      year 2007, or about 55.10% of the total net sales.





The
      revenue generated from sales of cactus food, beverage and wine was $3,758,293.91
      in year 2007, or about 26.39 %. The remaining 18.51% of the sales is cactus
      raw
      and intermediate materials.




The
      Company has its own R&D facility, the Heilongjiang Sino-Mexico Cactus
      Development and Utilization Institute, which is certified by Heilongjiang
      Science & Technology Committee. The Institute has independently
      developed many patented cactus -based nutriceuticals and nutritional food and
      drink product formulas and production processes.




In
      order
      to quickly penetrate the markets in China, enhance the efficiency of
      distributions, lower sales costs and administrative overheads, starting August
      2006, the Company has reformed its sales and distribution models and gradually
      disposed its own domestic distribution network of approximately 200 self-owned,
      franchised chain and Kangtai branded stores in Harbin, Beijing, Guangzhou and
      other cities in China. The Company has adopted the strategies of distributions
      and sales of its products primarily through various types and levels of
      provincial and municipal distributors and agents in Dalian, Heilongjiang,
      Harbin, Beijing, Guangzhou, Tianjin, Shenzhen, Jilin, Hebei, Liaoning, Shanxi,
      Hunan, Gansu and Shandong in China. The Company’s major revenue breakdown
      by region in China is as follows:




US$Heilongjiang
            
            $
            4,218,706.80Jilin
            
            $
            709,701.30Shandong
            
            $
            1,005,958.80Beijing
            
            $
            1,372,001.40Guangdong
            
            $
            1,315,383.30Tianjin
            
            $
            749,202.30Hebei
            
            $
            961,191.00Shenzhen
            
            $
            1,096,811.10Liaoning
            
            $
            653,083.20Shanxi
            
            $
            470,061.90Hunan
            
            $
            363,409.20Gansu
            
            $
            373,942.80




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          6
          -





Competition




The
      cactus product industry in China is not highly competitive, and no published
      data is available regarding China Kangtai’s relative position in the markets in
      which it operates. Although no major competitor currently competes against
      the
      Company across
      its entire product line, competitive products are available from a number of
      different vendors offering features similar to those of China Kangtai’s
      products. The Company’s existing and potential competitors include companies
      having greater financial, marketing and technical resources than the Company.
      There can be no assurance that one or more of these competitors will not develop
      products that are equal or superior to the products the Company markets. In
      addition, many potential clients for China Kangtai’s products have in-house
      capabilities to develop cactus products that can provide some or all of the
      functionality of China Kangtai’s products.




The
      Company believes that there are distinguishing competitive factors in the
      selection of its cactus products. These include price/performance
      characteristics, marketing and sales expertise, R&D expertise and patents
      protections, management proprietary knowledge and experiences on cactus
      production, ownership of large cactus plantations, product benefit and
      functions, and reliability and integration of cactus into a variety of other
      products. The Company believes that it competes favorably with regard to these
      factors.




A
      major
      competitive asset for the Company is that it offers quality assurance of its
      products from the raw material stage all the way to the final products
      stage.




The
      Company believes it is in compliance in all material respects with all laws,
      rules, regulations and requirements that affect its business. Further, the
      Company believes that compliance with such laws, rules, regulations and
      requirements does not impose a material impediment on its ability to conduct
      business.




Administrative
      Offices




China
      Kangtai’s registered statutory office is located at CSC Services of
      Nevada, Inc., 502 East John Street, Suite E, Carson City, Nevada
      89706 *.* The
      Company’s operations office is located at 99 Taibei Road, Limin
      Economic and Technological Development Zone, Harbin, Heilongjiang Province,
      P.
      R. China. Zip Code: 150025 and its telephone number is (86) 451
      57351189.




Employees




As
      of
      March, 2008, China Kangtai has 188 full-time employees. The Management of the
      Company expects to continue to use consultants, attorneys, and accountants
      as
      necessary, to complement services rendered by its employees.




Reports
      to Security Holders




China
      Kangtai is not required to deliver an annual report to security holders and
      will
      not automatically deliver a copy of the annual report to its security holders
      unless a request is made for such delivery. The Company files all of its
      required reports and other information with the Securities and Exchange
      Commission (the “Commission”).




The
      public may read and copy any materials that are filed by China Kangtai with
      the Commission at the Commission’s Public Reference Room at 100 F Street,
      NE, Room 2521, Washington, D. C. 20549. The public may obtain
      information on the operation of the Public Reference Room by calling the
      Commission at 1-800-SEC-0330. The statements and forms filed by InvestNet with
      the Commission have also been filed electronically and are available for viewing
      or copy on the Commission maintained Internet site that contains reports, proxy
      and information statements, and other information regarding issuers that file
      electronically with the Commission. The Internet address for this site can
      be
      found at http://www.sec.gov.




**ITEM
      2.  DESCRIPTION OF PROPERTY.**




China
      Kangtai’s operations office is located at 99 Taibei Road, Limin
      Economic and Technological Development Zone, Harbin, Heilongjiang Province,
      P.
      R. China, Zip Code: 150025 and its telephone number is (86) 451 57351189. In
      addition, the Company has over 387 acres of cactus farming bases in China,
      production facilities and an R&D facility.





**ITEM
      3.  LEGAL PROCEEDINGS.**




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




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          7
          -





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




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




**PART II**




**ITEM
      5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS**




**Market
      for Common Stock**




Since
      August 25, 2005, our Common Stock has traded on the OTC Bulletin Board
      under the symbol “CKGT.OB.” Prior to that, our Common Stock traded on the OTC
      Bulletin Board under the symbol “INVE.OB.” The following table lists the high
      and low bid price for our Common Stock as quoted, in U.S. dollars, by the OTC
      Bulletin Board during each quarter within the last fiscal year. These quotations
      reflect inter-dealer prices, without retail mark-up, markdown, or commission
      and
      may not represent actual transactions.




Year
            
            Quarter Ended
            
            
            High
            
            
            Low2007
            
            
            December
                31
            
            
            
            
            $
            1.40
            
            
            
            
            $
            0.72September
                30
            
            
            
            
            $
            0.95
            
            
            
            
            $
            0.60June
                30
            
            
            
            
            $
            1.32
            
            
            
            
            $
            0.54March
                31
            
            
            
            
            $
            1.97
            
            
            
            
            $
            1.012006
            
            
            December
                31
            
            
            
            
            $
            1.13
            
            
            
            
            $
            0.60September
                30
            
            
            
            
            $
            1.65
            
            
            
            
            $
            0.81June
                30
            
            
            
            
            $
            1.80
            
            
            
            
            $
            0.39March
                31
            
            
            
            
            $
            1.40
            
            
            
            
            $
            0.442005
            
            
            December
                31
            
            
            
            
            $
            1.90
            
            
            
            
            $
            0.70September
                30
            
            
            
            
            $
            2.10
            
            
            
            
            $
            0.02June
                30
            
            
            
            
            $
            0.03
            
            
            
            
            $
            0.02March
                31
            
            
            
            
            $
            0.027
            
            
            
            
            $
            0.0262004
            
            
            December
                31
            
            
            
            
            $
            0.16
            
            
            
            
            $
            0.08September
                30
            
            
            
            
            $
            0.74
            
            
            
            
            $
            0.09June
                30
            
            
            
            
            $
            1.36
            
            
            
            
            $
            0.40March
                31
            
            
            
            
            $
            1.57
            
            
            
            
            $
            1.01




Record
      Holders




As
      February 27, 2008, there were approximately 101 shareholders of record holding
      a
      total of 17,739,625 shares of common stock.




The
      holders of the common stock are entitled to one vote for each share held of
      record on all matters submitted to a vote of stockholders. Holders of the common
      stock have no preemptive rights and no right to convert their common stock
      into
      any other securities. There are no redemption or sinking fund provisions
      applicable to the common stock.




Dividends




CKGT
      has
      not declared any cash dividends since inception and does not anticipate paying
      any dividends in the foreseeable future. The payment of dividends is within
      the
      discretion of the board of directors and will depend on CKGT’s earnings, capital
      requirements, financial condition, and other relevant factors. There are no
      restrictions that currently limit CKGT’s ability to pay dividends on its common
      stock other than those generally imposed by applicable state law.




Stock
      Re-Purchases




We
      did
      not make any re-purchases of shares of our common stock during the fourth
      quarter of fiscal 2006 and we do not currently have any publicly-announced
      repurchase plans in effect.


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          8
          -




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




CAUTIONARY
      STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES
      LITIGATION REFORM ACT OF 1995.




Certain
      statements in this report, including statements in the following discussion
      which are not statements of historical fact, are what are known as “forward
      looking statements,” which are basically statements about the future. For that
      reason, these statements involve risk and uncertainty since no one can
      accurately predict the future. Words such as “plans,” “intends,” “will,”
“hopes,” “seeks,” “anticipates,” “expects” and the like often identify such
      forward looking statements, but are
      not
      the only indication that a statement is a forward-looking statement. Such
      forward looking statements include statements concerning our plans and
      objectives with respect to the present and future operations of the Company,
      and
      statements which express or imply that such present and future operations will
      or may produce revenues, income or profits. Numerous factors and future
      events could cause the Company to change such plans and objectives or fail
      to
      successfully implement such plans or achieve such objectives, or cause such
      present and future operations to fail to produce revenues, income or profits.
      Therefore, the reader is advised that the following discussion should be
      considered in light of the discussion of risks and other factors contained
      in
      this report on Form 10KSB and in the Company’s other filings with the
      Securities and Exchange Commission. No statements contained in the following
      discussion should be construed as a guarantee or assurance of future performance
      or future results.




The
      following discussion and analysis of our financial condition and results of
      operations should be read in conjunction with the financial statements and
      accompanying notes and the other financial information appearing elsewhere
      in
      this report. CKGT’s fiscal year end is December 31.




