**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form 10-KSB/A**





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


EXCHANGE
      ACT OF 1934





For
      the
      fiscal year ended December 31, 2006





o TRANSITION
      REPORT
      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 o    No o




Indicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act). Yes o No x




State
      issuer’s revenue for its most recent fiscal year: $10,384,655.




The
      aggregate market value of the common stock of the issuer held by non-affiliates
      of the issuer on March 29, 2007 based on the closing price of the common stock
      as reported on the OTC Bulletin Board on such date was $7,760,162.




As
      of
      March 29, 2007 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
            
            6Item
                3.
            Legal
                Proceedings
            
            6Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            7PART IIItem
                5.
            Market
                for Common Equity and Related Stockholder Matters
            
            7Item
                6.
            Management’s
                Discussion and Analysis
            
            8Item
                7.
            Financial
                Statements
            
            11Item
                8.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            29Item
                8A
            Controls
                and Procedures
            
            29Item
                8B
            Other
                Information
            
            29PART IIIItem
                9.
            Directors,
                Executive Officers, Promoters and Control Persons; Compliance With
                Section 16(a) of the Exchange Act.
            
            30Item
                10.
            Executive
                Compensation
            
            32Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management
            
            32Item
                12.
            Certain
                Relationships and Related Transactions
            
            33Item
                13.
            Exhibits
            
            34Item
                14.
            Principal
                Accountant Fees and Services
            
            36SIGNATURES
            
            37




-
          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 2006 is 60,000 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 has many co-operative processing agreements with local pharmaceutical,
      food and beverage manufacturers to produce its products.





Two
      of
      such agreements are with Shandong Tsingtao Beer Inc (Harbin subsidiary)’s Acheng
      Branch and Harbin Ice Lantern Noodle Factory dated March 10 th ,
      2004.
      The Company has renewed these contracts on January 8 th and
      20 th 2006
      respectively. 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. 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. Pursuant to these contracts, the Company
      provides raw materials, technical support and quality control guidelines while
      the processors (Harbin Diwang Pharmacy Co. Ltd. (a GMP certified processor)
      and
      Harbin Bin County HuaLan Dairy Factory) provide labor and production
      facilities.





In
      2006,
      the Company has 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.





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
      is products with cactus extracts.




-
          4
          -


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 $7,373,105 in fiscal
      year 2006, or about 71% of the total net sales.




The
      Company also entered co-operative production agreements on
      March 10 th ,
      2004
      and renewed the contracts on January 8 th ,
      2006
      with Shandong Tsingtao Beer Inc.’s Harbin subsidiary to jointly produce cactus
      beer for long term cooperation. Pursuant to these agreements, the Company
      provides raw materials, recipes, technical support and quality control
      guidelines. Shandong Tsingtao Beer Inc. Acheng Branch provides labor and
      processing facilities and strictly follows the Company’s guidelines and
      instructions for production. The Company has also established its own cactus
      beverage and fruit wine production facility. The Company’s cactus drinks include
      cactus beer, cactus fruit wine (including the brand name (Overlord Scourge
      Flower Imperial Wine), cactus beverage and cactus fruit drink,




The
      revenue generated from sales of cactus food, beverage and wine was $2,596,163
      in
      year 2006, or about 25%. The remaining 4% of the sales is cactus raw and
      intermediate materials.




The
      Company has established its own R&D institution and Sino-Mexico Cactus
      Institution, which is certified by Heilongjiang Science & Technology
      Committee. The Company independently developed many patented cactus -based
      nutriceutical and nutritional food and drinks.




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 exclusively through various types and levels of
      provincial and municipal distributors and agents in Dalian, Heilongjiang,
      Harbin, Beijing, Guangzhou, Tianjin, Shenzhen, Jilin, Wuhan, and Shandong in
      China. The Company’s revenue breakdown by region in China is as
      follows:




US$Heilongjiang
            
            $
            3,047,521.07Jilin
            
            $
            735,885.39Shandong
            
            $
            703,558.02Beijing
            
            $
            1,167,597.55Guangdong
            
            $
            2,021,956.07Tianjin
            
            $
            973,286.99Hubei
            
            $
            440,065.88




-
          5
          -




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
      April 2, 2007, China Kangtai has 232 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.





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.




-
          6
          -




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, 2006.




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
              
              Low2006
              
              
              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
      of
      December 31, 2006, there were approximately 92 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.




-
          7
          -




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, 2006, 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, 2006 and Year Ended December 31,
      2005




Sales




For
      the
      fiscal year ended December 31, 2006, sales increased by $2,381,917 or by
      29.8% to $ 10,384,655 from $8,002,738 for the year ended December 31, 2005.
      The increase in sales is attributable to the fact that the Company’s products
      are efficiently marketed and increasingly well accepted by the domestic market
      customers.