CKGT’s
      short-term strategy is to realize net cash flow from operations and financing
      activities to be used to expand marketing efforts in China and research and
      development. CKGT is committed to ensuring that its products remain at the
      forefront of providing a variety of quality cactus based nutriceuticals,
      nutritional food from cactus, and beverages from cactus, including but not
      limited to beer and wine derived from cactus. The realization of net cash flows
      in the near term will require a significant increase in CKGT’s revenues without
      a substantial increase in expenses. Financing activities will focus on equity
      financing. Once CKGT has additional positive net cash flow, its longer-term
      strategy is to expand marketing efforts beyond China into other Asian
      markets based on anticipated increases in marketing spending over the next
      several years in South Korea, Singapore, Taiwan and other southeastern Asian
      countries.




CKGT’s
      business development strategy is prone to significant risks and uncertainties
      certain of which can have an immediate impact on its efforts to realize positive
      net cash flow and deter future prospects of revenue growth.




CKGT’s
      financial condition and results of operations depend primarily on the revenue
      generated from the sale of its products and its ability to control the cost
      of
      sales. CKGT has a limited history of generating revenue which cannot be viewed
      as an indication of continued growth and a recent historical record of incurring
      losses. Should CKGT be unable to consistently generate revenue through the
      successful implementation of its business model and reduce or stabilize expenses
      to the point where it can realize a net cash flow such failure will have a
      short-term impact on CKGT’s ability to continue its business
      operations.




Results
      of Operations




During
      the period from March 31, 2004 through December 31, 2007, CKGT has
      been engaged in the development and marketing of its products from Harbin,
      China. CKGT expects that over the next twelve months it will continue to market
      its products in Harbin, China.




Year
      Ended December 31, 2007 and Year Ended December 31,
      2006




Sales




For
      the
      fiscal year ended December 31, 2007, sales increased by $3,856,000 or by
      37.1% to $14,240,655 from $10,384,655 for the year ended December 31, 2006.
      The increase in sales is attributable to the fact that the Company’s products
      are more efficiently marketed and increasingly well accepted by the domestic
      market customers.




-
          9
          -




Cost
      of
      Sales




For
      the
      fiscal year ended December 31, 2007, cost of sales increased by $2,566,971
      or 36.3% to $9,629,251 from $7,062,280 as compared to the corresponding period
      of the prior year. The smaller percentage increase in the cost of sales
      than that of sales resulted from the increasing efficiency in the operations
      of
      the Company.




Selling
      and Distribution Expenses




For
      the
      fiscal year ended December 31, 2007, selling expenses increased by $67,331
      or 31.8% to $279,303 from $211,972 as compared to the corresponding period
      of
      the prior year. The proportionally smaller increase is primarily attributable
      to
      the Company’s optimization of its operating team and sales forces, allocated
      sales and distribution expenses to the sales agent companies in different
      provinces of China, all of which reduced the unit selling and distribution
      expenses of the Company.




General
      and Administrative Expenses




For
      the
      fiscal year ended December 31, 2007, general and administrative expenses
      increased by $762,727 or 196.2% to $1,151,534 from $388,807 as compared to
      the
      corresponding period of the prior year. This large increase is due to the
      large increase in allowance for returns and doubtful accounts of $732,010
      for 2007, or from $71,597 for 2006 to $838,736 for 2007, taking into
      considerations of exchange rate changes. Without this increase, there is
      actually a slight drop in general and administrative expenses. The
      increase in allowance for returns and doubtful accounts of $732,010 in 2007
      is due to the high levels of accounts receivable caused by increased sales
      and
      aging of accounts.





Total
      Operating Expenses





For
      the
      fiscal year ended December 31, 2007, operating expenses decreased by $138,025,
      or 7.7% from $1,799,138 to $1,661,113, as compared to the corresponding period
      of the prior year. The decrease indicates an improvement in operational
      efficiency.





Net
      Income




For
      the
      fiscal year ended December 31, 2007, the net income increased by $865,055
      or 60.3%% to $2,299,700 from $1,434,645 as compared to the corresponding period
      of the prior year. The increase mainly resulted from rapid growth in the sales
      of the Company’s products and the reduction in the operating
      expenses.




Impact
      of
      Inflation




CKGT
      believes that inflation has had a negligible effect on operations over the
      past
      three years. CKGT believes that it can offset inflationary increases in
      operating costs by increasing prices.




Liquidity
      and Capital Resources




For
      the
      fiscal year ended December 31, 2007, cash flows from operating activities
      increased by $1,991,568 or 1,438.8% to $2,129,986 from $138,418 as compared
      to
      the corresponding fiscal year ended December 31, 2006. The increase is
      primarily due to the increase of net income and the decrease in
      inventories.




For
      the
      fiscal year ended December 31, 2007, cash flows from investing activities
      decreased by $1,783,963 or 210.6% to $(2,631,017) from $(847,054) as compared
      to
      the corresponding period of the prior year. The decrease is due to increased
      investments in the Company’s property and equipment in 2007.




For
      the
      fiscal year ended December 31, 2007, cash flow provided by financing
      activities increased by $27,301 or 104.1% to $53,524 from $26,223 as compared
      to
      fiscal year ended December 31, 2006. The primary factor responsible for the
      increase is due to the increase in note payable.




The
      Company’s operations for the year ended December 31, 2007 resulted in
      comprehensive income of $3,347,289. The Company has funded its cash needs from
      revenue and debt financing in the form of loans provided by related and
      unrelated parties.




CKGT
      has
      no defined benefit plan or contractual commitment with any of its officers
      or
      directors.




CKGT
      has
      no current plans for the purchase or sale of any plant or equipment, outside
      of
      normal items to be utilized by office personnel.




-
          10
          -





CKGT
      has
      no current plans to make any significant changes in the number of
      employees.




Critical
      Accounting Policies




In
      Note 1
      to the audited consolidated financial statements for the year ended
      December 31, 2007 and for the twelve months ended December 31, 2006
      included in this Form 10-KSB, CKGT discusses those accounting policies that
      are considered to be significant in determining the results of operations and
      its financial position. CKGT believes that the accounting principles utilized
      by
      it conform to accounting principles generally accepted in the United States
      of America.




The
      preparation of financial statements requires management to make significant
      estimates and judgments that affect the reported amounts of assets, liabilities,
      revenues and expenses. By their nature, these judgments are subject to an
      inherent degree
      of
      uncertainty. On an on-going basis, we evaluate our estimates, including those
      related to bad debts, inventories, intangible assets, warranty obligations,
      product liability, revenue, and income taxes. CKGT bases its estimates on
      historical experience and other facts and circumstances that are believed to
      be
      reasonable, and the results form the basis for making judgments about the
      carrying value of assets and liabilities. The actual results may differ
      from these estimates under different assumptions or conditions.




CKGT
      applies the following critical accounting policies related to revenue
      recognition in the preparation of its financial statements.




Revenue
      Recognition




The
      Company recognizes revenue upon delivery or shipment of the products, at which
      time title passes to the customer provided that: there are no uncertainties
      regarding customer acceptance; persuasive evidence of an arrangement exists;
      the
      sales price is fixed or determinable; and collectibility is deemed
      probable.




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




The
      information required by this Item is incorporated by reference to the financial
      statements beginning on page F-1.





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




As
      previously reported in a filing on Form 8K dated October 20, 2006, the Company
      dismissed Jimmy C.H. Cheung & Co, Certified Public Accountants (a
      member of Kreston International), of 304 Dominion Centre, 43 Queen’s Road East,
      Hong Kong (“Jimmy C.H. Cheung & Co.”) as its auditor for the fiscal
      year ending December 31, 2006, and appointed Michael
      T. Studer, Certified
      Public Accountants ,
      P.C. of
      18 East Sunrise Highway, Suite 311, Freeport, NY 11520 as its auditor for the
      fiscal year ending December 31, 2006. There
      were no disagreements with the Company’s prior accountants on accounting and
      financial disclosure.




**ITEM
      8A.  CONTROLS AND PROCEDURES.**




An
      evaluation was carried out under the supervision and with the participation
      of
      the Company’s management, including the Chief Executive Officer (“CEO”) and
      Chief Financial Officer (“CFO”), of the effectiveness of the Company’s
      disclosure controls and procedures as of December 31, 2006 which was
      designed to provide reasonable assurance. Based on that evaluation, the CEO
      and
      CFO have concluded that the Company’s disclosure controls and procedures are
      effective to provide reasonable assurance that: (i) information required to
      be disclosed by the Company in reports that it files or submits under the
      Securities Exchange Act of 1934 is accumulated and communicated to the Company’s
      management, including the CEO and CFO, as appropriate to allow timely decisions
      regarding required disclosure by the Company; and (ii) information required
      to be disclosed by the Company in reports that it files or submits under the
      Securities Exchange Act of 1934 is recorded, processed, summarized and reported
      within the time periods specified in Securities and Exchange Commission
      rules and forms. During the year ended December 31, 2007, there were
      no changes in the Company’s internal control over financial reporting that have
      materially affected, or are reasonably likely to materially affect, its internal
      control over financial reporting.




**Item
        8A(T).** **MANAGEMENT’S
        ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL
        REPORTING.**


Our
        management is responsible for establishing and maintaining adequate internal
        control over financial reporting for the company in accordance with as defined
        in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control
        over financial reporting is designed to provide reasonable assurance regarding
        the (i) effectiveness and efficiency of operations, (ii) reliability of
        financial reporting and the preparation of financial statements for external
        purposes in accordance with generally accepted accounting principles, and
        (iii)
        compliance with applicable laws and regulations. Our internal controls framework
        is based on the criteria set forth in the Internal Control - Integrated
        Framework issued by the Committee of Sponsoring Organizations of the Treadway
        Commission (COSO).
  Because
        of its inherent limitations, internal control over financial reporting may
        not
        prevent or detect misstatements. Also, projections of any evaluation of
        effectiveness to future periods are subject to the risk that controls may
        become
        inadequate because of changes in conditions, or that the degree of compliance
        with the policies or procedures may deteriorate.
  Management’s
        assessment of the effectiveness of the small business issuer’s internal control
        over financial reporting is as of the year ended December 31, 2007. We believe
        that internal control over financial reporting is effective. We have not
        identified any, current material weaknesses considering the nature and extent
        of
        our current operations and any risks or errors in financial reporting under
        current operations.
  This
        annual report does not include an attestation report of the Company’s registered
        public accounting firm regarding internal control over financial reporting.
        Management’s report was not subject to attestation by the Company’s registered
        public accounting firm pursuant to temporary rules of the Securities and
        Exchange Commission that permits us to provide only management’s report in this
        annual report.


**ITEM
      8B.  OTHER INFORMATION.**




None.


-
          11
          -




**PART III**




**ITEM
      9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
      COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
      ACT.**




The
      directors and executive officers currently serving the Company are as
      follows:




Name
            
            Age
            
            Positions HeldJinjiang
                Wang
            
            59
            
            President,
                Chief Executive Officer and Chairman of the Board of
                DirectorsChengzhi
                Wang
            
            38
            
            General
                Manager and a DirectorHong
                Bu
            
            34
            
            Chief
                Financial Officer and a DirectorJiping
                Wang
            
            47
            
            DirectorSong
                Yang
            
            34
            
            DirectorJohn
              Zhang
            
            35
            
            Director




The
      directors named above will serve until the next annual special meeting of the
      Company’s stockholders. Thereafter, directors will be elected for one-year terms
      at the annual stockholders’ meeting. Officers will hold their positions at the
      pleasure of the board of directors, absent any employment agreement, of which
      none currently exists or is contemplated. There is no arrangement or
      understanding between any of the directors or officers of the Company and any
      other person pursuant to which any director or officer was or is to be selected
      as a director or officer.




The
      directors and officers will devote their time to the Company’s affairs on an “as
      needed” basis, which, depending on the circumstances, could amount to as little
      as two hours per month, or more than forty hours per month, but more than likely
      will fall within the range of five to ten hours per month. All of the Company’s
      officers are full time employees of the Company.




Biographical
      Information




Jinjiang
      Wang was appointed as the Chairman of the Board, President and Chief Executive
      Officer of CKGT on June 3, 2005 and appointed a director of CKGT on
      July 22, 2005. Mr. Wang was born in the Heilongjiang Province of the
      P.R.C. Mr. Wang graduated from Northeast Agricultural University with a degree
      in Agriculture & Forest Engineering. Mr. Wang has over
      20 years of experience in management, production development and sales. He
      is a founder of Harbin Hainan Kangda and a pioneer of the now established edible
      cactus trade of China.




Chengzhi
      Wang was appointed as the General Manager CKGT on June 3, 2005 and
      appointed a director of CKGT on July 22, 2005. Mr. Wang was born in
      Heilongjiang Province of the P.R.C. Mr. Wang graduated from Architectonics
      Department of Harbin Institute of Technology with an engineer degree.
      Mr. Wang has over five years experience in management, production and
      sales. Mr. Wang is a founder of Harbin Hainan Kangda and a pioneer in the
      edible cactus trade of the P.R.C.




Hong
      Bu
      was appointed as Chief Financial Officer of CKGT on June 3, 2005 and
      appointed a director of CKGT on July 22, 2005. Ms. Bu graduated with a
      degree in Finance from the Finance and Economics Institute of Harbin. She is
      a
      CPA (certified public accountant). Ms. Bu has over five years of experience
      as Harbin Hainan Kangda’s senior accountant. Ms. Bu was a founder of Harbin
      Hainan Kangda and a pioneer in the edible cactus trade of the
      P.R.C.




Jiping
      Wang ** was
      appointed as a director of CKGT on July 22, 2005. Ms. Wang was born in
      Heilongjiang Province; P.R.C. Ms. Wang graduated from the Economic
      Managerial Cadre’s Institute of Harbin.




Song
      Yang ** was
      appointed as a director of CKGT on July 22, 2005. Ms. Yang has over
      15 years of experience in the Government Administrative Department.
      Ms. Wang was a founder of Harbin Hainan Kangda and a pioneer in the edible
      cactus trade of the P.R.C. Ms. Yang has not served as an officer and
      director of any other public companies over the last five years.




John
        Zhang, age 35, is an independent director of the Company. He was a founder
        of JC
        Global Capital Partners, LLC, a financial consulting firm located in Shanghai,
        China, and from September 2006 to the present has been its CEO. JC Global
        Capital Partners, LLC, specializes in cross-border capital market transactions,
        and as CEO, Mr. Zhang is responsible for overseeing all of the firm’s
        operations. Prior to founding JC Global Capital Partners, LLC, from September
        2003 to August 2006, Mr. Zhang was the Managing Director of FirsTrust Group,
        a
        US merchant bank headquartered in Atlanta, GA, where he was responsible for
        its
        entire China operation. From September 1993 to August 2000, Mr. Zhang worked
        various positions at ASI Computer Technology, Inc, where he was responsible
        for
        Sales and Product Management. In 2002 - 2003, Mr. Zhang was employed by CTX
        International, Inc., as Sales Manager, where he was responsible for Business
        Development. Prior to CTX, Mr. Zhang attended Emory University and graduated
        with an MBA in 2003.





Audit
      Committee/ Compensation Committee / Director Compensation




The
      board
      of directors has established an audit committee. The audit committee is
      comprised of Jinjiang Wang and Chengzhi Wang. The audit committee has yet to
      adopt a definitive charter though it typically reviews, acts on, and reports
      to
      the board of directors with respect to various auditing and accounting matters.
      The matters typically considered by CKGT’s audit committee include
      recommendations as to the performance of its independent auditors, the scope
      of
      the annual
      audits, fees to be paid to the independent auditors, and internal accounting
      and
      financial control policies and procedures. Certain stock exchanges currently
      require companies to adopt a formal written charter that establishes an audit
      committee that specifies the scope of an audit committee’s responsibilities and
      the means by which it carries out those responsibilities. In order to be listed
      on any of these exchanges, CKGT would be required to adopt a definitive charter
      for its audit committee. The board of directors has not yet established a
      compensation committee. Directors currently are not reimbursed for out-of-pocket
      costs incurred in attending meetings and no director receives any compensation
      for services rendered as a director. CKGT does not anticipate adopting a
      provision for compensating directors in the future.


-
          12
          -




Compliance
      With Section 16(a) of the Exchange Act.




Section 16(a) of
      the Securities Exchange Act of 1934 requires the Company’s executive officers
      and directors, and persons who own more that 10% of the Company’s capital
      stock, to file reports of ownership and changes of ownership on Forms 3, 4
      and 5
      with the Securities and Exchange Commission. Executive officers, directors
      and
      greater than 10% shareholders are required to furnish the Company with copies
      of
      all Forms 3, 4 and 5 they file.




Based
      solely on the Company’s review of the copies of such forms it has received, and
      written representations from certain reporting persons, the Company believes
      that all of its executive officers and directors complied with all
      Section 16(a) filing requirements applicable to them during the
      Company’s fiscal year ended December 31, 2006, with one exception. A
      Form 3 for Chengzhi Wang, the Company’s **** CEO
      and
      a director
      of the Company, was inadvertently filed a day late in connection with the
      Company’s reorganization transaction occurring in June 2005.




Code
      of
      Ethics




CKGT
      has
      adopted a Code of Ethics within the meaning of Item 406(b) of Regulation
      S-B of the Securities Exchange Act of 1934. The Code of Ethics applies to
      directors and senior officers, such as the principal executive officer,
      principal financial officer, controller, and persons performing similar
      functions. CKGT has filed a copy of its Code of Ethics as Exhibit 14 to its
      Form 10-KSB for the fiscal year ended 2003. Further, CKGT’s Code of Ethics
      is available in print, at no charge, to any security holder who requests such
      information by contacting CKGT.




-
          13
          -


**ITEM
      10. EXECUTIVE COMPENSATION.**





The
      following table provides summary compensation information for the years 2006,
      2005 and 2004 concerning cash and non-cash compensation paid or accrued by
      the
      Company to or on behalf of the chief executive officer:





**Summary
      Compensation Table**




**Name
                    and****Principal
                    Position**
                
                **Year**
                
                **Salary**
                  **($)**
                
                **Bonus**
                  **($)**
                
                **Stock
                    Award(s)**
                  **($)**
                
                **Option
                    Award(s)**
                  **($)**
                
                **Non-Equity**
                  **Incentive**
                  **Plan**
                  **Compensation**
                  **($)**
                
                **Change
                    in**
                  **Pension**
                  **Value and******
                  **Non-qualified******
                  **Compensation
                    Earnings**
                  **($)**
                
                **All
                    other**
                  **Compensation**
                  **($)**
                
                **Total**
                  **($)**Jinjiang
                    Wang,
                  President,
                    Chief Executive Officer and Chairman2007
                
                $
                7,900
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                $
                7,9002006
                
                $
                2,600
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                $
                2,6002005
                
                $
                90,000
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                $
                90,0002004
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —Chengzhi
                    Wang,
                  General
                    Manager2007
                
                $
                6,320
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                $
                6,3202006
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —2005
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —2004
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —Hong
                    Bu,
                  Chief
                    Financial Officer2007
                
                $
                6,320
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                $
                6,3202006
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —2005
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —2004
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —





No
      executive officer received compensation in excess of $100,000 during the fiscal
      years ended December 31, 2007, 2006, 2005, and 2004. In addition, members of
      the
      Board of Directors did not receive compensation for their services during the
      fiscal years ending December 31, 2007, 2006, 2005, and 2004.





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




The
      following table sets forth, as of the end of the Company’s most recent fiscal
      year, the number of shares of Common Stock owned of record and beneficially
      by
      executive officers, directors and persons who hold 5.0% or more of the
      outstanding Common Stock of the Company. Also included are the shares held
      by
      all executive officers and directors as a group.




Title
                of
              Class
            
            Name
                and Address of Owner
            
            Amount
                and Nature
              of
                Ownership
            
            Percent
                of
              ClassCommon
                Stock
            
            Jinjiang
                Wang
              The
                4th Group, 21st Residents’
              Committee
                Xinhua Street, Boli Town,
              Boli
                County Heilongjiang Province P.R.C.
            
            4,801,390
                Direct
            
            27.1%Common
                Stock
            
            Chengzhi
                Wang
              No. 98
                Xiangshun Street
              Xiangfang
                District, Harbin, P.R.C.
            
            3,892,970
                Direct
            
            21.9%


-
          14
          -





Common
                Stock
            
            Hong
                Bu
              No. 99
                Taibei Road
              Limin
                Economy and Technology
              Developing
                District, Harbin, P.R.C.
            