Cost
      of
      Sales




For
      the
      fiscal year ended December 31, 2006, cost of sales increased by $906,096 or
      14.7% to $7,062,280 from $6,156,184 as compared to the corresponding period
      of
      the prior year. The much smaller percentage increase in the cost of sales
      resulted from the increasing efficiency in the operations of the
      Company.




-
          8
          -




Selling
      and Distribution Expenses




For
      the
      fiscal year ended December 31, 2006, selling and distribution expenses
      decreased by $30,763 or 12.7% to $211,972 from $242,735 as compared to the
      corresponding period of the prior year. The decrease 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 cost of selling and distribution
      expenses of the Company.
      Starting August 2006, the Company has also adopted a strategy of using
      exclusively local distributors and distribution agents, and disposed its
      self-owned retail outlets, hence greatly reduced its selling and distribution
      costs.





Impairment
      of Inventories





Impairment
      of inventories for the fiscal years ended December 31, 2006 and 2005 were
      $661,229 and $724,504 respectively. Most of the inventories are the cactus
      crops
      growing on the farmland. Therefore the allowance is mostly based on the
      difference between the cost of cactus in the book and the conversion value
      of
      the cactus, which is the estimated market price of cactus minus all the
      estimated costs and taxes of the cactus to be sold, at the year end, if the
      conversion value is below the book cost.





For
      the
      fiscal year ended December 31, 2006, the book cost of cactus inventories was
      $0.19/kg. The conversion value at the time was at $0.17/kg. A total of
      33,061,450 kg of cactus inventories was affected, so the allowance was
      $661,229.





For
      the
      fiscal year ended December 31, 2005, the book cost of cactus inventories was
      $0.19/kg and the conversion value was $0.165/kg. A total of 24,818,820 kg of
      cactus inventories was affected. Therefore the allowance was $620,470. The
      difference between this allowance and $724,504 is the result of decreases in
      the
      values of other raw materials and packaging materials




General
      and Administrative Expenses




For
      the
      fiscal year ended December 31, 2006, general and administrative expenses
      increased by $757,832 or 123.5% to $1,371,507 from $613,675 as compared to
      the
      corresponding period of the prior year. The primary factor responsible for
      the
      increase is a one time S-8 shares issuance for stock based compensation of
      $982,700. Separating that entry, this category of expenses is basically flat
      from 2005 to 2006.




Please
      note for the fiscal year ended December 31, 2006, the category of
      Professional Fees are included in the General and Administrative Expenses,
      which
      has also decreased due to the fact that the Company is becoming more
      cost-effective to managing its professional services providers, such as
      attorneys, accountants and auditors, and investor relations
      consultants.




For
      the
      fiscal year ended December 31, 2006, the net income increased by $639,154
      or 80.3% to $1,434,645 from $795,491 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 unit cost of its
      products.




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 revenue and improving operating
      efficiencies.




Liquidity
      and Capital Resources




For
      the
      fiscal year ended December 31, 2006, cash flows from operating activities
      increased by $753,118 or 122.5% to $138,418 from $($614,700) as compared to
      the
      corresponding fiscal year ended December 31, 2005. The increase is
      primarily due to the increase of net income, the decrease of accounts
      receivables, stock compensation, and deposit paid by a related
      party.




For
      the
      fiscal year ended December 31, 2006, cash flows from investing activities
      decreased by $717,633 or 554.5% to $(847,054) from ($129,421) as compared to
      the
      corresponding period of the prior year. The decrease is due to investments
      in
      the Company’s property and equipment in 2006, in particular an acquisition of
      cactus plantation (Taishan Kangda) in June 2006.




For
      the
      fiscal year ended December 31, 2006, cash flow provided by financing
      activities decreased by $771,801 or 96.7% to $26,223 from $798,024 as compared
      to fiscal year ended December 31, 2004. The primary factor responsible for
      the decrease is due to the absence of a large due from a related party in
      2005.




-
          9
          -




The
      Company’s operations for the year ended December 31, 2006 resulted in
      comprehensive income of $1,993,182. 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.




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, 2006 and for the twelve months ended December 31, 2005
      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.





-
          10
          -




ITEM
      7.  FINANCIAL STATEMENTS.




CHINA
      KANGTAI CACTUS BIO-TECH INC. AND SUBSIDIARIES





CONSOLIDATED
      FINANCIAL STATEMENTS


AS
      OF
      DECEMBER 31, 2006 AND 2005




-
          11
          -




CHINA
      KANGTAI CACTUS BIO-TECH INC.


(PREVIOUSLY
      INVESTNET, INC.)