            750,046
                Direct
            
            4.2%Common
                Stock
            
            Jiping
                Wang
              No. 99
                Taibei Road
              Limin
                Economy and Technology
              Developing
                District, Harbin, P.R.C.
            
            700,734
                Direct
            
            4.0%Common
                Stock
            
            Song
                Yang
              No. 99
                Taibei Road
              Limin
                Economy and Technology
              Developing
                District, Harbin, P.R.C.
            
            726,688
                Direct
            
            4.1%Common
              Stock
            
            John
              Zhang
            
            115,334
              Direct and Indirect
            
            0.7%Common
                Stock
            
            All
                Directors and Executive Officers as a Group
            
            10,987,162
                Direct and Indirect
            
            61.9%







(1) Percentage
      is based on 17,739,625 shares of Common Stock outstanding as of March 31,
      2007.




(2) Jinjiang
      Wang has been the President of the Company since June 3, 2005. He has been
      and is the President of Harbin Hainan Kangda since 2000. Jinjiang Wang acquired
      165,182 shares of the Company pursuant to the Reorganization Agreement on
      June 3, 2005 and 428,572 shares of the Company as Kangtai’s sole designee
      pursuant to the Stock Purchase Agreement on June 3, 2005. A day after the
      Reverse Split on August 26, 2005, the Convertible Note was converted by its
      holders(s) into 14,248,395 shares of the Company and Mr. Jinjiang Wang
      acquired 4,207,636 shares from 14,248,395 shares of the Company.




**ITEM
      12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**




None




-
          15
          -


**ITEM
      13.  EXHIBITS**





The
                Exhibits listed below are filed as part of this Annual
                Report.3.1
            Articles
                of Incorporation (incorporated by reference from Registration Statement
                on
                Form SB-2/A filed with the Securities and Exchange Commission on
                October 18, 2000).3.2
            Amended
                Articles of Incorporation (incorporated by reference to the
                Form 10QSB filed with the Securities and Exchange Commission on
                November 3, 2003)3.3
            Amended
                and Restated Articles of Incorporation (incorporated by reference
                to the
                Form 10KSB filed with the Securities and Exchange Commission April
                17,
                2006.3.4
            Bylaws
                (incorporated by reference from Registration Statement on Form SB-2/A
                filed with the Securities and Exchange Commission on October 18,
                2000).10.1
            Distribution
                Agreement Between China Kangtai Cactus Bio-tech, Inc and Hunan Tianxiang
                Trading Company, Ltd (incorporated by reference to the Form 10QSB
                filed with the Securities and Exchange Commission on November 19,
                2007).10.2
            Distribution
                Agreement Between China Kangtai Cactus Bio-tech, Inc and Jinan Qitai
                Economic and Trading Center (incorporated by reference to the
                Form 10QSB filed with the Securities and Exchange Commission on
                November 19, 2007).10.3
            Distribution
                Agreement Between China Kangtai Cactus Bio-tech, Inc and Lanzhou
                Xinhui
                Economic and Trading Company, Ltd. (incorporated by reference to
                the
                Form 10QSB filed with the Securities and Exchange Commission on
                November 19, 2007).10.4
            Distribution
                Agreement Between China Kangtai Cactus Bio-tech, Inc and Qingdao
                Furui
                Economic and Trading Company, Ltd. (incorporated by reference to
                the
                Form 10QSB filed with the Securities and Exchange Commission on
                November 19, 2007).10.5
            Distribution
                Agreement Between China Kangtai Cactus Bio-tech, Inc and Shanxi Anyang
                Food Distribution Company (incorporated by reference to the
                Form 10QSB filed with the Securities and Exchange Commission on
                November 19, 2007).10.6
            Processing
                Agreement dated January 8, 2006, between the Company and Shandong
                Tsingtao Beer Inc. Harbin subsidiary (incorporated by reference to
                the
                Form 10QSB filed with the Securities and Exchange Commission on May
                16, 2007).10.7
            Processing
                Agreement dated January 20, 2006, between the Company and Harbin
                Ice Lantern Noodle Factory (incorporated by reference to the
                Form 10QSB filed with the Securities and Exchange Commission on May
                16, 2007).10.8
            Processing
                Agreement dated March 30, 2005, between the Company and
                Harbin Diwang Pharmacy Co. Ltd. (incorporated by reference to the
                Form 10QSB filed with the Securities and Exchange Commission on May
                16, 2007).10.9
            Processing
                Agreement dated July 10, 2005, between the Company and
                Harbin Bin County HuaLan Dairy Factory (incorporated by reference
                to the
                Form 10QSB filed with the Securities and Exchange Commission on May
                16, 2007).10.10
            Processing
                Agreement dated January 20, 2006, between the Company and Huimeijia
                Bio-tech Ltd. (incorporated by reference to the Form 10QSB filed with
                the Securities and Exchange Commission on May 16,
                2007).10.11
            Processing
                Agreement dated March 2, 2006, between the Company and Kangwei Health
                Foods Ltd. Of Mudanjiang City (incorporated by reference to the
                Form 10QSB filed with the Securities and Exchange Commission on May
                16, 2007).10.12
            Distributions
                Agreement dated February 15, 2007, with Jilin Yanji Economic and
                Trading
                Company, Ltd. (incorporated by reference to the Form 10QSB filed with
                the Securities and Exchange Commission on May 16,
                2007).10.13
            Distributions
                Agreement dated January 16, 2007, with Liaoning Shenneng Trading
                and
                Development Ltd. (incorporated by reference to the Form 10QSB filed
                with the Securities and Exchange Commission on May 16,
                2007).10.14
            Distributions
                Agreement dated February 9, 2007, with Jianshuang Zhang - Hubei
                (incorporated by reference to the Form 10QSB filed with the
                Securities and Exchange Commission on May 16, 2007).10.15
            Distributions
                Agreement, dated February 3, 2007, with Hunan Green Food Distribution
                Company, Ltd. (incorporated by reference to the Form 10QSB filed with
                the Securities and Exchange Commission on May 16,
                2007).10.16
            Distributions
                Agreement dated January 29, 2007, with Harbin Huadingwei Trading
                Company,
                Ltd. (incorporated by reference to the Form 10QSB filed with the
                Securities and Exchange Commission on May 16, 2007).10.17
            Distributions
                Agreement dated February 6, 2007, with Hangzhou Hesheng Economic
                and
                Trading Company, Ltd. (incorporated by reference to the Form 10QSB
                filed with the Securities and Exchange Commission on May 16,
                2007).


-
          16
          -





10.18
            Distributions
                Agreement dated January 16, 2007, with Guangdong Jinpei Lin (incorporated
                by reference to the Form 10QSB filed with the Securities and Exchange
                Commission on May 16, 2007).10.19
            Distributions
                Agreement dated January 9, 2007, with Fujian Tianyi Economic and
                Trading
                Company Ltd (incorporated by reference to the Form 10QSB filed with
                the Securities and Exchange Commission on May 16,
                2007).10.20
            Distributions
                Agreement, Dated January 20, 2007, With Beijing Yaping Liu (incorporated
                by reference to the Form 10QSB filed with the Securities and Exchange
                Commission on May 16, 2007).10.21
            Cooperation
                Agreement between Harbin Hainan Kangda Cactus Hygienical Foods Co.,
                Ltd
                and Party B: Harbin Meijia Bio-Tech Co., Ltd. dated October 8, 2007
                *10.22
            Contract
                of Termination of Lease, dated January 10, 2006, by and between the
                Company and the Lijia Village, Tongling Town Jixi City (incorporated
                by
                reference to the Form 10QSB filed with the Securities and Exchange
                Commission on May 15, 2006).10.23
            Contract
                of Termination of Lease, dated January 18, 2006, by and between the
                Company and Lindian Cactus Farming Base (incorporated by reference
                to the
                Form 10QSB filed with the Securities and Exchange Commission on May
                15, 2006).10.24
            Contract
                of Termination of Lease, dated January 9, 2006, by and between the
                Company
                and the Qiqihar Angangxi Green Park (incorporated by reference to
                the
                Form 10QSB filed with the Securities and Exchange Commission on May
                15, 2006).10.25
            Contract
                of Termination of Lease, dated January 13, 2006, by and between the
                Company and the Beian Huashengnongfeng Planting Base (incorporated
                by
                reference to the Form 10QSB filed with the Securities and Exchange
                Commission on May 15, 2006).10.26
            Contract
                of Termination of Lease, dated January 6, 2006, by and between the
                Company
                and the Hongqi Jinxing Planting Base (incorporated by reference to
                the
                Form 10QSB filed with the Securities and Exchange Commission on May
                15, 2006).10.27
            Contract
                of Termination of Lease, dated January 17, 2006, by and between the
                Company and the Hailin Luming Planting Base (incorporated by reference
                to
                the Form 10QSB filed with the Securities and Exchange Commission on
                May 15, 2006).10.28
            Contract
                of Termination of Lease, dated January 5, 2006, by and between the
                Company
                and the Dalian River Planting Base (incorporated by reference to
                the
                Form 10QSB filed with the Securities and Exchange Commission on May
                15, 2006).10.29
            Contract
                of Termination of Lease, dated January 23, 2006, by and between the
                Company and the Wanbao Planting Base (incorporated by reference to
                the
                Form 10QSB filed with the Securities and Exchange Commission on May
                15, 2006).10.30
            Transfer
                Agreement for Greenhouse, dated January 13, 2006, by and between
                the
                Company and the Lijia Village, Tongling Town Jixi City (incorporated
                by
                reference to the Form 10QSB filed with the Securities and Exchange
                Commission on May 15, 2006).10.31
            Transfer
                Agreement for Greenhouse, dated January 18, 2006, by and between
                the
                Company and the Lindian Cactus Farming Base. (incorporated by reference
                to
                the Form 10QSB filed with the Securities and Exchange Commission on
                May 15, 2006).10.32
            Transfer
                Agreement for Greenhouse, dated January 9, 2006, by and between the
                Company and the Qiqihar Angangxi Green Park (incorporated by reference
                to
                the Form 10QSB filed with the Securities and Exchange Commission on
                May 15, 2006).10.33
            Transfer
                Agreement for Greenhouse, dated January 11, 2006, by and between
                the
                Company and the Beian Huashengnongfeng Planting Base (incorporated
                by
                reference to the Form 10QSB filed with the Securities and Exchange
                Commission on May 15, 2006).10.34
            Transfer
                Agreement for Greenhouse, dated January 6, 2006, by and between the
                Company and the Hongqi Jinxing Planting Base (incorporated by reference
                to
                the Form 10QSB filed with the Securities and Exchange Commission on
                May 15, 2006).10.35
            Transfer
                Agreement for Greenhouse, dated January 17, 2006, by and between
                the
                Company and the Hailin Luming Planting Base (incorporated by reference
                to
                the Form 10QSB filed with the Securities and Exchange Commission on
                May 15, 2006).10.36
            Transfer
                Agreement for Greenhouse, dated January 5, 2006, by and between the
                Company and the Dalian River Planting Base (incorporated by reference
                to
                the Form 10QSB filed with the Securities and Exchange Commission on
                May 15, 2006).10.37
            Transfer
                Agreement for Greenhouse, dated January 23, 2006, by and between
                the
                Company and the Wanbao Planting Base (incorporated by reference to
                the
                Form 10QSB filed with the Securities and Exchange Commission on May
                15, 2006).


-
          17
          -





10.38
            Transfer
                Agreement for Greenhouse, dated January 24, 2006, by and between
                the
                Company and the Daqing Ranghulu Hi-tech Zone (incorporated by reference
                to
                the Form 10QSB filed with the Securities and Exchange Commission on
                May 15, 2006).21.1
            List
                of Subsidiaries31.1
            Certification
                of the Chief Executive Officer pursuant to Rule 13a-14(a) or
                15d-14(a) under the Securities Exchange Act of 1934, as amended and
                adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.31.2
            Certification
                of the Chief Financial Officer pursuant to Rule 13a-14(a) or
                15d-14(a) under the Securities Exchange Act of 1934, as amended and
                adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.32.1
            Certification
                of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.2
            Certification
                of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.





*
      Filed
      Herewith


ITEM
      14.
 PRINCIPAL ACCOUNTANT FEES AND SERVICES




Audit
      Fees




The
      aggregate fees for audit of the Company’s annual financial statements were
      $70,000 billed by Michael T. Studer, C.P.A., P.C. and $0 billed by Jimmy C.H.
      Cheung & Co. for the fiscal year ended December 31, 2007. The
      aggregate fees for audit of the Company’s financial statements were $60,000
      billed by Michael T. Studer, C.P.A., P.C. and $0 billed by Jimmy C.H. Cheung
      & Co. for the fiscal year ended December 31, 2006.




The
      aggregate fees billed by Michael T. Studer, C.P.A., P.C. for review of the
      Company’s financial statements included in its quarterly reports on
      Form 10-QSB were $37,739 during the year ended December 31, 2007 and
      $8,000 for the period ended December 31, 2006. The aggregate fees billed
      by Jimmy C.H. Cheung & Co. for review of the Company's financial
      statements included in its quarterly reports on Form 10-QSB were $0 during
      the
      year ended December 31, 2007 and $17,100 during the year ended December 31,
      2006.




Audit
      Related-Fees




Jimmy
      C.H. Cheung & Co. billed the Company $0, and Michael T. Studer, C.P.A., P.C.
      billed the Company $0 for assurance and related services that were related
      to
      their audit or review of the Company's financial statements during the fiscal
      periods ended December 31, 2007 or December 31, 2006.




Tax
      Fees




The
      aggregate fees billed by P. C. Liu, CPA, P.C. for tax compliance, tax
      advice and tax planning were $1,000 for the fiscal years ended December 31,
      2007
      and $1,000 for the fiscal years ended December 31, 2006 The aggregate fees
      billed by Michael T. Studer, C.P.A., P.C. and Jimmy C.H. Cheung & Co. for
      tax compliance, tax advice and tax planning were $0 for the fiscal years
      ended December 31, 2007 and 2006.





All
      Other Fees





Michael
      T, Studer, C.P.A., P.C. did not bill the Company for any products and services
      other than the foregoing during the fiscal periods ended 2006.




Jimmy
      C.H. Cheung & Co. billed the Company $12,000 for issuing a consent letter
      for the amended 10KSB filing for the fiscal years ended December 31, 2006,
      $1,000 for issuing a consent letter for an S-8 filing and $800 for issuing
      a
      consent letter for an SB-2 filing; other than the foregoing during the fiscal
      periods ended 2006.





Audit
      Committee Pre-Approval




The
      Company's Audit Committee pre-approved the engagement of Michael T. Studer,
      C.P.A., P.C. to act as its independent auditor for the fiscal year ended
      December 31, 2006. The Company's Audit Committee also pre-approved Michael
      T.
      Studer, C.P.A., P.C. to provide the audit, audit related services, and all
      other services described above for the fiscal year ended December 31, 2006.
      The
      Company's board of directors also pre-approved P. C. Liu,
      C.P.A, P.C. to provide the tax services for the fiscal period ended
      December 31, 2005. The Company's independent auditors performed all work only
      with their full time permanent employees.


-
          18
          -




**SIGNATURES**




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




CHINA
      KANGTAI CACTUS BIO-TECH INC.




By:
              /s/
                  Jinjiang Wang
              President
                  (CEO) and a Director andPrincipal
                  Executive OfficerDate:
                  April 15, 2008By:
              /s/
                  Hong Bu
              Chief
                  Financial Officer and a Director andPrincipal
                  Financial and Accounting OfficerDate:
                  April 15, 2008




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.




By:
              /s/
                  Jinjiang Wang
              President
                  (CEO) and a Director andPrincipal
                  Executive OfficerDate:April
                  15, 2008By:
              /s/
                  Chengzhi Wang
              General
                  Manager and a DirectorDate:April
                  15, 2008By:
              /s/
                  Hong Bu
              Chief
                  Financial Officer and a Director andPrincipal
                  Financial and Accounting OfficerDate:April
                  15, 2008By:
              /s/
                  Jiping Wang
              DirectorDate:April
                  15, 2008By:
              /s/
                  Song Yang
              DirectorDate:April
                  15, 2008


By:
                
                DirectorJohn
                  ZhangDate:




-
          19
          -


Index
      to
      Financial Statements


Report
                of Independent Registered Public Accounting Firm
            F-1Balance
                Sheets as of December 31, 2007 and 2006
            F-2Statements
                of Operations for the years ended December 31, 2007 and
                2006
            F-3Statements
                of Changes in Stockholders' Equity for the years ended December 31,
                2007
                and 2006
            F-4Statements
                of Cash Flow for the years ended December 31, 2007 and
                2006
            F-5Notes
                to Financial Statements
            F-6





**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 To
        the
        Board of Directors and Stockholders of
 China
        Kangtai Cactus Bio-Tech Inc.
 
 I
        have
        audited the accompanying consolidated balance sheets of China Kangtai Cactus
        Bio-Tech Inc. and subsidiaries (the “Company”) as of December 31, 2007 and 2006
        and the related consolidated statements of operations and comprehensive income,
        stockholders’ equity, and cash flows for the years then ended. These financial
        statements are the responsibility of the Company’s management. My responsibility
        is to express an opinion on these financial statements based on my
        audits.
 
 I
        conducted my audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        I plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. I believe that my audits provide a reasonable
        basis for my opinion.
 
 In
        my
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of China Kangtai Cactus
        Bio-Tech Inc. and subsidiaries as of December 31, 2007 and 2006 and the results
        of their operations and cash flows for the years then ended in conformity
        with
        accounting principles generally accepted in the United States.
 
 
 /s/ Michael T. Studer CPA
                P.C.
 
 
 Freeport,
        New York
 April
        11,
        2008




F-1




**China
      Kangtai Cactus Bio-Tech Inc. and Subsidiaries**


**Consolidated
      Balance Sheets**


**(Expressed
      in US Dollars)**





December
              31,
              2007
            
            December
              31,
              2006(Audited)
            
            (Audited)**ASSETS****Current
                Assets**Cash
                and cash equivalents
            
            $
            509,901
            
            $
            451,936Accounts
                receivable, net of allowance for returns and doubtful accounts of
                $838,736
                and $71,597, respectively
            
            
            4,036,169
            
            
            1,777,507Accounts
                receivable from a related party
            
            
            -
            
            
            1,924Inventories
            
            
            6,093,955
            
            
            7,382,444Other
                receivables and prepaid expenses
            
            
            20,237
            
            
            24,310**Total
                Current Assets**
            
            
            10,660,262
            
            
            9,638,121**Property
                and Equipment, net of accumulated depreciation of $1,176,821 and
                $889,662,
                respectively**
            
            
            6,290,330
            
            
            3,444,787**Other
                Assets**Intangible
                assets, net
            
            
            553,038
            
            
            637,402Land
                use rights, net
            
            
            1,290,141
            
            
            1,250,429**Total
                Assets**
            
            $
            18,793,771
            
            $
            14,970,739





**LIABILITIES
      AND STOCKHOLDERS' EQUITY**





**Current
                Liabilities**Accounts
                payable
            
            $
            160,543
            
            $
            64,758Other
                payables and accrued liabilities
            
            
            192,548
            
            
            156,693Note
                payable
            
            
            829,437
            
            
            775,913Taxes
                payable
            
            
            319,149
            
            
            78,336**Total
                current liabilities**
            
            
            1,501,677
            
            
            1,075,700**Commitments
                and Contingencies**
            
            
            -
            
            
            -**Stockholders'
                Equity**Preferred
                stock, $0.001 par value; authorized 200,000,000 shares, none issued
                and
                outstanding
            
            
            -
            
            
            -Common
                stock, $0.001 par value; authorized 200,000,000 shares, issued and
                outstanding: 17,739,625 and 17,739,625 shares,
                respectively
            