AND
      SUBSIDIARIES





CONTENTS




PagesReports
                of Independent Registered Public Accounting Firms
            
            
            13Consolidated
                Balance Sheets as of December 31, 2006 and 2005
            
            
            16Consolidated
                Statements of Operations and Comprehensive income for the years ended
                December 31, 2006 and 2005
            
            
            17Statements
                of Stockholders’ Equity for the years ended December 31, 2006 and
                2005
            
            
            18Consolidated
                Statements of Cash Flows for the years ended December 31, 2006 and
                2005
            
            
            19Notes
                to the Consolidated Financial Statements
            
            
            20




-
          12
          -




**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 sheet of China Kangtai Cactus
      Bio-Tech Inc. and subsidiaries (the “Company”) as of December 31, 2006 and the
      related consolidated statements of operations and comprehensive income,
      stockholders’ equity, and cash flows for the year 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
      audit.





I
      conducted my audit 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 audit provides 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, 2006 and the results of their
      operations and cash flows for the year then ended in conformity with accounting
      principles generally accepted in the United States.




/s/
                Michael T. Studer, CPA, P.C.




Freeport,
      New York


March
      30,
      2007




-
          13
          -


China Kangtai
            **Jimmy
                C.H. Cheung & Co**
              *Certified
                Public Accountants*
              *(A
                member of Kreston International)*
            Registered
                with the Public Company
              Accounting
                Oversight Board





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
      the
      Board of Directors of:


China
      Kangtai Cactus Bio-Tech Inc. (previously InvestNet, Inc.) and
      subsidiaries





We
      have
      audited the accompanying consolidated balance sheets of China Kangtai Cactus
      Bio-Tech Inc. (previously InvestNet, Inc.) and subsidiaries as of December
      31,
      2005 and the related consolidated statements of operations and comprehensive
      income, changes in stockholders’ equity and cash flows for the years ended
      December 31, 2005. These financial statements are the responsibility of the
      Company’s management. Our responsibility is to express an opinion on these
      financial statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a test basis, evidence supporting the amounts and disclosures in the
      financial statements. An audit also includes assessing the accounting principles
      used and significant estimates made by management, as well as evaluating the
      overall financial statement presentation. We believe that our audits of the
      financial statements provide a reasonable basis for our
      opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of China Kangtai Cactus Bio-Tech
      Inc.
      (previously InvestNet, Inc.) and subsidiaries as of December 31, 2005 and the
      related consolidated statements of its operations and its cash flows for the
      years ended December 31, 2005 in conformity with accounting principles generally
      accepted in the United States of America.




China Kangtai




**JIMMY
      C.H. CHEUNG & CO**


Certified
      Public Accountants





Hong
      Kong





Date:
      March 10, 2006 except for Note 14, which the date is March 29, 2006





1607
                Dominion Centre, 43 Queen’s Road East, Wanchai, Hong Kong
              Tel:
                (852) 25295500 Fax: (852) 28651067 Email:
                jimmycheung@jimmycheungco.com
              Website:
                http://www.jimmycheungco.com
            China Kangtai





-
          14
          -




China Kangtai
                **JIMMY
                    C.H. CHEUNG & CO.**
                  Certified
                    Public Accountants
                  Members
                    of Kreston International
                1607
                    Dominion Centre43
                    Queen’s Road EastWanchai,
                    Hong KongTelephone
                :
                    (852) 2529-5500Fax
                :
                    (852) 2865-1067Email
                : jchc@krestoninternational.com.hkWeb
                    site
                : http://www.jimmycheungco.com
 
 **CONSENT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
  **THE
        BOARD OF DIRECTORS**
 **CHINA
        KANGTAI CACTUS BIO-TECH INC.**
 
 We
        hereby
        consent to the re-issue of our opinion on the audited financial statements
        of
        China Kangtai Cactus Bio-Tech Inc. and subsidiaries for the year ended December
        31, 2005 for use in a Form 10-KSB that it expects to file with the SEC on
        or
        about January 29, 2008.
 
 China Kangtai
  JIMMY
        C.H. CHEUNG & CO.
 Certified
        Public Accountants
 
 Hong
        Kong
 
 January
        29, 2008
  China Kangtai
                  China Kangtai
  -
              15
              -




CHINA
      KANGTAI CACTUS BIO-TECH, INC. AND SUBSIDIARIES


CONSOLIDATED
      BALANCE SHEETS


(EXPRESSED
      IN U.S. DOLLARS)





December 31,2006
            
            2005(Audited)
            
            (Audited)**ASSETS****Current
                Assets**Cash
                and cash equivalents
            
            $
            451,936
            
            $
            887,637Accounts
                receivable, net of allowance for doubtful accounts of $71,597 and
                $69,177,
                respectively
            
            
            1,777,507
            
            
            913,163Accounts
                receivable from a related party
            
            
            1,924
            
            
            204,461Inventories
            
            
            7,382,444
            
            
            4,346,262Other
                receivables and prepaid expenses
            
            
            24,310
            
            
            113,377Deposit
                paid to a related company
            
            
            -
            
            
            525,675**Total
                Current Assets**
            
            
            9,638,121
            
            
            6,990,575**Property
                and Equipment, net of accumulated depreciation of $889,662 and $1,126,956,
                respectively**
            
            
            3,444,787
            
            
            4,315,602**Other
                Assets**Intangible
                assets, net of accumulated amortization of $564,300 and $415,942,
                respectively
            
            
            637,402
            
            
            714,493Land
                use rights, net of accumulated amortization of $152,845 and $107,945,
                respectively
            
            
            1,250,429
            
            
            182,084**Total
                Assets**
            
            $
            14,970,739
            
            $
            12,202,754**LIABILITIES
                AND STOCKHOLDERS' EQUITY****Current
                Liabilities**Accounts
                payable
            
            $
            64,758
            
            $
            121,289Other
                payables and accrued liabilities
            
            
            156,693
            
            
            165,924Note
                payable
            
            
            775,913
            
            
            749,690Taxes
                payable
            
            
            78,336
            
            
            292,276**Total
                current liabilities**
            
            
            1,075,700
            
            
            1,329,179**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 17,105,625 shares,
                respectively
            
            
            17,740
            
            
            17,105Additional
                paid-in capital
            
            
            6,558,082
            
            
            5,530,435Retained
                earningsAppropriated
            
            
            1,361,365
            
            
            885,137Unappropriated
            
            
            5,266,815
            
            
            4,308,398Accumulated
                other comprehensive income
            
            
            691,037
            
            
            132,500**Total
                stockholders' equity**
            
            
            13,895,039
            
            
            10,873,575**Total
                Liabilities and Stockholders' Equity**
            
            $
            14,970,739
            
            $
            12,202,754





**See
      notes to consolidated financial statements.**




-
          16
          -




CHINA
      KANGTAI CACTUS BIO-TECH, INC.AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME


(EXPRESSED
      IN U.S. DOLLARS)





Year ended December 31,2006
            
            2005(Audited)
            
            (Audited)**Net
                Sales**
            
            $
            10,384,655
            
            $
            8,002,738**Cost
                of Sales**
            
            
            (7,062,280
            )
            
            (6,156,184
            )**Gross
                Profit**
            
            
            3,322,375
            
            
            1,846,554**Operating
                Expenses**Selling
                expenses
            
            
            211,972
            
            
            242,735General
                and administrative expenses (including stock-based compensation of
                $982,700 and $300,000, respectively)
            
            
            1,371,507
            
            
            613,675Depreciation
            
            
            64,836
            
            
            59,930Amortization
                of land use rights
            
            
            32,034
            
            
            1,207Amortization
                of intangible assets
            
            
            118,789
            
            
            113,043Total
                operating expenses
            
            
            1,799,138
            
            
            1,030,590**Income
                from Operations**
            
            
            1,523,237
            
            
            815,964**Other
                Income (Expenses)**Government
                grant
            
            
            -
            
            
            24,450Interest
                income
            
            
            258
            
            
            356Imputed
                interest
            
            
            (45,582
            )
            
            (44,981
            )Loss
                on disposal of property and equipment
            
            
            (43,268
            )
            
            -Other
                income (expense) - net
            
            
            -
            
            
            (298
            )Total
                Other Income (Expenses)
            
            
            (88,592
            )
            
            (20,473
            )**Income
                before Income Taxes**
            
            
            1,434,645
            
            
            795,491**Income
                Tax Expense**
            
            
            -
            
            
            -**Net
                Income**
            
            
            1,434,645
            
            
            795,491**Other
                Comprehensive Income**Foreign
                currency translation gain (loss)
            
            
            558,537
            
            
            132,500**Comprehensive
                Income**
            
            
            1,993,182
            
            
            927,991**Net
                income per common share**Basic
                and diluted
            
            $
            0.08
            
            $
            0.05Basic
                and Diluted
            
            
            17,440,863
            
            
            16,563,910





**See
      notes to consolidated financial statements.**




-
          17
          -




CHINA
      KANGTAI CACTUS BIO-TECH, INC. AND SUBSIDIARIES


STATEMENTS
      OF STOCKHOLDERS’ EQUITY


(EXPRESSED
      IN U.S. DOLLARS)