            
            17,740
            
            
            17,740Additional
                paid-in capital
            
            
            6,607,848
            
            
            6,558,082Retained
                earningsAppropriated
            
            
            1,844,937
            
            
            1,361,365Unappropriated
            
            
            7,082,943
            
            
            5,266,815****Accumulated
                other comprehensive income
            
            
            1,738,626
            
            
            691,037**Total
                stockholders' equity**
            
            
            17,292,094
            
            
            13,895,039**Total
                Liabilities and Stockholders' Equity**
            
            $
            18,793,771
            
            $
            14,970,739





**See
      notes to consolidated financial statements.**


F-2





**China
      Kangtai Cactus Bio-Tech Inc. and Subsidiaries**


**Consolidated
      Statements of Operations and Comprehensive Income**


**(Expressed
      in US Dollars)**





December
                31,
            
            December
                31,2007
            
            2006(Audited)
            
            (Audited)**Net
                Sales**
            
            $
            14,240,655
            
            $
            10,384,655**Cost
                of Sales**
            
            
            (9,629,251
            )
            
            (7,062,280
            )**Gross
                Profit**
            
            
            4,611,404
            
            
            3,322,375**Operating
                Expenses**Selling
                expenses
            
            
            279,303
            
            
            211,972General
                and administrative expenses
            
            
            1,151,534
            
            
            388,807Stock-based
                compensation
            
            
            -
            
            
            982,700Stock
                issued for service
            
            
            -
            
            
            -Depreciation
            
            
            70,589
            
            
            64,836Amortization
                of land use rights
            
            
            35,983
            
            
            32,034Amortization
                of intangible assets
            
            
            123,704
            
            
            118,789Total
                operating expenses
            
            
            1,661,113
            
            
            1,799,138**Income
                from Operations**
            
            
            2,950,291
            
            
            1,523,237**Other
                Income (Expenses)**Interest
                income
            
            
            603
            
            
            258Imputed
                interest
            
            
            (47,796
            )
            
            (45,582
            )Loss
                on disposal of property and equipment
            
            
            -
            
            
            (43,268
            )Other
                income (expense) - net
            
            
            (171
            )
            
            -Total
                Other Income (Expenses)
            
            
            (47,364
            )
            
            (88,592
            )**Income
                before Income Taxes**
            
            
            2,902,927
            
            
            1,434,645**Income
                Tax Expense**
            
            
            603,227
            
            
            -**Net
                Income**
            
            
            2,299,700
            
            
            1,434,645**Other
                Comprehensive Income**Foreign
                currency translation adjustment
            
            
            1,047,589
            
            
            558,537**Comprehensive
                Income**
            
            
            3,347,289
            
            
            1,993,182**Net
                income per common share**Basic
                and diluted
            
            $
            0.13
            
            $
            0.08**Weighted
                average number of common shares outstanding**Basic
                and Diluted
            
            
            17,739,625
            
            
            17,440,863





**See
      notes to consolidated financial statements.**


F-3


**China
      Kangtai Cactus Bio-Tech Inc. and Subsidiaries**


**Consolidated
      Statements of Stockholders' Equity**


**(Expressed
      in US Dollars)**





Common Stock $0.001 par value
            
            Additional
            
            Unappropriated
            
            Appropriated
            
            Accumulated otherpaid-in
            
            retained
            
            retained
            
            comprehensiveShares
            
            Amount
            
            capital
            
            earnings
            
            earnings
            
            income
            
            TotalBalance at
                December 31, 2005
            
            
            17,105,625
            
            
            17,105
            
            
            5,530,435
            
            
            4,308,398
            
            
            885,137
            
            
            132,500
            
            
            10,873,575Stock
                issued for services
            
            
            634,000
            
            
            634
            
            
            982,065
            
            
            -
            
            
            -
            
            
            -
            
            
            982,699Imputed
                interest on note payable
            
            
            -
            
            
            -
            
            
            45,582
            
            
            -
            
            
            -
            
            
            -
            
            
            45,582Transfer
                to statutory andstaff
                welfare reserves
            
            
            -
            
            
            -
            
            
            -
            
            
            (476,228
            )
            
            476,228
            
            
            -
            
            
            -Net
                income for the year ended December 31, 2006
            
            
            -
            
            
            -
            
            
            -
            
            
            1,434,645
            
            
            -
            
            
            -
            
            
            1,434,645Currency
                translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            558,537
            
            
            558,537Balance
                at December 31, 2006
            
            
            17,739,625
            
            $
            17,740
            
            $
            6,558,082
            
            $
            5,266,815
            
            $
            1,361,365
            
            $
            691,037
            
            $
            13,895,039Stock
                issued for servicesImputed
                interest on note payable
            
            
            -
            
            
            -
            
            
            49,766
            
            
            -
            
            
            -
            
            
            -
            
            
            49,766Transfer
                to statutory andstaff
                welfare reserves
            
            
            -
            
            
            -
            
            
            -
            
            
            (483,572
            )
            
            483,572
            
            
            -
            
            
            -Net
                income for the year ended December 31, 2007
            
            
            -
            
            
            -
            
            
            -
            
            
            2,299,700
            
            
            -
            
            
            -
            
            
            2,299,700Currency
                translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,047,589
            
            
            1,047,589Balance
                at December 31, 2007
            
            
            17,739,625
            
            $
            17,740
            
            $
            6,607,848
            
            $
            7,082,943
            
            $
            1,844,937
            
            $
            1,738,626
            
            $
            17,292,094





**See
      notes to consolidated financial statements.**


F-4





**China
      Kangtai Cactus Bio-Tech Inc. and Subsidiaries**


**Consolidated
      Statements of Cash Flows**


**(Expressed
      in US Dollars)**


****


December
                31,
            
            December
                31,2007
            
            2006(Audited)
            
            (Audited)**Cash
                Flows from Operating Activities**Net
                income
            
            $
            2,299,700
            
            $
            1,434,645Adjustmens
                to reconcile net income to net cash provided by (used for) operating
                activitiesDepreciation
                - cost of sales
            
            
            143,937
            
            
            151,357Depreciation
                - operating expenses
            
            
            70,589
            
            
            64,836Amortization
                of land use rights
            
            
            35,983
            
            
            32,034Amortization
                of intangible assets
            
            
            123,704
            
            
            118,789Stock-based
                compensation
            
            
            -
            
            
            973,400Stock
                issued for services
            
            
            -
            
            
            9,300Loss
                on disposal of property and equipment
            
            
            -
            
            
            43,268Imputed
                interest
            
            
            47,796
            
            
            45,582Write-down
                of inventories
            
            
            -
            
            
            661,229Changes
                in operating assets and liabilitiesAccounts
                receivable, net
            
            
            (2,258,662
            )
            
            (864,344
            )Accounts
                receivable - related party
            
            
            1,924
            
            
            202,537Other
                receivables and prepaid expenses
            
            
            4,073
            
            
            89,067Inventories
            
            
            1,288,489
            
            
            (3,058,380
            )Deposit
                paid - related party
            
            
            -
            
            
            525,675Accounts
                payable
            
            
            95,785
            
            
            (56,531
            )Other
                payables and accrued liabilities
            
            
            35,855
            
            
            (20,107
            )Taxes
                payable
            
            
            240,813
            
            
            (213,940
            )**Net
                cash provided by (used for) operating activities**
            
            
            2,129,986
            
            
            138,418**Cash
                Flows from Investing Activities**Acquisition
                of Taishan Kangda
            
            
            -
            
            
            (1,473,665
            )Proceeds
                from disposals of property and equipment
            
            
            -
            
            
            964,250Purchase
                of property and equipment
            
            
            (2,631,017
            )
            
            (33,889
            )Purchase
                of land use rights
            
            
            -
            
            
            (303,750
            )**Net
                cash provided by (used for) investing activities**
            
            
            (2,631,017
            )
            
            (847,054
            )**Cash
                Flows from Financing Activities**Note
                payable
            
            
            53,524
            
            
            26,223**Net
                cash provided by (used for) financing activities**
            
            
            53,524
            
            
            26,223**Effect
                of exchange rate on cash**
            
            
            505,472
            
            
            246,712**Increase
                (decrease) in cash and cash equivalents**
            
            
            57,965
            
            
            (435,701
            )**Cash
                and cash equivalents, beginning of period**
            
            
            451,936
            
            
            887,637**Cash
                and cash equivalents, end of period**
            
            $
            509,901
            
            $
            451,936**Supplemental
                disclosures of cash flow information:**Interest
                paid
            
            $
            -
            
            $
            -Income
                taxes paid
            
            $
            610,792
            
            $
            -




**See
      notes to consolidated financial statements.**


F-5





**CHINA
      KANGTAI CACTUS BIO-TECH INC. AND SUBSIDIARIES**


NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31,
      2007




Note
      1. Organization
      and Business Operations




China
      Kangtai Cactus Bio-Tech Inc. (“US China Kangtai”) was incorporated in Nevada on
      March 16, 2000 as InvestNet, Inc. (“InvestNet”).




China
      Kangtai Cactus Bio-tech Company Limited (“BVI China Kangtai”) was incorporated
      in the British Virgin Islands (“BVI”) on November 26, 2004. Harbin Hainan
      Kangda Cacti Hygienical Foods Co., Ltd. (“Harbin Hainan Kangda”) a company with
      limited liability was incorporated in the People’s Republic of China (“PRC”) on
      December 30, 1998.




BVI
      China
      Kangtai is an investment holding company and Harbin Hainan Kangda’s principal
      activities are planting and developing new types of cactus, producing and
      trading in cactus health foods and related products in Harbin, PRC.




During
      2004, Harbin Hainan Kangda’s stockholders exchanged 100% of their ownership in
      Harbin Hainan Kangda for 500,000 shares of BVI China Kangtai under a
      reorganization plan. The transfer has been accounted for as a reorganization
      of
      entities under common control as the companies were beneficially owned by
      closely related stockholders and share common management.




On
      June 3, 2005, pursuant to an Agreement for Sales of Ownership, InvestNet
      sold its 100% owned subsidiaries, Champion Agents Limited and Interchance
      Limited, to a company controlled by a former director and stockholder. The
      sale
      consideration was for the purchaser to assume the liabilities of Champion Agents
      Limited, DSI Computer Technology Company Limited, a subsidiary of Champion
      Agents Limited and Interchance Limited.