Common Stock $0.001 par value
            
            Additional
            
            Unappropriated
            
            Appropriated
            
            Accumulated otherpaid-in
            
            retained
            
            retained
            
            comprehensive
            
            Due toShares
            
            Amount
            
            capital
            
            earnings
            
            earnings
            
            income
            
            stockholdersBalance
                at December 31, 2004
            
            
            15,821,690
            
            
            15,821
            
            
            5,186,738
            
            
            3,701,862
            
            
            696,182
            
            
            -
            
            
            66,400Stock
                issued in connection with recapitalization
            
            
            855,364
            
            
            855
            
            
            (855
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Stock
                issued for services
            
            
            428,571
            
            
            429
            
            
            299,571
            
            
            -
            
            
            -
            
            
            -
            
            
            -Repayment
                to stockholders
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (66,400
            )Imputed
                interest on note payable
            
            
            -
            
            
            -
            
            
            44,981
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                income for the year
            
            
            -
            
            
            -
            
            
            -
            
            
            795,491
            
            
            -
            
            
            -
            
            
            -Transfer
                to statutory and staff welfare reserves
            
            
            -
            
            
            -
            
            
            -
            
            
            (188,955
            )
            
            188,955
            
            
            -
            
            
            -Currency
                translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            132,500
            
            
            -Balance
                at December 31, 2005
            
            
            17,105,625
            
            
            17,105
            
            
            5,530,435
            
            
            4,308,398
            
            
            885,137
            
            
            132,500
            
            
            -Stock
                issued for services
            
            
            634,000
            
            
            635
            
            
            982,065
            
            
            -
            
            
            -
            
            
            
            
            
            -Imputed
                interest on note payable
            
            
            -
            
            
            -
            
            
            45,582
            
            
            -
            
            
            -
            
            
            
            
            
            -Transfer
                to statutory and staff welfare reserves
            
            
            -
            
            
            -
            
            
            -
            
            
            (476,228
            )
            
            476,228
            
            
            -
            
            
            -Net
                income for the year
            
            
            -
            
            
            -
            
            
            -
            
            
            1,434,645
            
            
            -
            
            
            -
            
            
            -Currency
                translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            558,537
            
            
            -Balance
                at December 31, 2006
            
            
            17,739,625
            
            $
            17,740
            
            $
            6,558,082
            
            $
            5,266,815
            
            $
            1,361,365
            
            $
            691,037
            
            $
            -





**See
      notes to consolidated financial statements.**




-
          18
          -




CHINA
      KANGTAI CACTUS BIO-TECH, INC. AND SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


(EXPRESSED
      IN U.S. DOLLARS)





Year Ended December 31,2006
            
            2005(Audited)
            
            (Audited)**Cash
                Flows from Operating Activities**Net
                income
            
            $
            1,434,645
            
            $
            795,491Adjustments
                to reconcile net income to net cash provided by (used for) operating
                activitiesDepreciation
                - cost of sales
            
            
            151,357
            
            
            276,048Depreciation
                - operating expenses
            
            
            64,836
            
            
            59,930Amortization
                of land use rights
            
            
            32,034
            
            
            1,207Amortization
                of intangible assets
            
            
            118,789
            
            
            113,043Loss
                on disposal of property and equipment
            
            
            43,268
            
            
            -Stock
                bonuses
            
            
            973,400
            
            
            -Stock
                issued for services
            
            
            9,300
            
            
            300,000Imputed
                interest
            
            
            45,582
            
            
            44,981Write-down
                of inventories
            
            
            661,229
            
            
            724,504Changes
                in operating assets and liabilitiesAccounts
                receivable, net
            
            
            (864,344
            )
            
            (483,297
            )Accounts
                receivable - related party
            
            
            202,537
            
            
            (204,461
            )Other
                receivables and prepaid expenses
            
            
            89,067
            
            
            (77,230
            )Inventories
            
            
            (3,058,380
            )
            
            (1,110,447
            )Deposit
                paid - related party
            
            
            525,675
            
            
            (525,675
            )Accounts
                payable
            
            
            (56,531
            )
            
            (38,682
            )Other
                payables and accrued liabilities
            
            
            (20,107
            )
            
            (116,286
            )Taxes
                payable
            
            
            (213,940
            )
            
            (373,826
            )**Net
                cash provided by (used for) operating activities**
            
            
            138,418
            
            
            (614,700
            )**Cash
                Flows from Investing Activities**Net
                cash outflow from business combination
            
            
            (1,473,665
            )
            
            -Proceeds
                from disposals of property and equipment
            
            
            964,250
            
            
            -Purchase
                of property and equipment
            
            
            (33,889
            )
            
            (1,788
            )Purchase
                of land use rights
            
            
            (303,750
            )
            
            (127,633
            )**Net
                cash provided by (used for) investing activities**
            
            
            (847,054
            )
            
            (129,421
            )**Cash
                Flows from Financing Activities**Due
                from a related party
            
            
            -
            
            
            845,411Due
                from stockholders
            
            
            -
            
            
            (66,400
            )Note
                payable
            
            
            26,223
            
            
            19,013**Net
                cash provided by (used for) financing activities**
            
            
            26,223
            
            
            798,024**Effect
                of exchange rate on cash**
            
            
            246,712
            
            
            132,500**Increase
                (decrease) in cash and cash equivalents**
            
            
            (435,701
            )
            
            186,403**Cash
                and cash equivalents, beginning of period**
            
            
            887,637
            
            
            701,234**Cash
                and cash equivalents, end of period**
            
            $
            451,936
            
            
            887,637**Supplemental
                disclosures of cash flow information:**Interest
                paid
            
            $
            -
            
            $
            -Income
                taxes paid
            
            $
            -
            
            $
            -





**See
      notes to consolidated financial statements.**




-
          19
          -




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


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER 31,
      2006**


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 its100% 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. After sale of its subsidiaries,
        InvestNet became a non-operating shell corporation.
  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 has not yet commenced business operations
        but
        owns a piece of land approximating 240,000 square meters in Guangdong Taishan
        used for growing cactus and a factory property.
 
 US
        China
        Kangtai, BVI China Kangtai, Harbin Hainan Kangda and Taishan Kangda are
        hereafter collectively referred to as the “Company”.
  -
            20
            -
  Note
        2. Summary
        of Significant Accounting Policies
 
 Principles
        of Consolidation
  The
        accompanying consolidated financial statements for 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).
 
 The
        accompanying consolidated financial statements for 2005 include the financial
        statements of US China Kangtai (from June 3, 2005) and its 100% owned
        subsidiaries, BVI China Kangtai and Harbin Hainan Kangda.
 
 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 the financial statements in conformity with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect the reported amount 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, 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.
 
 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 ($0.12825 and $0.12396
        at
        December 31, 2006 and 2005, respectively). Harbin Hainan Kangda and Taishan
        Kangda revenues and expenses are translated into United States dollars at
        weighted average exchange rates for the periods ($0.12557 and $0.12240 for
        the
        years ended December 31, 2006 and 2005, 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, 2006 and 2005 consist of cash on hand and
        a
        demand deposit account with a bank. The Company considers all highly liquid
        instruments with maturities of three months or less at the time of issuance
        to
        be cash equivalents.
 
 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 doubtful accounts is
        established and recorded based on managements’ assessment of the credit history
        with the customer and current relationships with them.
  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.
  -
            21
            -
  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 goodwill, patents and licenses.
        Goodwill is not being amortized. 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. For
        consignment sales, revenues are recognized at the time that the consignee
        makes
        sales to customers with no right of return.
  Advertising
        Costs
  Advertising
        costs are expensed as incurred. Advertising expenses totaled $ 137,874 and
        $128,689 for the years ended December 31, 2006 and 2005
        respectively.
  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 and cost of sales for the years ended December
        31,
        2006 and 2005 were $11,835 and $50,019 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 2005 and 2006 and none are outstanding at December 31,
        2006.
 
 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.
  -
            22
            -
  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.
 
 Note
        3.
        Acquisition of Taishan Kangda
 
 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 shareholders was the Company’s
        president who owns 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
        owns 21.9% of the Company’s issued and outstanding stock. Taishan Kangda has not
        yet commenced business operations but owns a piece of land approximating
        240,000
        square metres in Guangdong Taishan used for growing cactus and a factory
        property.
 
 The
        allocation of the net assets acquired is 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
  -
            23
            -
  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, 2006.
 
 Had
        the
        acquisition occurred January 1, 2005, pro forma combined results of operations
        would be:
 Year Ended December 312006
                
                2005Net
                    sales
                
                $
                10,384,655
                
                $
                8,002,738Net
                    income
                
                $
                1,423,313
                
                $
                773,299Net
                    income per common share - basic and diluted
                
                $
                0.08
                
                $
                0.05
 Note
          4. Inventories
 
 Inventories
        consist of:
 
 December 312006
              
              2005Cactus
                  stock
              
              $
              5,680,089
              
              $
              4,715,577Other
                  raw materials
              
              
              1,888,726
              
              
              215,791Work-in-progress
              
              
              228,108
              
              
              -Finished
                  goods
              
              
              246,750
              
              
              139,3988,043,673
              
              
              5,070,766Less:
                  allowance for market adjustments to inventories
              
              
              (661,229
              )
              
              (724,504
              )$
              7,382,444
              
              $
              4,346,262
  Note
        5.  Property,
        Plant and Equipment
 