On
      June 3, 2005, pursuant to a Stock Purchase Agreement, InvestNet issued
      428,571 shares to a stockholder of BVI China Kangtai for $300,000. On the same
      date, InvestNet exchanged 12% of BVI China Kangtai’s outstanding shares for
      1,573,295 shares of common stock, $0.001 par value ( the “Common Stock”), of
      InvestNet pursuant to an Agreement and Plan of Reorganization it had entered
      into on May 13, 2005 with the stockholders of BVI China Kangtai. In
      addition, InvestNet issued a Convertible Promissory Note for $8,070,000 plus
      accrued interest at 5% per annum that was converted into 14,248,395 shares
      (post
      a one for seventy reverse split) of the Company’s Common Stock (the “Convertible
      Note”) for the remaining 88% of the outstanding shares of BVI China Kangtai on
      August 26, 2005. After a one for seventy reverse spilt of the Company’s
      outstanding Common Stock took place on August 25, 2005, the total number
      shares of the Company’s outstanding Common Stock was 2,857,230 shares, and after
      adding the 14,248,395 shares of Common Stock following conversion of the
      Convertible Note on August 26, 2005, the total outstanding shares of Common
      Stock of the Company (now US China Kangtai) was 17,105,625 shares.




On
      August 25, 2005, InvestNet changed its name to China Kangtai Cactus
      Bio-Tech Inc.





Since
      InvestNet was a non-operating shell corporation after the sale of its two
      subsidiaries, the merger of InvestNet and BVI China Kangtai has been treated
      for
      accounting purposes as a capital transaction and recapitalization by the
      accounting acquirer (“BVI China Kangtai”) and as a reorganization by the
      accounting acquiree (“InvestNet”). The financial statements have been prepared
      as if the reorganization had occurred retroactively.





On
      June
      26, 2006 (see Note 3), Harbin Hainan Kangda acquired a 100% equity interest
      in
      Guangdong Taishan Kangda Cactus Hygienical Food Co., Ltd (“Taishan Kangda”), a
      PRC company with limited liability previously owned by two stockholders, for
      $1,475,000 in cash. Taishan Kangda owns a piece of land approximating 240,000
      square metres in Guangdong Taishan used for growing cactus.





US
      China
      Kangtai, BVI China Kangtai, Harbin Hainan Kangda and Taishan Kangda are
      hereafter collectively referred to as the “Company”.


F-6





Note
      2. Summary
      of Significant Accounting Policies




Principles
      of Consolidation




The
      accompanying consolidated financial statements for 2007 and 2006 include the
      financial statements of US China Kangtai and its 100% owned subsidiaries, BVI
      China Kangtai, Harbin Hainan Kangda and Taishan Kangda (from June 26,
      2006).





All
      significant inter-company accounts and transactions have been eliminated in
      consolidation.





Basis
      of Presentation





The
      financial statements of the Company have been prepared in accordance with
      accounting principles generally accepted in the United States and are expressed
      in US dollars.





Use
      of
      estimates




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the Unites States 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.





Fair
      Value of Financial Instruments





The
      Company’s financial instruments consist of cash and cash equivalents, accounts
      receivable, other receivables, accounts payable and accrued liabilities, note
      payable, and taxes payable. The fair value of these financial instruments
      approximate their carrying amounts reported in the consolidated balance sheets
      due to the short term maturity of these instruments and based on interest rates
      of comparable instruments.





Foreign
      Currency Translation




The
      functional currency of US China Kangtai and BVI China Kangtai is the United
      States dollar. The functional currency of Harbin Hainan Kangda and Taishan
      Kangda is the Chinese Renminbi (“RMB”). The reporting currency of the Company is
      the United States dollar.





Harbin
      Hainan Kangda and Taishan Kangda assets and liabilities are translated into
      United States dollars at period-end exchange rates ($0.13710 and $0.12825 at
      December 31, 2007 and 2006, respectively). Harbin Hainan Kangda and Taishan
      Kangda revenues and expenses are translated into United States dollars at
      weighted average exchange rates for the periods ($0.13167 and $0.12557 for
      the
      years ended December 31, 2007 and 2006, respectively). Resulting translation
      adjustments are recorded as a component of accumulated other comprehensive
      income (loss) within stockholders’ equity.





Cash
      and Cash Equivalents




Cash
      and
      cash equivalents at December 31, 2007 and 2006 consist of cash on hand and
      demand deposit accounts with banks. The Company considers all highly liquid
      instruments with maturities of three months or less at the time of issuance
      to
      be cash equivalents.


F-7





Accounts
      receivable




The
      Company extends unsecured credit to its customers in the ordinary course of
      business but mitigates the associated risks by performing credit checks and
      actively pursuing past due accounts. An allowance for returns and doubtful
      accounts is established and recorded based on historical experience and the
      aging of the related accounts receivable.




Inventories




Inventories
      of cactus stock include trees and palms whose cost consists of seeds and an
      allocation of fertilizers, direct labor and overhead costs such as depreciation,
      rent, freight and fuel, among others. Inventories of cactus stock are stated
      at
      the lower of cost or market value, cost being calculated on the weighted average
      basis.




Other
      raw
      materials are stated at the lower of cost or market value, cost being determined
      on a first in first out method.




Work
      in
      progress and finished goods are stated at lower of cost or market value, cost
      being determined on a first in first out method.




The
      Company provided for inventory allowances based on excess and obsolete
      inventories determined principally by customer demand.




Property
      and equipment




Property,
      plant and equipment are stated at cost less accumulated depreciation.
      Expenditures for additions, major renewals and betterments are capitalized
      and
      expenditures for maintenance and repairs are charged to expense as incurred.
      Depreciation is calculated on a straight-line basis over the estimated useful
      lives of the respective assets (40 years for buildings, 12 years for plant
      equipment and machinery, 10 years for motor vehicles, and 8 years for furniture
      and office equipment).





Intangible
      and Other Long-Lived Assets




Intangible
      and other long-lived assets are stated at cost, less accumulated amortization
      and impairments. Land use rights are being amortized on a straight-line basis
      over the remaining term of the related agreements, which range from 40 to 50
      years. Other intangible assets consist of patents and licenses. Patents and
      licenses are being amortized over their expected useful economic life of 10
      years.




The
      Company reviews its long-lived assets for impairment annually or more frequently
      if events or changes in circumstances indicate that the carrying amount of
      an
      asset may no longer be recoverable. The Company measures impairment by comparing
      the carrying value of the long-lived assets to the estimated undiscounted future
      cash flows expected to result from the use of the assets and their eventual
      disposition. If the sum of the expected undiscounted cash flows is less than
      the
      carrying amount of the assets, the Company would recognize an impairment loss
      based on the fair value of the assets.





Revenue
      Recognition




The
      Company recognizes revenue upon delivery of the products, at which time title
      passes to the customer provided that: there are no uncertainties regarding
      customer acceptance; persuasive evidence of an arrangement exists; the sales
      price is fixed or determinable; and collectibility is deemed
      probable.




Advertising
      Costs




Advertising
      costs are expensed as incurred. Advertising expenses totaled $218,083 and
      $137,874 for the years ended December 31, 2007 and 2006
      respectively.


F-8




Research
      and Development




Research
      and development costs related to both present and future products are expensed
      as incurred. Total expenditures on research and development charged to general
      and administrative expenses for the years ended December 31, 2007 and 2006
      were
      $72,961 and $11,835 respectively.




Stock-Based
      Compensation




Stock-based
      compensation is accounted for at fair value in accordance with SFAS No. 123
      (R)
“Accounting for Stock-Based Compensation”. No stock options or warrants were
      granted or issued in 2006 and 2007 and none are outstanding at December 31,
      2007.





Income
      Taxes





Deferred
      income taxes are recognized for temporary differences between the tax bases
      of
      assets and liabilities and their reported amounts in the financial statements
      by
      applying enacted statutory tax rates expected to apply in the years in which
      those temporary differences are expected to be recovered or settled. Deferred
      tax assets are reduced by a valuation allowance when, in the opinion of
      management, it is not more likely than not that some portion or all of the
      deferred tax assets will be realized. Current income taxes are provided for
      in
      accordance with the laws of the relevant taxing authorities.





Net
      Income Per Common Share




Basic
      net
      income per common share is computed by dividing net income by the weighted
      average number of common shares outstanding during the period.





Diluted
      net income per common share is computed on the basis of the weighted average
      number of common shares and dilutive securities (such as stock options and
      convertible securities) outstanding. Dilutive securities having an anti-dilutive
      effect on diluted net income per common share are excluded from the
      calculation.





Segment
      Information





The
      Company operates in only one segment, the sale of products made from cactus
      plants. The Company sells to two customer groups; health foods comprising cactus
      liquor and juice and sale of cactus powder to pharmaceutical companies for
      use
      in medical products.




Recent
      Accounting Pronouncements





Certain
      accounting pronouncements have been issued by the FASB and other standard
      setting organizations which are not yet effective and have not yet been adopted
      by the Company. The impact on the Company’s financial position and results of
      operations from adoption of these standards is not expected to be
      material.





Reclassifications





Certain
      prior period amounts have been reclassified to conform to the current period
      presentation.


F-9





Note
      3. Business
      Combination





Pursuant
      to an agreement dated June 26, 2006, Harbin Hainan Kangda acquired a 100% equity
      interest in Taishan Kangda which was previously owned by two stockholders for
      $1,475,000 in cash. One of the Taishan Kangda stockholders was the Company’s
      president who owned 27.1% of the Company’s issued and outstanding stock; the
      other stockholder was the president’s son and the Company’s general manager who
      owned 21.9% of the Company’s issued and outstanding stock.





The
      allocation of the net assets acquired was as follows:





Cash
                and cash equivalents
            
            $
            1,335Inventories
            
            
            639,031Total
                current assets
            
            
            640,366Property
                and equipment
            
            
            80,370Land
                use rights
            
            
            765,139Total
                assets
            
            
            1,485,875Less:
                Other payables and accrued liabilities
            
            
            (10,875
            )Net
                assets acquired
            
            $
            1,475,000





Analysis
      of the net outflow of cash and cash equivalents in respect of the business
      combination is as follows:





Cash
                consideration paid
            
            $
            1,475,000Less:
                cash and cash equivalents acquired
            
            
            (1,335
            )Net
                cash outflow
            
            $
            1,473,665




The
      acquisition of Taishan Kangda was accounted for as a purchase under SFAS No.
      141, Business Combinations. Accordingly, the operating results of Taishan Kangda
      have been included in the consolidated statements of operations and
      comprehensive income of the Company from June 26, 2006 (date of acquisition)
      to
      December 31, 2007. Had the acquisition occurred January 1, 2006, proforma
      combined net sales, net income, and net income per share for the year ended
      December 31, 2006 would be $10,384,655, $1,423,313, and $0.08,
      respectively.