 Property,
        plant and equipment, net consist of:
 
 December 31,2006
              
              2005Buildings
              
              $
              2,648,869
              
              $
              3,887,142Plant
                  equipment and machinery
              
              
              1,418,693
              
              
              1,331,854Motor
                  vehicles
              
              
              253,183
              
              
              211,588Furniture
                  and office equipment
              
              
              13,704
              
              
              11,974Total
              
              
              4,334,449
              
              
              5,442,558Less
                  accumulated depreciation
              
              
              (889,662
              )
              
              (1,126,956
              )Net
              
              $
              3,444,787
              
              $
              4,315,602
  -
            24
            -


Note
        6. Intangible
        Assets
 
 Intangible
        assets, net consist of:
 -
            25 -


December
                31,2006
            
            2005Patents
                and licenses
            
            
            1,201,702
            
            
            1,130,435Total
            
            
            1,201,702
            
            
            1,130,435Less
                accumulated amortization
            
            
            (564,300
            )
            
            (415,942
            )Net
            
            $
            637,402
            
            $
            714,493








The
      estimated amortization of intangible assets expense for each of the five
      succeeding fiscal years ending December 31, 2007, 2008, 2009, 2010, and 2011
      is
      $120,170.





Note
      7. Land
      Use Rights





Land
      use
      rights, net consist of:





December
                31,2006
            
            2005Harbin
                Hainan Kangda
            
            $
            638,135
            
            $
            290,029Taishan
                Kangda
            
            
            765,139
            
            
            -Total
            
            
            1,403,274
            
            
            290,029Less
                accumulated amortization
            
            
            (152,845
            )
            
            (107,945
            )Net
            
            $
            1,250,429
            
            $
            182,084







The
      estimated amortization of land use rights expense for each of the five
      succeeding fiscal years ending December
      31, 2007, 2008, 2009, 2010, and 2011 is $28,249.





Note
      8. Note
      Payable





Note
      payable consists of:





December
                31,**2006**
            
            **2005**Note
                payable to a financial institution, unsecured and due on
                demand.
            
            $
            775,913
            
            $
            749,690




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 $45,582 and $44,981 for the years ended December 31, 2006 and 2005,
      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.





-
          26 -




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 $1,361,365 and $885,137 at
      December 31, 2006 and 2005, respectively.




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 2006 and 2005 since US China
      Kangtai had taxable losses in those years. At December 31, 2006, US China
      Kangtai had net operating loss carryforwards of approximately $565,000 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
      $192,000 attributable to the utilization of these net operating loss
      carryforwards (which expire in 2026) will be realized. Accordingly, the Company
      has provided a 100% valuation allowance against the deferred tax asset in the
      financial statements at December 31, 2006.





At
      December 31, 2006, US China Kangtai has an unrecognized deferred United States
      income tax liability relating to undistributed earnings to 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. No income tax expense has been
      recorded for 2006 and 2005, as Harbin Hainan Kangda was exempt under the special
      economic region rules.





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
                31,2006
            
            2005Expected
                tax at 35%
            
            $
            502,126
            
            $
            278,422Tax
                    effect of unutilized losses of USA China Kangtai; BVI China Kangtai;
                    and
                    Taishan Kangda
            
            
            438,045
            
            
            105,000Tax
                effect of Harbin Hainan Kangda income not taxed
            
            
            (886,447
            )
            
            (361,512
            )Tax
                  effect of PRCincome
                  taxed at lower rate
            
            
            (53,724
            )
            
            (21,910
            )Actual
                provision for income taxes
            
            $
            -
            
            $
            -




-
          27 -




Note
      11. Related
      Party Transactions




Net
      sales
      in 2005 include $204,461 in sales of cactus to a company controlled by a related
      party of the Company.





Note
      12. 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, 2006 and 2005 were $ 19,631 and $37,878, respectively.





At
      December 31, 2006, future minimum rental commitments under all non-cancelable
      operating leases are due as follows:




**2007**
            
            $
            16,920**2008**
            
            
            16,920**2009**
            
            
            16,920**2010**
            
            
            5,377**2011**
            
            
            2,709**Thereafter**
            
            
            120,530**Total**
            
            
            179,376




Concentrations
      and risks




During
      2006 and 2005, 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.





-
          28 -





Note
      13. Restatement
      of Previously Issued Consolidated Financial Statements




As
      previously reported (in the December 31, 2006 consolidated financial statements
      included in the December 31, 2006 Form 10-KSB filed April 2, 2007), the Company
      allocated $132,091 of the $1,475,000 purchase price of Taishan Kangda to
      goodwill and $633,048 to land use rights. As restated (in the accompanying
      consolidated financial statements), the Company has adjusted that allocation
      to
      $0 for goodwill and $765,139 for land use rights. This restatement had no effect
      on total assets at December 31, 2006 or on the consolidated statement of
      operations and comprehensive income for the year then ended.





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 that the Company's controls and
      procedures are effective. 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 quarter ended December 31, 2006, 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
      8B.
 OTHER INFORMATION.




None.




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          29 -




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
            
            58
            
            President,
                Chief Executive Officer and Chairman of the Board of
                DirectorsChengzhi
                Wang
            
            37
            
            General
                Manager and a DirectorHong
                Bu
            
            33
            
            Chief
                Financial Officer and a DirectorJiping
                Wang
            
            46
            
            DirectorSong
                Yang
            
            33
            
            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.





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.




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          30 -




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.




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          31 -




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**




**Change
                  in****Pension****Non-Equity**
              
              **Value
                  and****Incentive**
              
              **Non-qualified****Stock**
              
              **Option**
              
              **Plan**
              
              **Compensation**
              
              **All
                  other****Name
                  and**
              
              
              
              **Salary**
              
              **Bonus**
              
              **Award(s)**
              
              **Award(s)**
              
              **Compensation**
              
              **Earnings**
              
              **Compensation**
              
              **Total****Principal
                  Position**
              
              **Year**
              
              **($)**
              
              **($)**
              
              **($)**
              
              **($)**
              
              **($)**
              
              **($)**
              
              **($)**
              
              **($)**Jinjiang
                  WangPresident,
                  Chief Executive Officer and Chairman2006
              
              $
              2,600
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              $
              2,6002005
              
              $
              90,000
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              $
              90,0002004
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —




No
      executive officer received compensation in excess of $100,000 during the fiscal
      years ended December 31, 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, 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
            %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
            
            All
                Directors and Executive Officers as a Group
            
            10,871,828
                Direct
            
            61.3
            %




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          32 -





(1) Percentage
      is based on 17,739,625 shares of Common Stock outstanding as of March 21,
      2006.




(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




In
      June
      2006 China Kangtai Cactus Bio-tech Inc, acquired Taishan Kangda Food Co., Ltd.
      and the transaction was reported in 8K and subsequent 8K/A.




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          33 -




ITEM
      13.
 EXHIBITS





(a)
            The
                Exhibits listed below are filed as part of this Annual
                Report.3(i)(a)
            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(i)(b)
            Amended
                Articles of Incorporation (incorporated by reference to the
                Form 10QSB filed with the Securities and Exchange Commission on
                November 3, 2003)3(i)(c)
            Amended
                Articles of Incorporation, filed herewith.3(ii)
            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
            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).10.2
            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).10.3
            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).10.4
            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).10.5
            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).10.6
            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).10.7
            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).10.8
            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).10.9
            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).10.10
            Transfer
                Agreement for Greenhouse, dated January 18, 2006, by and between
                the
                Company and the Lindian Cactus Farming Base.10.11
            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).




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          34 -




10.12
            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).10.13
            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).10.14
            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).10.15
            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).10.16
            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).10.17
            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).31.1
            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.




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          35 -




ITEM
      14.
 PRINCIPAL ACCOUNTANT FEES AND SERVICES




Audit
      Fees




The
      aggregate fees for audit of the Company’s annual 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 for audit of the Company’s financial statements were $ 0 billed
      by PKF and $60,000 billed by Jimmy C.H. Cheung & Co. for the fiscal year
      ended December 31, 2005.




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 $8,000 during the year ended December 31, 2006 and $0
      for the period ended December 31, 2005. 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 $17,100 during
      the year ended December 31, 2006.




Audit
      Related-Fees




Jimmy
      C.H. Cheung & Co. and Michael T. Studer, C.P.A., P.C. did not bill the
      Company any amounts 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, 2006 or December 31, 2005.




Tax
      Fees




The
      aggregate fees billed by P. C. Liu, CPA, P.C. for tax compliance, tax
      advice and tax planning were $500 for the fiscal years ended 2005. 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 2006 and 2005.





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 $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.




-
          36 -




**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:
                January 31, 2008By:
            /s/
                Hong Bu
            Chief
                Financial Officer and a Director andPrincipal
                Financial and Accounting OfficerDate:
                : January 31, 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::
                January 31, 2008By:
            /s/
                Chengzhi Wang
            General
                Manager and a DirectorDate::
                January 31, 2008By:
            /s/
                Hong Bu
            Chief
                Financial Officer and a Director andPrincipal
                Financial and Accounting OfficerDate::
                January 31, 2008By:
            /s/ Jiping Wang
            DirectorDate::
                January 31, 2008By:
            /s/
                Song Yang
            DirectorDate::
                January 31, 2008




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          37 -