F-10


Note
      4. Inventories





Inventories
      consist of:





December
                312007
            
            2006Cactus
                stock
            
            $
            5,512,782
            
            $
            5,680,089Other
                raw materials
            
            
            82,872
            
            
            1,888,726Work-in-progress
            
            
            2,700
            
            
            228,108Finished
                goods
            
            
            495,601
            
            
            246,750Total
            
            
            6,093,955
            
            
            8,043,673Less:
                allowance for market adjustments to inventories
            
            
            -
            
            
            (661,229
            )Net
            
            $
            6,093,955
            
            $
            7,382,444




Note
      5.  Property,
      Plant and Equipment





Property,
      plant and equipment, net consist of:





December
                31,2007
            
            2006Buildings
            
            $
            2,831,657
            
            $
            2,648,869Plant
                equipment and machinery
            
            
            4,350,191
            
            
            1,418,693Motor
                vehicles
            
            
            270,654
            
            
            253,183Furniture
                and office equipment
            
            
            14,649
            
            
            13,704Total
            
            
            7,467,151
            
            
            4,334,449Less
                accumulated depreciation
            
            
            (1,176,821
            )
            
            (889,662
            )Net
            
            $
            6,290,330
            
            $
            3,444,787





Note
      6. Intangible
      Assets





Intangible
      assets, net consist of:




December
                31,2007
            
            2006Patents
                and licenses
            
            $
            1,284,604
            
            $
            1,201,702Total
            
            
            1,284,604
            
            
            1,201,702Less
                accumulated amortization
            
            
            (731,566
            )
            
            (564,300
            )Net
            
            $
            553,038
            
            $
            637,402





The
      estimated amortization of intangible assets expense for each of the five
      succeeding fiscal years ending December 31, 2008, 2009, 2010, 2011, and 2012
      is $128,460.


F-11





Note
      7. Land
      Use Rights





Land
      use
      rights, net consist of:




December
                31,2007
            
            2006Harbin
                Hainan Kangda
            
            $
            674,994
            
            $
            638,135Taishan
                Kangda
            
            
            815,985
            
            
            765,139Total
            
            
            1,490,979
            
            
            1,403,274Less
                accumulated amortization
            
            
            (200,838
            )
            
            (152,845
            )Net
            
            $
            1,290,141
            
            $
            1,250,429





The
      estimated amortization of land use rights expense for each of
      the
      five succeeding fiscal years ending December
      31, 2008, 2009, 2010, 2011, and 2012 is $35,983.





Note
      8. Note
      Payable





Note
      payable consists of:





December
                31,******2007******
            
            **2006******Note
                payable to a financial institution, unsecured and due on
                demand.
            
            $
            829,437
            
            $
            775,913





The
      note
      payable is due to a PRC provincial government financial institution which made
      the loan to the Company to promote the commercial cultivation of cactus. The
      loan was made to the Company on an interest-free and unsecured basis and is
      repayable on demand. Imputed interest is calculated at 6% per annum on the
      amount due. Total imputed interest recorded as additional paid-in capital
      amounted to $49,766
      and $45,582 for the years ended December 31, 2007 and 2006, respectively.





Note
      9. Stockholders’
      Equity




Stock
      issuances





In
      June
      2006, the Company issued 628,000 shares of common stock having a fair value
      of
      $973,400 to fifteen persons as stock bonuses.





In
      June
      2006, the Company issued 6,000 shares of common stock having a fair value of
      $9,300 to a consultant for services provided.





Appropriated
      retained earnings





Relevant
      PRC statutory laws and regulations permit payments of dividends by Harbin Hainan
      Kangda only out of their retained earnings, if any, as determined in accordance
      with PRC accounting standards and regulations. In addition, PRC laws and
      regulations require that annual appropriations of after-tax income should be
      set
      aside prior to payments of dividends as a reserve fund. As a result of these
      PRC
      laws and regulations Harbin Hainan Kangda is restricted in its ability to
      transfer a portion of its net assets in the form of dividends, loans or
      advances, which restricted portion amounted to $1,844,937 and $1,361,365 at
      December 31, 2007 and 2006, respectively.


F-12




Note
      10. Income
      Taxes






The
      Company is subject to current income taxes on an entity basis on taxable income
      arising in or derived from the tax jurisdiction in which each entity is
      domiciled.




US
      China
      Kangtai was incorporated in the United States and is subject to United States
      income tax. No income taxes were provided in 2007 and 2006 since US China
      Kangtai had taxable losses in those years. At December 31, 2007, US China
      Kangtai had net operating loss carryforwards of approximately $773,000 which
      may
      be available to offset future taxable income. Management has not yet determined
      it to be more likely than not that a deferred tax asset of up to approximately
      $270,000 attributable to the utilization of these net operating loss
      carryforwards (which expire in 2027) will be realized. Accordingly, the Company
      has provided a 100% valuation allowance against the deferred tax asset in the
      financial statements at December 31, 2007.





At
      December 31, 2007, US China Kangtai has an unrecognized deferred United States
      income tax liability relating to undistributed earnings of Harbin Hainan Kangda.
      These earnings are considered to be permanently invested in operations outside
      the United States. Generally, such earnings become subject to United States
      income tax upon the remittance of dividends and under certain other
      circumstances. Determination of the amount of the unrecognized deferred United
      States income tax liability with respect to such earnings is not
      practicable.




BVI
      China
      Kangtai was incorporated in the BVI and is not subject to tax on income or
      on
      capital gains.




Harbin
      Hainan Kangda and Taishan Kangda were incorporated in the PRC and are subject
      to
      PRC income tax which is computed according to the relevant laws and regulations
      in the PRC. Harbin Hainan Kangda located its factories in a special economic
      region in Harbin, the PRC. This economic region allows foreign enterprises
      a
      two-year income tax exemption beginning in the first year after they become
      profitable, being 2005 and 2006 and a 50% income tax reduction for the following
      three years, being 2007 to 2009. Harbin Hainan Kangda was approved as a wholly
      owned foreign enterprise in March 2005.





The
      provision for income taxes differs from the amount computed by applying the
      statutory United States federal income tax rate to income before income taxes.
      A
      reconciliation follows:





Year
                EndedDecember
                31,2007
            
            2006Expected
                tax at 35%
            
            $
            1,016,024
            
            $
            502,126Tax
                effect of unutilized losses of USA China Kangtai; BVI China Kangtai;
                and
                Taishan Kangda
            
            
            75,109
            
            
            438,045Tax
                effect of Harbin Hainan Kangda income not taxed
            
            
            -
            
            
            (886,447
            )Tax
                effect of PRC income taxed at lower rate
            
            
            (487,906
            )
            
            (53,724
            )Acutal
                provision for income taxes
            
            $
            603,227
            
            $
            -


F-13





Note
      11. Commitments
      and Contingencies





Operating
      lease commitments





The
      Company leases office space and land for growing cactus from third parties
      under
      operating leases. Rental expenses for all operating leases for the years ended
      December 31, 2007 and 2006 were $ 17,371 and $19,631, respectively.





At
      December 31, 2007, future minimum rental commitments under all non-cancellable
      operating leases are due as follows:




**2008**
            
            $
            18,087**2009**
            
            
            18,087**2010**
            
            
            5,748**2011**
            
            
            2,896**2012**
            
            
            3,270**Thereafter**
            
            
            124,821**Total**
            
            $
            172,909





Concentrations
      and risks





During
      2007 and 2006, substantially all of the Company’s assets were located in China
      and 100% of the Company’s revenues were derived from companies located in
      China.




Substantially
      all of Harbin Hainan Kangda and Taishan Kangda’s business operations are
      conducted in the PRC and governed by PRC laws and regulations. Because these
      laws and regulations are relatively new, the interpretation and enforcement
      of
      these laws and regulations involve uncertainties.





The
      PRC
      government imposes controls on the convertibility of RMB into foreign currencies
      and, in certain cases, the remittance of currency out of the PRC. Under existing
      PRC foreign exchange regulations, payment of current account items, including
      profit distributions, interest payments and expenditures from the transaction,
      can be made in foreign currencies without prior approval from the PRC State
      Administration of Foreign Exchange by complying with certain procedural
      requirements. However, approval from appropriate governmental authorities is
      required where RMB is to be converted into foreign currency and remitted out
      of
      the PRC to pay capital expenses, such as the repayment of bank loans denominated
      in foreign currencies. The PRC government may also at its discretion restrict
      access in the future to foreign currencies for current account
      transactions.





Note
      12. Subsequent
      Events





On
      March
      21, 2008, the Company entered into a Preferred Stock Purchase Agreement (the
      “Purchase Agreement”) with T Squared Investments LLC (the “Investor”) to sell in
      a private placement to the Investor for an aggregate purchase price of $500,000,
      (i) 833,333 shares of the Company’s newly designated Series A Convertible
      Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”) for
      $0.60 per share (the “Shares”), (ii) warrants to purchase up to 1,250,000 shares
      of Company’s common stock exercisable for a period of three years at an exercise
      price of $0.75 per share (the “A Warrants”) or an aggregate exercise price of
      $937,500 if all of the A Warrants were exercised, and (iii) warrants to purchase
      up to 1,500,000 shares of Company’s common stock exercisable for a period of
      three years at an exercise price of $1.00 per share (the “B Warrants”), or an
      aggregate exercise price of $1,500,000 if all the B Warrants were exercised.
      The
      Company issued the Shares, the A Warrants and B Warrants on the same day.
      Westernking Financial Service acted as the sole placement agent in the
      transaction and received a fee of $30,000 (6% of the gross
      proceeds).





The
      Company also entered into a Registration Rights Agreement with the Investor,
      pursuant to which the Company is obligated to file a registration statement
      registering the resale of the Shares and Common Stock issuable upon the exercise
      of the A Warrants and B Warrants.


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